Letter to shareholders
November 15, 1999
William V. Fries, CFA
Portfolio Manager
Dear Fellow Shareholders,
The fiscal year ended September 30 was excellent for the Thornburg Value Fund.
The results for the fiscal year, calendar year-to-date and since inception are
shown in the table below. These returns are for investors who held the shares
from the beginning of each period with all dividends reinvested. Since the end
of the fiscal year, investment performance has continued to be healthy.
Total return performance as of 9/30/99
Inception: 10/2/95
<TABLE>
<CAPTION>
A Shares C Shares
Cal. YTD 1 Year 3 Years Since Incept. Cal. YTD 1 Year 3 Years Since Incept.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value 12.99% 35.50% 26.86%** 26.16%** 12.38% 34.45% 25.84%** 25.20%**
Max Offering Price 7.91% 23.39% 24.94%** 24.73%** 11.38% 34.45% 25.84%** 25.20%**
<FN>
Past performance cannot guarantee future results.
* Assumes redemption during the period.
** Annualized.
</FN>
</TABLE>
The stocks of companies involving technology, communications and financial
services were prime drivers of the year's good performance. Buyout activity
(ARCO, Fore Systems, Learning Company, Liechtenstein Global Trust and U.S. West)
also played a positive role. Market weakness late in the fiscal year dropped net
asset value per share materially below peak levels reached in mid-July. A couple
of 25 basis point increases in the fed funds rate (what banks pay to borrow) set
off concern that the fight to ward off inflation from a booming economy would
require more vigorous Fed action. Up until recently, potential monetary
authority action has been dampening enthusiasm for most equities. I say "most"
because there has been plenty of enthusiasm for selected sectors; Internet,
technology and telecommunications equipment, for example. The narrowness of the
market advance since the end of the fiscal year coupled with a wide disparity of
valuations is causing a good deal of consternation among investment
professionals espousing a traditional value philosophy. Lower interest rates are
now an unreliable tailwind for stock value. Earnings and, more importantly,
robust and reliable revenue and earnings growth, have become paramount for
investors. This is not new. Earnings growth is what equity investing is all
about. What is new is the number of companies enjoying extraordinary growth,
especially in the technology arena. We have been fortunate to own some of these
companies (Advent, Intel, Lam Research, Nortel). It is hard to imagine, but less
than a year ago, a number of today's favored semiconductor and semiconductor
equipment stocks were losing money with deeply depressed stock prices. For us,
it presented a great opportunity! We believe there are similar opportunities for
investors today.
An example of one such opportunity is a recent addition to the portfolio, Health
Management Associates. From a financial standpoint, the healthcare service
industry has been in turmoil for a couple of years. Most publicly traded stocks
in this sector have been poor performers. In the past, Health Management had
done a creditable job of both buying and operating small city hospitals. Not
immune to the negative trends affecting the industry, however, the company's
consistent record of growth has been interrupted by pressure on profit margins.
In part, these related to cuts in Medicare reimbursement. We are optimistic the
worst is over for the company. Its service is essential. Demographics suggest
growing demand, and efficient operators such as Hospital Management should be
able to prosper. In today's environment, the stock is priced with low
expectations. Another area of current opportunity is personal care companies. We
have added Dial Corp and Kimberly Clark to the portfolio. A couple of years ago,
investors were willing to pay almost any price to own brand name franchises.
This is not the case today. Issues such as the bargaining power of retailers,
adverse currency translations and a perception of lower growth have reduced the
appeal of these stocks. Nonetheless, both Dial and Kimberly Clark possess
attractive attributes. Both enjoy high profitability, market leadership and
consistent and improving earnings. The above examples of stocks we like are
offered to help you understand the nature of our value philosophy. The new
stocks we add to the portfolio may not seem to have good prospects at the time
of purchase, but how they are perceived next year is what is important. The Fund
continues to be a focused but diversified portfolio composed of 46 stocks in 23
industries at September 30. Semiconductor, semiconductor capital equipment and
telecommunications equipment stocks account for 4.4%, 6.2% and 7.1%, of the
portfolio, respectively. Financial services (banks, investment managers, and
brokers) account for 13.7%. On September 30, 1999 an income distribution of
$0.01 per share on Class A shares was paid. On November 1, 1999 a long-term
capital gain distribution of $0.39 per share on Class A and C shares was paid.
These distributions were very modest in relation to the overall investment
performance of the fund. Achieving excellent performance relative to our
investment objective is our most important job. Being tax efficient for taxable
investors continues to be a priority as well. For more complete descriptions of
the stocks we hold in your Thornburg Value Fund portfolio, please visit our
Website at www.thornburg.com. We appreciate your continued trust and confidence.
Thank you for investing with us.
Respectfully,
William V. Fries, CFA
Portfolio Manager
Tax Update
THORNBURG VALUE FUND'S AFTER TAX RETURNS SHOW GREAT TAX EFFICIENCY
Federal income taxes have had only a slight impact on your fund's return - an
important consideration for investors who own mutual funds in taxable accounts.
While the pretax return is most often used to tally a fund's performance, the
fund's after-tax return may be a better representation of your net return. The
after tax return accounts for taxes you may pay on distributions of capital
gains and income dividends. If you own the Thornburg Value Fund in a
tax-deferred account such as an individual retirement account or a 401(k), this
information does not apply to you. Such accounts are not subject to current
federal income taxes.
The Table below presents the pretax and after-tax returns for your fund (and an
appropriate peer group of mutual funds). Two things to keep in mind:
o The after-tax return calculations use the top federal income tax
rates in effect at the time of each distribution. The tax burden, therefore,
would be somewhat less, and the after-tax return somewhat more, if you are in a
lower tax bracket.
o The peer funds' returns are provided by Morningstar, Inc.
As you can see, the Thornburg Value Fund's pretax total returns of 35.50% and
34.45% (to A and C shares, respectively) for the 12 months ended September 30,
1999 were only slightly reduced by taxes. For investors in the highest tax
bracket, the fund's pretax returns to A and C shares were cut by only .33% and
.08%, respectively. By comparison, the average "midcap blend" fund earned a
pretax return of 19.97% and an after tax return of 18.33%. Morningstar
classifies Thornburg Value Fund as a midcap blend fund.
<TABLE>
<CAPTION>
Average Annual Returns: Pretax and After-Tax
Periods Ended September 30, 1999
1 Year 3 Years
Pretax After-Tax Tax Efficiency Pretax After-Tax Tax Efficiency
<S> <C> <C> <C> <C> <C> <C>
Thornburg Value Fund -A 35.50% 35.17% 99.1% 26.86% 25.05% 93.3%
Thornburg Value Fund -C 34.45% 34.37% 99.8% 25.84% 24.39% 94.4%
Average Fund* 19.97% 18.33% 91.8% 13.56% 11.13% 82.1%
<FN>
*Based on data from Morningstar, Inc. for 266 Midcap Blend Funds.
</FN>
</TABLE>
The Thornburg Value Fund results, before and after taxes, compare favorably with
those of its average peer. Your fund lost less to taxes (one year tax efficiency
of 99.1%, A shares) than its peer group average (one year tax efficiency of
91.8%). Your fund also earned a higher pretax return (35.50% vs. 19.97%) than
its peer group average.
It is very difficult to predict tax efficiency. A fund's tax efficiency can be
influenced by its turnover rate, the types of securities it holds, the
accounting practices it uses when selling shares, and the net cash flow it
receives. The tax efficiency of Thornburg Value Fund thus far is no accident. We
have worked to manage our investment activities in a tax efficient manner, and
we will continue to do so. Our calculations do not reflect the tax effect of
your own investment activities. You may incur additional capital gains taxes if
you decide to sell all or some of your shares.
A Note About Our Calculations: Pretax total returns assume that all
distributions received (income dividends, short-term capital gains, and
long-term capital gains) are reinvested in new shares, while our after-tax
returns assume that highest individual federal income tax rates at the time of
the distributions. Those rates are currently 39.6% for dividends and short-term
capital gains and 20% for long-term capital gains. The calculation does not
account for state and local income taxes, nor does it take into consideration
any tax adjustments that a shareholder may claim for foreign taxes paid by the
fund. The competitive group returns provided by Morningstar are calculated in a
manner consistent with that used for Thornburg Value Fund. All A share
calculations assume purchase at net asset value and no redemption. Return
calculations reflecting the maximum sales charge applicable to A shares are
shown on page 1 of this report.
Statement of assets and liabilities
Thornburg Value Fund
ASSETS
Investments, at value (cost $482,998,639) .......................$548,380,866
Cash ............................................................ 11,384,400
Receivable for securities sold .................................. 7,859,829
Receivable for fund shares sold ................................. 5,328,564
Dividends receivable ............................................ 779,585
Prepaid expenses and other assets ............................... 54,522
Total Assets ......................... 573,787,766
LIABILITIES
Payable for securities purchased ................................ 23,325,895
Payable for fund shares redeemed ................................ 562,453
Unrealized loss on forward exchange contracts (Note 6) .......... 1,876,570
Payable to investment advisor ................................... 440,038
Accounts payable and accrued expenses ........................... 325,963
Total Liabilities .................... 26,530,919
NET ASSETS ......................................................$547,256,847
NET ASSETS CONSIST OF:
Net unrealized appreciation (depreciation) on investments ..$ 63,623,747
Accumulated net realized gain .............................. 9,572,912
Net capital paid in on shares of beneficial interest ....... 474,060,188
$547,256,847
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($360,966,176 applicable to 13,776,135 shares of beneficial
interest outstanding - Note 4) ............................... $ 26.20
Maximum sales charge, 4.50% of offering
price (4.70% of net asset value per share) ................... 1.23
Maximum Offering Price Per Share ............................. $ 27.43
Class C Shares:
Net asset value and offering price per share*
($133,933,653 applicable to 5,136,388 shares of beneficial
interest outstanding - Note 4) ............................... $ 26.08
Class I Shares:
Net asset value, offering and redemption price per share
($52,357,018 applicable to 1,994,090 shares of beneficial
interest outstanding - Note 4) ............................... $ 26.26
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge. See notes to financial statements.
Statement of operations
INVESTMENT INCOME
Dividend income (net of foreign taxes withheld of $191,813) . $ 6,558,699
Interest income ............................................. 721,348
Other income ................................................ 287,695
Total Income ..................... 7,567,742
EXPENSES
Investment advisory fees (Note 3) ........................... 3,210,299
Administration fees (Note 3)
Class A Shares ..................................... 319,626
Class C Shares ..................................... 106,392
Class I Shares ..................................... 13,259
Distribution and service fees (Note 3)
Class A Shares ..................................... 639,251
Class C Shares ..................................... 851,134
Transfer agent fees ......................................... 345,218
Registration & filing fees .................................. 97,346
Custodian fees .............................................. 186,785
Professional fees ........................................... 37,286
Accounting fees ............................................. 27,530
Trustee fees ................................................ 6,116
Other expenses .............................................. 34,995
Total Expenses ................... 5,875,237
Less:
Expenses reimbursed by investment advisor (Note 3) .......... (35,996)
Net Expenses ................................................ 5,839,241
Net Investment Income ............ 1,728,501
REALIZED AND UNREALIZED GAIN (LOSS) - NOTE 5 Net realized gain on:
Investments ....................................... 9,010,585
Foreign currency transactions ..................... 2,221,065
Option contracts written .......................... 318,589
11,550,239
Net unrealized appreciation (depreciation)
Investments ........................................ 59,359,747
Foreign currency translation ...................... (292,463)
59,067,284
Net Realized and Unrealized
Gain on Investments .............. 70,617,523
Net Increase in Net Assets Resulting
From Operations . $ 72,346,024
See notes to financial statements.
<TABLE>
<CAPTION>
Statements of changes in net assets
Year Ended Year Ended
September 30, 1999 September 30, 1998
INCREASE (DECREASE) IN
NET ASSETS FROM:
OPERATIONS:
<S> <C> <C>
Net investment income ................................................... $ 1,728,501 $ 1,118,961
Net realized gain (loss) on investments and foreign currency transactions 11,550,239 (168,836)
Increase (decrease) in unrealized appreciation on investments
and foreign currency translation ........................................ 59,067,284 (10,040,414)
Net Increase (Decrease) in Net Assets
Resulting from Operations .................... 72,346,024 (9,090,289)
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares ................................................. (2,125,801) (938,716)
Class C Shares ................................................. (251,359) (27,348)
Class I Shares ................................................. (302,311) 0
From realized gains
Class A Shares ................................................. 0 (4,677,701)
Class C Shares ................................................. 0 (746,009)
Class I Shares ................................................. 0 0
From return of capital
Class A Shares ................................................. 0 (165,589)
Class C Shares ................................................. 0 (4,824)
Class I Shares ................................................. 0 0
FUND SHARE TRANSACTIONS - (Note 4)
Class A Shares ................................................. 158,138,008 95,534,687
Class C Shares ................................................. 77,354,880 35,229,776
Class I Shares ................................................. 50,091,345 0
Net Increase in Net Assets ................... 355,250,786 115,113,987
NET ASSETS:
Beginning of year .............................................. 192,006,061 76,892,074
End of year ............................................................. $ 547,256,847 $ 192,006,061
See notes to financial statements .......................................
</TABLE>
Notes to financial statements
Thornburg Investment Trust
Note 1 - Organization
Thornburg Value Fund hereinafter referred to as the "Fund," is a diversified
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 seven
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, Thornburg Global
Value 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 three
classes of shares of beneficial interest, Class A, Class C and Institutional
Class (Class I) 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
service fee and a distribution fee, (iii) Class I shares are sold at net asset
value without a sales charge at the time of purchase, and (iv) the respective
classes have different reinvestment privileges. Additionally, the 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,
administrative 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 at 4:00 pm est 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. Options
written: When the Fund writes a call option, an amount equal to the premium
received by the Fund is included in the Fund's statement of assets and
liabilities as a liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option written. The
current market value of a traded option is the last sales price on the principal
exchange on which such option is traded, or in the absence of such sale, the
latest ask quotation. When an option expires on its stipulated expiration date
or the Fund enters into a closing purchase transaction, the Fund realizes a gain
(or loss if the cost of a closing purchase transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. When a call option is exercised, the Fund realizes a gain or loss
from the sale of the underlying security and the proceeds from such sale are
increased by the premium originally received. The risk in writing a call option
is that the Fund gives up the opportunity of profit if the market price of the
security increases. The Fund also has the additional risk of not being able to
enter into a closing transaction if a liquid secondary market does not exist.
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. Net realized capital
losses are carried forward to offset realized gains in future years. To the
extent such carryforwards are used, no capital distributions will be made.
When-Issued and Delayed Delivery Transactions: The Fund may engage in
when-issued or delayed delivery transactions. To the extent a 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. 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 to the
Fund for which the fees are payable at the end of each month. For the year ended
September 30, 1999, 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. The Fund also has 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. For the year ended September 30, 1999, the
Adviser voluntarily reimbursed certain operating expenses amounting to $35,996
for the Fund. The Fund has an underwriting agreements with Thornburg Securities
Corporation (the "Distributor"), which acts as the Distributor of the Fund's
shares. For the year ended September 30, 1999, the Distributor earned
commissions aggregating $313,665 from the sale of Class A shares of the Fund,
and collected contingent deferred sales charges aggregating $25,784 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 Fund may reimburse to the
Adviser an amount not to exceed 1/4 of 1% annum of its 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 Fund has also
adopted Distribution Plans pursuant to Rule 12b-1, applicable only to the Fund's
Class C shares under which the Fund compensated the Distributor for services in
promoting the sale of Class C shares of the Fund at an annual rate of up to 3/4
of 1% or .75% of the average daily net assets attributable to Class C shares.
Total fees incurred by each class of shares of the Fund under its respective
Service and Distribution Plans for the year ended September 30, 1999 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 is borne by the Trust.
Notes to financial statements . . . continued
Note 4 - Shares of Beneficial Interest
At September 30, 1999 there were an unlimited number of shares of beneficial
interest authorized. Sales of Class I of the Value Fund commenced November 2,
1998. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Thornburg Value Fund
Year Ended September 30, 1999 Year Ended September 30, 1998
Shares Amount Shares Amount
Class A Shares
<S> <C> <C> <C> <C>
Shares sold .................................... 9,050,261 $ 232,959,415 5,364,791 $ 114,402,496
Shares issued to shareholders in
reinvestment of dividends ............. 73,730 1,947,825 290,340 5,509,526
Shares repurchased ............................. (3,074,913) (76,769,232) (1,204,237) (24,377,335)
Net Increase ................................... 6,049,078 $ 158,138,008 4,450,894 $ 95,534,687
Class C Shares
Shares sold .................................... 3,233,243 $ 83,091,171 1,712,966 $ 36,707,174
Shares issued to shareholders
in reinvestment of distributions ...... 7,428 195,674 37,794 705,580
Shares repurchased ............................. (239,159) (5,931,965) (106,131) (2,182,978)
Net Increase ................................... 3,001,512 $ 77,354,880 1,644,629 $ 35,229,776
Class I Shares
Shares sold .................................... 2,014,660 $ 50,619,712
Shares issued to shareholders
in reinvestment of distributions ...... 11,304 300,372
Shares repurchased ............................. (31,874)
Net Increase ................................... 1,994,090 $ 50,091,345
</TABLE>
Note 5 - Securities Transactions
For the year ended September 30, 1999, the Fund had purchases and sales
transactions of investment securities of $478,369,520 and $219,711,046,
respectively.
The cost of investments for Federal income tax purpose is $483,822,925 for the
Fund.
At September 30, 1999, net unrealized appreciation of investments was
$64,557,941 resulting from $90,466,643 gross unrealized appreciation and
$25,908,702 gross unrealized depreciation.
The Fund had the following option contracts written during the year:
Number of Contracts Premium
Balance at begining of year 0 0
Options written 300 $ 318,589
Options expired (200) (286,490)
Options assigned (100) (32,099)
Balance at end of year 0 0
Note 6 - Financial Investments With Off-Balance Sheet Risk
During the year ended September 30, 1999, the Fund was a party to financial
instruments with off-balance sheet risks, primarily currency forward exchange
contracts. A forward exchange contract is an agreement between two parties to
exchange different currencies at a specified rate at an agreed upon future date.
These contracts are purchased in order to minimize the risk to the Fund with
respect to its 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 holdings. 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. At September 30, 1999, 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 the 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.
<TABLE>
<CAPTION>
Contracts to sell:
<S> <C> <C>
15,551,710 Swiss Francs for 10,285,992 U.S. Dollars, December 15, 1999 $ (156,591)
1,593,052,142 Japanese Yen for 13,731,616 U.S. Dollars, December 15, 1999 (1,367,324)
35,634,734 Euros for 37,599,219 U.S. Dollars, December 15, 1999 (551,518)
6,944,125 New Zealand Dollars for 3,798,295 U.S. Dollars, December 15, 1999 198,863
Unrealized loss from forward exchange contracts ($1,876,570)
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
Per share operating performance (for a share outstanding throughout the period)
Year Ended September 30,
1999 1998 1997 1996(a)
Class A Shares:
<S> <C> <C> <C> <C>
Net asset value, beginning of year .......................... $ 19.48 $ 20.42 $ 14.50 $ 11.94
Income from investment operations:
Net investment income ......................... 0.16 0.20 0.21 0.28
Net realized and unrealized gain on investments 6.76 0.40 6.28 2.56
Total from investment operations ............................ 6.92 0.60 6.49 2.84
Less dividends from:
Net investment income ......................... (0.20) (0.17) (0.20) (0.28)
Net realized gains ............................ 0.00 (1.35) (0.37) 0.00
Return of capital ............................. 0.00 (0.02) 0.00 0.00
Change in net asset value ................................... 6.72 (0.94) 5.92 2.56
Net asset value, end of year ................................ $ 26.20 $ 19.48 $ 20.42 $ 14.50
Total Return (b) ............................................ 35.50% 3.15% 46.01% 24.02%
Ratios/Supplemental Data Ratios to average net asset:
Net investment income ......................... 0.62% 0.95% 1.35% 2.48%(c)
Expenses, after expense reductions ............ 1.44% 1.54% 1.61% 1.55%(c)
Expenses, before expense reductions ........... 1.44% 1.54% 1.61% 2.16%(c)
Portfolio turnover rate ..................................... 62.71% 99.55% 78.83% 59.62%
Net assets at end of year (000) ............................. $ 360,966 $ 150,492 $ 66,893 $ 15,438
<FN>
(a) Fund commenced operations on October 2, 1995.
(b) Sales loads are not reflected in computing total return, which are not
annualized for periods less than a year.
(c) Annualized.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Class C Shares: 1999 1998 1997 1996(a)
<S> <C> <C> <C> <C>
Net asset value, beginning of year .................. $ 19.45 $ 20.40 $ 14.51 $ 11.94
Income from investment operations:
Net investment income ................. (0.01) 0.03 0.07 0.18
Net realized and unrealized
gain on investments ................... 6.71 0.39 6.27 2.57
Total from investment operations .................... 6.70 0.42 6.34 2.75
Less dividends from:
Net investment income ................. (0.07) 0.00 (0.08) (0.18)
Net realized gains .................... 0.00 (1.35) (.37) 0.00
Return of capital ..................... 0.00 (0.02) 0.00 0.00
Change in net asset value ........................... 6.63 (0.95) 5.89 2.57
Net asset value, end of year ........................ $ 26.08 $ 19.45 $ 20.40 $ 14.51
Total Return (b) .................................... 34.45% 2.34% 44.77% 23.20%
Ratios/Supplemental Data Ratios to average net asset:
Net investment income ...................... (0.17)% 0.14% 0.48% 1.73%(c)
Expenses, after expense reductions ......... 2.23% 2.36% 2.49% 2.30%(c)
Expenses, before expense reductions ........ 2.23% 2.37% 2.73% 6.51%(c)
Portfolio turnover rate ............................. 62.71% 99.55% 78.83% 59.62%
Net assets at end of year (000) ..................... $ 133,934 $ 41,513 $ 9,999 $ 1,267
<FN>
(a) Fund commenced operations on October 2, 1995.
(b) Sales loads are not reflected in computing total return, which are not
annualized for periods less than a year.
(c) Annualized.
</FN>
</TABLE>
Class I Shares:
Net asset value, beginning of period ........................ $ 21.78
Income from investment operations:
Net investment income ......................... 0.25
Net realized and unrealized gain on investments 4.48
Total from investment operations ............................ 4.73
Less dividends from:
Net investment income ......................... (0.25)
Change in net asset value ................................... 4.48
Net asset value, end of period .............................. $ 26.26
Total Return (b) ............................................ 21.70%
Ratios/Supplemental Data Ratios to average net asset:
Net investment income .............................. 1.14%(c)
Expenses, after expense reductions ................. 1.00%(c)
Expenses, before expense reductions ................ 1.13%(c)
Portfolio turnover rate ..................................... 62.71%
Net assets at end of period (000) .................... $ 52,357
(a) Commencment of operations.
(b) Sales loads are not reflected in computing total return, which are not
annualized for periods less than a year. (c) Annualized
<TABLE>
<CAPTION>
Schedule of Investments
Thornburg Value Fund
September 30, 1999 CUSIPS: Class A - 885-215-731, Class C -
885-215-715, Class I - 885-215-632
NASDAQ Symbols: Class A - TVAFX, Class C - TVCFX, Class I - TVIFX
COMMON STOCKS--73.40%
<S> <C> <C>
BANKING INSTITUTIONS (3.80%)
Bank Austria AG 190,839 $9,493,154
Hudson City Bancorp Inc. 475,000 6,531,250
Unionbancal Corp. 298,000 10,802,500
BIOTECHNOLOGY (2.00%)
Genzyme Corp. 311,000 14,014,438
CONSUMER ELECTRONICS (2.30%)
Sony Corp. 52,800 7,867,091
Sony Corp. - ADR 55,000 8,253,438
BUILDING MATERIALS (1.80%)
Dyckerhoff AG Preferred 403,000 12,392,664
CAPITAL EQUIPMENT (1.80%)
Boeing Co. 290,000 12,361,250
CHEMICALS (3.40%)
Dow Chemical Corp. 112,500 12,782,812
Hercules Inc. 402,100 11,510,113
TELECOMMUNICATION SERVICES (0.90%)
SBA Communcations Corp. + 600,000 6,525,000
PHARMACEUTICALS (2.50%)
Eli Lilly & Company 275,000 17,600,000
ENERGY (3.50%)
Atlantic Richfield Co. 205,000 18,168,125
Occidental Petroleum Corp. 290,000 6,706,250
ENTERTAINMENT (1.60%)
Fox Entertainment Group Inc. + 537,600 11,356,800
FOOD & BEVERAGES (1.80%)
Pepsico Inc. 425,000 12,856,250
NATURAL GAS PIPELINES (2.80%)
El Paso Energy Corp. 488,200 19,436,463
HEALTHCARE SERVICES (1.90%)
Health Management Assoc. + 1,800,000 13,323,384
HOUSEHOLD PRODUCTS (0.70%)
Henkel KGaA Preferred 82,600 5,185,538
INVESTMENT MANAGEMENT & BROKERAGE (6.80%)
Charles Schwab and Co. 260,000 8,758,750
Ing Groep N.V. 178,022 9,660,634
Investment Technology Group 355,869 8,184,987
Julius Baer Holding AG 3,403 10,078,769
Pimco Advisors Holdings L. P. 365,000 11,497,500
RAILROADS (1.40%)
Union Pacific Corp. 201,600 9,689,400
REAL ESTATE INVESTMENT TRUSTS (2.60%)
JDN Realty Corp. 480,000 9,830,743
Sun Communities Inc. 259,500 8,579,719
RETAIL (2.00%)
CVS Corp. 350,000 14,284,375
TECHNOLOGY - SEMI CONDUCTORS & EQUIPMENT (8.20%)
Applied Materials Inc. 145,000 11,291,875
Brooks Automation Inc. + 298,200 5,237,137
Dallas Semiconductor Corp. 130,000 6,946,875
Intel Corp. 230,000 17,091,875
Lam Research Corp. + 290,000 17,690,000
TECHNOLOGY - COMPUTERS & PERIPHERALS (3.90%)
Diebold Inc. 496,700 11,486,187
Seagate Technology Inc. + 230,000 7,086,875
Sun Microsystems Inc. + 100,000 9,300,000
TECHNOLOGY - SOFTWARE & SERVICES (3.20%)
Advent Software, Inc. + 228,750 14,239,688
Macromedia Inc. + 200,000 8,200,795
TECHNOLOGY - CONSULTING (0.30%)
US WEB + 65,000 2,204,225
TELECOMMUNICATION SERVICES (6.50%)
Bell Atlantic Corp. 373,800 25,161,412
Telecom Corporation Of New Zealand ADR 109,300 3,497,600
U. S. West Inc. 300,000 17,118,750
TELECOMMUNICATION EQUIPMENT (5.50%)
Newbridge Networks Corp. + 505,000 13,161,562
Nokia Corp. 30,000 2,684,274
Nortel Networks Corp. 450,000 22,950,000
TRANSPORTATION SERVICES (1.50%)
Avis Rental A Car Inc. + 509,000 10,625,375
TRAVEL SERVICES (0.70%)
Sabre Holdings Corp. + 107,900 4,639,700
TOTAL COMMON STOCKS (Cost $452,963,375) 518,345,602
COMMERCIAL PAPER--3.30%
Bellsouth Telecomm Inc., 5.25% due 10/22/1999 550,000 548,316
Citicorp Inc., 5.27% due 10/13/1999 5,900,000 5,889,636
Citicorp Inc., 5.28% due 10/14/1999 5,000,000 4,990,466
Toyota Motor Credit Co., 5.28% due 10/1/1999 390,000 390,000
Toyota Motor Credit Co., 5.30% due 10/7/1999 6,095,000 6,089,616
Toyota Motor Credit Co., 5.36% due 10/12/1999 4,000,000 3,993,449
Toyota Motor Credit Co., 5.33% due 10/21/1999 1,700,000 1,694,966
TOTAL COMMERCIAL PAPER (Cost $23,596,449) 23,596,449
COMMERCIAL PAPER (0.90%)
American General Finance, 5.25% due 10/4/1999 500,000 499,781
Ford Motor Credit Corp., 5.27% due 10/5/1999 2,400,000 2,398,595
Ford Motor Credit Corp., 5.29% due 11/1/1999 3,000,000 2,986,334
Merrill Lynch Inc., 5.28% due 10/12/1999 555,000 554,105
TOTAL COMMERCIAL PAPER (Cost $6,438,815) 6,438,815
TOTAL INVESTMENTS (Cost $482,998,639)* $ 548,380,866
<FN>
+ Non-income producing.
See notes to financial statements.
</FN>
</TABLE>
Independent Auditor's Report
To the Board of Trustees and Shareholders of Thornburg Investment Trust In our
opinion, the accompanying statement of assets and liabilities, including the
schedule of investments, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Thornburg Value Fund series of Thornburg
Investment Trust (hereafter referred to as the "Fund") at September 30, 1999,
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. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with generally accepted auditing standards,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at September 30, 1999 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above. The financial statements for the year ended September 30, 1998, including
the financial highlights for each of the four years in the period then ended,
were audited by other independent accountants whose report dated October 23,
1998 expressed an unqualified opinion on those financial statements.
PricewaterhouseCoopers LLP New York, New York October 29, 1999
change in Independent accountants
Thornburg Investment Trust
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of the Fund pursuant to an agreement by PricewaterhouseCoopers LLP
(PwC) to acquire McGladrey's investment company practice. The McGladrey partners
and professionals serving the Fund at the time of the acquisition joined PwC.
The reports of McGladrey on the financial statements of the Fund during the past
two fiscal years contained no adverse opinion or disclaimer of opinion, and were
not qualified or modified as to uncertainty, audit scope or accounting
principles. In connection with its audits for the two most recent fiscal years
and through August 13, 1999, there were no disagreements with McGladrey on any
matter of accounting principle or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of McGladrey would have caused it to make reference to the subject
matter of disagreement in connection with its report. On September 22, 1999, the
Fund, with the approval of its Board of Directors and its Audit Committee,
engaged PwC as its independent auditor. Index Comparisons Thornburg Value Fund
Index Comparison Compares performance of Thornburg Value Fund and the Standard &
Poor's 500 Index for the period October 1, 1995 to September 30, 1999. Past
performance of the Index and the Fund may not be indicative of future
performance.
Class A Shares
Average Annual Total Returns (at max. offering price) (periods ended 9/30/99)
One Year: 29.39%
Three Year 24.94%
Since Inception (10/1/95): 24.73%
Class C Shares
Average Annual Total Returns (periods ending 9/30/99)
One Year: 34.45%
Three Years: Letter to shareholders
William V. Fries, CFA
Portfolio Manager
Dear Fellow Shareholders,
The fiscal year ended September 30 was excellent for the Thornburg Value Fund.
The results for the calendar year-to-date and since inception are shown in the
table below. Since the end of the fiscal year investment performance has
continued to be healthy. Total return performance as of 9/30/99 Inception:
11/2/98 I Shares
Net Asset Value Cal. YTD 1 Year* 3 Years* Since Incept.*
13.42% 35.99% 27.02%** 26.28%**
Past performance cannot guarantee future results. * Reflects purchase of A
Shares at NAV until I Share inception of 11/2/98 ** Annualized.
Y2k Update
We Are Ready for the Year 2000
Dear Shareholder,
I wish to inform you about our success with respect to being Year 2000 compliant
in the computer systems used to manage your Thornburg funds investment. Your
shareholder records are kept on a large computer system belonging to our
transfer agent, DST Systems. Accounting data pertaining to your investment
portfolio reside on large systems belonging to State Street Bank and its
affiliates. We have smaller computer networks at Thornburg Investment Management
to help us organize and manage our investment activities. I will describe
briefly the Year 2000 status of each area.
Shareholder records for Thornburg funds are kept on computers that use a DST
software system called "TA 2000." DST is one of the largest mutual fund record
processors in the world, keeping shareholder records for many large mutual fund
families. The TA 2000 system, as is name implies, was built with 4-digit year
description fields in order to be Year 2000 compliant. To quote from DST's
February 1999 newsletter, "Internal 2000 readiness testing of TA 2000 and TRA
2000 is complete. Several retests of critical TA 2000 (and TRAC 2000) functions
were also completed successfully in 1998. With the completion of these internal
tests, the TA 2000 (and TRAC 2000) systems are considered to be Y2K ready."
There are no hedge words in the preceeding 3 sentences! I am not surprised. I
first heard DST talk about taking concrete measures to deal with Y2K issues
about 8 years ago. If you worry about electric power continuity, I can inform
you that DST maintains its own diesel powered backup generating station adjacent
to its computer facility.
Both are located in geologically stable limestone caves east of Kansas City.
Asset custody and fund accounting records of the Thornburg funds are stored on
State Street Bank computers. We use a variety of software systems to carry out
all activities relating to running the funds. We are informed that this software
infrastructure has been 100% tested and corrected to be Year 2000 compliant. You
can monitor State Street Bank's disclosure yourself on the internet website,
statestreet.com.
Thornburg Investment Management has a computer network to help us carry out our
daily business of managing the assets in our mutual funds. Our information
technology director, Stewart Kane, has made a great effort to be certain that
our software platforms are Year 2000 compliant.
We look forward to the new year.
Brian McMahon
President, Thornburg Investment Management
Investment Manager
Thornburg Investment Management, Inc.
119 East Marcy Street
Santa Fe, New Mexico 87501
800.847.0200
Principal Underwriter
Thornburg Securities Corporation
119 East Marcy Street
Santa Fe, New Mexico 87501
800.847.0200
This report is submitted for the general information of the
shareholders of the Fund. It is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective prospectus,
which includes information regarding the Fund's objectives and policies,
experience of its management, marketability of shares, and other information.
Performance data quoted represent past performance and do not guarantee future
results.
