letter to shareholders
Dear Fellow Shareholders: October 23, 1996
I am pleased to report returns for Thornburg Value Fund for the fiscal year
ended September 30. The table below shows results for both A shares and C shares
for the entire period.
Total Return Performance as of 9/30/96 (Inception: 10/1/95)
A Shares C Shares
Y.T.D.* Since Inception Y.T.D.*Since Inception
N.A.V. per share 24.68% 24.02% 24.05% 23.20%
Max. Offering Price 19.04% 18.46% 23.05% 22.20%
*calendar 1996 year to date
On September 30, 1996 your stock portfolio consisted of 34 companies in 16
industries. Seven of these investments result from conversions of depositor
owned savings institutions to publicly traded entities. These bargain stocks,
typically purchased at less than book value, make up 10.4% of your portfolio.
41.3% of the portfolio is invested in 3 other industries: 16.6% technology,
12.9% investment management and 11.8% energy. We believe these sectors have good
prospects. More importantly, we believe that all the companies in your portfolio
are undervalued stocks. Recent additions to the portfolio include Elf Aquitaine
(a major French oil producer), Applied Materials (a leading semiconductor
manufacturing equipment provider), Kaufel Group (a Canadian emergency lighting
manufacturer), and Ocean Financial Corp. (a New Jersey savings and loan,
recently converted from depositor owned to publicly owned.)
Market volatility this past summer provided investment opportunities. Increases
in your positions in the technology area helped performance, as did investments
in financial and investment management stocks. Retailers Sears and Walmart have
also enjoyed solid performance, and, most recently, energy issues have prospered
as the price of crude oil has risen.
While our results were good, the year was not without challenges. There was
ample opportunity to own poorly performing stocks, especially among cyclical
industries, or companies with negative earnings surprises. As you would expect,
our investment philosophy minimized exposure to both influences.
We base our stock selection on valuation, fundamental research, the company's
product or services, its financial characteristics, and its ability to maintain
its competitive position in the future. I include our thoughts on three
companies in the Thornburg Value Fund portfolio so you have a feel for how we
think. Past performance is no guarantee of future results and your shares, when
redeemed, may be worth more or less than their original cost.
Maximum sales charge for the Thornburg Value Fund- Class A Shares is 4.50%.
Gulf Canada Resources (GOU) 3.1% of Total Assets - This Canadian oil and
gas producer is well into a fundamental turnaround. Under a new CEO, the company
is more aggressive in exploration and production, debt is lower, costs are down
and revenues are higher. Production and reserves are expected to continue to
rise as aggressive drilling on properties acquired in Western Canada continues
and a discovery well comes on stream this quarter. Cash flow should exceed $1.20
per share in 1997. The company's potential is not reflected in its current cash
flow multiple.
Host Marriott Services (HMS) 3.9% of Total Assets - Spun off from Marriott
Corp. in 1995, HMS is the leading operator of retail, food, and convenience
locations at airports, toll roads, entertainment arenas, and most recently a
shopping mall food court. At its 70 airport locations, Host is benefiting from
two trends: growing airport passenger traffic and fewer in flight meals. A third
beneficial phenomenon is the conversion of locations to franchise names. We see
above average growth prospects and a modest multiple of cash flow for such a
well positioned growth company.
Sun Communities (SUI) 3.4% of Total Assets - Organized as a REIT (real
estate investment trust), Sun owns 79 manufactured housing communities with
28,600 house sites and an additional 2,800 expansion sites. Revenues are
generated by leasing homesites to mobile home owners. Sun's operating costs are
the lowest of the publicly traded operators, and their rent margin is the
highest. Florida, Michigan, and Indiana account for about 80% of Sun's
locations. Competition is limited, because zoning approvals are difficult to
obtain. Turnover is typically much less than other rental properties, tenants
perform their own maintenance, and rents have easily kept pace with inflation.
Internal expansion and a good pipeline of potential property acquisition will
maintain Sun's steady growth rate. The stocks's current dividend yield is over
6%.
Most forthright investment professionals would have to characterize the stock
market's robust performance over the past few years as a surprise. The reasons
for the market's good results are the enormous cash flows into equities,
sustained modest economic growth, healthy corporate earnings, and interest rates
that reflect little fear of inflation or need for tighter monetary policy. Will
these conditions persist? Barring an exogenous event such as an oil shock,
probably so. In any case, we will continue to attempt to invest in quality,
undervalued companies while maintaining a modest risk profile .
Sincerely,
William V. Fries, CFA
Portfolio Manager
The holdings listed are only current as of 9-30-96. They can and do vary over
time. The holdings are listed according to their dollar-weighted market value.
The report above does not purport to be a complete description of the
securities, markets or developments referred to herein. All expressions of
opinion reflect the judgement of the firm at this date and are subject to
change. Information has been obtained from sources considered reliable but we do
not guarantee that the foregoing report is accurate or complete. Thornburg
Management Company, its affiliates , officers, directors, employees and/or
agents may have or may in the future execute transactions in the securities
mentioned in this report, which tranasactions may not be consistent with this
report's conclusions. Thornburg Securities Corp., Distributors
s t a t e m e n t o f a s s e t s a n d l i a b i l i t i e s
Thornburg Value Fund
September 30, 1996
ASSETS
Investments, at value (cost $14,610,002) $16,657,123
Cash 16,847
Dividend receivable 36,679
Prepaid expenses and other assets 34,491
TOTAL ASSETS 16,745,140
LIABILITIES
Accounts payable and accrued expenses 40,288
TOTAL LIABILITIES 40,288
NET ASSETS $16,704,852
NET ASSETS CONSIST OF:
Distribution in excess of net investment income ($4,997)
Net unrealized appreciation 2,047,121
Accumulated net realized gain 504,465
Net capital paid in on shares of beneficial interest 14,158,263
$16,704,852
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($15,438,253 applicable to 1,064,816 shares of beneficial
interest outstanding - Note 4) $14.50
Maximum sales charge, 4.50% of offering
price (4.68% of net asset value per share) .68
Maximum Offering Price Per Share $15.18
Class C Shares:
Net asset value and offering price per share*
($1,266,599 applicable to 87,321 shares of beneficial
interest outstanding - Note 4) $14.51
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
s t a t e m e n t o f o p e r a t i o n s
Thornburg Value Fund
Year Ended September 30, 1996
INVESTMENT INCOME
Dividend income $401,781
Interest income 25,370
TOTAL INCOME 427,151
EXPENSES
Investment advisory fees (Note 3) 101,303
Administration fees (Note 3)
Class A Shares 4,253
Class C Shares 358
Distribution and service fees (Note 3)
Class A Shares 24,457
Class C Shares 8,086
Custodian fees 36,284
Registration & filing fees 36,084
Transfer agent fees 32,679
Professional fees 10,722
Other expenses 9,735
TOTAL EXPENSES 263,961
Less:
Expenses reimbursed by investment adviser (Note 3) (93,382)
NET EXPENSES 170,579
NET INVESTMENT INCOME 256,572
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS - NOTE 5
Net realized gain on investments sold 504,465
Increase in unrealized appreciation of investments 2,047,121
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 2,551,586
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $2,808,158
See notes to financial statements.
s t a t e m e n t s o f c h a n g e s i n n e t a s s e t s
Year Ended September 30, 1996
INCREASE (DECREASE) IN
NET ASSETS FROM:
OPERATIONS:
Net investment income $256,572
Net realized gain on investments sold 504,465
Increase in unrealized
appreciation of investments 2,047,121
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 2,808,158
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares (248,181)
Class C Shares (13,388)
FUND SHARE TRANSACTIONS - (Note 4)
Class A Shares 13,093,231
Class C Shares 1,065,032
NET INCREASE IN NET ASSETS 16,704,852
NET ASSETS:
Beginning of year 0
End of year $16,704,852
See notes to financial statements.
n o t e s t o f i n a n c i a l s t a t e m e n t s
Thornburg Value Fund
Note 1 - ORGANIZATION
Thornburg Value Fund (the "Fund"), is a series of Thornburg Investment Trust.
The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated June 3, 1987 and is registered as a diversified, open-end management
investment company under the Investment Company Act of 1940, as amended. The
Trust is currently issuing five series of shares of beneficial interest in
addition to those of the Fund: Thornburg Limited Term U.S. Government Fund,
Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate
Municipal Fund, Thornburg Limited Term Income Fund and Thornburg Florida
Intermediate Municipal Fund. Each series is considered to be a separate entity
for financial reporting and tax purposes. The Fund seeks long-term capital
appreciation by investing primarily in domestic equity securities selected on a
value basis.
The Fund commenced operations on October 1, 1995 and currently offers two
classes of shares of beneficial interest, Class A and Class C shares. Each class
of shares of a Fund represents an interest in the same portfolio of investments
of the Fund, except that (i) Class A shares are sold subject to a front-end
sales charge collected at the time the shares are purchased and bear a service
fee, (ii) Class C shares are sold at net asset value without a sales charge at
the time of purchase, but are subject to a contingent deferred sales charge upon
redemption within one year, and bear both a service fee and a distribution fee,
and (iii) the respective classes have different reinvestment privileges.
Additionally, each Fund may allocate among its classes certain expenses, to the
extent allowable to specific classes, including transfer agent fees, government
registration fees, certain printing and postage costs, and administrative and
legal expenses. Currently, class specific expenses of the Fund are limited to
distribution fees and certain custody and transfer agent expenses.
Note 2 - SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the
Fund are as follows:
Valuation of Securities: In determining net asset value, investments are stated
at value based on latest sales prices reported on national securities exchanges
on the last business day of the period. Investments for which no sale is
reported are valued at the mean between bid and asked prices. Securities for
which market quotations are not readily available are valued at fair value as
determined by management and approved in good faith by the Board of Trustees.
Short term obligations having remaining maturities of 60 days or less are valued
at amortized cost which approximates market value.
Federal Income Taxes: It is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to "regulated investment companies" and
to distribute all of its taxable income to its shareholders. Therefore, no
provision for Federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Portfolio may engage in
when-issued or delayed delivery transactions. To the extent the Fund engages in
such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objectives and not for the purpose of
investment leverage or to speculate on market changes. At the time the Fund
makes a commitment to purchase a security on a when-issued basis, it will record
the transaction and reflect the value in determining its net asset value. When
effecting such transactions, assets of the Fund of an amount sufficient to make
payment for the portfolio securities to be purchased will be segregated on the
Fund's records on the trade date.
Dividends: Dividends are paid quarterly and are reinvested in additional shares
of the Fund at net asset value per share at the close of business on the
dividend payment date, or at the shareholder's option, paid in cash. Net
realized capital gains, to the extent available, will be distributed annually.
Distributions to shareholders are based on income tax regulations and therefore,
their characteristics may differ for financial statement and tax purposes.
General: Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned and dividend income is recorded on the
ex-dividend date.
Deferred Expenses: Organizational expenses were deferred and are being amortized
on a straight-line basis over a 60-month period.
Use of Estimates: The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
Note 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, Thornburg Management Company, Inc.
(the "Adviser") serves as the investment adviser and performs services for which
the fees are payable at the end of each month. For the year ending September 30,
1996, these fees were payable at annual rates ranging from 7/8 of 1% to 27/40 of
1% of the average daily net assets of the Fund. Effective July 1, 1996, the Fund
entered into an Administrative Services Agreement with the Adviser, whereby the
Adviser will perform certain administrative services for the shareholders of
each class of the Fund's shares, and for which fees will be payable at an annual
rate of up to 1/8 of 1% of the average daily net assets attributable to each
class of shares.
In the event normal operating expenses of the Fund, exclusive of brokerage
commissions, taxes, interest, and extraordinary expenses, exceed the limits
prescribed by any state in which the Fund's shares are qualified for sale, the
Adviser will reimburse the Fund for such excess. No such reimbursement was
required as a result of this limitation. For the year ended September 30, 1996,
the Adviser reimbursed certain operating expenses amounting to $93,382.
The Fund has an underwriting agreement with Thornburg Securities Corporation
(the "Distributor"), which acts as the Distributor of Fund shares. For the year
ended September 30, 1996, the Distributor earned commissions aggregating $22,669
from the sale of Class A shares, and collected contingent deferred sales charges
aggregating $604 from redemptions of Class C shares of the Fund.
Pursuant to a Service Plan under Rule 12b-1 of the Investment Company Act of
1940, the Portfolio may reimburse to the Adviser amounts not to exceed .25 of 1%
per annum of the average net assets attributable to each class of shares of the
Fund for payments made by the Adviser to securities dealers and other financial
institutions to obtain various shareholder related services. The Adviser may pay
out of its own funds additional expenses for distribution of the Portfolio's
shares.
The Fund has also adopted a Distribution Plan pursuant to Rule 12b-1, applicable
only to the Fund's Class C shares, under which the Fund can compensate the
Distributor for services in promoting the sale of Class C shares at an annual
rate of up to 1% of the average daily net assets attributable to Class C shares.
Total fees incurred by each class of shares of the Fund under their respective
service and distribution plans for the year ended September 30, 1996 are set
forth in the statement of operations.
Certain officers and directors of the Fund are also officers and/or directors
of the Adviser and Distributor. The compensation of unaffiliated directors of
the Fund is borne by the Fund.
Note 4 - SHARES OF BENEFICIAL INTEREST:
At September 30, 1996, there were an unlimited number of shares of beneficial
interest authorized, and capital paid-in aggregated $14,158,263. Transactions
in shares of beneficial interest were as follows:
Year Ended
September 30, 1996
Class A Shares Shares Amount
Shares sold 1,135,471 $14,003,507
Shares issued to shareholders
in reinvestment of
distributions 17,592 236,260
Shares repurchased (88,247) (1,146,536)
Net Increase 1,064,816 $13,093,231
Class C Shares
Shares sold 91,439 $1,120,838
Shares issued to shareholders
in reinvestment of
distributions 826 11,016
Shares repurchased (4,944) (66,822)
Net Increase 87,321 $1,065,032
Note 5 - SECURITIES TRANSACTIONS
Purchases and proceeds from maturities or sales of investment securities of the
Portfolio, other than short-term securities, aggregate $19,209,756 and
$5,783,843, respectively. The cost of investments is the same for financial
reporting and Federal income tax purposes. At September 30, 1996, the aggregate
gross unrealized appreciation and depreciation, based on cost for Federal income
tax purposes, were $2,089,211 and $42,090, respectively.
f i n a n c i a l h i g h l i g h t s
Thornburg Value Fund
Per share operating performance
(for a share outstanding
throughout the period)
Year Ended
September 30,1996(a)
Class of Shares: A C
Net asset value, beginning of year $11.94 $11.94
Income from investment operations:
Net investment income .28 .18
Net realized and unrealized
gain on investments 2.56 2.57
Total from investment operations 2.84 2.75
Less dividends from:
Net investment income (.28) (.18)
Change in net asset value 2.56 2.57
Net asset value, end of year $14.50 $14.51
Total return (b) 24.02% 23.20%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income 2.48% 1.73%
Expenses, after expense reductions 1.55% 2.30%
Expenses, before expense reductions 2.16% 6.51%
Portfolio turnover rate 59.62% 59.62%
Average Commission Rate Per Share $ .062 $ .062
Net assets
at end of year (000) $ 15,438 $ 1,267
(a) Fund commenced operations on October 1, 1995.
(b) Sales loads are not reflected in computing total return.
s c h e d u l e o f i n v e s t m e n t s
September 30, 1996 CUSIPS: Class A - 885-215-731, Class C - 885-215-715 NASDAQ
Symbols: Class A - TVAFX, Class C - TVCFX (Proposed)
STOCKS - 95.9%
Shares Value
AGRICULTURE (2.7%)
Terra Industries, Inc. 30,000 $446,250
AUTOS (3.7%)
Ford Motor Company 20,000 625,000
BUILDING MATERIALS (2.0%)
Kaufel Group, Ltd. 150,000 330,372
CAPITAL EQUIPMENT (3.5%)
Cummins Engine, Inc. 15,000 590,625
CHEMICALS (4.2%)
Rhone-Poulenc SA ADR 25,000 700,000
ENERGY (11.8%)
Atlantic Richfield Company 5,500 701,250
Elf Aquitaine SA ADR 19,000 748,125
Gulf Canada Resources, Ltd.+ 80,000 510,000
FINANCIAL SERVICES (10.4%)
Charter Financial, Inc. 10,000 125,000
Commonwealth Bancorp, Inc. 30,000 356,250
First Colorado Bancorp, Inc. 20,000 310,000
Jacksonville Bancorp, Inc. 20,000 255,000
North Central Bancshares, Inc. 10,000 125,000
Ocean Financial Corporation+ 10,000 238,750
Provident Financial Holdings, Inc.+ 25,000 315,625
INVESTMENT MANAGEMENT (12.9%)
Eaton Vance Corporation 10,000 388,750
John Nuveen & Company - Class A 23,000 621,000
Oppenheimer Capital, L.P. 20,000 662,500
Raymond James Financial, Inc. 20,000 485,000
INSURANCE (2.1%)
Allstate Corporation 7,000 344,750
REAL ESTATE (3.4%)
Sun Communities, Inc. 20,000 570,000
RETAIL (6.2%)
Sears, Roebuck & Company 10,000 447,500
Wal-Mart Stores, Inc. 22,500 593,437
SERVICES (3.9%)
Host Marriott Services Corporation+ 80,000 650,000
SPECIAL PURPOSE FINANCE (5.6%)
Capstead Mortgage 16,450 339,281
Resource Mortgage Capital 25,000 593,750
STEELS (2.5%)
AK Steel Holding Corporation 10,000 410,000
TECHNOLOGY (16.6%)
Applied Materials, Inc.+ 10,000 276,250
Compaq Computer Corporation+ 11,000 705,375
EMC Corporation+ 30,000 678,750
International Business Machines, Inc. 8,000 996,000
Premenos Technology Corporation+ 5,000 101,250
UTILITIES-ELECTRIC (4.4%)
Public Service Company of New Mexico 30,000 585,000
Telecom Corporation of New Zealand ADR 2,000 151,500
-------
TOTAL COMMON STOCKS (Cost $13,930,220) 15,977,341
----------
Principal
Amount
COMMERCIAL PAPER - 4.1%
American General, 5.41% due 10/1/96 180,000 180,000
United Parcel Service, 5.22% due 10/4/96 500,000 499,782
-------
TOTAL COMMERCIAL PAPER (Cost $679,782) 679,782
-------
TOTAL INVESTMENTS (Cost $14,610,002)* $16,657,123
-----------
*Cost is the same for Federal income tax purposes.
+Non income producing.
See notes to financial statements.
i n d e p e n d e n t a u d i t o r 's r e p o r t
To the Board of Trustees and Shareholders
Thornburg Value Fund
Santa Fe, New Mexico
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Thornburg Value Fund, series of Thornburg
Investment Trust as of September 30, 1996, the related statement of operations,
the statement of changes in net assets, and the financial highlights for the
year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30, 1996 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Thornburg Value Fund as of September 30, 1996, the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
New York, New York
October 25, 1996
