I am pleased to report in the table below the Fund's total returns for the
fiscal quarter and semi-annual period ending March 31, 1998. Total returns for
both A shares and C shares reflect results for investors who held shares for the
periods shown. These good results were achieved with portfolio volatility
maintained at below average levels.
Annualized total return performance as of 3/31/98
Inception: 10/2/95
Net Asset Value
Max. Offering Price
Year to Date
17.38%
12.08%
1 Year
56.99%
49.95%
Since Incept.
35.93%
33.46%
Year to Date
17.18%
16.18%*
1 Year
55.70%
55.70%
Since Incept.
34.93%
34.93%
Past performance cannot guarantee future results. * Assumes redemption during
the period.
Once again, markets were rewarding for many investors. While portfolio
appreciation was broadly based, holdings in banking, particularly European, and
technology software and services did well during the quarter. We continue to
remain optimistic about the capital appreciation prospects for both these
dynamic industries. Together they accounted for 31% of portfolio assets. Other
important industries represented include: real estate investment trusts (REITs),
11%; telephones, 10%; and investment management companies, 10%. At the end of
the quarter 37 stocks were held in the portfolio including special situation
holdings in recently converted savings & loans, and 2 closed-end funds managed
by Deutsche Bank (Germany Fund and New Germany Fund).
During the latest quarter,
new stocks added to the portfolio included Republic New York Bank, United Asset
Management and Capital Automotive Real Estate Investment Trust. A brief comment
on each follows. Republic New York Bank (RNB) While providing consumer and other
banking services through 84 branches in the New York metropolitan area, the
bank's main business is serving the financial needs of companies and individuals
operating on a multi-country basis. Opportunities with regard to private banking
for high net worth individuals, which the bank serves both in the U. S. and
abroad, appear quite large. This market is served through a 49% interest in
rapidly growing, Luxembourg based, Safra Republic Holdings, which has over $30
billion in assets under management. Safra is publicly traded in Europe and is
valued at $5.8 billion, making Republics' share worth $2.8 billion or 35% of
Republic's $7.7 billion capitalization. At a time when earnings growth from
traditional banking services may be difficult to maintain because of contracting
interest rate spreads, Republic appears particularly well positioned as its fee
related services grow in importance. Its private banking business in the U.S.
has grown from $2 billion in assets under management in 1995 to over $8 billion
currently. United Asset Management (UAM) The company has grown largely as an
acquirer of investment managers, most of whom manage portfolios for traditional
pension plans. With over 50 separate manager entities and over $200 billion in
assets under management, the company offers a variety of investment philosophies
and styles. Until recently, each manager unit operated autonomously. That
appears to be changing. To better serve fast growing retail markets such as
mutual funds and employee contribution plans (401k, 403b etc.) an initiative is
underway to coordinate marketing and assist underperforming managers. Successful
execution of this initiative will create a large opportunity for the company.
Capital Automotive Real Estate Investment Trust (CARS) This company was recently
formed as a financing vehicle for multi-site, multi-franchise automobile
dealers, enabling these dealers to reduce the capital tied up in dealership
properties. Properties financed are to be on high traffic major thoroughfares,
zoned for a wide range of commercial uses, with high visibility and easy access.
The REITS first 20 property acquisitions, utilizing approximately 50% of initial
public offering proceeds will be primarily in the Washington D.C. area. Pohanka
Automotive Group, Rosenthal Automotive Organization and Cross-Continent Auto
Retailers (Denver, Amarillo, Las Vegas) will account for 80% of the property
values purchased. In addition to the properties being cross collateralized, the
dealership owners are personally liable for the lease payments as well. On March
31,1998 a dividend income distribution was made amounting to $0.044 per share on
the Class A shares and $0.012 on the Class C shares. The flow of funds into
equities by investors continues to drive stock prices higher, not only in the
U.S., but in many overseas markets as well. In fact, European markets enjoyed
even higher returns than the U.S. in the first calender quarter. The Value
Fund's foreign holdings also have performed particularly well so far this
calendar year. Including recent additions, KLM Airlines and Henkel KGaA, foreign
holdings have risen to 25% of portfolio assets. This is the result of
identifying value, not the result of some strategy initiative. We have but one
strategy: Find value wherever it exists and manage the risk. We are off to a
good start in the current year and will work to take advantage of opportunities
as they become apparent. Thank you for your trust and confidence. Respectfully,
William V. Fries, CFA
Portfolio Manager
The holdings listed are only current as of 3/31/98. They can and do vary over
time.
The holdings are listed according to their dollar-weighted market value. This
report 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
transactions may not be consistent with this report's conclusions. Past
performance cannot guarantee future results.
ASSETS
Investments, at value (cost $106,580,648) $ 129,754,965
Cash 2,075,058
Receivable for securities sold 7,486,466
Receivable for fund shares sold 1,713,044
Net unrealized gain on forward exchange contracts (Note 6) 614,962
Dividend receivable 252,328
Prepaid expenses and other assets 44,612
Total Assets 141,941,435
LIABILITIES
Payable for securities purchased 3,558,600
Payable for fund shares redeemed 113,756
Accounts payable and accrued expenses 217,874
Total Liabilities 3,890,230
NET ASSETS $ 138,051,205
NET ASSETS CONSIST OF:
Accumulated undistributed net investment income $ (345) Net unrealized
appreciation on investments 23,174,317 Net unrealized appreciation on
foreign currency 614,962 Accumulated undistributed net realized gain
14,754,932 Distributions from capital gains (5,423,710) Net capital
paid in on shares of beneficial interest 104,931,049
$ 138,051,205
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share ($116,236,922 applicable to
5,157,294 shares of beneficial interest outstanding - Note 4) $ 22.54
Maximum sales charge, 4.50% of offering price (4.70% of net asset
value per share) 1.06
Maximum Offering Price Per Share $ 23.60
Class C Shares:
Net asset value and offering price per share* ($21,814,283 applicable to 969,277
shares of beneficial interest outstanding - Note 4) $ 22.51
* Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See notes to unaudited financial statements.
INVESTMENT INCOME
Dividend income (net of foreign taxes withheld of $10,956)$ 1,057,755
Interest income 115,824
Total Income 1,173,579
EXPENSES
Investment advisory fees (Note 3) 421,749
Administration fees (Note 3)
Class A Shares 51,484
Class C Shares 8,766
Distribution and service fees (Note 3)
Class A Shares 102,968
Class C Shares 70,128
Transfer agent fees 55,166
Registration & filing fees 27,752
Custodian fees 40,640
Professional fees 10,171
Accounting fees 7,605
Other expenses 16,332
Total Expenses 812,761
Net Investment Income 360,818
REALIZED AND UNREALIZED GAIN - NOTE 5 Net realized gain on:
Investments 9,397,949
Foreign currency transactions 828,954
10,226,903
Net unrealized appreciation:
Investments 8,685,149
Foreign currency translation 505,516
9,190,665
Net Realized and Unrealized Gain on Investments 19,417,568
Increase in Net Assets Resulting From Operations $19,778,386
See notes to unaudited financial statements.
Six Months Ended Year Ended
March 31, 1998 September 30, 1997
INCREASE (DECREASE) IN
NET ASSETS FROM:
OPERATIONS:
Net investment income $ 360,818 $ 542,780
Net realized gain 10,226,903 4,516,474
Increase in unrealized appreciation 9,190,665 12,549,755
Net Increase in Net Assets Resulting from Operations 19,778,386 17,609,009
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares (350,640) (504,495)
Class C Shares (11,530) (21,502)
Distributions from capital gains
Class A Shares (4,677,701) (467,203)
Class C Shares (746,009) (34,748)
FUND SHARE TRANSACTIONS - (Note 4)
Class A Shares 37,597,546 36,738,729
Class C Shares 9,569,079 6,867,432
Net Increase in Net Assets 61,159,131 60,187,222
NET ASSETS:
Beginning of period 76,892,074 16,704,852
End of period $ 138,051,205 76,892,074
See notes to unaudited financial statements.
Note 1 - Organization
Thornburg Value Fund (the "Fund"), is a series of Thornburg Investment Trust
(the "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 six 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, Thornburg
Florida Intermediate Municipal Fund and Thornburg New York 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 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, administration
fees and certain 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. Foreign Currency Translation:
Porfolio securities securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollars based on the exchange rate
of such currencies against the U.S. dollar on the date of valuation. Purchases
and sales of securities and income items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the translation
date. When the Fund purchases or sells foreign securities it will customarily
enter into a foreign exchange contract to minimize foreign exchange risk from
the trade date to the settlement date of such transactions. The Fund does not
separately report the effect of changes in foreign exchange rates from changes
in market prices on securities held. Such changes are included in net realized
and unrealized gain or loss from investments. 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 Fund 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 to the
shareholders 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 six months ended March
31, 1998, 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 depending on the Fund's
asset size. Also, the Trust 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. The Fund has an underwriting
agreement with Thornburg Securities Corporation (the "Distributor"), which acts
as the Distributor of Fund shares. For the six months ended March 31, 1998, the
Distributor earned commissions aggregating $86,864 from the sale of Class A
shares, and collected contingent deferred sales charges aggregating $2,132 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 Trust 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 Fund's shares. The Trust has also
adopted a Distribution Plan pursuant to Rule 12b-1, applicable only to the
Fund's Class C shares, under which the Trust 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 six months ended March 31, 1998 are set forth in the
statement of operations. Certain officers and Trustees of the Trust are also
officers and/or directors of the Adviser and Distributor. The compensation of
unaffiliated Trustees of the Fund is borne by the Fund.
Note 4 - Shares of Beneficial Interest
At March 31, 1998 there were an unlimited number of shares of beneficial
interest authorized, and capital paid in aggregated $104,931,049. Transactions
in shares of beneficial interest were as follows:
Six Months Ended March 31, 1998 Year Ended September 30, 1997
Class A Shares Shares Amount Shares Amount
Shares sold 1,888,939 $ 38,052,503 2,414,402 $ 40,168,216
Shares issued to shareholders in
reinvestment of dividends 256,845 4,810,036 57,280 925,077
Shares repurchased (264,653) (5,264,993) (260,335) (4,354,564)
Net Increase 1,881,131 $ 37,597,546 2,211,347 $ 36,738,729
Class C Shares
Shares sold 467,724 $ 9,384,066 413,412 $ 7,033,375
Shares issued to shareholders
in reinvestment of distrib 36,976 687,972 3,110 48,914
Shares repurchased (25,670) (502,959) (13,595) (214,857)
Net Increase 479,030 $ 9,569,079 402,927 $6,867,432
Note 5 - Securities Transactions
For the six months ended March 31, 1998 purchases and proceeds from maturities
or sales of investment securities of the Fund, other than short-term securities,
aggregated $73,674,907 and $40,561,597, respectively. The cost of investments
for Federal income tax purposes is 106,469,025. The aggregate gross unrealized
appreciation and depreciation, based on cost for Federal income tax purposes,
were $25,584,138 and $2,409,821 respectively. Note 6 - Financial Investments
With Off-Balance Sheet Risk During the six months ended March 31, 1998, the Fund
was a party to financial instruments with off-balance sheet risks, primarily
currency forward exchange contracts. These contracts are purchased in order to
minimize the risk to the Fund with respect to it's foreign stock holdings from
adverse changes in the relationship between the U.S. dollar and foreign
currencies. In each case these contracts have been initiated in conjunction with
foreign stock purchases. These instruments may involve market risks in excess of
the amount recognized on the Statements of Assets and Liabilities. Such risks
would arise from the possible inability of counterparties to meet the terms of
their contracts, future movement in currency value and interest rates and
contract positions that are not exact offsets. The contract amounts indicate the
extent of the Fund's involvement in such contracts. Forwards: A forward exchange
contract is an agreement between two parties to exchange different currencies at
a specified rate at an agreed upon future date. At March 31, 1998, the Fund had
outstanding forward exchange contracts for the sale of currencies as set out
below. These contracts are reported in the financial statements at each Fund's
net equity, as measured by the difference between the forward exchange rates at
the reporting date and the forward exchange rates at the dates of entry into the
contract. Contracts to sell:
18,170,485 German Marks for 10,062,466 U.S. Dollars, June 17, 1998 $188,624
11,580,000 Swiss Francs for 7,975,207 U.S. Dollars,
September 14, 1998 232,819
3,625,000 New Zealand Dollars for 1,884,558 U.S. Dollars,
June 15, 1998 95,012
247,503,136 Japanese Yen for 1,985,158 U.S. Dollars, June 17, 1998 107,351
8,580,000 Dutch Guilders for 4,170,960 U.S. Dollars,
September 18, 1998 32,694
Unrealized gain from forward exchange contracts $656,500
9,120,000 Hong Kong Dollars for 1,132,919 U.S. Dollars,
June 15, 1998 ($41,688)
Unrealized Loss from forward exchange contracts ($41,688)
<TABLE>
Per share operating performance (for a share outstanding throughout the year)
<CAPTION>
<S> <C> <C> <C>
Six Months Ended Year Ended September 30 ,
March 31, 1998 1997 1996(a)
Class A Shares:
Net asset value, beginning of period $ 20.42 $ 14.50 $ 11.94
Income from investment operations:
Net investment income 0.07 0.21 0.28
Net realized and unrealized gain on investments
3.47 6.28 2.56
Total from investment operations 3.54 6.49 2.84
Less dividends from:
Net investment income (0.07) (0.20) (0.28)
Realized capital gains (1.35) (0.37) 0.00
Change in net asset value 2.12 5.92 2.56
Net asset value, end of period $ 22.54 $ 20.42 $ 14.50
Total Return (b) 18.82% 46.01% 24.02%
Ratios/Supplemental Data Ratios to average net asset:
Net investment income 0.87%(c) 1.35% 2.48%
Expenses, after expense reductions 1.56%(c) 1.61% 1.55%
Expenses, before expense reductions 1.56%(c) 1.61% 2.16%
Portfolio turnover rate 43.31% 78.83% 59.62%
Net assets at end of period (000) $ 116,237 $ 66,893 $ 15,438
<FN>
(a) Fund commenced operations on October 2, 1995.
(b) Sales loads are not reflected in computing total return.
(c) Annualized
</FN>
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Six Months Ended Year Ended September 30,
March 31, 1998 1997 1996(a)
Class C Shares:
Net asset value, beginning of period $ 20.40 $ 14.51 $ 11.94
Income from investment operations:
Net investment income 0.01 0.07 0.18
Net realized and unrealized
gain on investments 3.46 6.27 2.57
Total from investment operations 3.47 6.34 2.75
Less dividends from:
Net investment income 0.01 (0.08) (0.18)
Capital gains distribution (1.35) (.37) 0.00
Change in net asset value 2.11 5.89 2.57
Net asset value, end of period $ 22.51 $ 20.40 $ 14.51
Total Return (b) 18.43% 44.77% 23.20%
Ratios/Supplemental Data Ratios to average net asset:
Net investment income 0.01%(c) 0.48% 1.73%
Expenses, after expense reductions 2.41%(c) 2.49% 2.30%
Expenses, before expense reductions 2.40%(c) 2.73% 6.51%
Portfolio turnover rate 43.31% 78.83% 59.62%
Net assets at end of period (000) $ 21,814 $ 9,999 $ 1,267
</FN>
(a) Fund commenced operations on October 2, 1995.
(b) Sales loads are not reflected in computing total return.
(c) Annualized
</FN>
</TABLE>
CUSIPS: Class A - 885-215-731, Class C - 885-215-715
NASDAQ Symbols: Class A - TVAFX, Class C -TVCFX
Shares Value
COMMON STOCKS 100.00%
AIRLINES (6.40%)
AMR Corporation + 30,000 $4,295,625
KLM Royal Dutch Airlines 100,000 4,062,500
APPAREL (0.10%)
Columbia Sportswear Company + 5,000 105,625
BANKING INSTITUTIONS (16.60%)
Bank Austria AG - Preferred 90,000 6,114,120
FirstSpartan Financial Corporation 26,000 1,173,250
Liechtenstein Global Trust 4,000 3,615,612
Ocean Financial Corporation 30,000 1,110,000
Republic New York Corporation 26,000 3,467,750
Richmond County Financial Corporation + 52,500 1,007,344
Verwaltungs und Privat-Bank AG 2,000 4,998,360
BIOTECHNOLOGY (7.10%)
Amgen Inc. + 100,000 6,087,500
Genzyme Corporation + 100,000 3,200,000
ENERGY (6.00%)
Atlantic Richfield Company 37,000 2,909,125
Occidental Petroleum Corporation 168,000 4,924,500
INVESTMENT MANAGEMENT & BROKERAGE (10.20%)
Alliance Capital Management L. P. 50,000 2,593,750
Everen Capital Corporation 27,500 1,213,437
Pimco Advisors Holdings L. P. 83,500 2,797,250
Raymond James Financial, Inc. 40,000 1,742,500
United Asset Management Corporation1 80,000 4,905,000
MAINTENANCE PRODUCTS (1.80%)
RPM, Inc. 130,000 2,315,625
REAL ESTATE INVESTMENT TRUSTS (11.90%)
Capital Automotive + 200,000 3,775,000
JDN Reality Corporation 150,700 5,152,056
Sun Communities Inc. 187,000 6,498,250
RESTAURANTS (2.80%)
McDonalds Corporation 60,000 3,600,000
RETAIL (2.20%)
Pier 1 Imports Inc. 107,500 2,915,938
TECHNOLOGY (16.40%)
Advent Software Incorporated + 100,000 4,750,000
Checkpoint Systems, Inc. + 200,000 4,250,000
EMC Corporation + 90,000 3,403,125
NEC Corporation 160,000 1,609,307
Oracle Corporation + 90,000 2,840,625
The Learning Company + 190,000 4,393,750
TELECOMMUNICATION SERVICES (10.50%)
Bell Atlantic Corporation 40,000 4,100,000
Telecom Corporation Of New Zealand ADR 90,000 3,459,375
U.S. West, Inc. 110,000 6,022,500
TRANSPORTATION (3.40%)
FDX Corporation 61,500 4,374,188
CLOSED END FUNDS (4.60%)
Germany Fund, Inc. 141,700 2,284,913
New Germany Fund, Inc. 220,000 3,685,000
OTHER (0.00%)
2,065
TOTAL COMMON STOCKS (Cost $106,580,648) 129,754,965
TOTAL INVESTMENTS (Cost $106,580,648)* $ 129,754,965
+ Non-income producing.
* See notes to unaudited financial statements.
