485APOS 1 0001.txt 33-14905 Filed with the Securities and Exchange Commission October 13, 2000 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x] Pre-Effective Amendment No. [ ] Post-Effective Amendment No. 43 [x] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x] Amendment No. 46 [x] (Check appropriate box or boxes) THORNBURG INVESTMENT TRUST (formerly "Thornburg Income Trust") (Exact Name of Registrant as Specified in Charter) 119 East Marcy Street, Suite 202, Santa Fe, NM 87501 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code (505) 984-0200 H. Garrett Thornburg, Jr. 119 East Marcy Street, Suite 202 Santa Fe, New Mexico 87501 (Name and Address of Agent for Service Approximate Date of Proposed Public Offering December 27, 2000 ----------------- It is proposed that this filing will become effective (check appropriate box): [ ] Immediately upon filing pursuant to paragraph (b) [ ] On [date] pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a) [ ] On November 1, 2000 pursuant to paragraph (a)(1) [X] 75 days after filing pursuant to paragraph (a)(2) [ ] On [date] pursuant to paragraph (a)(2) of Rule 485 If appropriate, check the following box: [ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment. THORNBURG INVESTMENT TRUST (i) Thornburg Limited Term U.S. Government Fund (ii) Thornburg Intermediate Municipal Fund (iii) Thornburg New Mexico Intermediate Municipal Fund (iv) Thornburg Limited Term Income Fund (v) Thornburg Florida Intermediate Municipal Fund (vi) Thornburg Value Fund (vii) Thornburg Global Value Fund (viii) Thornburg New York Intermediate Municipal Fund (ix) Thornburg Growth Fund CONTENTS Facing Sheet Contents Cross Reference Sheets (Thornburg Intermediate Municipal Fund; [Class A and Class C shares] Thornburg New Mexico Intermediate Municipal Fund [Class A shares and Class D shares]; Thornburg Florida Intermediate Municipal Fund [Class A shares]; Thornburg New York Intermediate Municipal Fund [Class A shares]; (Thornburg Limited Term U.S. Government Fund [Class A shares and Class C shares]; Thornburg Limited Term Income Fund [Class A shares and Class C shares]) Thornburg Value Fund [Class A shares, Class B shares and Class C shares]; Thornburg Global Value Fund [Class A shares, Class B shares and Class C shares] Cross Reference Sheets (Thornburg Intermediate Municipal Fund [Institutional Class]; Thornburg Limited Term U.S. Government Fund [Institutional Class]; Thornburg Limited Term Income Fund [Institutional Class]; Thornburg Value Fund [Institutional Class]) Cross Reference Sheets (Thornburg Growth Fund[Class A Shares and Class C Shares]) Prospectus (Thornburg Intermediate Municipal Fund; [Class A and Class C shares] Thornburg New Mexico Intermediate Municipal Fund [Class A and Class D shares]; Thornburg Florida Intermediate Municipal Fund [Class A shares]; Thornburg New York Intermediate Municipal Fund [Class A shares]) (Thornburg Limited Term U.S. Government Fund [Class A shares and Class C shares]; Thornburg Limited Term Income Fund [Class A shares and Class C shares]) (Thornburg Value Fund [Class A shares, Class B shares and Class C shares]; Thornburg Global Value Fund [Class A shares, Class B shares and Class C shares]) Prospectus (Thornburg Intermediate Municipal Fund [Institutional Class shares]; Thornburg Limited Term U.S. Government Fund [Institutional Class Shares]; Thornburg Limited Term Income Fund [Institutional Class shares]; Thornburg Value Fund [Institutional Class shares]) Prospectus (Thornburg Growth Fund [Class A shares and Class C shares]) Statement of Additional (Thornburg Limited Term U.S. Government Fund Information [Class A shares and Class C shares]; Thornburg Limited Term Income Fund [Class A shares and Class C shares]) (Thornburg Intermediate Municipal Fund [Class A shares and Class C shares]; Thornburg New Mexico Intermediate Municipal Fund [Class A and Class D shares]; Thornburg Florida Intermediate Municipal Fund [Class A shares]; Thornburg New York Intermediate Municipal Fund [Class A shares]) (Thornburg Value Fund [Class A shares, Class B shares and Class C shares]; Thornburg Global Value Fund [Class A shares, Class B shares and Class C shares]) Statement of Additional Information (Thornburg Intermediate Municipal Fund [Institutional Class shares]; Thornburg Limited Term U.S. Government Fund [Institutional Class shares]; Thornburg Limited Term Income Fund [Institutional Class shares]; and Thornburg Value Fund [Institutional Class shares]) Statement of Additional Information (Thornburg Growth Fund [Class A shares and Class C shares]) Part C Signature Page Exhibits THORNBURG INVESTMENT TRUST CROSS REFERENCE SHEETS ("Thornburg Funds" [Class A Shares, Class B Shares, Class C Shares and Class D Shares]) Thornburg Intermediate Municipal Fund Thornburg New Mexico Intermediate Municipal Fund Thornburg Florida Intermediate Municipal Fund Thornburg New York Intermediate Municipal Fund Thornburg Limited Term U.S. Government Fund Thornburg Limited Term Income Fund Thornburg Value Fund Thornburg Global Value Fund Form N-1A Item Number --------------------- Part A Prospectus Caption 1(a). . . . . . . . . . . . . . . . . .Front Cover Page (b). . . . . . . . . . . . . . . . . . Back Cover Page 2(a). . . . . . . . . . . . . . . . . .Investment Goals (b). . . . . . . . . . . Principal Investment Strategy (c). . . . . . . . . .Principal Risks/Past Performance 3 . . . . . . . . . . . . . . . . . . Fees and Expenses 4 . . . . . . . . . . . Principal Investment Strategies 5 . . . . . . . . . . . . . . . . . . .(Annual Reports) 6(a) . . . . . . . . . . . . . . . . INVESTMENT ADVISER (b) . . . . . . . . . . . . . . . . . (Not Applicable) 7(a) . . . . . .OPENING AN ACCOUNT - BUYING FUND SHARES (b) . . . . . OPENING AN ACCOUNT - BUYING FUND SHARES; Buying Class A Shares; Buying Class C Shares; Buying Class D Shares (c) . . . . . . . . . . . . . . . .SELLING FUND SHARES (d) . . . . . . . . . . . .DIVIDENDS AND DISTRIBUTIONS (e) . . . . . . . . . . . . . . . . . . . . . . .TAXES (f) . . . . . . . . . . . . . . . . . (Not Applicable) 8(a) . . . . . . . . . . . . . . . . BUYING FUND SHARES (b) . . . . . . . . .YOUR ACCOUNT - BUYING FUND SHARES (c) . . . . . . . . . . . . . . . . BUYING FUND SHARES 9 . . . . . . . . . . . . . . . . .FINANCIAL HIGHLIGHTS Part B Statement of Additional Information 10(a) . . . . . . . . . . . . . . . . .Front Cover Page 10(b) . . . . . . . . . . . . . . . . TABLE OF CONTENTS 11(a) . . . . . . . . . . . . ORGANIZATION OF THE FUNDS (b) . . . . . . . . . . . . . . . . .(Not Applicable) 12(a) . . . . . . . . . . . . ORGANIZATION OF THE FUNDS (b) . . . . . . . .INVESTMENT OBJECTIVES AND POLICIES (c) . . . . . . . INVESTMENT OBJECTIVES AND POLICIES; INVESTMENT LIMITATIONS (d) . . . . . . . . . . . . . . . . . . . .Prospectus (e) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS 13(a) . . . . . . ORGANIZATION OF THE FUNDS; MANAGEMENT (b) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES (c) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES (d) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES 14(a) . . . . . . . . . . . . . . . . .(Not Applicable) (b) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES (c) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES 15(a) . . . . . . . . . . . . . INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS (b) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR (c) . . . . . . . . . . . . . INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS (d) . . . . . . . . . . . . . INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS (e) . . . . . . . . . . . . . . . . .(Not Applicable) (f) . . . . . . . . . . . . . Prospectus; DISTRIBUTOR (g) . . . . . . . . . .SERVICE AND DISTRIBUTION PLANS (h) . . . . . . . . . . . . . . . . .(Not Applicable) 16(a) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS (b) . . . . . . . . . . . . . . . . .(Not Applicable) (c) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS (d) . . . . . . . . . . . . . . . . .(Not Applicable) (e) . . . . . . . . . . . . . . . . .(Not Applicable) 17(a) . . . . . . Prospectus; ORGANIZATION OF THE FUNDS (b) . . . . . . . . . . . . . . . . .(Not Applicable) 18(a) . . . . . . . Prospectus; PURCHASE OF FUND SHARES (b) . . . . . . . . . . . . . PURCHASE OF FUND SHARES (c) . . .Prospectus; DETERMINATION OF NET ASSET VALUE (d) . . . . . . . . . . . . . . . . . . . .Prospectus 19(a) . . DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS (b) . . DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS 20(a) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR (b) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR (C) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR 21(a) . . . . . . . . . . . . . . . . .(Not Applicable) (b) . . . . . . . . . . YIELD AND RETURN COMPUTATION; REPRESENTATIVE PERFORMANCE INFORMATION 22(a) . Financial Statements (incorporated by reference) (b) . Financial Statements (incorporated by reference) THORNBURG INVESTMENT TRUST CROSS REFERENCE SHEETS Thornburg Intermediate Municipal Fund [Institutional Class] Thornburg Limited Term U.S. Government Fund [Institutional Class] Thornburg Limited Term Income Fund [Institutional Class] Thornburg Value Fund [Institutional Class] Form N-1A Item Number --------------------- Part A Prospectus Caption 1(a). . . . . . . . . . . . . . . . . .Front Cover Page (b). . . . . . . . . . . . . . . . . . Back Cover Page 2(a). . . . . . . . . . . . . . . . . .Investment Goals (b). . . . . . . . . . . Principal Investment Strategy (c). . . . . . . . . .Principal Risks/Past Performance 3 . . . . . . . . . . . . . . . . . . Fees and Expenses 4 . . . . . . . . . . . Principal Investment Strategies 5 . . . . . . . . . . . . . . . . . . .(Annual Reports) 6(a) . . . . . . . . . . . . . . . . INVESTMENT ADVISER (b) . . . . . . . . . . . . . . . . . (Not Applicable) 7(a) . . . . . .OPENING AN ACCOUNT - BUYING FUND SHARES (b) . . . . . OPENING AN ACCOUNT - BUYING FUND SHARES; Buying Class A Shares; Buying Class C Shares; Buying Class D Shares (c) . . . . . . . . . . . . . . . .SELLING FUND SHARES (d) . . . . . . . . . . . .DIVIDENDS AND DISTRIBUTIONS (e) . . . . . . . . . . . . . . . . . . . . . . .TAXES (f) . . . . . . . . . . . . . . . . . (Not Applicable) 8(a) . . . . . . . . . . . . . . . . BUYING FUND SHARES (b) . . . . . . . . .YOUR ACCOUNT - BUYING FUND SHARES (c) . . . . . . . . . . . . . . . . BUYING FUND SHARES 9 . . . . . . . . . . . . . . . . .FINANCIAL HIGHLIGHTS Part B Statement of Additional Information 10(a) . . . . . . . . . . . . . . . . .Front Cover Page 10(b) . . . . . . . . . . . . . . . . TABLE OF CONTENTS 11(a) . . . . . . . . . . . . ORGANIZATION OF THE FUNDS (b) . . . . . . . . . . . . . . . . .(Not Applicable) 12(a) . . . . . . . . . . . . ORGANIZATION OF THE FUNDS (b) . . . . . . . .INVESTMENT OBJECTIVES AND POLICIES (c) . . . . . . . INVESTMENT OBJECTIVES AND POLICIES; INVESTMENT LIMITATIONS (d) . . . . . . . . . . . . . . . . . . . .Prospectus (e) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS 13(a) . . . . . . ORGANIZATION OF THE FUNDS; MANAGEMENT (b) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES (c) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES (d) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES 14(a) . . . . . . . . . . . . . . . . .(Not Applicable) (b) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES (c) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES 15(a) . . . . . . . . . . . . . INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS (b) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR (c) . . . . . . . . . . . . . INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS (d) . . . . . . . . . . . . . INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS (e) . . . . . . . . . . . . . . . . .(Not Applicable) (f) . . . . . . . . . . . . . Prospectus; DISTRIBUTOR (g) . . . . . . . . . .SERVICE AND DISTRIBUTION PLANS (h) . . . . . . . . . . . . . . . . .(Not Applicable) 16(a) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS (b) . . . . . . . . . . . . . . . . .(Not Applicable) (c) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS (d) . . . . . . . . . . . . . . . . .(Not Applicable) (e) . . . . . . . . . . . . . . . . .(Not Applicable) 17(a) . . . . . . Prospectus; ORGANIZATION OF THE FUNDS (b) . . . . . . . . . . . . . . . . .(Not Applicable) 18(a) . . . . . . . Prospectus; PURCHASE OF FUND SHARES (b) . . . . . . . . . . . . . PURCHASE OF FUND SHARES (c) . . . . . . . . . . . . . . . . . . . .Prospectus (d) . . . . . . . . . . . . . . . . . . . .Prospectus 19(a) . . DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS (b) . . DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS 20(a) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR (b) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR (C) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR 21(a) . . . . . . . . . . . . . . . . .(Not Applicable) (b) . . . . . . . . . . YIELD AND RETURN COMPUTATION; REPRESENTATIVE PERFORMANCE INFORMATION 22(a) . Financial Statements (incorporated by reference) (b) . Financial Statements (incorporated by reference) THORNBURG INVESTMENT TRUST CROSS REFERENCE SHEETS ("Thornburg Growth Fund") [Class A Shares and Class C Shares] Thornburg Growth Fund Form N-1A Item Number --------------------- Part A Prospectus Caption 1(a). . . . . . . . . . . . . . . . . .Front Cover Page (b). . . . . . . . . . . . . . . . . . Back Cover Page 2(a). . . . . . . . . . . . . . . . . .Investment Goals (b). . . . . . . . . . . Principal Investment Strategy (c). . . . . . . . . .Principal Risks/Past Performance 3 . . . . . . . . . . . . . . . . . . Fees and Expenses 4 . . . . . . . . . . . Principal Investment Strategies 5 . . . . . . . . . . . . . . . . . . .(Annual Reports) 6(a) . . . . . . . . . . . . . . . . INVESTMENT ADVISER (b) . . . . . . . . . . . . . . . . . (Not Applicable) 7(a) . . . . . .OPENING AN ACCOUNT - BUYING FUND SHARES (b) . . . . . OPENING AN ACCOUNT - BUYING FUND SHARES; Buying Class A Shares; Buying Class C Shares; Buying Class D Shares (c) . . . . . . . . . . . . . . . .SELLING FUND SHARES (d) . . . . . . . . . . . .DIVIDENDS AND DISTRIBUTIONS (e) . . . . . . . . . . . . . . . . . . . . . . .TAXES (f) . . . . . . . . . . . . . . . . . (Not Applicable) 8(a) . . . . . . . . . . . . . . . . BUYING FUND SHARES (b) . . . . . . . . . . . . . . . . BUYING FUND SHARES (c) . . . . . . . . . . . . . . . . BUYING FUND SHARES 9 . . . . . . . . . . . . . . . . . . .(Not Applicable) Part B Statement of Additional Information 10(a) . . . . . . . . . . . . . . . . .Front Cover Page 10(b) . . . . . . . . . . . . . . . . TABLE OF CONTENTS 11(a) . . . . . . . . . . . . .ORGANIZATION OF THE FUND (b) . . . . . . . . . . . . . . . . .(Not Applicable) 12(a) . . . . . . . . . . . . .ORGANIZATION OF THE FUND (b) . . . . . . . .INVESTMENT OBJECTIVES AND POLICIES (c) . . . . . . . INVESTMENT OBJECTIVES AND POLICIES; INVESTMENT LIMITATIONS (d) . . . . . . . . . . . . . . . . . . . .Prospectus (e) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS 13(a) . . . . . . ORGANIZATION OF THE FUNDS; MANAGEMENT (b) . . . . . . . . . . . . . . . . . . . .MANAGEMENT (c) . . . . . . . . . . . . . . . . . . . .MANAGEMENT (d) . . . . . . . . . . . . . . . . . . . .MANAGEMENT 14(a) . . . . . . . . . . . . . . . . .(Not Applicable) (b) . . . . . . . . . . . . . . . . . . . .MANAGEMENT (c) . . . . . . . . . . . . . . . . . . . .MANAGEMENT 15(a) . . . . . . . . . . . . . INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS (b) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR (c) . . . . . . . . . . . . . INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS (d) . . . . . . . . . . . . . INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS (e) . . . . . . . . . . . . . . . . .(Not Applicable) (f) . . . . . . . . . . . . . Prospectus; DISTRIBUTOR (g) . . . . . . . . . .SERVICE AND DISTRIBUTION PLANS (h) . . . . . . . . . . . . . . . . .(Not Applicable) 16(a) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS (b) . . . . . . . . . . . . . . . . .(Not Applicable) (c) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS (d) . . . . . . . . . . . . . . . . .(Not Applicable) (e) . . . . . . . . . . . . . . . . . (Not Applicable) 17(a) . . . . . . Prospectus; ORGANIZATION OF THE FUNDS (b) . . . . . . . . . . . . . . . . .(Not Applicable) 18(a) . . . . . . . Prospectus; PURCHASE OF FUND SHARES (b) . . . . . . . . . . . . . PURCHASE OF FUND SHARES (c) . . .Prospectus; DETERMINATION OF NET ASSET VALUE (d) . . . . . . . . . . . . . . . . . . . .Prospectus 19(a) . . DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS (b) . . DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS 20(a) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR (b) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR (C) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR 21(a) . . . . . . . . . . . . . . . . .(Not Applicable) (b) . . . . . . . . . . YIELD AND RETURN COMPUTATION; 22(a) . . . . . . . . . . . . . . . . .(not applicable) (b) . . . . . . . . . . . . . . . . .(not applicable) THORNBURG GROWTH FUND Prospectus THORNBURG INVESTMENT MANAGEMENT December 27, 2000 Thornburg Growth Fund ("Growth Fund") Thornburg Growth Fund is a separate investment portfolio of Thornburg Investment Trust. These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. Fund shares involve investment risks (including possible loss of principal), and are not deposits or obligations of, or guaranteed or endorsed by, and are not insured by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any government agency. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE TABLE OF CONTENTS 2 Thornburg Growth Fund Investment Goals Principal Investment Strategies Principal Risks of Investing in the Fund Past Performance of the Fund Fees and Expenses 5 Additional Information About Fund Investments, Investment Practices and Risks 8 Potential Advantages of Investing in the Fund 8 Opening Your Account 8 Buying Fund Shares 12 Selling Fund Shares 14 Investor Services 16 Transaction Details 17 Dividends and Distributions 19 Taxes 20 Organization of the Fund 43 Investment Adviser Thornburg Growth Fund Investment Goals ---------------- The Fund seeks long-term growth of capital by investing in equity securities selected for their growth potential. This goal is a fundamental policy of the Fund and may be changed only with shareholder approval. Principal Investment Strategies ------------------------------ Growth Fund expects to invest primarily in domestic equity securities (primarily common stocks) selected for their growth potential. However, the Fund may own a variety of securities, including foreign equity and debt securities, domestic debt securities, and options, futures and warrants relating to equity securities. The Fund's investment adviser, Thornburg Investment Management, Inc. (Thornburg) intends to invest in companies that it believes can grow revenues and profits faster than the growth rate of the economy. The Fund can invest in companies of any size, from larger, well-established companies to smaller, emerging growth companies. Thornburg primarily uses individual company and industry analysis to make investment decisions. Among the specific factors considered by Thornburg in identifying securities for inclusion in the Fund are: . relative earnings growth potential . franchise value . industry growth potential . price/earnings ratio . industry leadership . inconsistency of revenue . management strength stream . potential for favorable developments . price/cash flow ratio . undervalued assets . debt/capital ratio The Fund typically makes equity investments in the following three types of companies: . Growth Industry Leaders are fast growing companies that appear to have proprietary advantages in industry segments that are experiencing rapid growth. Stocks of these companies generally sell at premium valuations. . Consistent Growth Companies. Stocks in this category generally sell at premium valuations and tend to show steady revenue and earnings growth. . Emerging Franchises are typically growing companies that in Thornburg's opinion are in the process of establishing a leading position in a significant product, service or market and which Thornburg expects will grow, or continue to grow, at an above average rate. Debt securities occasionally will be considered for investment when Thornburg believes them to be more attractive than equity alternatives. The Fund may purchase debt securities of any maturity and of any quality. Principal Investment Risks ------------------------- It is possible to lose money on an investment in the Fund. The value of the Fund's investments varies from day to day, generally reflecting changes in market conditions, political and economic news, interest rates, dividends, industry and technological developments, and specific corporate developments. The value of the Fund's investments can be reduced sharply by unsuccessful investment strategies, changes in industry leadership, poor economic growth, high interest rates, and market volatility which may lead to extended periods of lower valuations of future expected earnings. Principal foreign investment risks are changes in currency exchange rates which may adversely affect the Fund's investments, economic and political instability, confiscation, inability to sell foreign investments, and reduced legal protections for investments. Debt securities owned by the Fund may decrease in value because of interest rate increases, defaults, or downgrades by rating agencies. The loss of money is a risk of investing in the Fund, and when you sell your shares they may be worth less than what you paid for them. An investment in the Fund is not a deposit in any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. Additional information about Fund investments, investment strategies, and risks of investing in the Fund appears below beginning on page __ and in the Statement of Additional Information. Past Performance of the Fund ---------------------------- Growth Fund commenced investment operations on December 27, 2000. Fund performance results have not been provided because the Fund has not been in existence for a full calendar year. Fees and Expenses of the Fund ----------------------------- The following tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund. Shareholder Fees (fees paid directly from your investment) ---------------- Class A Class C ------- ------- Maximum Sales Charge (Load) on Purchases 4.50% none (as a percentage of offering price) Maximum Deferred Sales Charge (Load) on Redemptions 1.00* 1.00%** (as a percentage of redemption proceeds or original purchase price, whichever is lower) * Imposed only on redemptions of purchases greater than $1 million or greater in the event of a redemption within 12 months of purchase. ** Imposed only on redemptions of Class C shares within 12 months of purchase. Annual Fund Operating Expenses (expenses that are deducted ------------------------------ from Fund assets) Class A Class C Management Fee .88% .88% Distribution and Service (12b-1) Fees .25% 1.00% Other Expenses 1.94% 4.17% ----- ------ Total Annual Operating Expenses 3.07%* 6.05%* *Other expenses in the table are estimated for the current fiscal year, before expense reimbursements. Thornburg Investment Management, Inc. intends to reimburse expenses so that actual Class A expenses are 1.63% and actual Class C expenses are 2.38%. Reimbursement of expenses may be terminated at any time. Example. This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and redeem all of your shares at the end of these periods. The Example also assumes that your investment has a 5% return each year, dividends and distributions are reinvested, and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 Year 3 Years ------ ------- Class A Shares $746 $1,355 Class C Shares 702 1,787 You would pay the following expenses if you did not redeem your Class C shares: 1 Year 3 Years ------ ------- Class C Shares $602 $1,787 ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS, INVESTMENT PRACTICES, AND RISKS We describe below in greater detail certain types of securities and investment practices that are referred to above in describing the Fund. We also describe below securities and investment practices which the Fund may sometimes use, but which are not of principal importance to the Fund. The investment profile of the Fund will vary over time, depending on various factors, and the Fund may not invest in all of the securities in its permitted to purchase. You will find more information on these subjects in the Fund's Statement of Additional Information. Equity Securities. ----------------- The Fund invests in equity securities, which include common stocks, preferred stocks, convertible securities, warrants, ADRs (American Depository Receipts or EDR's), partnership interests and publicity traded real estate investment trusts. Common stocks, the most familiar type, represent an equity (ownership) interest in a corporation. Although equity securities have a history of long-term growth in value, their prices fluctuate based on changes in a company's financial condition and on overall market and economic conditions. Debt Securities. --------------- The Fund may invest in debt securities. Bonds and other debt instruments, including convertible debt securities, are used by issuers to borrow money from investors. The issuer pays the investor a fixed or variable rate of interest, and must repay the amount borrowed at maturity. Some debt securities, such as zero coupon bonds, do not pay current interest, but are purchased at a discount from their face values. Debt securities have varying degrees of quality and varying levels of sensitivity to changing interest rates. Longer-term debt securities are generally more sensitive to interest rate changes than short term debt securities. Lower-quality debt securities (sometimes called "junk bonds" or "high yield securities") are rated below investment grade by the primary rating agencies, and are often considered to be speculative. U.S. Government Securities. -------------------------- The Funds may invest in U.S. Government securities, although this is not a principal investment strategy of the Fund. U.S. Government Securities include U.S. Treasury obligations such as U.S. Treasury Bills, U.S. Treasury Notes, and U.S. Treasury Bonds, with various interest rates, maturities and dates of issuance. These U.S. Treasury Securities are direct obligations of the U.S. Treasury, backed by the full faith and credit of the U.S. Government. U.S. Government securities also include "agency obligations." Some agency obligations are backed by the full faith and credit of the U.S. Government, but other agency obligations are supported by the agency's authority to borrow from the U.S. Government or the discretionary authority of the Treasury to purchase obligations of the issuing agency. Foreign Securities. ------------------ The Fund may invest in foreign securities. Foreign securities and foreign currencies may involve additional risks. Securities of foreign issuers, even if denominated in U.S. dollars, may be affected significantly by fluctuations in the value of foreign currencies, and the value of these securities in U.S. dollars may decline even if the securities increase in value in their home country. Foreign securities also are subject to greater political risk, including nationalization of assets, confiscatory taxation, currency exchange controls, excessive or discriminatory regulations, and restrictions on repatriation of assets and earnings to the United States. In some countries, there may be political instability or insufficient governmental supervision of markets, and the legal protections for the Fund's investments could be subject to unfavorable judicial or administrative changes. Further, governmental issuers may be unwilling or unable to repay principal and interest when due, and may require that the terms for payment be renegotiated. Markets in some countries may be more volatile, and subject to less stringent investor protection and disclosure requirements and it may be difficult to sell securities in those markets. Moreover, the economics in many countries may be relatively unstable because of dependence on a few industries or economic sectors. Temporary Investments. --------------------- The Fund may purchase short-term, highly liquid securities such as time certificates of deposit, short-term U.S. Government securities, and commercial paper. The Fund typically holds these securities under normal conditions pending investment of idle funds or to provide liquidity. The Fund also may hold assets in these securities for temporary defensive conditions. Investment in these securities for temporary periods could reduce the Fund's ability to attain its investment objectives. The Fund may invest in debt securities of any quality, including high yield securities commonly known as "junk bonds." Securities which are rated within the four highest ratings of a ratings agency are considered "investment grade" securities. These securities are regarded by rating agencies as having a capacity to pay interest and repay principal that varies from "extremely strong" to "adequate". The lowest ratings of the investment grade securities may have speculative characteristics, and may be more vulnerable to adverse economic conditions or changing circumstances. Junk bonds involve greater risk of default or price changes due to changes in the issuer's creditworthiness, or they may already be in default. The market prices of these securities may fluctuate more than higher-quality securities and may decline significantly in periods of general economic difficulty or in response to adverse publicity or changes in investor perceptions. Investments in Small Companies. ------------------------------ The Fund may invest in the stock or debt securities of smaller or unseasoned issuers. Although investments in these companies may offer greater prospects for appreciation, they involve additional risks because of limited product lines, limited access to markets and financial resources, and greater vulnerability to competition and changes in markets. Additionally, the value of these securities may fluctuate more, and they may be more difficult to sell, particularly in declining markets. Investments in Other Investment Companies. ----------------------------------------- The Fund may invest in securities of closed end investment companies, although this is not a principal strategy of the Fund. Up to 5% of its total assets at the time of purchase may be invested in any one investment company, provided that after its purchase no more than 3% of that investment company's outstanding stock is owned by the Fund, and provided further, that no more than 10% of the Fund's total assets are invested in investment companies. Thornburg will charge an advisory fee on the portion of the Fund's assets that are invested in securities of other investment companies. Thus shareholders will be paying a "double fee" on those assets since the advisers of the investment companies also will be charging fees on the same assets. Adjusting Investment Exposure. ----------------------------- The Fund may use various techniques to increase or decrease its exposure to changing securities prices, interest rates, currency exchange rates, commodity prices, or other factors that affect securities values. These techniques may involve derivative transactions such as buying and selling options and futures contracts, entering into currency exchange contracts or swap agreements, and purchasing indexed securities. The Fund may sell securities short. Thornburg can use these practices to adjust the risk and return characteristics of the Fund's portfolio of investments. If Thornburg judges market conditions incorrectly or employs a strategy that does not correlate well with the Fund's investments, these techniques could result in a loss, regardless of whether the intent was to reduce risk or increase return. These techniques may increase the price volatility of the Fund and may involve a small investment of cash relative to the magnitude of the risk assumed. In addition, these techniques could result in a loss if the counter-party to the transaction does not perform as promised. Illiquid and Restricted Securities. ---------------------------------- Some investments may be determined by Thornburg, under the supervision of the Trustees, to be illiquid, which means that they may be difficult to sell promptly at an acceptable price. The sale of other securities, including illiquid securities, may be subject to legal restrictions. Difficulty in selling securities may result in a loss or may be costly to the Fund. Borrowing. --------- The Fund may borrow from banks or through reverse repurchase agreements. If the Fund borrows money, its share price may be subject to greater fluctuation until the borrowing is paid off. If the Fund makes additional investments while borrowings are outstanding, this may be considered a form of leverage. Portfolio Turnover ------------------ The Fund anticipates that its annual turnover rate normally will be less than 100%. A 100% turnover rate would occur, for example, if all of the securities held by the Fund were sold and replaced within one year. Thornburg does not consider the portfolio turnover rate a limiting factor in making investment decisions for a Fund which are otherwise consistent with the Fund's investment objectives and management policies. A higher rate of turnover, may, however, result in increased transaction costs and taxable capital gains. POTENTIAL ADVANTAGES OF INVESTING IN THE FUND Investing through a mutual fund permits smaller investors to diversify an investment among a larger number of securities. Investment in a mutual fund also relieves the investor of many investment management and administrative burdens usually associated with the direct purchase and sale of securities, otherwise consistent with that fund's investment objectives and management policies. These include: (i) selection of portfolio investments; (ii) surveying the market for the best price at which to buy and sell; (iii) valuation of portfolio securities; (iv) selecting and scheduling of maturities and reinvestments; (v) receipt, delivery and safekeeping of securities; and (vi) portfolio recordkeeping. OPENING AN ACCOUNT Complete and sign an account application and give it, along with your check, to your financial advisor. You may also open your account by mail, by sending your application with your check payable to the Fund. You may, if there is no application accompanying this Prospectus, call 1-800-847-0200. The minimum amount to open an account is $5,000, except that an individual retirement account may be opened with $2,000. The minimum amount to add to an account is $100. You also may exchange from one Thornburg Fund into another Thornburg Fund. See "Investor Services," below. You may add to an existing account by mail, wire, or through your financial advisor. Add to your account by mailing a check payable to your Fund, and be sure to note your account number on the check. If you wish to add to an account by wire, telephone 1-800-847-0200 for wiring instructions. Add to an account through your financial advisor by telephoning your advisor. You also may add to an account through the Automatic Investment Program. See "Investor Services," below, or telephone us at 1-800-847-0200 for details. THE FUND OFFERS DIFFERENT CLASS OF SHARES The Fund currently offers Class A and Class C shares. Each of a Fund's shares represents an equal undivided interest in the Fund's assets, and the Fund has common investment objectives and a common investment portfolio. Each class may have varying annual expenses and sales charge structures, which may affect performance. If you do not specify a class of shares in your order, your money will be invested in Class A shares of the Fund. Financial advisors and others who sell shares of the Fund receive different compensation for selling different classes of the Fund's shares. Shares of the Funds may be purchased through investment dealers, brokers or agents "financial advisors") who have agreements with the Funds' distributor, Thornburg Securities Corporation (TSC), or through TSC in those states where TSC is registered. All orders are subject to acceptance by the Fund, and the Fund and TSC reserve the right to refuse any order in whole or in part. The Fund also may issue one or more other classes of shares not offered through this Prospectus. Different classes may have different sales charges and other expenses which may affect performance. Investors may telephone the Fund's distributor, TSC, at (800) 847-0200 to obtain more information concerning the various classes of shares which may be available to them through their sales representatives. Investors may also obtain information respecting the different classes of shares through their sales representative or other person who is offering or making available shares of the Fund. NET ASSET VALUE When you purchase shares, the price is based on the net asset value (NAV) next determined after receipt of your order. The net asset value is the value of a share, and is computed for each class of the Fund by adding the market value of investments, cash and other assets for the class, subtracting liabilities, and then dividing by the number of shares outstanding. Share price is normally calculated at 4:00 p.m. Eastern time on each day the New York Stock Exchange is open for business. BUYING CLASS A SHARES Class A shares are sold subject to a front-end sales charge. The sales charge is deducted from the offering price when you purchase shares, and the balance is invested at net asset value (NAV). The sales charge is not imposed on shares that are purchased with reinvested dividends or other distributions. Class A shares are also subject to a Rule 12b-1 Service Plan, which provides for the Fund's payment to Thornburg of up to 1/4 of 1% of the class's net assets each year, to obtain various shareholder related services. Because this service fee is paid out of the class's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost more than paying other types of sales charges. Because the fees for Class A shares of the Fund are lower than the fees for Class C shares of the Fund, Class A shares of the Fund pay higher dividends than Class C shares of the same Fund. The deduction of the initial sales charge, however, means that you purchase fewer Class A shares than Class C shares of the Fund for a given amount invested. If you are in any of the special classes of investors who can buy Class A shares at net asset value or at a reduced sales charge, you should consider buying Class A shares. If you are planning a large purchase or purchases under the Right of Accumulation or Letter of Intent you should consider if your overall costs will be lower by buying Class A shares, particularly if you plan to hold your shares for an extended period of time. Class A Shares Total Sales Charge As Percentage As Percentage of Offering Price of Net Asset Growth Fund ---------------------- Less than $50,000 4.50% 4.71% $50,000 to 99,999.99 4.00% 4.17% $100,000 to 249,999.99 3.50% 3.63% $250,000 to $499,999.99 3.00% 3.09% $500,000 to 999,999.99 2.00% 2.04% %1,000,000 and over 0.00% 0.00%*
* A 1% CDSC is imposed on any portion of such purchases which are redeemed within one year. TSC or Thornburg intend to pay a commission of 1% to financial advisors who place orders from $1 million to $2 million, a commission of .7% for portions of any such trade exceeding $2 million and less than $4 million, and a commission of .5% for portions of any such trade exceeding $4 million. At certain times, for specific periods, TSC may reallow up to the full sales charge to all dealers who sell Fund shares. These "full reallowances" may be based upon the dealer reaching specified minimum sales goals. TSC will reallow the full sales charge only after notifying all dealers who sell Fund shares. During such periods, dealers may be considered underwriters under securities laws. Thornburg or TSC also may pay additional cash or non-cash compensation to dealer firms which have selling agreements with TSC. Those firms may pay additional compensation to financial advisors who sell Fund shares. Non-cash compensation may include travel and lodging in connection with seminars or other educational programs. LETTERS OF INTENT. If you intend to invest, over the course of 13 or fewer months, an amount of money that would qualify for a reduced sales charge if it were made in one investment, you can qualify for the reduced sales charge on the entire amount of your investment by signing a "Letter of Intent" (LOI). Each investment you make during the 13 months will be charged the reduced sales commission applicable to the amount stated in your LOI. You do not have to reach the goal you set. If you don't, you will have to pay the difference between the sales charge you would have paid and the sales charge you did pay. You may pay this amount directly to TSC, or TSC will redeem a sufficient number of your shares in the Fund to obtain the difference. RIGHTS OF ACCUMULATION. Each time the value of your account plus the amount of any new investment passes one of the breakpoints illustrated in the table below, the amount of your new investment in excess of the breakpoint will be charged the reduced sales charge applicable to that range. SALES CHARGE WAIVERS. You may purchase Class A shares of the Fund with no sales charge if you notify TSC or the Fund's transfer agent, NFDS, at the time you purchase shares that you belong to one of the categories below. If you do not provide such notification at the time of purchase, your purchase will not qualify for the waiver of sales charge. A SHAREHOLDER WHO REDEEMED CLASS A SHARES OF THE FUND. For two years after such a redemption you will pay no sales charge on amounts that you reinvest in Class A shares of the Fund, up to the amount you previously redeemed. AN OFFICER, TRUSTEE, DIRECTOR, OR EMPLOYEE OF THORNBURG (or any investment company managed by THORNBURG), TSC, any affiliated Thornburg Company, the Fund's Custodian bank or Transfer Agent and members of their families including trusts established for the benefit of the foregoing. EMPLOYEES OF BROKERAGE FIRMS who are members in good standing with the National Association of Securities Dealers, Inc. (NASD); employees of financial planning firms who p lace orders for the Fund through a member in good standing with NASD; the families of both types of employees. Orders must be placed through an NASD member firm who has signed an agreement with TSC to sell Fund shares. CUSTOMERS of bank trust departments, companies with trust powers, investment broker dealers and investment advisors who charge fees for service, including investment broker dealers who utilize wrap fee or similar arrangements. Accounts established through these persons are subject to conditions, fees and restrictions imposed by these persons. INVESTORS PURCHASING $1 MILLION OR MORE. However, a contingent deferred sales charge of 1% applies to shares redeemed within one year of purchase. THOSE PERSONS WHO ARE DETERMINED BY THE TRUSTEES OF THE FUND to have acquired their shares under special circumstances not involving any sales expenses to the Fund or Distributor. PURCHASES PLACED THROUGH A BROKER THAT MAINTAINS ONE OR MORE OMNIBUS ACCOUNTS WITH THE FUND provided that such purchases are made by: (i) investment advisors or financial planners who place trades for their own accounts or the accounts of their clients and who charge a management, consulting or other fee for their services; (ii) clients of such investment advisors or financial planners who place trades for their own accounts if the accounts are linked to the master account of such investment advisor or financial planner on the books and records of the broker or agent; and iii) retirement and deferred compensation plans and trusts used to fund those plans, including, but not limited to, those defined in Sections 401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi trusts." Investors may be charged a fee if they effect transactions in Fund shares through a broker or agent. PROCEEDS FROM A LOAD FUND REDEMPTION. You may purchase shares of the Fund at net asset value without a sales charge to the extent that the purchase represents proceeds from a redemption (within the previous 60 days) of shares of another mutual fund which has a sales charge. When making a direct purchase at net asset value under this provision, the Fund must receive one of the following with your direct purchase order: (i) the redemption check representing the proceeds of the shares redeemed, endorsed to the order of the Fund, or (ii) a copy of the confirmation from the other fund, showing the redemption transaction. Standard back office procedures should be followed for wire order purchases made through broker dealers. Purchases with redemptions from money market funds are not eligible for this privilege. This provision may be terminated anytime by TSC or the Fund without notice. BUYING CLASS C SHARES. Class C shares are sold at the NAV next determined after your order is received. Class C shares are subject to a 1% contingent deferred sales charge (CDSC) if the shares are redeemed within one year of purchase. The percentage is calculated on the amount of the redemption proceeds for each share, or the original purchase price, whichever is lower. Shares not subject to the CDSC are considered redeemed first. The CDSC is not imposed on shares purchased with reinvested dividends or other distributions. Class C shares are subject to a Rule 12b-1 Service Plan providing for payment of a service fee of up to 1/4 of 1% of the class's net assets each year, to obtain shareholder related services. Class C shares are also subject to a Rule 12b-1 Distribution Plan providing for payment of a distribution fee of up to 3/4 of 1% of the class's net assets each year, to pay for the sale and distribution of the Fund's shares and to pay for commissions and other distribution expenses. Because these service and distribution fees are paid out of the class's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost more than paying other types of sales charges. Purchases of $1,000,000 or more of Class C shares will not be accepted. If your investment horizon is relatively short and you do not qualify to purchase Class A shares at a reduced sales charge, you should consider purchasing Class C shares. SELLING FUND SHARES You can withdraw money from your Fund account at any time by redeeming some or all of your shares (by selling them back to the Fund or by selling the shares through you r financial advisor). Your shares will be redeemed by the Fund at the next share price (NAV) calculated after your order is received in proper form. The amount of the CDSC, if any, will be deducted and the remaining proceeds sent to you. No CDSC is imposed on the amount by which the value of a share may have appreciated. Similarly, no CDSC is imposed on shares obtained through reinvestment of dividends or capital gains. Shares not subject to a CDSC will be redeemed first. Share price is normally calculated at 4 p.m. Eastern time. * Your Fund may hold payment on redemptions until it is reasonably satisfied that investments previously made by check have been collected, which can take up to 15 business days. * Payment for shares redeemed normally will be made by mail the next business day, and in most cases within seven days, after receipt by the Transfer Agent of a properly executed request for redemption accompanied by any outstanding certificates in proper form for transfer. The Funds may suspend the right of redemption and may postpone payment when the New York Stock Exchange is closed for other than weekends or holidays, or if permitted by rules of the Securities and Exchange Commission during an emergency which makes it impractical for the Funds to dispose of their securities or fairly to determine net asset value, or during any other period specified by the Securities and Exchange Commission in a rule or order for the protection of investors. * No interest is accrued or paid on amounts represented by uncashed distribution or redemption checks. If you are selling some but not all of your shares, leave at least $1,000 worth of shares in the account to keep it open. The Fund reserves the right to redeem the shares of any shareholder whose shares have a net asset value of less than $1,000. The Fund will notify the shareholder before performing the redemption. To redeem shares in an account, you may use any of the following methods. Written Instructions ------------------- Mail your instructions to the transfer agent at the address shown on the back cover page. Instructions must include the following information: . Your name . The Fund's name . Fund Account number . Dollar amount or number of shares to be redeemed . Signature guarantee, if required (see below for instructions) . Signature (see below for signature instructions) Signature Requirements. Individual, Joint Tenants, Tenants in Common, Sole Proprietor General Partner Instructions must be signed by all persons required to sign for transactions, exactly as their names appear on the account. UGMA or UTMA. Instructions must be signed by the custodian exactly as it appears on the account. Trust. Instructions must be signed by trustee, showing trustee's capacity. If trustee's name is not an account registration, provide a copy of trust document certified within the last 60 days. Corporation, Association. Instructions must be signed by person authorized to sign on account. A signature guarantee is required. Please include a copy of corporate resolution authorizing the signer to act. IRA or Retirement Account. See IRA instructions or telephone 1-800-847-0200. Executor, Administrator, Conservator, Guardian. Telephone 1-800-847-0200. Telephone Redemption ------------------- If you completed the telephone redemption section of your application when you first purchased your shares, you may redeem by telephoning your Fund Customer Representative at 1-800-847-0200. Money may be wired to your bank account designated on your account application or sent to you in a check. The Funds' transfer agency may charge a wire fee, which will be deducted from the amount wired. If you did not complete the telephone redemption section of your account application you may add this feature to your account. The minimum wire redemption is $1,000, and the minimum check redemption is $50.00. See "Investor Services," below, or telephone 1-800-847-0200. Redeem Through Financial Adviser ------------------------------- Consult with your financial advisor. Your financial adviser may charge a fee. Internet Redemption ------------------- You may redeem shares of any Fund by contacting Thornburg at its Website, www.thornburg.com, and following the instructions. Systematic Withdrawal Plan ------------------------- Systematic withdrawal plans let you set up periodic redemptions from your account. Because of the sales charge on Class A shares of the Fund, you may not want to set up a systematic withdrawal plan during a period when you are buying Class A shares of the Fund on a regular basis. Minimum account size for this feature is $10,000, and the minimum payment is $50.00. Please telephone your Fund Customer Representative at 1-800-847-0200. CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to protect you and your Fund from fraud. Your request must be made in writing and include a signature guarantee if any of the following situations apply: * You wish to redeem more than $25,000 worth of shares, * Your account registration has changed within the last 30 days, * The check is being mailed to a different address than the one on your account (record address), * The check is being made payable to someone other than the account owner, * The redemption proceeds are being transferred to a Thornburg account with a different registration, or * The redemption proceeds are otherwise being transferred differently than your account record authorizes. You should be able to obtain a signature guarantee from a bank, broker dealer, credit union (if authorized under state law), securities exchange or association, clearing agency, savings association or participant in the Securities Transfer Agent Medallion Program (STAMP). A notary public cannot provide a signature guarantee. INVESTOR SERVICES Fund Information ---------------- Thornburg's telephone representatives are available Monday through Friday from 9:30 a.m. to 6:30 p.m. Eastern time. Whenever you call, you can speak with someone equipped to provide the information or service you need. Statements and reports sent to you include the following: . Account statements after every transaction affecting your account. . Quarterly account statements. . Financial reports (every six months). Thornburg's Website on the Internet provides you with helpful information 24 hours a day, at www.thornburg.com. Automatic Investment Plan ------------------------- One easy way to pursue your financial goals is to invest money regularly. While regular investment plans do not guarantee a profit and will not protect you against loss in a declining market, they can be an excellent way to invest for retirement, a home, educational expenses, and other long-term financial goals. Certain restrictions apply for retirement accounts. Call 800-847-0200 and speak to a Fund Customer Service Representative for more information. Exchanging Shares ----------------- As a shareholder, you have the privilege of exchanging Class A shares of the Fund for Class A shares of other Thornburg Funds. However, you should note the following: . The Fund you are exchanging into must be registered for sale in your state. . You may only exchange between accounts that are registered in the same name address, and taxpayer identification number. . Before exchanging into a Fund, obtain and read the prospectus. . Exchanges may have tax consequences for you. . Because excessive trading can hurt fund performance and shareholders, the Fund reserves the right to temporarily or permanently terminate the exchange privilege of any investor who makes more than four exchanges out of a Fund in any calendar year. Accounts under common ownership or control, including accounts with the same taxpayer identification number, will be counted together for purposes of the four exchange limit. . The Fund reserves the right to refuse exchange purchases by any person or group if, in Thornburg's judgment, the Fund would be unable to invest the money effectively in accordance with its investment objective and policies, or would otherwise potentially be adversely affected. . Your exchanges may be restricted or refused if a Fund receives or anticipates simultaneous orders affecting significant portions of the Fund's assets. In particular, a pattern of exchanges that coincide with a "market timing" strategy may be disruptive to a Fund. Although a Fund will attempt to give prior notice whenever it is reasonably able to do so, it may impose these restrictions at any time. The Thornburg Funds reserve the right to terminate or modify the exchange privilege in the future. Telephone Redemption -------------------- If you completed the telephone redemption section of your application when you first purchased your shares, you may easily redeem any class of shares by telephone simply by calling a Fund Customer Service Representative. If you did not complete the telephone redemption section of your application, you may add this feature to your account by calling the Fund for a telephone redemption application. Once you receive it, please fill it out, have it signature guaranteed and send it to the address shown in the application. The Fund, TSC, Thornburg and the Fund's Transfer Agent are not responsible for, and will not be liable for, the authenticity of withdrawal instructions received by telephone or the delivery or transmittal of the redemption proceeds if they follow instructions communicated by telephone that they reasonably believe to be genuine. By electing telephone redemption you are giving up a measure of security you otherwise may have by redeeming shares only with written instructions, and you may bear the risk of any losses resulting from telephone redemption. The Fund's Transfer Agent will attempt to implement reasonable procedures to prevent unauthorized transactions and the Fund or its Transfer Agent could be liable if these procedures are not employed. These procedures will include recording of telephone transactions, providing written confirmation of such transactions within 5 days, and requesting certain information to better confirm the identity of the caller at the time of the transaction. You should verify the accuracy of your confirmation statements immediately after you receive them. Street Name Accounts -------------------- Some broker dealers and other financial services firms offer to act as owner of record of Fund shares as a convenience to investors who are clients of those firms. Neither the Fund nor its Transfer Agent can be responsible for failures or delays in crediting shareholders for dividends or redemption proceeds, or for delays in reports to shareholders if a shareholder elects to hold Fund shares in street-name through an account with a financial firm rather than directly in the shareholder's own name. Further, neither the Fund nor its Transfer Agent will be responsible to the investor for any loss to the investor due to the failure of a financial firm, its loss of property or funds, or its acts or omissions. Prospective investors are urged to confer with their financial advisors to learn about the different options available for owning mutual funds shares. You may receive share certificates or hold shares in your name with the Transfer Agent upon request. TRANSACTION DETAILS The Fund is open for business each day the New York Stock Exchange (NYSE) is open. The Fund normally calculates its net asset value for each class of shares as of the close of business of the NYSE, normally 4 p.m. Eastern time. Bonds and other fixed income securities are valued primarily using prices obtained from independent pricing services. Equity securities such as common stocks are valued primarily on the basis of market quotations. Foreign securities are valued on the basis of quotations from the primary market in which they are traded, and are translated from the local currency into U.S. dollars using current exchange rates. If quotations are not readily available assets are valued by a method that the Trustees believe accurately reflects fair value. When you sign your account application, you will be asked to certify that your Social Security or taxpayer identification number is correct and that you are not subject to 31% backup withholding for failing to report income to the IRS. If you violate IRS regulations, the IRS can require your Fund to withhold 31% of your taxable distributions and redemptions. The Fund reserves the right to suspend the offering of shares for a period of time. The Fund also reserves the right to reject any specific purchase order, including certain purchases by exchange. See "Exchanging Shares" above. Purchase orders may be refused if, in Thornburg's opinion, they would disrupt management of the Fund. If you open or add to your account yourself rather than through your financial advisor please note the following: . All of your purchases must be made in U.S. dollars and checks must be drawn on U.S. banks. . The Fund does not accept cash. . If your check does not clear, your purchase will be cancelled and you could be liable for any losses or fees the Fund or its Transfer Agent has incurred. When you buy shares of the Fund or sell them through your financial advisor you may be charged a fee for this service. Please read your financial advisor's program materials for any additional procedures, service features or fees that may apply. Certain financial institutions which have entered into sales agreements with TSC may enter confirmed purchase orders on behalf of customers by phone, with payments to follow no later than the time when the Fund is priced on the following business day. If payment is not received by that time, the financial institution could be held liable for resulting fees or losses. The Fund may authorize certain securities brokers to receive on its behalf purchase and redemption orders received in good form, and some of those brokers may be authorized to designate other intermediaries to receive purchase and redemption orders on the Fund's behalf. Provided the order is promptly transmitted to the Fund, the Fund will be deemed to have received a purchase or redemption order at the time it is accepted by such an authorized broker or its designee, and customer orders will be priced based upon the Fund's net asset value next computed after the order is received by the authorized broker or its designee. DIVIDENDS AND DISTRIBUTIONS The Fund distributes substantially all of its net income and realized capital gains, if any, to shareholders each year. The Fund distributes any net investment income quarterly. The Fund will distribute net realized capital gains, if any, at least annually. Capital gain distributions normally will be declared and payable in December. Distribution Options The Fund may earn interest from bond, money market, and other investments. These are passed along as dividend distributions. The Fund realizes capital gains whenever it sells securities for a higher price than it paid for them. These are passed along as capital gain distributions. When you open an account, specify on your application how you want to receive your distributions. The Fund offers four options, (which you can change at any time). Dividends 1. Reinvestment Option. Your dividend distributions will be automatically invested in additional shares of your Fund at the next determined net asset value. If you do not indicate a choice on your application, you will be assigned this option. You may also instruct the Fund to invest your dividends in the shares of any other Thornburg Fund. 2. Cash Option. You will be sent a check for your dividend distributions. Cash distribution checks are normally mailed on the third business day after the month-end. Capital Gains 1. Reinvestment Option. Your capital gain distributions, if any, will be automatically reinvested in additional shares of the Fund at the next determined net asset value. If you do not indicate a choice on your application, you will be assigned this option. You may also instruct the Fund to re invest your capital gain distributions in shares of any other Thornburg Fund. 2. Cash Option. You will be sent a check for any capital gain distributions. Shares of any Thornburg Fund purchased through reinvestment of dividend and capital gain distributions are not subject to sales charges or contingent deferred sales charges. No interest is accrued or paid on amounts represented by uncashed distribution checks. Turnover and Capital Gains The Fund does not intend to engage in short-term trading for profits. Nevertheless, when a Fund believes that a security will no longer contribute towards its reaching its goal, it will normally sell that security. When the Fund sells a security at a profit it realizes a capital gain. When it sells a security at a loss it realizes a capital loss. A fund must, by law, distribute capital gains, net of any losses, to its shareholders. Whether you reinvest your capital gain distributions or take them in cash, the distribution is taxable. To minimize taxable capital gain distributions, the Fund will realize capital losses, if available, when, in the judgment of the portfolio manager, the integrity and income generating aspects of the portfolio would be unaffected by doing so. TAXES Federal Taxes - In General Certain general aspects of federal income taxation of individual shareholders are discussed below. Aspects of investment by shareholders who are not individuals are addressed in a more limited manner. Prospective investors, and in particular persons who are not individuals, should consult their own tax advisers concerning federal, state and local tax consequences respecting investments in the Funds. Federal Tax Treatment of Distributions Distributions to shareholders representing net investment income and net short term capital gains will be taxable to the recipient shareholders as ordinary income, whether the distributions are actually taken in cash or are reinvested in additional shares. Fund distributions will not be eligible for the dividends received deduction for corporations. Distributions of net long-term capital gains, if any, will be treated as long-term capital gains by shareholders regardless of the length of time the shareholder has owned the shares, and whether received as cash or in additional shares. Federal Tax Treatment of Sales or Redemptions of Shares Redemption or resale of shares by a shareholder will be a taxable transaction for federal income tax purposes, and the shareholder will recognize gain or loss in an amount equal to the difference between the shareholder's basis in the shares and the amount received on the redemption or resale. If the shares sold or redeemed are a capital asset, the gain or loss will be a capital gain or loss and will be long-term if the shares were held for more than one year. State Taxes With respect to distributions of interest income and capital gains from the Fund, the laws of the several states and local taxing authorities vary with respect to the taxation of such distributions, and shareholders of the Funds are advised to consult their own tax advisers in that regard. ORGANIZATION OF THE FUND Growth Fund is a diversified series of Thornburg Investment Trust, a Massachusetts business trust (the "Trust") organized as a diversified, open-end management investment company under a Declaration of Trust (the "Declaration"). The Trust currently has eight other active series, each with a separate investment portfolio. The Trustees are authorized to divide the Trust's shares into additional series and classes. INVESTMENT ADVISER The Fund is managed by Thornburg Investment Management, Inc. (Thornburg). Thornburg performs investment management services for the Fund under the terms of an Investment Advisory Agreement which specifies that Thornburg will select investments for the Fund, monitor those investments and the markets generally, and perform related services. Thornburg also performs administrative services applicable to each class under an Administrative Services Agreement which requires that Thornburg will supervise, administer and perform certain administrative services necessary for the maintenance of the class shareholders. Thornburg 's services to the Fund and the Fund is supervised by the Trustees of Thornburg Investment Trust. The annual investment advisory and administrative services fee rates of the Fund are .875% and .125%, respectively. The advisory fee rate for the Fund decreases as assets increase, as described in the Statement of Additional Information. ______________, a Managing Director of Thornburg, is the portfolio manager of the Fund. He has held this responsibility for the Fund since its inception in December, 2000. Before joining Thornburg he managed equity mutual funds with another mutual fund management company. Mr. __________ is assisted by other employees of Thornburg. Thornburg may, from time to time, agree to waive its fees or to reimburse the Fund for expenses above a specified percentage of average daily net assets. Thornburg retains the ability to be repaid by the Fund for these expense reimbursements if expenses fall below the limit prior to the end of the fiscal year. Fee waivers or expenses by the Fund will boost its performance, and repayment of waivers or reimbursements will reduce its performance. In addition to Thornburg's fees, the Fund will pay all other costs and expenses of its operations. The Fund will not bear any costs of sales or promotion incurred in connection with the distribution of its shares, except as described above under "Buying Fund Shares". Thornburg Securities Corporation (TSC) distributes and markets the Thornburg Funds. Thornburg or TSC may make payments from their own resources to assist in the sales or promotion of the Fund. H. Garrett Thornburg, Jr., a Director and Chairman of the Company, and a Trustee and Chairman of the Trust, is the controlling stockholder of both Thornburg and TSC. ADDITIONAL INFORMATION Reports to Shareholders Shareholders will receive annual reports of their Fund containing financial statements audited by the Fund's independent auditors, and also will receive unaudited semi- annual reports. In addition, each shareholder will receive an account statement no less often than quarterly. General Counsel Legal matters in connection with the issuance of shares of the Funds are passed upon by White, Koch, Kelly & McCarthy, Professional Association, Post Office Box 787, Santa Fe, New Mexico 87504-0787. Investment Adviser Thornburg Investment Management, Inc. 119 East Marcy Street, Suite 202 Santa Fe, New Mexico 87501 Distributor Thornburg Securities Corporation 119 East Marcy Street, Suite 202 Santa Fe, New Mexico 87501 Custodian State Street Bank & Trust Co. 1 Heritage Drive North Quincy, Massachusetts 02171 Transfer Agent State Street Bank & Trust Co. c/o NFDS Servicing Agent Post Office Box 419017 Kansas City, Missouri 64141-6017 Additional information about the Funds' investments is available in the Fund's Annual and Semiannual Reports to Shareholders. In the Fund's Annual Report you will find a discussion of the market conditions and investment strategies which significantly affected the Fund's performance during its last fiscal year. The Fund's Statement of Additional Information (SAI) and the Fund's Annual and Semiannual Reports are available without charge upon request. Shareholders may make inquiries about the Fund, and investors may request copies of the SAI, Annual and Semiannual Reports, and obtain other Fund information, by contacting Thornburg Securities Corporation at 119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501 (800) 847-0200. The Fund's current SAI is incorporated in this Prospectus by reference (legally forms a part of this Prospectus). Information about the Fund (including the SAI) may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Reports and other information about the Fund are also available on the Commission's Internet site at http://www.sec.gov and copies of information may be obtained, upon payment of a duplicating fee, by writing the Commission's Public Reference Section, Washington, D.C. 20549-6009. No dealer, sales representative or any other person has been authorized to give any information or to make any representation not contained in this Prospectus and, if given or made, the information or representation must not be relied upon as having been authorized by the Fund or Thornburg Securities Corporation. This Prospectus constitutes an offer to sell securities of the Fund only in those states where the Fund's shares have been registered or otherwise qualified for sale. The Fund will not accept applications from persons residing in states where the Fund's shares are not registered. Thornburg Securities Corporation, Distributor 119 East Marcy Street Santa Fe, New Mexico 87501 (800) 847-0200 www.thornburg.com email: postmaster@thornburg.com Thornburg Growth Fund is a separate series of Thornburg Investment Trust, which files its registration statements and certain other information with the Commission under Investment Company Act of 1940 file number 811-05201. Statement of Additional Information for Thornburg Growth Fund ("Growth Fund") 119 East Marcy Street, Suite 202 Santa Fe, New Mexico 87501 Thornburg Growth Fund ("Growth Fund") is an investment portfolio established by Thornburg Investment Trust (the "Trust"). This Statement of Additional Information relates to the investments made or proposed to be made by the Fund, investment policies governing the Fund, the Fund's management, and other issues of interest to a prospective purchaser of Class A and Class C shares offered by the Fund. This Statement of Additional Information is not a prospectus but should be read in conjunction with the Fund's Prospectus dated December 27, 2000. A copy of the Prospectus and the most recent Annual and Semiannual Reports for the Fund may be obtained at no charge by writing to the distributor of the Funds' shares, Thornburg Securities Corporation, at 119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501. Prior to October 1, 1995, the Trust's name was "Thornburg Income Trust." The date of this Statement of Additional Information is December 27, 2000. TABLE OF CONTENTS ORGANIZATION OF THE FUND. . . . . . . . . . . . . . . . . . . .__ Illiquid Investments. . . . . . . . . . . . . . . . . . . . .__ Restricted Securities . . . . . . . . . . . . . . . . . . . .__ Swap Agreements, Caps, Floors, Collars. . . . . . . . . . . .__ Indexed Securities. . . . . . . . . . . . . . . . . . . . . .__ Repurchase Agreements . . . . . . . . . . . . . . . . . . . .__ Reverse Repurchase Agreements . . . . . . . . . . . . . . . .__ Securities Lending. . . . . . . . . . . . . . . . . . . . . .__ Lower-Quality Debt Securities . . . . . . . . . . . . . . . .__ Foreign Investments . . . . . . . . . . . . . . . . . . . . .__ Foreign Currency Transactions . . . . . . . . . . . . . . . .__ Limitations on Futures and Options Transactions . . . . . . .__ Real Estate-Related Instruments . . . . . . . . . . . . . . .__ Futures Contracts . . . . . . . . . . . . . . . . . . . . . .__ Futures Margin Payments-Value Fund. . . . . . . . . . . . . .__ Purchasing Put and Call Options . . . . . . . . . . . . . . .__ Writing Put and Call Options. . . . . . . . . . . . . . . . .__ Combined Positions. . . . . . . . . . . . . . . . . . . . . .__ Correlations of Price Changes . . . . . . . . . . . . . . . .__ Liquidity of Options and Futures Contracts-OTC Options. . . .__ Option and Futures Relating to Foreign Currencies . . . . . .__ Asset Coverage for Futures and Options Positions. . . . . . .__ Short Sales . . . . . . . . . . . . . . . . . . . . . . . . .__ YIELD AND RETURN COMPUTATION. . . . . . . . . . . . . . . . . .__ Performance and Portfolio Information . . . . . . . . . . . .__ TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .__ Federal Income Taxes-In General . . . . . . . . . . . . . . .__ Federal Income Taxes. . . . . . . . . . . . . . . . . . . . .__ State and Local Income Tax Considerations . . . . . . . . . .__ DISTRIBUTIONS AND SHAREHOLDERS ACCOUNTS . . . . . . . . . . . .__ INVESTMENT ADVISER, INVESTMENT ADVISORY AGREEMENT, AND ADMINISTRATIVE SERVICES AGREEMENT . . . . . . . . . . . . . .__ Investment Advisory Agreement . . . . . . . . . . . . . . . .__ Administrative Services Agreement . . . . . . . . . . . . . .__ SERVICE AND DISTRIBUTION PLANS. . . . . . . . . . . . . . . . .__ PORTFOLIO TRANSACTIONS. . . . . . . . . . . . . . . . . . . . .__ In General. . . . . . . . . . . . . . . . . . . . . . . . . .__ Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . .__ Portfolio Turnover Rates. . . . . . . . . . . . . . . . . . .__ MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . .__ -i- NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . .__ DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . .__ ADDITIONAL INFORMATION RESPECTING PURCHASE AND REDEMPTION OF SHARES . . . . . . . . . . . . . . .__ INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . . . . . . .__ -ii- ORGANIZATION OF THE FUND The Fund is a diversified series of Thornburg Investment Trust, a Massachusetts business trust (the "Trust") organized on June 3, 1987 as a diversified, open-end management investment company under a Declaration of Trust (the "Declaration"). The Trust currently has nine active Funds, one of which is described in this Statement of Additional Information. The Trustees are authorized to divide the Trust's shares into additional series and classes. The assets received for the issue or sale of shares of the Fund and all income, earnings, profits, and proceeds thereof, subject only to the rights of creditors, are especially allocated to the Fund, and constitute the underlying assets of that Fund. The underlying assets of the Fund are segregated on the books of account, and are charged with the liabilities with respect to the Fund and with a share of the general expense of the Trust. Expenses with respect to the Trust are allocated in proportion to the asset value of the respective series and classes of the Trust except where allocations of direct expense can otherwise be fairly made. The officers of the Trust, subject to the general supervision of the Trustees, determine which expenses are allocable to the Fund, or generally allocable to all of the several funds of the Trust. In the event of the dissolution or liquidation of the Trust, shareholders of the Fund are entitled to receive the underlying assets of that Fund which are available for distribution. The Fund may in the future, rather than invest in securities generally, seek to achieve its investment objectives by pooling its assets with assets of other funds for investment in another investment company having the same investment objective and substantially similar investment policies and restrictions as the Fund. The purpose of such an arrangement is to achieve greater operational efficiencies and to reduce cost. It is expected that any such investment company would be managed by Thornburg Investment Management, Inc. (Thornburg) in a manner substantially similar to the corresponding Fund. Shareholders of the Fund would receive prior written notice of any such investment, but may not be entitled to vote on the action. Such an investment would be made only if at least a majority of the Trustees of the Fund determined it to be in the best interest of the Fund and its shareholders. The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust may, under certain circumstances, be held personally liable for the obligations of the trust. The Declaration of Trust provides that the Trust shall not have any claim against shareholders except for the payment of the purchase price of shares. However, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which a fund itself would be unable to meet its obligations. Thornburg believes that, in view of the above, the risk of personal liability to shareholders is remote. The Fund may hold special shareholder meetings and mail proxy materials. These meetings may be called to elect or remove Trustees, change fundamental investment policies, or for other purposes. Shareholders not attending these meetings are encouraged to vote by proxy. The Fund will mail proxy materials in advance, including a voting card and information about the proposals to be voted on. The number of votes you are entitled to is based upon the number of shares you own. Shares do not have cumulative rights or preemptive rights. State Street Bank and Trust, Boston, Massachusetts, is custodian of the assets of the Fund. The Custodian is responsible for the safekeeping of the Fund's assets and the appointment of subcustodian banks and clearing agencies. The Custodian takes no part in determining the investment policies of the Fund or in deciding which securities are purchased or sold by the Fund. INVESTMENT POLICIES Illiquid Investments -------------------- Illiquid investments are investments that cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. Under the supervision of the Trustees, the Fund's investment adviser (Thornburg) determines the liquidity of investments by the Fund. In determining the liquidity of the Fund's investments, Thornburg may consider various factors, including (1) the frequency of trades and quotations, (2) the number of dealers and prospective purchasers in the marketplace, (3) dealer undertakings to make a market, (4) the nature of the security (including any demand or lender features), and (5) the nature of the market place for trades (including the ability to assign or offset the Fund's rights and obligations relating to the investment). Investments currently considered by the Fund to be illiquid include repurchase agreements not entitling the holder to payment of principal and interest within seven days, over-the-counter options, and non-government stripped fixed-rate mortgage-backed securities. Also, Thornburg may determine some restricted securities, government-stripped fixed-rate mortgage-backed securities, emerging market securities, and swap agreements to be illiquid. However, with respect to over-the-counter options the Fund writes, all or a portion of the value of the underlying instrument may be illiquid depending on the assets held to cover the option and the nature and terms of any agreement the Fund any have to close out the option before expiration. In the absence of market quotations, illiquid investments are priced at fair value as determined utilizing procedures and methods reviewed by the Trustees. If through a change in values, net assets, or other circumstances, a Fund were in a position where more than 10% of its net assets was invested in illiquid securities, it would seek to take appropriate steps to protect liquidity. Restricted Securities --------------------- Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, or in a registered public offering. Where registration is required, the Fund could be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it is permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less favorable price than prevailed when it decided to seek registration of the security. Swap Agreements, Caps, Floors, Collars -------------------------------------- Swap agreements can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. Depending on their structure, swap agreements may increase or decrease the Fund's exposure to long or short-term interest rates (in the U.S. or abroad), foreign currency values, mortgage securities, corporate borrowing rates, or other factors such as security prices or inflation rates. The Fund is not limited to any particular form of swap agreement if Thornburg determines it is consistent with the Fund's investment objective and policies. Although swaps can take a variety of forms, typically one party pays fixed and receives floating rate payments and the other party receives fixed and pays floating payments. An interest rate cap is an agreement between two parties over a specified period of time where one party makes payments to the other party equal to the difference between the current level of an interest rate index and the level of the cap, if the specified interest rate index increases above the level of the cap. An interest rate floor is similar except the payments are the difference between the current level of an interest rate index and the level of the floor, if the specified interest rate index decreases below the level of the floor. An interest rate collar is the simultaneous execution of a cap and floor agreement on a particular interest rate index. The purchase of a cap entitles the purchaser to receive payments on a notional principal amount from the party selling such cap to the extent that a specified index exceeds a predetermined interest rate or amount. Purchase of a floor entitles the purchaser to receive payments on a notional principal amount from the party selling such floor to the extent that a specified index falls below a predetermined interest rate or amount. A collar is a combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates or values. Inasmuch as these swaps, floors, caps and collars are entered into for good faith hedging purposes, Thornburg and the Fund believe these obligations do not constitute senior securities under the 1940 Act and, accordingly, will not treat them as being subject to borrowing restrictions. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid. Caps, floors and collars are more recent innovations for which standardized documentation is less highly developed and, accordingly, may be less liquid than swaps. Swap agreements will tend to shift the Fund's investment exposure from one type of investment to another. For example, if the Fund agreed to exchange payments in dollars for payments in foreign currency, the swap agreement would tend to decrease the Fund's exposure to U.S. interest rates and increase its exposure to foreign currency and interest rates. Caps and floors have an effect similar to buying or writing options. Depending on how they are used, swap agreements may increase or decrease the overall volatility of the Fund's investments and its share price and yield. The most significant factor in the performance of swap agreements is the change in the specific interest rate, currency, or other factors that determine the amounts of payments due to and from the Fund. If a swap agreement calls for payments by the Fund, the Fund must be prepared to make such payments when due. In addition, if the counterparty's credit worthiness declined, the Fund will have contractual remedies available to it, but the value of the swap or other agreement would be likely to decline, potentially resulting in losses. The Fund expects to be able to eliminate its exposure under swap agreements either by assignment or other disposition, or by entering into an offsetting swap agreement with the same party or a similarly creditworthy party. The Fund will maintain appropriate liquid assets in a segregated custodial account to cover its current obligations under swap agreements. If the Fund enters into a swap agreement on other than a net basis, it will segregate assets with a value equal to the full amount of the Fund's accrued obligations under the agreement. Indexed Securities ------------------ The Fund may purchase securities whose prices are indexed to the prices of other securities, securities indices, currencies, precious metals or other commodities, or other financial indicators. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic. Gold-indexed securities, for example, typically provide for a maturity value that depends on the price of gold, resulting in a security whose price tends to rise and fall together with gold prices. Currency indexed securities typically are short-term to intermediate-term debt securities whose maturity values or interest rates are determined by reference to the values of one or more specified foreign currencies, and may offer higher yields than U.S. dollar-denominated securities of equivalent issuers. Currency-indexed securities may be positively or negatively indexed; that is, their maturity value may increase when the specified currency value increases, resulting in a security that performs similarly to a foreign-denominated instrument, or their maturity value may decline when foreign currencies increases, resulting in a security whose price characteristics are similar to a put on the underlying currency. Currency-indexed securities may also have prices that depend on the values of a number of different foreign currencies relative to each other. The performance of indexed securities depends to a great extent on the performance of the security, currency or other instrument to which they are indexed, and may also be influenced by interest rate changes in the U.S. and abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer's creditworthiness deteriorates. Recent issuers of indexed securities have included banks, corporations, and certain U.S. government agencies. Indexed securities may be more volatile than their underlying instruments. Repurchase Agreements --------------------- In a repurchase agreement, the Fund purchases a security and simultaneously commits to resell that security to the seller at an agreed upon price on an agreed upon date within a number of days from the date of purchase. The resale price reflects the purchase price plus an agreed upon incremental amount which is unrelated to the coupon rate or maturity of the purchased security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is in effect secured by the value (at least equal to the amount of the agreed upon resale price and marked to market daily) of the underlying security. The Fund may engage in a repurchase agreements with respect to any security in which it is authorized to invest. The Fund may enter into these arrangements with member banks of the Federal Reserve System or any domestic broker-dealer if the creditworthiness of the bank or broker-dealer has been determined by Thornburg to be satisfactory. These transactions may not provide the Fund with collateral marked-to-market during the term of the commitment. For purposes of the Investment Company Act of 1940, a repurchase agreement is deemed to be a loan from the Fund to the seller of the security subject to the repurchase agreement and is therefore subject to the Fund's investment restriction applicable to loans. It is not clear whether a court would consider the security purchased by the Fund subject to a repurchase agreement as being owned by the Fund or as being collateral for a loan by the Fund to the seller. In the event of the commencement of bankruptcy or insolvency proceedings with respect to the seller of the security before repurchase of the security under a repurchase agreement, the Fund may encounter delay and incur costs before being able to sell the security. Delays may involve loss of interest or decline in the price of the underlying security. If the court characterized the transaction as a loan and the Fund has not perfected a security interest in the underlying security, the Fund may be required to return the security to the seller's estate and be treated as an unsecured creditor of principal and income involved in the transaction. As with any unsecured debt obligation purchased for the Fund, Thornburg seeks to minimize the risk of loss through repurchase agreements by analyzing the creditworthiness of the obligor, in this case the seller of the security. Apart from the risk of bankruptcy or insolvency proceedings, there is also the risk that the seller may fail to repurchase the security, in which case the Fund may incur a loss if the proceeds to the Fund of the sale to a third party are less than the repurchase price. However, if the market value (including interest) of the security subject to the repurchase agreement becomes less than the repurchase price (including interest), the Fund will direct the seller of the security to deliver additional securities so that the market value (including interest) of all securities subject to the repurchase agreement will equal or exceed the repurchase price. It is possible that the Fund will be unsuccessful in seeking to impose on the seller a contractual obligation to deliver additional securities. Reverse Repurchase Agreements ----------------------------- In a reverse repurchase agreement, the Fund sells a portfolio instrument to another party, such as a bank or broker-dealer, in return for cash and agrees to repurchase the instrument at a particular price and time. While a reverse repurchase agreement is outstanding, the Fund will maintain appropriate liquid assets in a segregated custodial account to cover its obligation under the agreement. The Fund will enter into reverse repurchase agreements only with parties whose creditworthiness has been found satisfactory by Thornburg. Such transactions may increase fluctuations in the market value of the Fund's assets and may be viewed as a form of leverage. Securities Lending ------------------ The Fund may lend securities to parties such as broker-dealers or institutional investors. Securities lending allows the Fund to retain ownership of the securities loaned and, at the same time, to earn additional income. Since there may be delays in the recovery of loaned securities, or even a loss of rights in collateral supplied should the borrower fail financially, loans will be made only to parties deemed by Thornburg to be of good standing. Furthermore, they will only be made if, in Thornburg's judgment, the consideration to be earned from such loans would justify the risk. Thornburg understands that it is the current view of the SEC Staff that a Fund may engage in loan transactions only under the following conditions: (1) the Fund must receive 100% collateral in the form of cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the borrower must increase the collateral whenever the market value of the securities loaned (determined on a daily basis) rises above the value of the collateral; (3) after giving notice, the Fund must be able to terminate the loan at any time; (4) the Fund must receive reasonable interest on the loan or a flat fee from the borrower, as well as amounts equivalent to any dividends, interest, or other distributions on the securities loaned and to any increase in market value; (5) the Fund may pay only reasonable custodian fees in connection with the loan; and (6) the Trustees must be able to vote proxies on the securities loaned, either by terminating the loan or by entering into an alternative arrangement with the borrower. Cash received through loan transactions may be invested in any security in which the Fund is authorized to invest. Investing this cash subjects that investment, as well as the security loaned, to market forces (i.e., capital appreciation or depreciation). Lower-Quality Debt Securities ----------------------------- The Fund may purchase lower-quality debt securities (those rated below Baa by Moody's Investors Service, Inc. or BBB by Standard and Poor's Corporation, and unrated securities judged by Thornburg to be of equivalent quality) that have poor protection with respect to the payment of interest and repayment of principal, or may be in default. These securities are often considered to be speculative and involve greater risk of loss or price changes due to changes in the issuer's capacity to pay. The market prices of lower-quality debt securities may fluctuate more than those of higher-quality debt securities and may decline significantly in periods of general economic difficulty, which may follow periods of rising interest rates. While the market for high-yield corporate debt securities has been in existence for many years and has weathered previous economic downturns, the 1980's brought a dramatic increase in the use of such securities to fund highly leveraged corporate acquisitions and restructuring. Past experience may not provide an accurate indication of the future performance of the high-yield bond market, especially during periods of economic recession. In fact, from 1989 to 1991, the percentage of lower-quality securities that defaulted rose significantly above prior levels, although the default rate decreased in 1992 and 1993. The market for lower-quality debt securities may be thinner and less active than that for higher-quality debt securities, which can adversely affect the prices at which the former are sold. If market quotations are not available, lower-quality debt securities will be valued in accordance with procedures established by the Trustees, including the use of outside pricing services. Judgment plays a greater role in valuing high-yield corporate debt securities than is the case for securities for which more external sources for quotations and last-sale information are available. Adverse publicity and changing investor perceptions may affect the ability of outside pricing services to value lower-quality debt securities and the Fund's ability to sell these securities. Since the risk of default is higher for lower-quality debt securities, Thornburg's research and credit analysis are an especially important part of managing securities of this type held by the Fund. In considering investments for the Fund, Thornburg will attempt to identify those issuers of high-yielding securities whose financial condition is adequate to meet future obligations, has improved, or is expected to improve in the future. Thornburg's analysis focuses on relative values based on such factors as interest or dividend coverage, asset coverage, earnings prospects, and the experience and managerial strength of the issuer. The Fund may choose, at its expense or in conjunction with others, to pursue litigation or otherwise to exercise its rights as a security holder to seek to protect the interests of security holders if it determines this to be in the best interest of the Fund's shareholders. Foreign Investments ------------------- Foreign investments can involve significant risks in addition to the risks inherent in U.S. investments. The value of securities denominated in or indexed to foreign currencies, and of dividends and interest from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices on some foreign markets can be highly volatile. Many foreign countries lack uniform accounting and disclosure standards comparable to those applicable to U.S. companies, and it may be more difficult to obtain reliable information regarding an issuer's financial condition and operations. It may be more difficult to obtain and enforce a judgment against a foreign issuer. In addition, the costs of foreign investing, including withholding taxes, brokerage commissions, and custodial costs, are generally higher than for U.S. investments. Foreign markets may offer less protection to investors than U.S. markets. Foreign issuers, brokers, and securities markets may be subject to less government supervision. Foreign security trading practices, including those involving the release of assets in advance of payment, may involve increased risks in the event of a failed trade or the insolvency of a broker-dealer, and may involve substantial delays. It may also be difficult to enforce legal rights in foreign countries. Investing abroad also involves different political and economic risks. Foreign investments may be affected by actions of foreign governments adverse to the interests of U.S. investors, including the possibility of expropriation or nationalization of assets, confiscatory taxation, restrictions on U.S. investment or on the ability to repatriate assets or convert currency into U.S. dollars, or other government intervention. There may be a greater possibility of default by foreign governments or foreign government-sponsored enterprises, and securities issued or guaranteed by foreign governments, their agencies, instrumentalities, or political subdivisions, may or may not be supported by the full faith and credit and taxing power of the foreign government. Investments in foreign countries also involve a risk of local political, economic, or social instability, military action or unrest, or adverse diplomatic developments. There is no assurance that Thornburg will be able to anticipate these potential events or counter their effects. The considerations noted above generally are intensified for investments in developing countries. Developing countries may have relatively unstable governments, economies based on only a few industries, and securities markets that trade a small number of securities. The Fund may invest in foreign securities that impose restrictions on transfer within the U.S. or to U.S. persons. Although securities subject to transfer restrictions may be marketable abroad, they may be less liquid than foreign securities of the same class that are not subject to such restrictions. American Depository Receipts and European Depository Receipts (ADR's and EDR's) are certificates evidencing ownership of shares of a foreign- based issuer held in trust by a bank or similar financial institution. Designed for use in U.S. and European securities markets, respectively, ADR's and EDR's are alternatives to the purchase of the underlying securities in their national markets and currencies. Foreign Currency Transactions ----------------------------- The Fund may conduct foreign currency transactions on a spot (i.e., cash) basis or by entering into forward contracts to purchase or sell foreign currencies at a future date and price. The Fund will convert currency on a spot basis from time to time, and investors should be aware of the costs of currency conversion. Although foreign exchange dealers generally do not charge a fee for conversion, they do realize a profit based on the difference between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should the Fund desire to resell that currency to the dealer. Forward contracts are generally traded in an interbank market conducted directly between currency traders (usually large commercial banks) and their customers. The parties to a forward contract may agree to offset or terminate the contract before its maturity, or may hold the contract to maturity and complete the contemplated currency exchange. The Funds may use currency forward contracts for any purpose consistent with their investment objectives. The following discussion summarizes the principal currency management strategies involving forward contracts that could be used by the Fund. The Fund may also use swap agreements, indexed securities, and options and futures contracts relating to foreign currencies for the same purposes. When the Fund agrees to buy or sell a security denominated in a foreign currency, it may desire to "lock in" the U.S. dollar price of the security. By entering into a forward contract for the purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying security transaction, the Fund will be able to protect itself against an adverse change in foreign currency values between the date the security is purchased or sold and the date on which payment is made or received. This technique is sometimes referred to as a "settlement hedge" or "transaction hedge." The Fund also may enter into forward contracts to purchase or sell a foreign currency in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected by Thornburg. The Fund may also use forward contracts to hedge against a decline in the value of existing investments denominated in foreign currency. For example, if the Fund owned securities denominated in pounds sterling, it could enter into a forward contract to sell pounds sterling in return for U.S. dollars to hedge against possible declines in the pound's value. Such a hedge, sometimes referred to as a "position hedge," would tend to offset both positive and negative currency fluctuations, but would not offset changes in security values caused by other factors. The Fund could also hedge the position by selling another currency expected to perform similarly to the pound sterling for example, by entering into a forward contract to sell Deutschemarks or European Currency Units in return for U.S. dollars. This type of hedge, sometimes referred to as a "proxy hedge," could offer advantages in terms of cost, yield, or efficiency, but generally would not hedge currency exposure as effectively as a simple hedge into U.S. dollars. Proxy hedges may result in losses if the currency used to hedge does not perform similarly to the currency in which the hedged securities are denominated. The Fund may enter into forward contracts to shift investment exposure from one currency into another. This may include shifting exposure from U.S. dollars to a foreign currency, or from one foreign currency to another foreign currency. For example, if the Fund held investments denominated in deutschemarks, the Fund could enter into forward contracts to sell deutschemarks and purchase Swiss francs. This type of strategy, sometimes known as a "cross hedge," will tend to reduce or eliminate exposure to the currency that is sold, and increase exposure to the currency that is purchased, much as if the Fund had sold a security denominated in one currency and purchased an equivalent security denominated in another. Cross-hedges protect against losses resulting from a decline in the hedged currency, but will cause the Fund to assume the risk of fluctuations in the value of the currency it purchases. Under certain conditions, SEC guidelines require mutual funds to set aside appropriate liquid assets in a segregated custodial account to cover currency forward contracts. As required by SEC guidelines, the Fund will segregate assets to cover currency forward contracts, if any, whose purpose is essentially speculative. The Fund will not segregate assets to cover forward contracts entered into for hedging purposes, including settlement hedges, position hedges, and proxy hedges. Because currency control is of great importance to the issuing governments and influences economic planning and policy, purchases and sales of currency and related instruments can be negatively affected by government exchange controls, blockages, and manipulations or exchange restrictions imposed by governments. Those can result in losses to a Fund if it is unable to deliver or receive currency in settlement of obligations and could also cause hedges it has entered into to be rendered ineffective, resulting in full currency exposure as well as incurring transaction costs. Currency futures are also subject to risks pertaining to futures contracts generally. See "Futures Contracts," below. Options trading on currency futures is subject to market liquidity, and establishing and closing positions may be difficult. Currency exchange rates may fluctuate based on factors extrinsic to the issuing country's own economy. Successful use of currency management strategies will depend on Thornburg's skill in analyzing and predicting currency values. Currency management strategies may substantially change the Fund's investment exposure to changes in currency exchange rates, and could result in losses to the Fund if currencies do not perform as Thornburg anticipates. For example, if a currency's value rose at a time when Thornburg had hedged the Fund by selling that currency in exchange for dollars, the Fund would be unable to participate in the currency's appreciation. If Thornburg hedges currency exposure through proxy hedges, the Fund could realize currency losses from the hedge and the security position at the same time if the two currencies do not move in tandem. Similarly, if Thornburg increases the Fund's exposure to a foreign currency, and that currency's value declines, the Fund will realize a loss. There is no assurance that Thornburg's use of currency management strategies will be advantageous to the Fund or that it will hedge at an appropriate time. Limitations on Futures and Options Transactions ----------------------------------------------- The Fund will not: (a) sell futures contracts, purchase put options, or write call options if, as a result, more than 25% of the Fund's total assets would be hedged with futures and options under normal conditions; (b) purchase futures contracts or write put options if, as a result, the Fund's total obligations upon settlement or exercise of purchased futures contracts and written put options would exceed 25% of its total assets; or (c) purchase call options if, as a result, the current value of option premiums for call options purchased by the Fund would exceed 5% of the Fund's total assets. These limitations do not apply to options attached to or acquired or traded together with their underlying securities, and do not apply to securities that incorporate features similar to options. The above limitations on the Fund's investments in futures contracts and options, and the Fund's policies regarding futures contracts and options discussed elsewhere in this Statement of Additional Information, are not fundamental policies and may be changed as regulatory agencies permit. Real Estate-Related Instruments ------------------------------- Real estate-related instruments include real estate investment trusts, commercial and residential mortgage-backed securities, and real estate financings. Real estate-related instruments are sensitive to factors such as changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, over building, and the management skill and creditworthiness of the issuer. Real estate-related instruments may also be affected by tax and regulatory requirements, such as those relating to the environment. Futures Contracts ----------------- When the Fund purchases a futures contract, it agrees to purchase a specified underlying instrument at a specified future date. When the Fund sells a futures contract, it agrees to sell the underlying instrument at a specified future date. The price at which the purchase and sale will take place is fixed when the Fund enters into the contract. Some currently available futures contracts are based on specific securities, such as U.S. Treasury bonds or notes, and some are based on indices of securities prices, such as the Standard & Poor's 500 Composite Stock Price Index (S&P 500). Futures can be held until their delivery dates, or can be closed out before then if a liquid secondary market is available. The value of a futures contract tends to increase and decrease in tandem with the value of its underlying instrument. Therefore, purchasing futures contracts will tend to increase the Fund's exposure to positive and negative price fluctuations in the underlying instrument, much as if it had purchased the underlying instrument directly. When the Fund sells a futures contract, by contrast, the value of its futures position will tend to move in a direction contrary to the market. Selling futures contracts, therefore will tend to offset both positive and negative market price changes, much as if the underlying instrument had been sold. Futures Margin Payments ----------------------- The purchaser or seller of a futures contract is not required to deliver or pay for the underlying instrument unless the contract is held until the delivery date. However both the purchaser and seller are required to deposit "initial margin" with a futures broker, known as a futures commission merchant (FCM), when the contract is entered into. Initial margin deposits are typically equal to a percentage of the contract's value. If either party's position declines, that party will be required to make additional "variation margin" payments to settle the change in value on a daily basis. The party that has a gain may be entitled to receive all or a portion of this amount. Initial and variation margin payments do not constitute purchasing securities on margin for purposes of the Fund's investment limitations. In the event of the bankruptcy of an FCM that holds margin on behalf of the Fund, the Fund may be entitled to return of margin owed to it only in proportion to the amount received by the FCM's other customers, potentially resulting in losses to the Fund. Purchasing Put and Call Options ------------------------------- By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays the current market price for the option (known as the option premium). Options have various types of underlying instruments, including specific securities, indices of securities prices, and futures contracts. The Fund may terminate its position in a put option it has purchased by allowing it to expire or by exercising the option. If the option is allowed to expire, the Fund will lose the entire premium it paid. If the Fund exercises the option, it completes the sale of the underlying instrument at the strike price. The Fund may also terminate a put option position by closing it out in the secondary market at its current price, if a liquid secondary market exists. The buyer of a typical put option can expect to realize a gain if security prices fall substantially. However, if the underlying instrument's price does not fall enough to offset the cost of purchasing the option, a put buyer can expect to suffer a loss (limited to the amount of the premium paid, plus related transaction costs). The features of call options are essentially the same as those of put options, except that the purchaser of a call option obtains the right to purchase, rather than sell, the underlying instrument at the option's strike price. A call buyer typically attempts to participate in potential price increases of the underlying instrument with risk limited to the cost of the option if security prices fall. At the same time, the buyer can expect to suffer a loss if security prices do not rise sufficiently to offset the cost of the option. Writing Put and Call Options ---------------------------- When a Fund writes a put option, it takes the opposite side of the transaction from the option's purchaser. In return for receipt of the premium, the Fund assumes the obligation to pay the strike price for the option's underlying instrument if the other party to the option chooses to exercise it. When writing an option on a futures contract the Fund will be required to make margin payments to an FCM as described above for futures contracts. The Fund may seek to terminate its position in a put option it writes before exercise by closing out the option in the secondary market at its current price. If the secondary market is not liquid for a put option the Fund has written, however, the Fund must continue to be prepared to pay the strike price while the option is outstanding, regardless of price changes, and must continue to set aside assets to cover its position. If security prices rise, a put writer would generally expect to profit, although its gain would be limited to the amount of the premium it received. If security prices remain the same over time, it is likely that the writer will also profit, because it should be able to close out the option at a lower price. If security prices fall, the put writer would expect to suffer a loss. This loss should be less than the loss from purchasing the underlying instrument directly, however, because the premium received for writing the option should mitigate the effects of the decline. Writing a call option obligates the Fund to sell or deliver the option's underlying instrument, in return for the strike price, upon exercise of the option. The characteristics of writing call options are similar to those of writing put options, except that writing calls generally is a profitable strategy if prices remain the same or fall. Through receipt of the option premium, a call writer mitigates the effects of a price decline. At the same time, because a call writer must be prepared to deliver the underlying instrument in return for the strike price, even if its current value is greater, a call writer gives up some ability to participate in security price increases. Combined Positions ------------------ The Fund may purchase and write options in combination with each other, or in combination with futures or forward contracts, to adjust the risk and return characteristics of the overall position. For example, the Fund may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out. A combined transaction will usually contain elements of risk that are present in each of its component transactions. Although combined transactions are normally entered into based upon Thornburg's judgment that the combined strategies will reduce risk or otherwise achieve a portfolio management goal, it is possible that the combination will instead increase risk or hinder achievement of the goal. Correlation of Price Changes ---------------------------- Because there are a limited number of types of exchange-traded options and futures contracts, it is likely that the standardized contracts available will not match the Fund's current or anticipated investments exactly. The Fund may invest in options and futures contracts based on securities with different issuers, maturities, or other characteristics from the securities in which it typically invests, which involves a risk that the options or futures position will not track the performance of the Fund's other investments. Options and futures prices can also diverge from the prices of their underlying instruments, even if the underlying instruments match the Fund's investments well. Options and futures prices are affected by such factors as current and anticipated short-term interest rates, changes in volatility of the underlying instrument, and the time remaining until expiration of the contract, which may not affect security prices the same way. Imperfect correlation may also result from differing levels of demand in the options and futures markets and the securities markets, from structural differences in how options and futures and securities are traded, or from imposition of daily price fluctuation limits or trading halts. The Fund may purchase or sell options and futures contracts with a greater or lesser value than the securities it wishes to hedge or intends to purchase in order to attempt to compensate for differences in volatility between the contract and the securities, although this may not be successful in all cases. If price changes in the Fund's options or futures positions are poorly correlated with its other investments, the positions may fail to produce anticipated gains or result in losses that are not offset by gains in other investments. Liquidity of Options and Futures Contracts ------------------------------------------ There is no assurance a liquid secondary market will exist for any particular options or futures contract at any particular time. Options may have relatively low trading volume and liquidity if their strike prices are not close to the underlying instrument's current price. In addition, exchanges may establish daily price fluctuation limits for options and futures contracts, and may halt trading if a contract's price moves upward or downward more than the limit in a given day. On volatile trading days when the price fluctuation limit is reached or a trading halt is imposed, it may be impossible for the Fund to enter into new positions or close out existing positions. If the secondary market for a contract is not liquid because of price fluctuation limits or otherwise, it could prevent prompt liquidation of unfavorable positions, and potentially could require the Fund to continue to hold a position until delivery or expiration regardless of changes in its value. As a result, the Fund's access to other assets held to cover its options or futures positions could also be impaired. OTC Options ----------- Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size, and strike price, the terms of over-the-counter options (options not traded on exchanges) generally are established through negotiation with the other party to the option contract. While this type of arrangement allows the Fund greater flexibility to tailor an option to its needs, OTC options generally involve greater credit risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded. The staff of the SEC currently takes the position that OTC options are illiquid, and investments by the Fund in those instruments are subject to the Fund's limitation on investing no more than 10% of its assets in illiquid instruments. Options and Futures Relating to Foreign Currencies ------------------------------------------------- Currency futures contracts are similar to forward currency exchange contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures contracts call for payment or delivery in U.S. dollars. The underlying instrument of a currency option may be a foreign currency, which generally is purchased or delivered in exchange for U.S. dollars, or may be a futures contract. The purchaser of a currency call obtains the right to purchase the underlying currency, and the purchaser of a currency put obtains the right to sell the underlying currency. The uses and risks of currency options and futures are similar to options and futures relating to securities or indices, as discussed above. The Fund may purchase and sell currency futures and may purchase and write currency options to increase or decrease its exposure to different foreign currencies. The Fund also may purchase and write currency options in conjunction with each other or with currency futures or forward contracts. Currency futures and options values can be expected to correlate with exchange rates, but may not reflect other factors that affect the value of the Fund's investments. A currency hedge, for example, should protect a Yen-denominated security from a decline in the Yen, but will not protect the Fund against a price decline resulting from deterioration in the issuer's creditworthiness. Because the value of the Fund's foreign- denominated investments changes in response to many factors other than exchange rates, it may not be possible to match the amount of currency options and futures to the value of the Fund's investments exactly over time. See "Foreign Currency Transactions," above. Asset Coverage for Futures and Options Positions ------------------------------------------------ The Fund will comply with guidelines established by the SEC with respect to coverage of options and futures strategies by mutual funds, and if the guidelines so require will set aside appropriate liquid assets in a segregated custodial account in the amount prescribed. Securities held in a segregated account cannot be sold while the futures or option strategy is outstanding, unless they are replaced with other suitable assets. As a result, there is a possibility that segregation of large percentage of the Fund's assets could impede Fund management or the Fund's ability to meet redemption requests or other current obligations. Short Sales ----------- The Fund may enter into short sales with respect to stocks underlying its convertible security holdings. For example, if Thornburg anticipates a decline in the price of the stock underlying a convertible security the Fund holds, it may sell the stock short. If the stock price subsequently declines, the proceeds of the short sale could be expected to offset all or a portion of the effect of the stock's decline on the value of the convertible security. The Fund currently intends to hedge no more than 15% of its total assets with short sales on equity securities underlying its convertible security holdings under normal circumstances. When the Fund enters into a short sale, it will be required to set aside securities equivalent in kind and amount to those sold short (or securities convertible or exchangeable into such securities) and will be required to continue to hold them while the short sale is outstanding. The Fund will incur transaction costs, including interest expense, in connection with opening, maintaining , and closing short sales. INVESTMENT LIMITATIONS The following policies and limitations supplement those set forth in the Prospectus. Unless otherwise noted, whenever an investment policy or limitation states a maximum percentage of the Fund's assets that may be invested in any security or other asset, that percentage limitation will be determined immediately after and as a result of the Fund's acquisition of such security or other asset. Accordingly, any subsequent change in values, net assets, or other circumstances will not be considered when determining whether the investment complies with the Fund's investment policies and limitations. As a matter of fundamental policy, the Fund may not: (1) with respect to 75% of the Fund's total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities) if, as a result, (a) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (b) the Fund would hold more than 10% of the outstanding voting securities of that issuer; (2) issue senior securities, except as permitted under the Investment Company Act of 1940; (3) borrow money, except for temporary or emergency purposes or except in connection with reverse repurchase agreements; in an amount not exceeding 33-1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that come to exceed this amount will be reduced within three days (not including Sundays and holidays) to the extent necessary to comply with the 33-1/3% limitation; (4) underwrite any issue of securities (except to the extent that the Fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in the disposition of restricted securities); (5) purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities) if, as a result, more than 25% of the Fund's total assets would be invested in the securities of companies whose principal business activities are in the same industry; (6) purchase or sell real estate unless acquired as a result or ownership of securities or other instruments (but this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business); (7) purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities); or (8) lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties, but this limitation does not apply to purchases of debt securities or to repurchase agreements. The following investment limitations are not fundamental and may be changed without shareholder approval as to the Fund: (i) The Fund does not currently intend to sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in futures contracts and options are not deemed to constitute selling securities short. (ii) The Fund does not currently intend to purchase securities on margin, except that the Fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin. (iii) The Fund may borrow money only (a) from a bank or (b) by engaging in reverse repurchase agreements with any party. The Fund will not purchase any security while borrowings representing more than 5% of its total assets are outstanding. (iv) The Fund does not currently intend to purchase any security if, as a result, more than 10% of its net assets would be invested in securities that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. (v) The Fund does not currently intend to purchase interests in real estate investment trusts that are not readily marketable or interests in real estate limited partnerships that are not listed on an exchange or traded on the NASDAQ National Market System if, as a result, the sum of such interests and other investments considered illiquid under the limitation in the preceding paragraph would exceed the Fund's limitations on investments in illiquid securities. (vi) The Fund does not currently intend to (a) purchase securities of other investment companies, except in the open market where no commission except the ordinary broker's commission is paid, or (b) purchase or retain securities issued by other open-end investment companies. Limitations (a) and (b) do not apply to securities received as dividends, through offers of exchange, or as a result of a reorganization, consolidation, or merger. (vii) The Fund does not currently intend to purchase the securities of any issuer (other than securities issue or guaranteed by domestic or foreign governments or political subdivisions thereof) if, as a result, more than 5% of its total assets would be invested in the securities of business enterprises that, including predecessors, have a record of less than three years of continuous operation. (viii) The Fund does not currently intend to purchase warrants, valued at the lower of cost or market, in excess of 5% of the Fund's net assets. Included in that amount, but not to exceed 2% of the Fund's net assets, may be warrants that are not listed on the New York Stock Exchange or the American Stock exchange. Warrants acquired by the Fund in units or attached to securities are not subject to these restrictions. (ix) The Fund does not currently intend to invest in oil, gas or other mineral exploration or development programs or leases. (x) The Fund does not currently intend to purchase the securities of any issuer if those officers and Trustees of the trust and those officers and directors of Thornburg who individually own more than 1/2 of 1% of the securities of such issuer together own more than 5% of such issuer's securities. For the Fund's limitations on futures and options transactions, see the section entitled "Limitations on Futures and Options Transactions - Value Fund and Global Value Fund." YIELD AND RETURN COMPUTATION Performance and Portfolio Information ------------------------------------- The Fund will from time to time display performance information, including yield, dividend returns total return, and average annual total return, in advertising, sales literature, and reports to shareholders. Yield is computed by dividing the Fund's net interest and dividend income for a given 30 days or one month period by the maximum share offering price at the end of the period. The result is "annualized" to arrive at an annual percentage rate. In addition, the Fund may use the same method for 90 day or quarterly periods. Total return is the change in share value over time, assuming reinvestment of any dividends and capital gains. "Cumulative total return" describes total return over a stated period, while "average annual total return" is a hypothetical rate of return which, if achieved annually, would have produced the same cumulative total return if performance had been constant for the period shown. Average annual return tends to reduce variations in return over the period, and investors should recognize that the average figures are not the same as actual annual returns. The Fund may display return information for differing periods without annualizing the results and without taking sales charges into effect. All performance figures are calculated separately for Class A and Class C shares. The figures are historical, and do not predict future returns. Actual performance will depend upon the specific investments held by the Fund, and upon the Fund's expenses for the period. Yield quotations include a standardized calculation which computes yield for a 30-day or one month period by dividing net investment income per share during the period by the maximum offering price on the last day of the period. The standardized calculation will include the effect of semiannual compounding and will reflect amortization of premiums for those bonds which have a market value in excess of par. New schedules based on market value will be computed each month for amortizing premiums. With respect to mortgage-backed securities or other receivables-backed obligations, the Fund will amortize the discount or premium on the outstanding principal balance, based upon the cost of the security, over the remaining term of the security. Gains or losses attributable to actual monthly paydowns on mortgage-backed obligations will be reflected as increases or decreases to interest income during the period when such gains or losses are realized. Provided that any such quotation is also accompanied by the standardized calculation referred to above, the Fund may also quote non-standardized performance data for a specified period by dividing the net investment income per share for that period by either the Fund's average public offering price per share for that same period or the offering price per share on the first or last day of the period, and multiplying the result by 365 divided by the number of days in the specified period. For purposes of this non-standardized calculation, net investment income will include accrued interest income plus or minus any amortized purchase discount or premium less all accrued expenses. The primary differences between the results obtained using the standardized performance measure and any non-standardized performance measure will be caused by the following factors: (1) The non-standardized calculation may cover periods other than the 30-day or one month period required by the standardized calculation; (2) The non-standardized calculation may reflect amortization of premium based upon historical cost rather than market value; (3) The non-standardized calculation may reflect the average offering price per share for the period or the beginning offering price per share for the period, whereas the standardized calculation always will reflect the maximum offering price per share on the last day of the period; (4) The non-standardized calculation may reflect an offering price per share other than the maximum offering price, provided that any time the Fund's return is quoted in reports, sales literature or advertisements using a public offering price which is less than the Fund's maximum public offering price, the return computed by using the Fund's maximum public offering price also will be quoted in the same piece; (5) The non-standardized return quotation may include the effective return obtained by compounding the monthly dividends. For the Fund's investments denominated in foreign currencies, income and expenses are calculated first in their respective currencies, and are then converted to U.S. dollars, either when they are actually converted or at the end of the 30-day or one month period, whichever is earlier. Capital gains and losses generally are excluded from the calculation as are gains and losses from currency exchange rate fluctuations. Income calculated for the purposes of calculating the Fund's yields differs from income as determined for other accounting purposes. Because of the different accounting methods used, and because of the compounding of income assumed in yield calculations, the Fund's yield may not equal its distribution rate, the income paid to a shareholder's account, or the income reported in the Fund's financial statements. Yield information may be useful in reviewing the Fund's performance and in providing a basis for comparison with other investment alternatives. However, the Fund's yield fluctuates, unlike investments that pay a fixed interest rate over a stated period of time. When comparing investment alternatives, investors should also note the quality and maturity of the portfolio securities of respective investment companies they have chosen to consider. Total returns quoted in advertising reflect all aspects of the Fund's return, including the effect of reinvesting dividends and capital gain distributions, and any change in the Fund's net asset value (NAV) over a stated period. Average annual total returns are calculated by determining the growth or decline in value of a hypothetical historical investment in the Fund over a stated period, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. For example, a cumulative total return of 100% over ten years would produce an average annual return of 7.18%, which is the steady annual rate of return that would equal 100% growth on a compounded basis in ten years. While average annual returns are a convenient means of comparing investment alternatives, investors should realize that the Fund's performance is not constant over time, but changes from year to year, and the average annual returns represent averaged figures as opposed to the actual year-to-year performance of the Fund. In addition to average annual total returns, the Fund may quote unaveraged or cumulative total returns reflecting the simple change in value an investment over a stated period. Average annual and cumulative total returns may be quoted as a percentage or as a dollar amount, and may be calculated for a single investment, a series of investments, or a series of redemptions, over any time period. Total returns may be broken down into their components of income and capital (including capital gains and changes to share price) in order to illustrate the relationship of these factors and their contributions to total return. Total returns may be quoted on a before-tax or after-tax basis and may be quoted with or without taking the Fund's maximum sales charge into account. Excluding the Fund's sales charge from a total return calculation produces a higher total return figure. Total returns, yields, and other performance information may be quoted numerically or in a table, graph, or similar illustration. Charts and graphs using the Fund's net asset values, adjusted net asset values, and benchmark indices may be used to exhibit performance. An adjusted NAV includes any distributions paid by the Fund and reflects all elements of its return. Unless otherwise indicated, the Fund's adjusted NAV's are not adjusted for sales charges, if any. The Fund may illustrate performance using moving averages. A long- term moving average is the average of each week's adjusted closing NAV or total return for a specified period. A short-term moving average NAV is the average of each day's adjusted closing NAV for a specified period. Moving average activity indicators combine adjusted closing NAV's from the last business day of each week with moving averages for a specified period the produce indicators showing when an NAV has crossed, stayed above, or stayed below its moving average. The Fund's performance may be compared to the performance of other mutual funds in general, or to the performance of particular types of mutual funds. These comparisons may be expressed as mutual fund ranking prepared by Lipper Analytical Services, Inc. (Lipper), an independent service located in Summit, New Jersey that monitors the performance of mutual funds. Lipper generally ranks funds on the basis of total return, assuming reinvestment of distributions, but does not take sales charges or redemption fees into consideration, and is prepared without regard to tax consequences. In addition to the mutual fund rankings the Fund's performance may be compared to stock, bond, and money market mutual fund performance indices prepared by Lipper or other organizations. When comparing these indices, it is important to remember the risk and return characteristics of each type of investment. For example, while stock mutual funds may offer higher potential returns, they also carry the highest degree of share price volatility. Likewise, money market funds may offer greater stability of principal, but generally do not offer the higher potential returns from stock mutual funds. From time to time, the Fund's performance may also be compared to other mutual funds tracked by financial or business publications and periodicals. For example, the Fund may quote Morningstar, Inc. in its advertising materials. Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the basis of risk- adjusted performance. Rankings that compare the performance different Thornburg funds to one another in appropriate categories over specific periods of time may also be quoted in advertising. Performance rankings and ratings reported periodically in financial publications such as "MONEY" magazine, "Forbes" and "BARRON's" also may be used. These performance analyses ordinarily do not take sales charges into consideration and are prepared without regard to tax consequences. Thornburg may provide information designed to help individuals understand their investment goals and explore various financial strategies. Such information may include information about current economic market, and political conditions; materials that describe general principles of investing, such as asset allocation, diversification, risk tolerance, and goal setting; questionnaires designed to help create a personal financial profile; worksheets used to project savings needs bases on assumed rates of inflation and hypothetical rates of return; and action plans offering investment alternatives. Materials may also include discussions of other Thornburg mutual funds. Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical returns of the capital markets in the United States, including common stocks, small capitalization stocks, long-term corporate bonds, intermediate-term government bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation (based on the CPI), and combinations of various capital markets. The performance of these capital markets is based on the returns of differed indices. The Fund may use the performance of these capital markets in order to demonstrate general risk-versus-reward investment scenarios. Performance comparisons may also include the value of a hypothetical investment in any of these capital markets. The risks associated with the security types in the capital market may or may not correspond directly to those of the Fund. The Fund may also compare performance to that of other compilations or indices that may be developed and made available in the future, and advertising, sales literature and shareholder reports also may discuss aspects of periodic investment plans, dollar cost averaging and other techniques for investing to pay for education, retirement and other goals. In addition, the Fund may quote or reprint financial or business publications and periodicals, including model portfolios or allocations, as they relate to current economic and political conditions, fund management, portfolio composition, investment philosophy, investment techniques and the desirability of owning a particular mutual fund. The Fund may present its fund number, Quotron (trademark) number, and CUSIP number, and discuss or quote its current portfolio managers. The Fund may quote various measures of volatility and benchmark correlation in advertising. In addition, the Fund may compare these measures to those of other funds. Measures of volatility seek to compare the Fund's historical share price fluctuations or total returns to those of a benchmark. Measures of benchmark correlation indicate how valid a comparative benchmark may be. All measures of volatility and correlation are calculated using averages of historical data. In advertising, the Fund may also discuss or illustrate examples of interest rate sensitivity. Momentum Indicators show the Fund's price movements over specific periods of time. Each point on the momentum indicator represents the Fund's percentage change in price movements over that period. The Fund may advertise examples of the effects of periodic investment plans, including the principle of dollar cost averaging. In such a program, an investor invests a fixed dollar amount in a fund at periodic intervals, thereby purchasing fewer shares when prices are high and more shares when prices are low. While such a strategy does not assure a profit or guard against loss in a declining market, the investor's average cost per share can be lower than if fixed numbers of shares are purchased at the same intervals. In evaluating such a plan, investors should consider their ability to continue purchasing shares during periods of low price levels. The Fund may be available for purchase through retirement plans or other programs offering deferral of, or exemption from, income taxes, which may produce superior after-tax returns over time. For example, a $1,000 investment earning a taxable return of 10% annually would have an after-tax value of $1,949 after ten years, assuming tax was deducted from the return each year at a 31% rate. An equivalent tax-deferred investment would have an after- tax value of $2,100 after ten years, assuming tax was deducted at a 31% rate from the tax-deferred earnings at the end of the ten-year period. TAXES In General The Fund intends to elect and qualify for treatment as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). If in any year the Fund fails to qualify for the treatment conferred by Subchapter M of the Code, the Fund would be taxed as a corporation on its income. Distributions to the shareholders would be treated as ordinary income to the extent of the Fund's earnings and profits, and would be treated as nontaxable returns of capital to the extent of the shareholders' respective bases in their shares. Further distributions would be treated as amounts received on a sale or exchange or property. Additionally, if in any year the Fund qualified as a regulated investment company but failed to distribute all of its net income, the Fund would be taxable on the undistributed portion of its net income. Although the Fund intends to distribute all of its net income currently, it could have undistributed net income if, for example, expenses of the Fund were reduced or disallowed on audit. The Code imposes a nondeductible 4% excise tax on regulated investment companies which do not distribute to shareholders by the end of each calendar year the sum of (i) 98% of the company's net ordinary income realized in the year, (ii) 98% of the company's net capital gain income for the 12-month period ending on October 31 of that year, and (iii) the excess of (A) the sum of the amounts in (i) and (ii) for the prior calendar year plus all amounts from earlier years which are not treated as having been distributed under this provision, over (B) actual distributions for the preceding calendar years. The effect of this excise tax will be to cause the Fund to distribute substantially all of its income during the calendar year in which the income is earned. Shareholders will be taxed on the full amount of the distribution declared by the Fund for each such year, including declared distributions not actually paid until January 31 of the next calendar year. Each shareholder will be notified annually by the Fund as to the amount and characterization of distributions paid to or reinvested by the shareholder for the preceding taxable year. The Fund may be required to withhold federal income tax at a rate of 31% from distributions otherwise payable to a shareholder if (i) the shareholder has failed to furnish the Fund with his taxpayer identification number, (ii) the Fund is notified that the shareholder's number is incorrect, (iii) the Internal Revenue Service notifies the Fund that the shareholder has failed properly to report certain income, or (iv) when required to do so, the shareholder fails to certify under penalty of perjury that he is not subject to this withholding. Effective for sales charges incurred after October 3, 1989 if the shareholder disposes of shares within 90 days after purchasing them, and later acquires shares for which the sales charge is eliminated or reduced pursuant to a reinvestment right, then the original sales charge to the extent of the reduction is not included in the basis of the shares sold for determining gain or loss. Instead, the reduction is included in determining the basis of the reinvested shares. Distributions by the Fund result in a reduction in the net asset value of the Fund's shares. Should distributions reduce the net asset value below a shareholder's cost basis, the distribution would nevertheless be taxable to the shareholder as ordinary income or capital gain as described above, even though, from an investment standpoint, it may constitute a partial return of capital. In particular, investors should consider the tax implications of buying shares just prior to a distribution. The price of shares purchased at that time includes the amount of the forthcoming distribution. Those purchasing just prior to a distribution will then receive a partial return of capital upon the distribution, which will nevertheless be taxable to them. If the Fund holds zero coupon securities or other securities which are issued at discount, a portion of the difference between the issue price and the face amount of zero coupon securities ("original issue discount") will be treated as ordinary income if the Fund holds securities with original issue discount each year, although no current payments will be received by the Fund with respect to that income. This original issue discount will comprise a part of that investment company taxable income of the Fund which must be distributed to shareholders in order to maintain its qualification as a regulated investment company and to avoid federal income tax on the Fund. Federal Income Taxes -------------------- Gains (losses) attributable to foreign currency fluctuations are generally taxable as ordinary income and therefore will increase (decrease) dividend distributions. Net short-term capital gains are distributed as dividend income. The Fund will send each shareholder a notice in January describing the tax status of dividends and capital gain distributions for the prior year. Long-term capital gains earned by the Fund on the sale of securities and distributed to shareholders are federally taxable as long-term capital gains, regardless of the length of time shareholders have held their shares. If a shareholder receives a long-term capital gain distribution on shares of the Fund and such shares are held 12 months or less and are sold at a loss, the portion of the loss equal to the amount of the long-term capital gain distribution will be considered a long-term loss for tax purposes. Net short-term capital gains distributed by the Fund are taxable to shareholders as dividends, not as capital gains. Redemption or resale of shares will be a taxable transaction for federal income tax purposes and the shareholder will recognize gain or loss in an amount equal to the difference between the shareholder's basis in the shares and the amount realized by the shareholder on the redemption or resale. If the shareholder held the shares as capital assets, the gain or loss will be long-term if the shares were held for more than 12 months, and any such long-term gain generally will be subject to a maximum federal income tax rate of 20% to the extent that gain exceeds any net short-term capital losses realized by the taxpayer. Effective for sales charges incurred after October 3, 1989 if the shareholder disposes of shares within 90 days after purchasing them, and later acquires shares for which the sales charge is eliminated or reduced pursuant to a reinvestment right, then the original sales charge to the extent of the reduction is not included in the basis of the shares sold for determining gain or loss. Instead, the reduction is included in determining the basis of the reinvested shares. Foreign governments may withhold taxes on dividends and interest paid with respect to foreign securities typically at a rate between 10% and 35%. Foreign governments may also impose taxes on other payments or gains with respect to foreign securities. Because the Fund does not currently anticipate that securities of foreign issuers will constitute more than 50% of its total assets at the end of its fiscal year, shareholders of the Fund should not expect to claim a foreign tax credit or deduction on their federal income tax returns with respect to foreign taxes withheld. The foregoing is a general and abbreviated summary of the provisions of the Code and Treasury Regulations currently in effect as they directly govern the income taxation of Fund shareholders. This summary primarily addresses income tax consequences to shareholders who are individuals. The Code and Regulations are subject to change at any time, in some cases retroactively. Shareholders are advised to consult their own tax advisers for more detailed information concerning the federal tax consequences of an investment in the Fund. State and Local Income Tax Considerations ----------------------------------------- Shareholders may be subject to state and local taxes on Fund distributions, and capital gains taxation on disposition of shares. Shares also may be subject, in some jurisdictions, to state and local property taxes. A portion of the Fund's dividends derived from certain U.S. Government obligations may be exempt from state and local taxation. Shareholders should consult their own tax advisers for information concerning the state and local taxation of an investment in the Fund. DISTRIBUTIONS AND SHAREHOLDERS ACCOUNTS When an investor or the investor's financial advisor makes an initial investment in shares of the Fund, the Transfer Agent will open an account on the books of the Fund, and the investor or financial advisor will receive a confirmation of the opening of the account. Thereafter, whenever a transaction, other than the reinvestment of interest income, takes place in the account such as a purchase of additional shares or redemption of shares the investor or the financial advisor will receive a confirmation statement giving complete details of the transaction. Shareholders also will receive at least quarterly statements setting forth all distributions of interest income and other transactions in the account during the period and the balance of full and fractional shares. The final statement for the year will provide information for income tax purposes. The distributions of investment income, net of expenses, and the annual distributions of net realized capital gains, if any, will be credited to the accounts of shareholders in full and fractional shares of the Fund at net asset value on the payment or distribution date, as the case may be. Upon written notice to the Transfer Agent, a shareholder may elect to receive periodic distributions of net investment income in cash. Such an election will remain in effect until changed by written notice to the Transfer Agent, which change may be made at any time in the sole discretion of the shareholder. INVESTMENT ADVISER, INVESTMENT ADVISORY AGREEMENTS, AND ADMINISTRATIVE SERVICES AGREEMENTS Investment Advisory Agreement Pursuant to an Investment Advisory Agreement in respect of the Fund, Thornburg Investment Management, Inc. ("Thornburg"), 119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501, acts as investment adviser for, and will manage the investment and reinvestment of the assets of the Fund in accordance with the Fund's investment objectives and policies, subject to the general supervision and control of the trustees of Thornburg Investment Trust. Thornburg is paid a fee by the Fund, in the percentage amounts set forth in the table below: ------------------ Net Assets of Fund Advisory Fee Rate ------------------ ----------------- 0 to $500 million .875% $500 million to $1 billion .825% $1 billion to $1.5 billion .775% $1.5 billion to $2 billion .725% Over $2 billion .625% The fee paid by the Fund is allocated among the different classes of shares offered by the Fund based upon the average daily net assets of each class of shares. All fees and expenses are accrued daily and deducted before payment of dividends. In addition to the fees of Thornburg, the Fund will pay all other costs and expenses of its operations. The Fund also will bear the expenses of registering and qualifying the Fund and its shares for distribution under federal and state securities laws, including legal fees. The Trust's Trustees (including a majority of the Trustees who are not "interested persons") have approved the Investment Advisory Agreement applicable to the Value Fund. The Investment Advisory Agreement applicable to the Fund may be terminated by either party, at any time without penalty, upon 60 days' written notice, and will terminate automatically in the event of its assignment. Termination will not affect the right of Thornburg to receive payments on any unpaid balance of the compensation earned prior to termination. The Agreement further provides that in the absence of willful misfeasance, bad faith or gross negligence on the part of Thornburg, or of reckless disregard of its obligations and duties under the Agreement, Thornburg will not be liable for any action or failure to act in accordance with its duties thereunder. No amounts have been paid to Thornburg by the Fund under the Agreement as of the date of this Statement of Additional Information. Thornburg may (but is not obligated to) waive its rights to any portion of its fees in the future, and may use any portion of its fee for purposes of shareholder and administrative services and distribution of fund shares. H. Garrett Thornburg, Jr., Treasurer, Director and Chairman of the Board of Thornburg Limited Term Municipal Fund, Inc., and President and Trustee of Thornburg Investment Trust, is also Director and controlling shareholder of Thornburg. Administrative Services Agreement --------------------------------- Administrative services are provided to each class of shares issued by the Fund under an Administrative Services Agreement which requires the delivery of administrative functions necessary for the maintenance of the shareholders of the class, supervision and direction of shareholder communications, assistance and review in preparation of reports and other communications to shareholders, administration of shareholder assistance, supervision and review of bookkeeping, clerical, shareholder and account administration and accounting functions, supervision or conduct of regulatory compliance and legal affairs, review and administration of functions delivered by outside service providers to or for shareholders, and other related or similar functions as may from time to time be agreed. The Administrative Services Agreement specific to the Fund's Class A and Class C shares provides that the class will pay a fee calculated at an annual percentage of .125% of the class's average daily net assets, paid monthly, together with any applicable sales or similar tax. Services are currently provided under these agreements by Thornburg. No amounts have been paid to Thornburg by the Fund under its Administrative Services Agreements as of the date of this Statement of Additional Information. The agreements applicable to each class may be terminated by either party, at any time without penalty, upon 60 days' written notice, and will terminate automatically upon assignment. Termination will not affect the service provider's right to receive fees earned before termination. The agreements further provide that in the absence of willful misfeasance, bad faith or gross negligence on the part of the service provider, or reckless disregard of its duties thereunder, the provider will not be liable for any action or failure to act in accordance with its duties thereunder. SERVICE AND DISTRIBUTION PLANS Service Plans - All Classes The Fund has adopted a plan and agreement of distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("Service Plan") which is applicable to Class A and Class C shares of the Fund. The Plan permits the Fund to pay to Thornburg (in addition to the management fee and reimbursements described above) an annual amount not exceeding .25 of 1% of each class's assets to reimburse Thornburg for specific expenses incurred by it in connection with certain shareholder services and the distribution of that class's shares to investors. Thornburg may, but is not required to, expend additional amounts from its own resources in excess of the currently reimbursable amount of expenses. Reimbursable expenses include the payment of amounts, including incentive compensation, to securities dealers and other financial institutions, including banks (to the extent permissible under the Glass-Steagall Act and other federal banking laws), for administration and shareholder services. The nature and scope of services provided by dealers and other entities likely will vary from entity to entity, but may include, among other things, processing new account applications, preparing and transmitting to the Transfer Agent computer processable tapes of shareholder account transactions, and serving as a source of information to customers concerning the Fund and transactions with the Fund. The Service Plan does not provide for accrued but unpaid reimbursements to be carried over and reimbursed to Thornburg in later years. The Fund has not paid reimbursements to Thornburg under the Service Plan as of the date of this Statement of Additional Information. Class C Distribution Plan The Fund has adopted a plan and agreement of distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940, applicable only to the Class C shares of the Fund ("Distribution Plan"). The Distribution Plan provides for the Fund's payment to the Fund's principal underwriter, Thornburg Securities Corporation ("TSC") on a monthly basis of an annual distribution fee of .75% of the average daily net assets attributable to the Fund's Class C shares. The purpose of the Distribution Plan applicable to the Fund is to compensate TSC for its services in promoting the sale of Class C shares of the Fund. TSC expects to pay compensation to dealers and others selling Class C shares from amounts it receives under the Distribution Plan. TSC also may incur additional distribution-related expenses in connection with its promotion of Class C shares sales, including payment of additional incentives to dealers, advertising and other promotional activities and the hiring of other persons to promote the sale of shares. Because the Distribution Plan is a compensation type plan, TSC can earn a profit in any year when Fund payments exceed TSC's actual expenses. The Funds are not liable for any expenses incurred by TSC in excess of the compensation it received from the Fund. The Fund has not paid any amounts to TSC under the Distribution Plan as of the date of this Statement of Additional Information. PORTFOLIO TRANSACTIONS All orders for the purchase or sale of portfolio securities are placed on behalf of the Fund by the Fund's investment adviser, Thornburg Investment Management, Inc. (Thornburg) pursuant to its authority under the Fund's investment advisory agreement. Thornburg also is responsible for the placement of transaction orders for other clients for whom it acts as investment adviser. Thornburg places orders for transactions in portfolio securities for the Fund in such a manner as, in the opinion of Thornburg, will offer the best price and market for the execution of these transactions. In selecting broker dealers, subject to applicable legal requirements, Thornburg considers various relevant factors, including, but not limited to: the size and type of the transaction; the nature and character of the markets for the security to be purchases or sold; the execution efficiency, settlement capability, and financial condition of the broker-dealer firm; the broker-dealer's execution services rendered on a continuing basis; and the reasonableness of any commissions; and arrangements for payment of Fund expenses. Generally commissions for foreign investments traded will be higher than for U.S. investments and may not be subject to negotiation. Thornburg may execute the Fund's portfolio transactions with broker- dealers who provide research and execution services to the Fund. Such services may include advice concerning the value of securities; the availability of securities or the purchasers or sellers of securities; furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and performance of accounts; and effecting securities transactions and performing functions incidental thereto (such as clearance and settlement). The selection of such broker-dealers is made by Thornburg based upon the quality of such research and execution services provided. The receipt of research from broker-dealers who execute transactions on behalf of the Fund may be useful to Thornburg in rendering investment management services to the Fund. The receipt of such research may not reduce Thornburg's normal independent research activities; however, it may enable Thornburg to avoid the additional expenses that could be incurred if Thornburg tried to develop comparable information through its own efforts. Subject to applicable limitations of the federal securities laws, broker-dealers may receive commissions for agency transactions that are in excess of the amount of commissions charged by other broker-dealers in recognition of their research and execution services. In order to cause the Fund to pay such higher commissions, Thornburg must determine in good faith that such commissions are reasonable in relation to the value of the brokerage and research services provided by the executing broker-dealers, viewed in terms of a particular transaction or Thornburg's overall responsibilities to the Fund. In reaching this determination, Thornburg will not attempt to place a specific dollar value on the brokerage and research services provided, or to determine what portion of the compensation would be related to those services. Thornburg is authorized to use research services provided by and to place portfolio transactions with brokerage firms that have provided assistance in the distribution of shares of the Funds to the extent permitted by law. Thornburg may use research services provided by and place agency transactions with Thornburg Securities Corporation (TSC) if the commissions are fair, reasonable, and comparable to commissions charged by non-affiliated, qualified brokerage firms for similar services. Thornburg may allocate brokerage transactions to broker-dealers who have entered into arrangements with Thornburg under which the broker-dealer allocates a portion of the commissions paid by the Fund toward payment of the Fund's expenses, such as transfer agent fees or custodian fees. The transaction quality must, however, be comparable to those of other qualified broker- dealers. Thornburg reserves the right to manage other investment companies and investment accounts for other clients which may have investment objectives similar to those of the Fund. Subject to applicable laws and regulations, Thornburg will attempt to allocate equitably portfolio transactions among the Fund and the portfolios of its other clients purchasing securities whenever decisions are made to purchase or sell securities by the Fund and one or more of such other clients simultaneously. In making such allocations the main factors to be considered will be the respective investment objectives of the Fund and the other clients, the size of investment commitments generally held by the Fund and the other clients and opinions of the persons responsible for recommending investments to the Fund and such other clients. While this procedure could have a detrimental effect on the price or amount of the securities available to the Fund from time to time, it is the opinion of the Fund's Trustees that the benefits available from Thornburg's organization will outweigh any disadvantage that may arise from exposure to simultaneous transactions. The Trustees of the Fund periodically review Thornburg's performance of its responsibilities in connection with the placement of portfolio transactions for the Fund. The Fund is a separate "series" or investment portfolio of Thornburg Investment Trust, a Massachusetts business trust (the "Trust"). The management of the Fund, including the general supervision of Thornburg's performance of its duties under the Investment Advisory Agreement and Administrative Services Agreements applicable to the Fund, is the responsibility of the Trust's Trustees. There are five Trustees, one of whom is an "interested person" (as the term "interested" is defined in the Investment Company Act of 1940) and four of whom are "disinterested" persons. The names of Trustees and officers and their principal occupations and affiliations during the past five years are set forth below, with the Trustee who is an "interested person" of the Trust indicated by an asterisk. H. Garrett Thornburg, Jr.,* 54 Trustee; Director, Chairman (since 1987) Chairman and of Trustees Treasurer (since its inception in 1984) of Thornburg Limited Term Municipal Fund, Inc.; Chairman and Director of Thornburg Mortgage Advisory Corporation since its formation in 1989; Chairman and Director of Thornburg Mortgage Asset Corporation (real estate investment trust) since its formation in 1993; Executive Vice President of Daily Tax Free Income Fund, Inc. (mutual fund) since its formation in 1982 and a Director from 1982 to June 1993; Director and Treasurer of Thornburg since its formation in 1982 and President from 1982 to August 1997. David A. Ater, 53 Trustee Principal in Ater & Ater Associates, Santa Fe, New Mexico (developer, planner and broker of residential and commercial real estate) since 1990; owner, developer and broker for various real estate projects; Director of Thornburg Mortgage Asset Corporation (real estate investment trust) since 1994. J. Burchenal Ault, 72 Trustee Independent Fund Raising Counsel; Trustee, Woodrow Wilson International Center for Scholars; Director of Thornburg Limited Term Municipal Fund, Inc. since its formation in 1984; Director of Farrar, Strauss & Giroux (publishers) since 1968. Forrest S. Smith, 68 Trustee Attorney in private practice and shareholder Catron, Catron & Sawtell (law firm), Santa Fe, New Mexico. James W. Weyhrauch, 40 Trustee Executive Vice President and Director, Nambe' Mills, Inc. (manufacturer), Santa Fe, New Mexico. Brian J. McMahon, 44 President President of Thornburg Limited Assistant Secretary Term Municipal Fund,Inc. since 1987; Managing Director of Thornburg since December 1985, President of Thornburg since August 1997 and a Vice President from April 1984 to August 1997. Steven J. Bohlin, 40 Vice President Vice President of Thornburg Treasurer Limited Term Municipal Fund, Inc. since 1988; a Managing Director and a Vice President of Thornburg. Dawn B. Fischer, 52 Secretary Secretary of Thornburg Limited Assistant Treasurer Term Municipal Fund, Inc. since its formation in 1984; Vice President, Daily Tax Free Income Fund, Inc. (Mutual Fund) since 1989; Managing Director of Thornburg since 1985 and a Vice President since January 1984. William Fries, 59 Vice President Managing Director of Thornburg since 1995 and Vice President of Thornburg Limited Term Municipal Fund, Inc. since 1995; Vice President of USAA Investment Management Company from 1982 to 1995. Ken Ziesenheim, 45 Vice President Managing Director of Thornburg since 1995; Vice President of Thornburg Limited Term Municipal Fund, Inc. since 1995; President of Thornburg Securities Corporation since 1995; Senior Vice President of Financial Services, Raymond James & Associates, Inc. from 1991 to 1995. George Strickland, 36 Vice President Assistant Vice President of Thornburg Limited Term Municipal Fund, Inc. from 1992 to 1998, and Vice President from 1998; Associate of Thornburg since July 1991 and a Managing Director commencing in 1996; Vice President of Thornburg since December 1995. Leigh Moiola, 32 Assistant Vice Assistant Vice President of President Thornburg Limited Term Municipal Fund, Inc. from 1997 to 1999, and Vice President since 1999; Vice President of Thornburg since 1995 and Managing Director commencing in 1998. Jack Lallement, 61 Assistant Vice Assistance Vice President of President Thornburg Limited Term Municipal Fund, Inc. since September 1997; Fund Accountant for Thornburg since March 1997; Chief Financial Officer/Controller for Zuni Rental, Inc. (equipment leasing and sales), Albuquerque, New Mexico from February 1995 to March 1997; Chief Financial Officer/Controller, Montgomery & Andrews, P.A. (law firm), Santa Fe, New Mexico from March 1987 to August 1994. Thomas Garcia, 29 Assistant Vice Assistant Vice President of President Thornburg Limited Term Municipal Fund, Inc. since 1997; Fund Accountant for Thornburg from 1994 to 1998; Portfolio Analyst from 1998 to present; Vice President since February 2000; since 1994; BBA, University of New Mexico, 1993. Van J. Billops, 33 Assistant Vice Assistant Vice President of President Thornburg Limited Term Municipal Fund, Inc. since 1997; Fund Accountant for Thornburg since 1993. Dale Van Scoyk, 52 Vice Vice President of Thornburg President Limited Term Municipal Fund, Inc. since 1999; Account Manager for Thornburg since 1997; Vice President since 1999, and Managing Director since 1999 National Account Manager for the Heartland Funds 1993 - 1997. Sophia Franco, 29 Assistant Vice Assistant Vice President of President Thornburg Limited Term Municipal Fund, Inc. since 1998; Associate of Thornburg since 1994. Claiborne Booker, 38 Assistant Vice Assistant Vice President of President Thornburg Limited Term Municipal Fund, Inc. from 1998 to 2000 and Vice President since June, 2000; Associate of Thornburg since 1998; Partner, Brinson Partners, Inc., 1994 - 1997. Kerry Lee, 33 Vice Assistant Vice President of President Thornburg Limited Term Municipal Fund, Inc. from 1998 to 1999, and vice President since 1999; Associate of Thornburg since 1995. Richard Brooks, 53 Assistant Vice Assistant Vice President of President Thornburg Limited Term Municipal Fund, Inc. since 1998; Associate of Thornburg since 1994. Yvette Lucero, 28 Assistant Vice Assistant Vice President of President Thornburg Limited Term Municipal Fund, Inc. since 1999; Associate of Thornburg since 1997; Sales Associate, Virginia Trading Post, 1992-1997. Christopher Ihlefeld, 30 Assistant Vice Assistant Vice President of President Thornburg Limited Term Municipal Fund, Inc. since 1999; Associate of Thornburg since 1996; Student, College of Santa Fe 1996-1998; Student, Western New Mexico University, 1995-1996; Student, Rollins College, 1991-1994. The business address of each person listed is 119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501. Mr. Thornburg is a Director of TSC, Executive Vice President of Daily Tax-Free Income Fund, Inc., and a Chairman and Treasurer of Thornburg Limited Term Municipal Fund, Inc. Mr. Ziesenheim and Ms. Fischer are president and secretary, respectively, of TSC. The officers and Trustees affiliated with Thornburg serve without any compensation from the Trust. The Trust pays each Trustee who is not an employee of Thornburg or an affiliated person an annual fee of $2,000 plus $1,000 for each meeting of the Trustees attended by the Trustee. In addition, the Trust pays a $4,000 annual stipend to each member of the audit committee, payable in quarterly installments, and reimburses all Trustees for travel and out-of-pocket expenses incurred in connection with attending those meetings. The Trustees have established one committee, the audit committee, on which Messrs. Ater, Ault, Smith and Weyhrauch currently serve. The Trust paid fees to the Trustees during the year ended September 30, 1999 as follows: Pension or Retirement Estimated Total Aggregate Benefits Annual Compensation Compensation Accrued as Benefits from Trust and from Part of Upon Fund Complex Trustee Trust Fund Expenses Retirement Paid to Trustee -------- ------------ ------------- ------------- --------------- H. Garret Thornburg, Jr. 0 0 0 0 David A. $7,000 0 0 $7,000 Ater J. Burchenal $7,000 0 0 $14,000 Ault Forrest S. $7,000 0 0 $7,000 Smith James W. $6,000 0 0 $6,000 Weyhrauch The Trust does not pay retirement or pension benefits. NET ASSET VALUE The Fund will calculate its net asset value at least once daily on days when the New York Stock Exchange is open for trading, and more frequently if deemed desirable by the Fund. Net asset value will not be calculated on New Year's Day, Washington's Birthday (on the third Monday in February), Good Friday, Memorial Day (on the last Monday in May), Independence Day, Labor Day, Thanksgiving Day, Christmas Day, on the preceding Friday if any of the foregoing holidays falls on a Saturday, and on the following Monday if any of the foregoing holidays falls on a Sunday. Under the Investment Company Act of 1940, net asset value must be computed at least once daily on each day (i) in which there is a sufficient degree of trading in the Fund's portfolio securities that the current net asset value of its shares might be materially affected by changes in the value of such securities and (ii) on which an order for purchase or redemption of its shares is received. DISTRIBUTOR Pursuant to a Distribution Agreement with Thornburg Investment Trust, Thornburg Securities Corporation ("TSC") acts as principal underwriter for the Fund. The Fund does not bear selling expenses except (i) those involved in registering its shares with the Securities and Exchange Commission and qualifying them or the Fund with state regulatory authorities, and (ii) expenses paid under the Service and Distribution Plans and which might be considered selling expenses. Terms of continuation, termination and assignment under the Distribution Agreement are identical to those described above with regard to the Investment Advisory Agreements, except that termination other than upon assignment requires six months' notice. H. Garrett Thornburg, Jr., Treasurer, a Director and Chairman of the Board of Thornburg Limited Term Municipal Fund, Inc. and President and a Trustee of Thornburg Investment Trust, is also Director and controlling stockholder of TSC. ADDITIONAL INFORMATION RESPECTING PURCHASE AND REDEMPTION OF SHARES To the extent consistent with state and federal law, the Fund may make payments of the redemption price either in cash or in kind. The Trust has elected to pay in cash all requests for redemption by any shareholder. They may, however, limit such cash in respect to each shareholder during any 90- day period to the lesser of $250,000 or 1% of the net asset value of a Fund at the beginning of such period. This election has been made pursuant to Rule 18f-1 under the Investment Company Act of 1940 and is irrevocable while the Rule is in effect unless the Securities and Exchange Commission, by order, permits its withdrawal. In the case of a redemption in kind, securities delivered in payment for shares would be valued at the same value assigned to them in computing the net asset value per share of the Fund. A shareholder receiving such securities would incur brokerage costs when selling the securities. INDEPENDENT AUDITORS PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York 10036 is the independent auditor of the Fund. PART C OTHER INFORMATION Items 22 and 23. Financial Statements and Exhibits. (a) Financial Statements None filed with this post-effective amendment. (b) Exhibits The following Exhibits are incorporated herein by reference to Registrant's Registration Statement on Form N-1A as initially filed on June 12, 1987. (a) Limited Term Trust, Agreement and Declaration of Trust, dated June 3, 1987. (6) Not applicable. (e) Form of Agency Agreement. (h) Form of Subscription to Shares by Thornburg Management Company, Inc. The following exhibits are incorporated herein by reference to Registrant's pre-effective amendment No. 1 to its Registration Statement on Form N-1A as filed on October 28, 1987: (a) Thornburg Income Trust - First Amendment and Supplement to Agreement and Declaration of Trust, dated August 11, 1987. (g) Form of Custodian Agreement between Registrant and State Street Bank and Trust Company. This exhibit supersedes the form of Custodian Agreement filed with the Registrant's initial Registration Statement on Form N-1A on June 12, 1987. (h) Form of Transfer Agency Agreement between Registrant and State Street Bank and Trust Company. This exhibit supersedes the form of Transfer Agency Agreement filed with the Registrant's initial Registration Statement on Form N-1A on June 12, 1987. The following exhibits are incorporated herein by reference to Registrant's post-effective amendment No. 1 to its Registration Statement on Form N-1A as filed on March 3, 1988: (a) Thornburg Income Trust-Second Amendment and Supplement to Agreement and Declaration of Trust, dated October 28, 1987. The following exhibits are incorporated herein by reference to Registrant's post-effective amendment No. 7 to its Registration Statement on Form N-1A as filed on April 19, 1991: (q) Powers of Attorney from Messrs. Smith and Thornburg. The following exhibits are incorporated herein by reference to Registrant's post-effective amendment No. 9 to its Registration Statement on Form N-1A as filed on March 3, 1992: (a) Power of Attorney from J. Burchenal Ault The following exhibits are incorporated herein by reference to the Registrant's post-effective amendment No. 10 to its Registration Statement on Form N-1A as filed on July 23, 1992: (h) Form of Subscription to Shares The following exhibits are incorporated herein by reference to the Registrant's post-effective amendment No. 13 to its Registration Statement on Form N-1A as filed on December 3, 1993: (a) Thornburg Income Trust -- Third, Fourth, Fifth, Sixth and Seventh Amendments and Supplements to Agreement and Declaration of Trust The following exhibits are incorporated herein by reference to the Registrant's post-effective amendment No. 14 to its Registration Statement on Form N-1A as filed on May 13, 1994: (9) Power of attorney (B. McMahon) The following exhibits are incorporated herein by reference to the Registrant's post-effective amendment no. 17 to its Registration Statement on Form N-1A as filed on July 27, 1994: (a) Thornburg Income Trust Amended and Restated Designation of Series. (m.1) Form of Plan and Agreement pursuant to Rule 12b-1 (Class B Distribution Plan) (m.2) Form of Plan and Agreement pursuant to Rule 12b-1 (Class C Distribution Plan) The following exhibits are incorporated herein by reference to the Registrant's post-effective amendment no. 18 to its Registration Statement on Form N-1A as filed on December 3, 1994: (m) Form of Plan and Agreement pursuant to Rule 12b-1 (Class B Service Plan) (m.1) Form of Plan and Agreement pursuant to Rule 12b-1 (Class C Service Plan) The following exhibits are incorporated by reference to the Registrant's post-effective amendment no. 20 to its Registration Statement on Form N-1A as filed on July 5, 1995: (a.1) Thornburg Income Trust - Ninth Amendment and Supplement to Agreement and Declaration of Trust (a.2) Thornburg Income Trust - Tenth Amendment and Supplement to Agreement and Declaration of Trust (15.2) Form of Plan and Agreement Pursuant to Rule 12b-1 (Class B Distribution Plan) - Thornburg Value Fund (q) Power of attorney from David A. Ater The following exhibit is incorporated by reference to the Registrant's post-effective amendment no. 22 to its Registration Statement on Form N-1A as filed on October 2, 1995: (a) Thornburg Income Trust - Corrected Tenth Amendment and Supplement to Agreement and Declaration of Trust The following exhibit is incorporated by reference to the Registrant's post-effective amendment no. 26 to its Registration Statement on Form N-1A as filed on May 6, 1996: (a) First Supplement to Amended and Restated Designation of Series The following exhibit is incorporated by reference to the Registrant's post-effective amendment no. 27 to its Registration Statement on Form N-1A as filed on August 30, 1996: (h) Form of Administrative Services Agreement The following exhibits are incorporated by reference from the Registrant's post-effective amendment no. 29 to its Registration Statement on Form N-1A as filed on March 14, 1997: (a.1) Eleventh Amendment and Supplement to Agreement and Declaration of Trust (a.2) Twelfth Amendment and Supplement to Agreement and Declaration of Trust (q) Power of attorney from Brian J. McMahon (q) Power of attorney from James W. Weyhrauch The following exhibits are incorporated by reference from the Registrant's post-effective amendment no. 32 to its Registration Statement on Form N-1A as filed on February 17, 1998: (d) Amended and Restated Investment Advisory Agreement (h) Administrative Services Agreement (Class A and Class C shares) (h) Administrative Services Agreement (Class I Shares) (r) Memorandum of Reimbursement (m.1) Plan and Agreement of Distribution Pursuant to Rule 12b-1 (Service Plan - Classes A, C and I) (m.2) Plan and Agreement of Distribution Pursuant to Rule 12b-1 (Distribution Plan - Class C) The following exhibit is incorporated by reference from Registrant's post-effective amendment no. 33 to its Registration Statement on Form N-1A as filed on March 10, 1998: (a) Thirteenth Amendment and Supplement to Agreement and Declaration of Trust The following exhibits are incorporated by reference from Registrant's post-effective amendment no. 42 to its Registration Statement on Form N-1A as filed on August 31, 2000: (b) Amended By-Laws of Thornburg Investment Trust (June 1, 2000) (j.1) Consent of counsel to be named in registration statement. (j.2) Consent of independent auditors (PricewaterhouseCoopers, LLP) to be named in registration statement. (j.3) Consent of independent auditors (McGladrey & Pullen, LLP) to be named in registration statement. (e) Thornburg Investment Trust Amended Distribution Agreement (April 4, 2000) (m) Amended Plan and Agreement of Distribution Pursuant to Rule 12b-1 (Distribution Plan - Class B)(April 4, 2000) (n.1) Financial Data Schedule - Thornburg Intermediate Municipal Fund Class A (six months ended 3/31/00) (n.2) Financial Data Schedule - Thornburg Intermediate Municipal Fund Class C (six months ended 3/31/00) (n.3) Financial Data Schedule - Thornburg Intermediate Municipal Fund Class I (six months ended 3/31/00) (n.4) Financial Data Schedule - Thornburg New Mexico Intermediate Municipal Fund Class A (six months ended 3/31/00) (n.5) Financial Data Schedule - Thornburg New Mexico Intermediate Municipal Fund Class D (six months ended 3/31/00) (n.6) Financial Data Schedule - Thornburg Florida Intermediate Municipal Fund Class A (six months ended 3/31/00) (n.7) Financial Data Schedule - Thornburg New York Intermediate Municipal Fund Class A (year ended 6/30/00) (n.8) Financial Data Schedule - Thornburg Limited Term U.S. Government Fund Class A (six months ended 3/31/00) (n.9) Financial Data Schedule - Thornburg Limited Term U.S. Government Fund Class C (six months ended 3/31/00) (n.10) Financial Data Schedule - Thornburg Limited Term U.S. Government Fund Class I (six months ended 3/31/00) (n.11) Financial Data Schedule - Thornburg Limited Term Income Fund Class A (six months ended 3/31/00) (n.12) Financial Data Schedule - Thornburg Limited Term Income Fund Class C (six months ended 3/31/00) (n.13) Financial Data Schedule - Thornburg Limited Term Income Fund Class I (six months ended 3/31/00) (n.14) Financial Data Schedule - Thornburg Value Fund Class A (six months ended 3/31/00) (n.15) Financial Data Schedule - Thornburg Value Fund Class C (six months ended 3/31/00) (n.16) Financial Data Schedule - Thornburg Value Fund Class I (six months ended 3/31/00) (n.17) Financial Data Schedule - Thornburg Global Value Fund Class A (six months ended 3/31/00) (n.18) Financial Data Schedule - Thornburg Global Value Fund Class C (six months ended 3/31/00) (o) Thornburg Investment Trust Plan for Multiple Class Distribution July 1, 1999 (as revised December 6, 1999) (p.1) Thornburg Investment Trust Code of Ethics (revised June 1, 2000) (p.2) Thornburg Investment Management, Inc./Thornburg Securities Corporation Code of Ethics (revised December 1999 and April 2000) The following exhibits are filed herewith: (a) Fourteenth Amendment and Supplement to Agreement and Declaration of Trust (j.1) Consent of Counsel to be named in registration statement (j.2) Consent of Independent Auditors Item 24. Persons Controlled By or Under Common Control With Registrant. Not applicable. Item 25. Indemnification. (1) Please see Section 10.2 of the Agreement and Declaration of Trust filed as Exhibit a. Section 10.2 generally provides that each of the Trust's officers and Trustees will be indemnified by the Trust against liability and expenses in connection with his having been a Trustee or officer unless it is determined that the individual is liable by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, or if the individual did not act in good faith in the reasonable belief that the action was in the Trust's best interest. (2) Please see Section 8 of the Distribution Agreement filed as Exhibit (e). Section 7 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 it is intended that the Trustees and officers of the Trust will become insured, under a joint professional and directors and officers liability policy. The described individuals are referred to as the "insureds." The policy covers amounts which the insureds become legally obligated to pay by reason of the act, error, omission, misstatement, misleading statement or neglect or breach of duty in the performance of their duties as directors, trustees and officers. In addition, the policy covers 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 undertaking set forth in the rules promulgated by the Securities and Exchange Commission: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to Trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policies expressed in such Act and that if a claim for indemnification against such liabilities other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in such Act and will be governed by the final adjudication of such issue. Item 26. Business and Other Connections of the Investment Adviser. See "MANAGEMENT" in the Statement of Additional Information. Item 27. Principal Underwriters. (a) The principal underwriter for the Registrant will be Thornburg Securities Corporation ("TSC"). TSC is registered as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. TSC was formed for the purpose of distributing the shares of the Registrant's series and other registered investment companies sponsored by its affiliates, and does not currently engage in the general securities business. (b) The address of each of the directors and officers of TSC is 119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501. Positions and Positions and Offices Offices Name with TSC with Registrant ---------------------- -------------- -------------------- H. Garrett Thornburg, Jr. Director Trustee; President Kenneth Ziesenheim President Vice President Dawn B. Fischer Secretary Secretary and Assistant Treasurer (c) Not applicable. Item 28. Location of Accounts and Records. All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the rules thereunder are maintained at the offices of State Street Bank and Trust Company, at 470 Atlantic Avenue, Fifth Floor, Boston, Massachusetts 02210. Item 29. Management Services. The Registrant and Thornburg Investment Management, Inc. ("Thornburg") have agreed that Thornburg will perform for the Registrant certain telephone answering services previously performed by the Registrant's transfer agent, National Financial Data Services, Inc. ("NFDS"). These telephone services include answering telephone calls placed to the Registrant or its transfer agent by shareholders, securities dealers and others through the Registrant's toll free number, and responding to those telephone calls by answering questions, effecting certain shareholder transactions described in the Registrant's current prospectuses, and performing such other, similar functions as the Registrant may reasonably prescribe from time to time. The Registrant will pay one dollar for each telephone call, which was the charge previously imposed by the Registrant's transfer agent for this service. The Registrant's transfer agent will no longer charge for this service. The Registrant understands that (i) the telephone answering service provided by Thornburg will be superior to that previously provided by the transfer agent because Thornburg will devote greater attention to training the telephone personnel, and those personnel will have immediate access to the Registrant's and Thornburg's management, (ii) the per-call charge imposed upon the Registrant for this service will be no greater than that charged by the Registrant's transfer agent, and (iii) Thornburg will not receive any profit from providing this service. The Registrant will reimburse Thornburg for a portion of the depreciation on certain telephone answering equipment purchased by Thornburg to render the described services. The Registrant paid $73,536.38, $20,906 and $4,246 to Thornburg under the described arrangements in each of the three most recent fiscal years ended September 30, 1997, 1998 and 1999. It is not believed that these arrangements constitute a management-related services agreement. Item 30. Undertakings. The Registrant undertakes, if requested to do so by the holders of at least 10% of its outstanding shares to call a meeting of shareholders for the purpose of voting upon the question of removal of a trustee or trustees, and to assist in communications with other shareholders as required by Section 16(c) of the Investment Company Act of 1940, as amended. The Registrant undertakes, within four to six months from the effective date of this amendment to the Registration Statement in respect of Thornburg Growth Fund, to file a post-effective amendment with financial statements for Thornburg Growth Fund, which need not be certified. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Santa Fe, and State of New Mexico on the 12th day of October, 2000. THORNBURG INVESTMENT TRUST Registrant By * ------------------------------------ Brian J. McMahon, President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated. * ------------------------------------------ Brian J. McMahon, President and principal executive officer * ------------------------------------------ H. Garrett Thornburg, Jr., Trustee, Chairman of Trustees, Treasurer * ------------------------------------------ J. Burchenal Ault, Trustee * ------------------------------------------ David A. Ater, Trustee * ------------------------------------------ Forrest S. Smith, Trustee * ------------------------------------------ James W. Weyhrauch, Trustee * By: /s/ -------------------------------- Charles W.N. Thompson, Jr. Attorney-In-Fact INDEX TO EXHIBITS Exhibit Number Exhibit ------- ------- (a) Fourteenth Amendment and Supplement to Agreement and Declaration of Trust (j.1) Consent of counsel to be named in registration statement (j.2) Consent of independent auditors EXHIBIT (a) THORNBURG INVESTMENT TRUST FOURTEENTH AMENDMENT AND SUPPLEMENT TO AGREEMENT AND DECLARATION OF TRUST THIS FOURTEENTH AMENDMENT AND SUPPLEMENT is made by H. Garrett Thornburg, Jr., David A. Ater, J. Burchenal Ault, Forrest S. Smith and James W. Weyhrauch (the "Trustees"). The Trust was formed on June 3, 1987 by an Agreement and Declaration of Trust - Limited Term Trust dated June 3, 1987. Section 3.1 permits the creation of new series of shares in addition to the series established and designated in Section 3.2. Accordingly, by execution of this Amendment and Supplement, the Trustees effect the following amendments to the Agreement and Declaration of Trust. Creation of New Series ---------------------- The Trustees establish a new series of shares designated "Thornburg Growth Fund" effective September 15, 2000. The new series will have the relative rights and preferences described in Section 3.2 of the Agreement and Declaration of Trust. The Trustees further establish and designate five classes of shares of Thornburg Growth Fund, each having an unlimited number of shares: the Class A Shares, the Class B Shares, the Class C Shares, the Class D Shares, and the Class I Shares, respectively. Additional classes of shares of the Fund may be established and designated by the Trustees from time to time by supplement to this Amendment and Supplement. Shares of each Class so created will represent interests in the same assets of the Fund, and will be identical in all respects except as described below: (a) fees will be charged to each Class under the Class's Rule 12b-1 distribution plans, if any, to the extent that expenses are allocable to that Class; (b) a service fee will be charged to each Class based on a percentage of the average daily net asset value of that Class, which fee shall be primarily intended to reimburse the adviser for expenditures to obtain shareholder services; and a distribution fee will be charged to each of Class B Shares, Class C Shares and Class D Shares under separate distribution plans; (c) a higher transfer agency fee may be charged to Class B Shares, Class C Shares and Class D Shares, and a different transfer agency fee may be charged to Class I Shares, than is imposed on Class A Shares; (d) shareholders of each Class will have exclusive voting rights with respect to any Rule 12b-1 plans applicable to that Class of shares; (e) Class B Shares, Class C Shares, Class D Shares and Class I Shares may have conversion features providing for conversion to Class A Shares, and the terms and periods for conversion for each Class may differ, as the Trustees may from time to time specify by resolution; (f) to the extent identifiable as being attributable to a specific Class, the following expenses may be allocated to the Class: (i) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses and proxy materials to current shareholders; (ii) blue sky fees and costs attributable to registration, qualification or exemption of the Class's shares, (iii) federal registration fees; (iv) administrative expense required to support the shareholders of a specific Class; and (v) litigation or other legal expenses relating solely to one Class of shares; (g) consistent with the foregoing, fees and expenses chargeable to a Class, and conversion and reinvestment rights of shares of the Class, shall be from time to time established by resolution of the Trustees; and (h) fees and expenses of a Class shall first be charged against the pro rata portion of the income of the Fund allocable to shares of that Class, and, to the extent necessary, fees and expenses will be charged to that portion of the net assets of the Fund allocable to that Class. Other than as specified above, the various Classes of the Fund shall have the rights and preferences as described in Article III of the Agreement and Declaration of Trust. The Trustees effect these amendments as of September 15, 2000, and direct the Trust's president to file this Amendment and Supplement in the appropriate governmental offices. ----------------------------------- H. Garrett Thornburg, Jr. ----------------------------------- David A. Ater ----------------------------------- J. Burchenal Ault ----------------------------------- Forrest S. Smith ----------------------------------- James W. Weyhrauch EXHIBIT j.1 WHITE Attorneys and Counselors at Law KOCH, KELLY John F. McCarthy, Jr. Julie A. Wittenberger & Benjamin Phillips Suzanne Odom McCARTHY David F. Cunningham A Professional Association Albert V. Gonzales Janet Clow Kevin V. Reilly Special Counsel C.W.N. Thompson, Jr. Paul L. Bloom M. Karen Kilgore Sandra J. Brinck Aaron J. Wolf Mary E. Walta Rebecca Dempsey John M. Hickey October 12, 2000 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 VIA EDGAR FILING Re: Thornburg Investment Trust Registration Number Under the Securities Act of 1933: 033-14905 Registration Number Under the Investment Company Act of 1940: 811-05201 Ladies and Gentlemen: We hereby consent to the references made to this firm in the post- effective amendment no. 43 to the registration statement of Thornburg Investment Trust and the prospectuses which are a part of that registration statement. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933. Very truly yours, /S/ Charles W.N. Thompson, Jr. CHARLES W. N. THOMPSON, JR. 433 Paseo de Peralta Post Office Box 787 Santa Fe, NM 87504-0787 Phone (505) 982-4374 Fax (505) 983-0350; 984-8631 e-mail wkkm@nm.net EXHIBIT j.2 CONSENT OF INDEPENDENT AUDITORS We hereby consent to the reference to us under the heading "Independent Auditors" in this Registration Statement on Form N-1A. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP New York, New York October 13, 2000