UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05201
Thornburg Investment Trust
(Exact name of registrant as specified in charter)
119 East Marcy Street, Santa Fe, New Mexico 87501
(Address of principal executive offices) (Zip code)
Garrett Thornburg 119 East Marcy Street, Santa Fe, New Mexico 87501
(Name and address of agent for service)
Registrant's telephone number, including area code: 505-984-0200
Date of fiscal year end: September 30, 2003
Date of reporting period: September 30, 2003
Item 1. Reports to Stockholders
The following annual reports are attached hereto, in order:
Thornburg Limited Term Income Funds
Thornburg Limited Term Income Funds Class I
Thornburg New Mexico Intermediate Municipal Fund
Thornburg Intermediate Municipal Fund
Thornburg Intermediate Municipal Fund Class I
Thornburg Value Fund
Thornburg Value Fund Class I
Thornburg Florida Intermediate Municipal Fund
Thornburg International Value Fund
Thornburg International Value Fund Class I
Thornburg Core Growth Fund
Thornburg Investment Income Builder Fund
Thornburg Limited Term Income Funds
Annual Report
September 30, 2003
Thornburg Limited Term Income Funds ALL DATA AS OF 9/30/03.
FUND FACTS: Thornburg Limited Term U.S. Government Fund*
A Shares B Shares C Shares R-1 Shares
Annualized Distribution Rate (at NAV) 2.77% 2.51% 2.51% 3.52%
SEC Yield ........................... 2.15% 1.91% 1.89% 2.00%
NAV ................................. $ 13.23 $ 13.22 $ 13.31 $ 13.23
Maximum Offering Price .............. $ 13.43 $ 13.22 $ 13.31 $ 13.23
TOTAL RETURNS: . (Annual Average - After Subtracting Maximum Sales Charge)
One Year 1.76% N/A 2.46% N/A
Three Years ......................... 7.43% N/A 7.57% N/A
Five Years .......................... 5.63% N/A 5.57% N/A
Ten Years ........................... 5.62% N/A N/A N/A
Since Inception ..................... 6.82% (1.40)% 6.11% 0.19%
Inception Date ...................... 11/16/1987 11/1/2002 9/1/1994 7/1/2003
FUND FACTS: Thornburg Limited Term Income Fund
A Shares C Shares R-1 Shares
Annualized Distribution Rate (at NAV) 3.74% 3.49% 3.99%
SEC Yield ........................... 2.51% 2.31% 2.30%
NAV ................................. $ 12.99 $ 12.97 $ 12.99
Maximum Offering Price .............. $ 13.19 $ 12.97 $ 12.99
TOTAL RETURNS: ........ (Annual Average - After Subtracting Maximum Sales Charge)
One Year 3.98% 4.70% N/A
Three Years ......................... 7.64% 7.78% N/A
Five Years .......................... 5.97% 5.89% N/A
Ten Years ........................... 6.08% N/A N/A
Since Inception ..................... 6.37% 6.43% 0.48%
Inception Date ...................... 10/1/1992 9/1/1994 7/1/2003
The investment return and principal value of an investment in the Fund will
fluctuate so that, when redeemed, an investor's shares may be worth more or less
than their original cost.
Maximum sales charge of the Funds' Class A Shares is 1.50%.
The data quoted represent past performance and may not be construed as a
guarantee of future results.
The SEC Yield is computed in accordance with SEC standards measuring the net
investment income per share over a specified 30-day period expressed as a
percentage of the maximum offering price of the Fund's shares at the end of the
period.
The distribution rate is calculated by taking the sum of the month's total
distribution factors and dividing this sum by a 30-day period and annualizing to
360-day year. The value is then divided by the ending NAV to arrive at the
annualized distribution yield. The yield is calculated on a periodic basis and
is subject to change depending on the fund's NAV and current distributions.
Shares are not guaranteed by the U.S. Government.
Letter to shareholders
October 13, 2003
Dear Fellow Shareholder,
I am pleased to present the Annual Report for the Thornburg Limited Term Income
Fund and the Thornburg Limited Term U.S. Government Fund for the year ended
September 30, 2003. The net asset value of an A share of the Thornburg Limited
Term Income Fund ended the year at $12.99. If you were invested for the entire
period, you received dividends of 50.6 cents per share. If you reinvested your
dividends, you received 51.6 cents per share. Investors who owned C shares
received 46.2 and 46.9 cents per share, respectively. The net asset value of an
A share of the Thornburg Limited Term U.S. Government Fund ended the year at
$13.23. If you were invested for the entire period, you received dividends of
46.8 cents per share. If you reinvested your dividends, you received 47.6 cents
per share. Investors who owned C shares received 42.8 and 43.5 cents per share,
respectively. Please read the accompanying exhibits for more detailed
information and history.
Some market economists are calling this the "job loss recovery" as the US
economy has shed over one million jobs since the end of the recession in 2001.
At the same time, GDP has averaged 2% annual growth over this time period. While
the GDP growth is not anything to write home about, it is growth. This growth
has come about primarily from consumer spending, which is up 3% on an annual
basis. The U.S. consumer has kept spending up mostly through savings from
refinancing mortgages. But this refinancing wave is most likely over. U.S.
corporations have hardly contributed to GDP growth, as they have spent the last
few years cutting costs by closing sites, firing employees, and lowering capital
expenditures. While this has led to improved profitability at lower revenues,
this has been thin gruel to those who are unemployed or underemployed. Unless
new jobs are created, consumer spending will probably slow. Falling imports can
make for a larger GDP number, but do not add to future growth. US corporations
must pick up their capital expenditures and add employees for GDP to grow at or
above trend.
The yield curve has steepened over the last year as short-term rates have
dropped while interest rates on bonds due in five years or more have moved up
slightly. The Fed has stated that, with inflation not a serious concern, they
shall wait to raise interest rates until it is clear that the U.S. economy has
above-trend growth. All this means that short-term rates are probably going to
stay low for some time. Many people have avoided buying bonds for fear that
interest rates will head higher. They might be leaving a lot of extra interest
income on the table. The yield curve is quite steep (the 10-year Treasury note
yields 247 basis points more than the two-year Treasury note, as of September
30) and there is quite a pick up in yield by buying short/intermediate bonds
rather than staying in cash.
Regardless of the direction of interest rates, we believe your funds are well
positioned. The Thornburg Limited Term Income Fund and the Thornburg Limited
Term U.S. Government Fund are laddered portfolios of short to intermediate
bonds. We do not speculate on the direction of interest rates. We keep the
portfolios laddered over a time period ranging from one day to approximately ten
years, with the average maturity of the portfolios always no more than five
years. Some of the bonds are always coming close to maturity, but never too many
at one time. We feel a laddered maturity portfolio of short to intermediate
bonds is a sensible strategy over time. Intermediate bonds have proven to be a
sensible part of a portfolio; they can provide stability to the underlying
principal, they can provide income for the portfolio, and, over the years, they
have provided an attractive return versus money market instruments. Please
review the charts at the back of this report, which show the return on an
investment in the Thornburg Limited Term Income Fund and the Thornburg Limited
Term U.S. Government Fund versus the average of taxable money market funds.
Thank you for investing in our funds. We believe the Thornburg Limited Term U.S.
Government Fund and the Thornburg Limited Term Income Fund are appropriate
investments for investors who want a short to intermediate bond portfolio. While
future performance cannot be guaranteed, we feel that we are well positioned,
and we will maintain a steady course.
Steven J. Bohlin
Portfolio Manager
Statements of assets and liabilities
September 30, 2003
Limited Term U.S. Limited Term
Government Fund Income Fund
ASSETS
Investments at value (cost $238,122,625 and $284,795,832 respectively) . $ 245,150,083 $ 296,631,537
Cash ................................................................... 2,175,281 988,525
Receivable for investments sold ........................................ 2,000,000 478,627
Principal receivable ................................................... 100,128 0
Receivable for fund shares sold ........................................ 348,691 1,672,653
Interest receivable .................................................... 2,400,135 3,495,677
Prepaid expenses and other assets ...................................... 32,635 31,701
Total Assets ......................................... 252,206,953 303,298,720
LIABILITIES
Payable for securities purchased ....................................... 2,000,000 3,458,195
Payable for fund shares redeemed ....................................... 620,953 474,593
Accounts payable and accrued expenses .................................. 166,767 146,360
Payable to investment advisor (Note 3) ................................. 88,947 102,424
Dividends payable ...................................................... 130,313 220,572
Total Liabilities .................................... 3,006,980 4,402,144
NET ASSETS ............................................................. $ 249,199,973 $ 298,896,576
NET ASSETS CONSIST OF:
Undistributed (distribution in excess of) net investment income $ 83,335 $ 5,946
Net unrealized appreciation (depreciation) .................... 7,027,458 11,836,975
Accumulated net realized (gain) loss .......................... (3,217,833) (1,683,076)
Net capital paid in on shares of beneficial interest .......... 245,307,013 288,736,731
$ 249,199,973 $ 298,896,576
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share ($176,875,586
and $184,497,130 applicable to 13,373,297 and 14,200,703
shares of beneficial interest outstanding - Note 4) ............... $ 13.23 $ 12.99
Maximum sales charge, 1.50% of offering price .............................. 0.20 0.20
Maximum Offering Price Per Share ........................................... $ 13.43 $ 13.19
Class B Shares:
Net asset value and offering price per share*
($3,072,596 applicable to 232,337 shares of beneficial
interest outstanding - Note 4) .................................... $ 13.22 $ 0
Class C Shares:
Net asset value and offering price per share * ($56,166,467 and $54,926,477
applicable to 4,220,665 and 4,234,338 shares of
beneficial interest outstanding - Note 4) ......................... $ 13.31 $ 12.97
Class I Shares:
Net asset value, offering and redemption price per share ($13,085,249 and
$59,472,894 applicable to 989,485 and 4,577,496 shares
of beneficial interest outstanding - Note 4) ...................... $ 13.22 $ 12.99
Class R-1 Shares:
Net asset value, offering and redemption price per share ($75 and $75
applicable to 6 and 6 shares
of beneficial interest outstanding - Note 4) ...................... $ 13.23 $ 12.99
<FN>
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges. See notes to financial statements.
</FN>
Statements of operations
Thornburg Limited Term Income Funds
Year Ended September 30, 2003
Limited Term U.S. Limited Term
INVESTMENT INCOME: Government Fund Income Fund
Interest income (net of premium amortized
of $1,611,234 and $1,092,070, respectively) $ 10,186,107 $ 11,550,369
EXPENSES:
Investment advisory fees (Note 3) ............................... 864,982 1,178,688
Administration fees (Note 3)
Class A Shares ......................................... 218,658 178,356
Class B Shares ......................................... 2,157
Class C Shares ......................................... 54,946 52,861
Class I Shares ......................................... 5,026 25,382
Distribution and service fees (Note 3)
Class A Shares ......................................... 367,252 256,848
Class B Shares ......................................... 17,254
Class C Shares ......................................... 439,572 422,891
Transfer agent fees
Class A Shares ......................................... 167,714 145,027
Class B Shares ......................................... 15,901
Class C Shares ......................................... 60,119 60,101
Class I Shares ......................................... 18,631 30,213
Class R-1 Shares ....................................... 2,002 2,002
Registration and filing fees ....................................
Class A Shares 15,222 11,686
Class B Shares ......................................... 13,360
Class C Shares ......................................... 9,026 8,905
Class I Shares ......................................... 9,932 9,648
Class R-1 Shares ....................................... 3,918 3,918
Custodian fees (Note 3) ......................................... 115,312 149,334
Professional fees ............................................... 45,546 68,245
Accounting fees ................................................. 10,374 17,960
Trustee fees .................................................... 5,298 5,238
Other expenses .................................................. 64,844 62,875
Total Expenses ................................ 2,527,046 2,690,178
Less:
Expenses reimbursed by investment advisor (Note 3) ..... (58,706) (147,162)
Distribution and service fees waived (Note 3) .......... (228,413) (211,445)
Fees paid indirectly (Note 3) .......................... (36,837) (3,999)
Net Expenses .................................. 2,203,090 2,327,572
Net Investment Income ......................... $ 7,983,017 $ 9,222,797
Limited Term U.S. Limited Term
Government Fund Income Fund
REALIZED AND UNREALIZED GAIN (LOSS) Net Realized Gain (loss) on:
Investments ............................................ $ 4,695,491 $ 1,068,074
Foreign currency transactions .......................... 0 7,131
4,695,491 1,075,205
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ (5,709,054) 2,952,369
Foreign currency translation ........................... 0 1,755
(5,709,054) 2,954,124
Net Realized and Unrealized
Gain (Loss) on Investments ................. (1,013,563) 4,029,329
Net Increase (Decrease) in Net Assets Resulting
from Operations ............................ $ 6,969,454 $ 13,252,126
<FN>
See notes to financial statements ...............................
</FN>
Statements of changes in net assets
Thornburg Limited Term U.S. Government Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ................................. $ 7,983,017 $ 6,276,998
Net realized gain (loss) on investments sold .......... 4,695,491 (45,823)
Increase (Decrease) in unrealized appreciation ........ (5,709,054) 6,659,263
Net Increase (Decrease) in Net Assets
Resulting from Operations ........ 6,969,454 12,890,438
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares ............................... (6,174,157) (5,307,301)
Class B Shares ............................... (50,597) 0
Class C Shares ............................... (1,378,892) (738,851)
Class I Shares ............................... (379,370) (230,846)
Class R-1 Shares ............................. (1) 0
FUND SHARE TRANSACTIONS (Note 4):
Class A Shares ............................... 21,836,105 45,137,805
Class B Shares ............................... 3,080,205 0
Class C Shares ............................... 25,756,540 16,875,559
Class I Shares ............................... 6,129,775 2,740,106
Class R-1 Shares ............................. 76 0
Net Increase (Decrease) in Net Assets 55,789,138 71,366,910
NET ASSETS:
Beginning of year ............................ 193,410,835 122,043,925
End of year .................................. $ 249,199,973 $ 193,410,835
<FN>
See notes to financial statements.
</FN>
Statements of changes in net assets
Thornburg Limited Term Income Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ................................................... $ 9,222,797 $ 6,161,024
Net realized gain (loss) on investments and foreign currency transactions 1,075,205
(1,194,478)
Increase (Decrease) in unrealized appreciation
of investments and foreign currency translation ................ 2,954,124 4,980,417
Net Increase (Decrease) in Net Assets
Resulting from Operations .......................... 13,252,126 9,946,963
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares ................................................. (5,571,809) (3,809,143)
Class C Shares ................................................. (1,505,535) (901,134)
Class I Shares ................................................. (2,145,452) (1,450,747)
Class R-1 Shares ............................................... (1) 0
FUND SHARE TRANSACTIONS (Note 4):
Class A Shares ................................................. 77,437,936 46,400,735
Class C Shares ................................................. 23,908,108 14,339,460
Class I Shares ................................................. 19,271,605 14,170,007
Class R-1 Shares ............................................... 76 0
Net Increase (Decrease) in Net Assets ................. 124,647,054 78,696,141
NET ASSETS:
Beginning of year .............................................. 174,249,522 95,553,381
End of year .................................................... $ 298,896,576 $ 174,249,522
<FN>
See notes to financial statements.
</FN>
Notes to financial statements
Thornburg Limited Term Income Funds
September 30, 2003
NOTE 1 - ORGANIZATION
Thornburg Limited Term U.S. Government Fund (the "Government Fund") and
Thornburg Limited Term Income Fund (the "Income Fund"), hereafter referred to
collectively as the "Funds", are diversified series of Thornburg Investment
Trust (the "Trust"). The Trust is 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 eight series of shares
of beneficial interest in addition to those of the Funds: Thornburg Florida
Intermediate Municipal Fund, Thornburg New York Intermediate Municipal Fund,
Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate
Municipal Fund, Thornburg Value Fund, Thornburg International Value Fund,
Thornburg Core Growth Fund, and Thornburg Investment Income Builder Fund. Each
series is considered to be a separate entity for financial reporting and tax
purposes and bears expenses directly attributable to it. The Funds' objectives
are to obtain as high a level of current income as is consistent with the
preservation of capital.
The Government Fund currently offers five classes of shares of beneficial
interest, Class A, Class B, Class C, Institutional Class (Class I), and
Retirement Class (Class R-1) shares. The Income Fund currently offers four
classes of shares of beneficial interest, Class A, Class C, Institutional Class
(Class I), and Retirement Class (Class R-1) shares. Each class of shares of a
fund represents an interest in the same portfolio of investments of that 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 B 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
and bear both a service fee and distribution fee, (iii) 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 and bear both a
service fee and a distribution fee, (iv) Class I shares are sold at net asset
value without a sales charge at the time of purchase, (v) Class R-1 shares are
sold at net asset value without a sales charge, but bear both a service fee and
a distribution fee, and (vi) 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
Funds are limited to service and distribution fees, administrative fees and
certain registration and transfer agent expenses.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the
Fund are as follows:
Valuation of Investments: In determining net asset value, the Funds utilize an
independent pricing service approved by the Trustees. Debt investment securities
have a primary market over the counter and are valued on the basis of valuations
furnished by the pricing service. The pricing service values portfolio
securities at quoted bid prices, normally at 4:00 pm EST or the yield
equivalents when quotations are not readily available. Securities for which
quotations are not readily available are valued at fair value as determined by
the pricing service using methods which include consideration of yields or
prices of obligations of comparable quality, type of issue, coupon, maturity,
and rating; indications as to value from dealers and general market conditions.
The valuation procedures used by the pricing service and the portfolio
valuations received by the Funds are reviewed by the officers of the Trust under
the general supervision of the Trustees. Short-term instruments having a
maturity of 60 days or less are valued at amortized cost, which approximates
market value.
Federal Income Taxes: It is the policy of the Funds to comply with the
provisions of the Internal Revenue code applicable to "regulated investment
companies" and to distribute all of their taxable income, including any net
realized gain on investments to its shareholders. Therefore no provision for
Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Funds may engage in
when-issued or delayed delivery transactions. To the extent the Funds engage in
such transactions, they will do so for the purpose of acquiring portfolio
securities consistent with their investment objectives and not for the purpose
of investment leverage or to speculate on interest rate changes. At the time a
fund makes a commitment to purchase a security on a when-issued basis, it will
record the transaction and reflect the value in determining each fund's net
asset value. When effecting such transactions, assets of the Funds of an amount
sufficient to make payment for the portfolio securities to be purchased will be
segregated on the Funds' records at the trade date. Securities purchased on a
when-issued or delayed delivery basis do not earn interest until the settlement
date.
Dividends: Net investment income of the Funds are declared daily as a dividend
on shares for which the Funds have received payment. Dividends are paid monthly
and are reinvested in additional shares of the Funds 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 capital gains, to the extent available,
will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Premiums and discounts on securities
purchased are amortized over the life of the respective securities. Realized
gains and losses from the sale of securities are recorded on an identified cost
basis. The Funds invest in various mortgage-backed securities. Such securities
pay interest and a portion of principal each month, which is then available for
investment in securities at prevailing prices. Net investment income, other than
class specific expenses, and realized and unrealized gains and losses, are
allocated daily to each class of shares based upon the relative net asset value
of outstanding shares (or the value of the dividend-eligible shares, as
appropriate) of each class of shares at the beginning of the day (after
adjusting for the current share activity of the respective class). Expenses
common to all funds are allocated among the funds comprising the Trust based
upon their relative net asset values or other appropriate allocation methods.
Foreign Currency Transactions: With respect to the Income Fund, portfolio
securities and other assets and liabilities denominated in foreign currencies
are translated into U.S. dollars based on the rate of exchange of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
portfolio securities and interest denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
The Income Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of interest recorded on the Income Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Funds. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services to
the Funds for which the fees are payable at the end of each month. For the year
ended September 30, 2003, these fees were payable at annual rates ranging from
..375 of 1% to .275 of 1% of the average daily net assets of the Government Fund
and .50 of 1% to .275 of 1% of the average daily net assets of the Income Fund
depending on each fund's asset size. The Funds also have an administrative
services agreement with the Advisor, whereby the Advisor will perform certain
administrative services for the shareholders of each class of each fund's
shares, and for which fees will be payable at an annual rate of up to .125 of 1%
of the average daily net assets attributable to Class A, Class B, Class C, and
Class R-1 shares, and up to .05 of 1% of the average daily net assets
attributable to Class I shares. For the year ended September 30, 2003, the
Advisor voluntarily reimbursed certain class specific expenses and
administrative fees of $25,229, $9,538, $18,019, and $5,920 for the Class B, C,
I, and R-1 shares, respectively, of the Government Fund and $69,643, $35,730,
$35,869, and $5,920 for the Class A, C, I, and R-1 shares, respectively, of the
Income Fund.
The Funds have underwriting agreements with Thornburg Securities Corporation
(the "Distributor"), which acts as the distributor of each fund's shares. For
the year ended September 30, 2003, the Distributor has advised the Funds that it
earned net commissions aggregating $4,694 and $246 from the sales of Class A
shares of the Government Fund and Income Fund, respectively, and collected
contingent deferred sales charges aggregating $16,456 and $14,111 from
redemptions of Class C shares of the Government Fund and Income Fund,
respectively.
Pursuant to a service plan under Rule 12b-1 of the Investment Company Act of
1940, the Funds may reimburse to the Advisor an amount not to exceed .25 of 1%
per annum of its average daily net assets attributable to the Class A, Class B,
Class C, and Class R-1 shares of the Funds for payments made by the Advisor to
securities dealers and other financial institutions to obtain various
shareholder related services. The Advisor may pay out of its own resources
additional expenses for distribution of each fund's shares. The Funds have also
adopted distribution plans pursuant to Rule 12b-1, applicable to each fund's
Class B, Class C, and Class R-1 shares under which the Funds compensate the
Distributor for services in promoting the sale of Class B, C, and R-1 shares of
the Funds at an annual rate of up to .75 of 1% of the average daily net assets
attributable to these classes. Total fees incurred by each class of shares of
the Funds under their respective service and distribution plans for the year
ended September 30, 2003 are set forth in the statement of operations.
Distribution fees of $8,627 for Class B shares of the Government Fund were
waived. Distribution fees of $219,786 and $211,445 respectively for Class C
shares of the Government Fund and Income Fund were waived.
The Funds have an agreement with the custodian bank to indirectly pay a portion
of the custodian's fees through credits earned by each fund's cash on deposit
with the bank. This deposit agreement is an alternative to overnight
investments. Custodial fees have been adjusted to reflect amounts that would
have been paid without this agreement, with a corresponding adjustment reflected
as fees paid indirectly in the statements of operations.
For the year ended September 30, 2003, the fees paid indirectly were $36,837 and
$3,999 for the Government Fund and Income Fund respectively.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4- SHARES OF BENEFICIAL INTEREST
At September 30, 2003 there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
GOVERNMENT FUND
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold ........................................... 7,033,728 $ 93,088,730 5,830,978 $ 74,915,518
Shares issued to shareholders in ...................... 352,071 4,651,838 308,530 3,936,572
reinvestment of dividends
Shares repurchased .................................... (5,757,412) (75,904,463) (2,644,186) (33,714,285)
Net Increase (Decrease) ............................... 1,628,387 $ 21,836,105 3,495,322 $ 45,137,805
Class B Shares*
Shares sold ........................................... 265,526 $ 3,519,557 -- $ --
Shares issued to shareholders in ...................... 2,704 35,753 -- --
reinvestment of dividends
Shares repurchased .................................... (35,893) (475,105) -- --
Net Increase (Decrease) ............................... 232,337 $ 3,080,205 -- $ --
Class C Shares
Shares sold ........................................... 2,733,738 $ 36,415,998 1,809,321 $ 23,357,218
Shares issued to shareholders in ...................... 83,795 1,113,966 49,185 632,519
reinvestment of dividends
Shares repurchased .................................... (887,516) (11,773,424) (556,607) (7,114,178)
Net Increase (Decrease) ............................... 1,930,017 $ 25,756,540 1,301,899 $ 16,875,559
*Effective date of Class B shares was November 1, 2002
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class I Shares
Shares sold ........................................... 808,309 $ 10,671,009 405,851 $ 5,212,897
Shares issued to shareholders in ...................... 24,410 322,502 15,459 197,119
reinvestment of dividends
Shares repurchased .................................... (367,766) (4,863,736) (209,432) (2,669,910)
Net Increase (Decrease) ............................... 464,953 $ 6,129,775 211,878 $ 2,740,106
Class R-1 Shares*
Shares sold ........................................... 6 $ 75 -- $ --
Shares issued to shareholders in ...................... 0 1 -- --
reinvestment of dividends
Shares repurchased .................................... 0 -- -- --
Net Increase (Decrease) ............................... 6 $ 76 -- $ --
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold ........................................... 7,033,728 $ 93,088,730 5,830,978 $ 74,915,518
Shares issued to shareholders in ...................... 352,071 4,651,838 308,530 3,936,572
reinvestment of dividends
Shares repurchased .................................... (5,757,412) (75,904,463) (2,644,186) (33,714,285)
Net Increase (Decrease) ............................... 1,628,387 $ 21,836,105 3,495,322 $ 45,137,805
Class B Shares*
Shares sold ........................................... 265,526 $ 3,519,557 -- $ --
Shares issued to shareholders in ...................... 2,704 35,753 -- --
reinvestment of dividends
Shares repurchased .................................... (35,893) (475,105) -- --
Net Increase (Decrease) ............................... 232,337 $ 3,080,205 -- $ --
Class C Shares
Shares sold ........................................... 2,733,738 $ 36,415,998 1,809,321 $ 23,357,218
Shares issued to shareholders in ...................... 83,795 1,113,966 49,185 632,519
reinvestment of dividends
Shares repurchased .................................... (887,516) (11,773,424) (556,607) (7,114,178)
Net Increase (Decrease) ............................... 1,930,017 $ 25,756,540 1,301,899 $ 16,875,559
*Effective date of Class B shares was November 1, 2002
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class I Shares
Shares sold ........................................... 808,309 $ 10,671,009 405,851 $ 5,212,897
Shares issued to shareholders in ...................... 24,410 322,502 15,459 197,119
reinvestment of dividends
Shares repurchased .................................... (367,766) (4,863,736) (209,432) (2,669,910)
Net Increase (Decrease) ............................... 464,953 $ 6,129,775 211,878 $ 2,740,106
Class R-1 Shares*
Shares sold ........................................... 6 $ 75 -- $ --
Shares issued to shareholders in ...................... 0 1 -- --
reinvestment of dividends
Shares repurchased .................................... 0 -- -- --
Net Increase (Decrease) ............................... 6 $ 76 -- $ --
INCOME FUND
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold .......................................... 8,212,612 $ 105,632,467 4,883,164 $ 60,723,116
Shares issued to shareholders in ..................... 317,279 4,076,963 216,337 2,686,604
reinvestment of dividends
Shares repurchased ................................... (2,518,725) (32,271,494) (1,375,041) (17,008,985)
Net Increase (Decrease) .............................. 6,011,166 $ 77,437,936 3,724,460 $ 46,400,735
Class C Shares
Shares sold .......................................... 2,753,770 $ 35,318,563 1,608,495 $ 19,981,690
Shares issued to shareholders in ..................... 83,893 1,076,023 57,332 707,055
reinvestment of dividends
Shares repurchased ................................... (973,489) (12,486,478) (510,378) (6,349,285)
Net Increase (Decrease) .............................. 1,864,174 $ 23,908,108 1,155,449 $ 14,339,460
Class I Shares
Shares sold .......................................... 2,435,755 $ 31,247,349 1,845,923 $ 22,978,197
Shares issued to shareholders in ..................... 150,329 1,931,913 96,298 1,197,933
reinvestment of dividends
Shares repurchased ................................... (1,080,571) (13,907,657) (806,185) (10,006,123)
Net Increase (Decrease) .............................. 1,505,513 $ 19,271,605 1,136,036 $ 14,170,007
Class R-1 Shares*
Shares sold .......................................... 6 $ 75 -- $ --
Shares issued to shareholders in ..................... -- 1 -- --
reinvestment of dividends
Shares repurchased ................................... -- -- -- --
Net Increase (Decrease) .............................. 6 $ 76 -- $ --
<FN>
* Effective date of Class R-1 Shares was July 1, 2003
</FN>
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003, portfolio purchase and sale transactions
(excluding short-term securities) were $143,743,069 and $77,220,696 for the
Government Fund and $166,153,784 and $41,699,436 for the Income Fund,
respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components of capital is as
follows:
Government Income
Fund Fund
Cost of investments
for tax purpose ........... $ 238,122,625 $ 284,968,923
Gross tax unrealized
appreciation .............. $ 8,607,808 13,951,669
Gross tax unrealized
depreciation .............. (1,580,350) (2,289,055)
Net tax unrealized
appreciation (depreciation)
on investments $ .......... 7,027,458 $ 11,662,614
Distributable earnings-
ordinary income ........... $ 83,335 $ 179,037
At September 30, 2003, the Government Fund had tax basis capital losses, which
may be carried over to offset future capital gains. Such losses expire as
follows: Capital loss carryovers expiring in:
2004 $ 2,026,055
2008 17,646
2009 1,160,521
2010 13,611
$ 3,217,833
At September 30, 2003, the Income Fund had tax basis capital losses, which may
be carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2004 $ 225,978
2008 497,824
2009 650,941
2010 308,333
$ 1,683,076
The Government Fund utilized $4,568,542 and the Income Fund utilized $98,558 of
loss carry forwards during the year ended September 30, 2003. Unutilized tax
basis capital losses may be carried forward to offset realized gains in future
years. To the extent such carry forwards are used, capital gains distributions
may be reduced to the extent provided by regulations.
During the year ended September 30, 2003, $78,173 and $489,157 of capital loss
carryforwards from prior years expired for the Government Fund and Income Fund
respectively. These amounts were reclassed to paid-in capital.
For tax purposes, distributions for the years ended September 30, 2003 and
September 30, 2002, were paid from ordinary income.
For the Income Fund, net investment income differs for financial statement and
tax purposes due to differing treatments of defaulted securities.
Financial highlights
Thornburg Limited Term U.S. Government Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class A Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ......................... $ 13.27 $ 12.77 $ 12.03 $ 12.06 $ 12.66
Income from investment operations:
Net investment income .................................. 0.47 0.58 0.67 0.68 0.66
Net realized and unrealized
gain (loss) on investments ........................... (0.04) 0.50 0.74 (0.03) (0.60)
Total from investment operations ........................... 0.43 1.08 1.41 0.65 0.06
Less dividends from:
Net investment income .................................. (0.47) (0.58) (0.67) (0.68) (0.66)
Change in net asset value .................................. (0.04) 0.50 0.74 (0.03) (0.60)
Net asset value, end of year ............................... $ 13.23 $ 13.27 $ 12.77 $ 12.03 $ 12.06
Total return (a) ........................................... 3.29% 8.75% 12.02% 5.58% 0.48%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income .................................. 3.53% 4.53% 5.39% 5.69% 5.33%
Expenses, after expense reductions ..................... 0.92% 0.93% 0.99% 0.98% 0.95%
Expenses, after expense reductions
and net of custody credits ........................... 0.90% 0.92% -- -- --
Expenses, before expense reductions .................... 0.92% 0.93% 0.99% 0.99% 0.95%
Portfolio turnover rate .................................... 35.06% 4.34% 15.23% 19.66% 19.39%
Net assets at end of year (000) ........................... $ 176,876 $ 155,864 $ 105,348 $ 87,616 $ 113,215
<FN>
(a) Sales loads are not reflected in computing total return
</FN>
Period Ended
September 30,
2003(c)
Class B Shares:
Per Share Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ..................... $ 13.12
Income from investment operations
Net investment income ................................ 0.37
Net realized and unrealized
gain (loss) on investments ......................... 0.10
Total from investment operations 0.47 Less dividends from:
Net investment income ................................ (0.37)
Change in net asset value ................................ 0.10
Net asset value, end of period ........................... $ 13.22
Total return (a) ......................................... 3.60%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ................................ 2.93% (b)
Expenses, after expense reductions ................... 1.35% (b)
Expenses, after expense reductions
and net of custody credits ......................... 1.33% (b)
Expenses, before expense reductions .................. 3.32% (b)
Portfolio turnover rate .................................. 35.06%
Net assets at end of period (000) ........................ $ 3,073
(a) Not annualized for periods less than one year.
(b) Annualized.
(c) Effective date of Class B Shares was November 1, 2002.
Year Ended September 30,
2003 2002 2001 2000 1999
Class C Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ................... $ 13.35 $ 12.85 $ 12.10 $ 12.12 $ 12.71
Income from investment operations:
Net investment income ............................ 0.43 0.54 0.62 0.63 0.60
Net realized and unrealized
gain (loss) on investments ..................... (0.04) 0.50 0.75 (0.02) (0.59)
Total from investment operations ..................... 0.39 1.04 1.37 0.61 0.01
Less dividends from:
Net investment income ............................ (0.43) (0.54) (0.62) (0.63) (0.60)
Change in net asset value ............................ (0.04) 0.50 0.75 (0.02) (0.59)
Net asset value, end of year ......................... $ 13.31 $ 13.35 $ 12.85 $ 12.10 $ 12.12
Total return ......................................... 2.96% 8.33% 11.60% 5.23% 0.13%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ............................ 3.14% 4.13% 4.89% 5.26% 4.88%
Expenses, after expense reductions ............... 1.24% 1.28% 1.41% 1.40% 1.40%
Expenses, after expense reductions
and net of custody credits ..................... 1.22% 1.27% -- -- --
Expenses, before expense reductions .............. 1.76% 1.78% 2.01% 2.11% 1.98%
Portfolio turnover rate .............................. 35.06% 4.34% 15.23% 19.66% 19.39%
Net assets at end of year (000) ..................... $ 56,166 $ 30,587 $ 12,704 $ 5,098 $ 7,516
Year Ended September 30,
2003 2002 2001 2000 1999
Class I Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ................... $ 13.27 $ 12.77 $ 12.03 $ 12.05 $ 12.65
Income from investment operations:
Net investment income ............................ 0.51 0.62 0.72 0.72 0.70
Net realized and unrealized
gain (loss) on investments ..................... (0.05) 0.50 0.74 (0.02) (0.60)
Total from investment operations ..................... 0.46 1.12 1.46 0.70 0.10
Less dividends from:
Net investment income ............................ (0.51) (0.62) (0.72) (0.72) (0.70)
Change in net asset value ............................ (0.05) 0.50 0.74 (0.02) (0.60)
Net asset value, end of year ......................... $ 13.22 $ 13.27 $ 12.77 $ 12.03 $ 12.05
Total return ......................................... 3.51% 9.11% 12.45% 6.07% 0.82%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ............................ 3.77% 4.86% 5.79% 6.06% 5.69%
Expenses, after expense reductions ............... 0.64% 0.61% 0.61% 0.60% 0.60%
Expenses, after expense reductions
and net of custody credits ..................... 0.62% 0.60% -- -- --
Expenses, before expense reductions .............. 0.82% 1.04% 1.21% 1.08% 1.06%
Portfolio turnover rate .............................. 35.06% 4.34% 15.23% 19.66% 19.39%
Net assets at end of year (000) ..................... $ 13,085 $ 6,960 $ 3,992 $ 3,819 $ 5,612
Period Ended
September 30,
2003(c)
Class R-1 Shares:
Per Share Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ..................... $ 13.38
Income from investment operations:
Net investment income ................................ 0.17
Net realized and unrealized
gain (loss) on investments ......................... (0.15)
Total from investment operations 0.02 Less dividends from:
Net investment income ................................ (0.17)
Change in net asset value ................................ (0.15)
Net asset value, end of period ........................... $ 13.23
Total return (a) ......................................... 0.19%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ................................ 5.07% (b)
Expenses, after expense reductions ................... 1.15% (b)
Expenses, after expense reductions
and net of custody credits ......................... 1.15% (b)
Expenses, before expense reductions .................. 41,652.81% (b)*
Portfolio turnover rate .................................. 35.06%
Net assets at end of period (000) ........................ $ -- (d)
(a) Not annualized for periods less than one year.
(b) Annualized.
(c) Effective date of Class R-1 Shares was July 1, 2003.
(d) Net assets at end of year were less than $1,000.
Due to the size of net assets and fixed expenses, ratios may appear
disproportionate.
Thornburg Limited Term Income Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class A Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 12.79 $ 12.55 $ 11.89 $ 11.93 $ 12.50
Income from investment operations:
Net investment income .......................... 0.51 0.61 0.73 0.73 0.69
Net realized and unrealized
gain (loss) on investments ................... 0.20 0.24 0.66 (0.04) (0.57)
Total from investment operations ................... 0.71 0.85 1.39 0.69 0.12
Less dividends from:
Net investment income .......................... (0.51) (0.61) (0.73) (0.73) (0.64)
Return of Capital .............................. -- -- -- -- (0.05)
Change in net asset value .......................... 0.20 0.24 0.66 (0.04) (0.57)
Net asset value, end of year ....................... $ 12.99 $ 12.79 $ 12.55 $ 11.89 $ 11.93
Total return (a) ................................... 5.56% 7.05% 12.05% 6.05% 1.02%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ........................... 3.91% 4.88% 5.94% 6.21% 5.68%
Expenses, after expense reductions .............. 0.99% 0.99% 1.00% 0.99% 0.99%
Expenses, after expense reductions
and net of custody credits .................... 0.99% 0.99% -- -- --
Expenses, before expense reductions ............. 1.04% 1.10% 1.16% 1.21% 1.19%
Portfolio turnover rate ............................. 18.86% 21.63% 20.54% 59.46% 48.50%
Net assets at end of year (000) ..................... $ 184,497 $ 104,710 $ 56,036 $ 31,520 $ 41,050
<FN>
(a) Sales loads are not reflected in computing total return
</FN>
Year Ended September 30,
2003 2002 2001 2000 1999
Class C Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 12.77 $ 12.53 $ 11.87 $ 11.91 $ 12.47
Income from investment operations:
Net investment income ....................... 0.46 0.56 0.68 0.68 0.64
Net realized and unrealized
gain (loss) on investments ................ 0.20 0.24 0.66 (0.04) (0.56)
Total from investment operations ................ 0.66 0.80 1.34 0.64 0.08
Less dividends from:
Net investment income ....................... (0.46) (0.56) (0.68) (0.68) (0.59)
Return of Capital ........................... -- -- -- -- (0.05)
Change in net asset value ....................... 0.20 0.24 0.66 (0.04) (0.56)
Net asset value, end of year .................... $ 12.97 $ 12.77 $ 12.53 $ 11.87 $ 11.91
Total return .................................... 5.20% 6.63% 11.61% 5.62% 0.68%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ....................... 3.56% 4.45% 5.52% 5.81% 5.28%
Expenses, after expense reductions .......... 1.33% 1.39% 1.41% 1.40% 1.40%
Expenses, after expense reductions
and net of custody credits ................ 1.33% 1.39% -- -- --
Expenses, before expense reductions ......... 1.92% 1.93% 2.13% 2.26% 2.22%
Portfolio turnover rate ......................... 18.86% 21.63% 20.54% 59.46% 48.50%
Net assets at end of year (000) ................. $ 54,926 $ 30,258 $ 15,219 $ 7,272 $ 7,528
Year Ended September 30,
2003 2002 2001 2000 1999
Class I Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ................ $ 12.79 $ 12.55 $ 11.90 $ 11.93 $ 12.50
Income from investment operations:
Net investment income ......................... 0.55 0.65 0.77 0.77 0.73
Net realized and unrealized
gain (loss) on investments .................. 0.20 0.24 0.65 (0.03) (0.57)
Total from investment operations .................. 0.75 0.89 1.42 0.74 0.16
Less dividends from:
Net investment income ......................... (0.55) (0.65) (0.77) (0.77) (0.68)
Return of Capital ............................. -- -- -- -- (0.05)
Change in net asset value ......................... 0.20 0.24 0.65 (0.03) (0.57)
Net asset value, end of year ...................... $ 12.99 $ 12.79 $ 12.55 $ 11.90 $ 11.93
Total return ...................................... 5.89% 7.38% 12.29% 6.46% 1.32%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ....................... 4.23% 5.19% 6.24% 6.54% 5.99%
Expenses, after expense reductions .......... 0.69% 0.69% 0.70% 0.69% 0.69%
Expenses, after expense reductions
and net of custody credits ................ 0.69% 0.69% -- -- --
Expenses, before expense reductions ......... 0.76% 0.78% 0.89% 1.00% 1.01%
Portfolio turnover rate ......................... 18.86% 21.63% 20.54% 59.46% 48.50%
Net assets at end of year (000) ................. $ 59,473 $ 39,281 $ 24,298 $ 12,094 $ 9,928
Period Ended
September 30,
2003(c)
Class R-1 Shares:
Per Share Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ..................... $ 13.10
Income from investment operations:
Net investment income ................................ 0.17
Net realized and unrealized
gain (loss) on investments ......................... (0.11)
Total from investment operations 0.06 Less dividends from:
Net investment income ................................ (0.17)
Change in net asset value ................................ (0.11)
Net asset value, end of period ........................... $ 12.99
Total return (a) ......................................... 0.48%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ................................ 5.19% (b)
Expenses, after expense reductions ................... 1.25% (b)
Expenses, after expense reductions
and net of custody credits ......................... 1.25% (b)
Expenses, before expense reductions .................. 41,534.94% (b)*
Portfolio turnover rate .................................. 18.86%
Net assets at end of period (000) ........................ $ -- (d)
(a) Not annualized for periods less than one year.
(b) Annualized.
(c) Effective date of Class R-1 Shares was July 1, 2003.
(d) Net assets at end of year were less than $1,000.
o Due to the size of net assets and fixed expenses, ratios may appear
disproportionate.
Schedule of investments
Thornburg Limited Term U.S. Government Fund
September 30, 2003
CUSIPS: CLASS A - 885-215-103, CLASS B - 885-215-848, CLASS C - 885-215-830, CLASS I - 885-215-699, CLASS R-1 - 885-215-491
NASDAQ SYMBOLS: CLASS A - LTUSX, CLASS B - LTUBX, CLASS C - LTUCX, CLASS I - LTUIX, CLASS R-1 - LTURX
Principal
Amount Security Name Value
U.S. Government Agencies (47.40%)
$ 900,000 Federal Agricultural Mortgage Corp., 5.86% due 3/3/2006 .................................. $ 985,193
1,000,000 Federal Agricultural Mortgage Corp., 8.07% due 7/17/2006 ................................. 1,161,241
200,000 Federal Agricultural Mortgage Corp., 6.71% due 7/28/2014 ................................. 238,969
4,650,000 Federal Farm Credit Bank, 1.875% due 1/16/2007 ........................................... 4,595,860
350,000 Federal Farm Credit Bank, 6.75% due 7/7/2009 ............................................. 412,361
1,900,000 Federal Farm Credit Bank Consolidated MTN, 5.875% due 7/28/2008 .......................... 2,137,998
1,300,000 Federal Farm Credit Bank Consolidated MTN, 5.87% due 9/2/2008 ............................ 1,463,783
200,000 Federal Farm Credit Bank Consolidated MTN, 5.35% due 12/11/2008 .......................... 220,522
300,000 Federal Farm Credit Bank Consolidated MTN, 5.80% due 3/19/2009 ........................... 337,279
240,000 Federal Farm Credit Bank Consolidated MTN, 6.06% due 5/28/2013 ........................... 272,413
265,000 Federal Home Loan Bank, 6.55% due 3/7/2005 ............................................... 284,079
100,000 Federal Home Loan Bank, 6.345% due 11/1/2005 ............................................. 109,679
225,000 Federal Home Loan Bank, 5.24% due 12/7/2005 .............................................. 241,850
100,000 Federal Home Loan Bank, 5.37% due 1/20/2006 .............................................. 108,018
3,000,000 Federal Home Loan Bank, 2.25% due 5/15/2006 .............................................. 3,016,644
100,000 Federal Home Loan Bank, 6.09% due 6/2/2006 ............................................... 110,512
200,000 Federal Home Loan Bank, 7.76% due 11/21/2006 ............................................. 233,066
1,000,000 Federal Home Loan Bank, 6.37% due 9/26/2007 .............................................. 1,130,216
475,000 Federal Home Loan Bank, 6.075% due 1/2/2008 .............................................. 533,449
150,000 Federal Home Loan Bank, 7.00% due 2/15/2008 .............................................. 174,703
2,050,000 Federal Home Loan Bank, 5.98% due 6/18/2008 .............................................. 2,310,721
570,000 Federal Home Loan Bank, 5.015% due 10/8/2008 ............................................. 617,898
225,000 Federal Home Loan Bank, 5.53% due 11/24/2008 ............................................. 249,659
1,250,000 Federal Home Loan Bank, 5.48% due 1/8/2009 ............................................... 1,384,374
1,465,000 Federal Home Loan Bank, 5.67% due 2/26/2009 .............................................. 1,635,626
3,000,000 Federal Home Loan Bank, 5.70% due 3/3/2009 ............................................... 3,355,701
3,000,000 Federal Home Loan Bank, 5.985% due 4/9/2009 .............................................. 3,399,495
200,000 Federal Home Loan Bank, 5.79% due 4/27/2009 .............................................. 224,553
2,000,000 Federal Home Loan Bank, 4.00% due 9/30/2010 .............................................. 2,000,000
75,000 Federal Home Loan Mortgage Corp., 5.98% due 12/8/2005 .................................... 81,751
300,000 Federal Home Loan Mortgage Corp., 6.80% due 3/19/2007 .................................... 344,683
105,954 Federal Home Loan Mortgage Corp., Pool # 141016, 9.25% due 11/1/2016 ..................... 116,302
316,699 Federal Home Loan Mortgage Corp., Pool # 141412, 8.50% due 4/1/2017 ...................... 346,329
37,462 Federal Home Loan Mortgage Corp., Pool # 160043, 8.75% due 4/1/2008 ...................... 40,247
42,891 Federal Home Loan Mortgage Corp., Pool # 181730, 8.50% due 5/1/2008 ...................... 46,160
723 Federal Home Loan Mortgage Corp., Pool # 200075, 9.00% due 9/1/2004 ...................... 743
49,664 Federal Home Loan Mortgage Corp., Pool # 252986, 10.75% due 4/1/2010 ..................... 54,904
29,726 Federal Home Loan Mortgage Corp., Pool # 256764, 8.75% due 10/1/2014 ..................... 31,935
65,589 Federal Home Loan Mortgage Corp., Pool # 260486, 9.00% due 1/1/2010 ...................... 71,347
187,164 Federal Home Loan Mortgage Corp., Pool # 273822, 8.50% due 4/1/2009 ...................... 200,256
17,558 Federal Home Loan Mortgage Corp., Pool # 291880, 8.25% due 5/1/2017 ...................... 19,132
69,813 Federal Home Loan Mortgage Corp., Pool # 294817, 9.75% due 1/1/2017 ...................... 78,075
29,915 Federal Home Loan Mortgage Corp., Pool # 298107, 10.25% due 8/1/2017 ..................... 33,686
139,169 Federal Home Loan Mortgage Corp., Pool # 770297, 4.00% due 6/1/2018 ...................... 141,777
110,805 Federal Home Loan Mortgage Corp., Pool # C90041, 6.50% due 11/1/2013 ..................... 116,537
13,165 Federal Home Loan Mortgage Corp., Pool # D06907, 9.00% due 4/1/2017 ...................... 14,002
33,229 Federal Home Loan Mortgage Corp., Pool # D06908, 9.50% due 9/1/2017 ...................... 36,536
157,540 Federal Home Loan Mortgage Corp., Pool # D37120, 7.00% due 7/1/2023 ...................... 167,068
134,511 Federal Home Loan Mortgage Corp., Pool # E00170, 8.00% due 7/1/2007 ...................... 142,277
94,430 Federal Home Loan Mortgage Corp., Pool # E49074, 6.50% due 7/1/2008 ...................... 99,712
135,074 Federal Home Loan Mortgage Corp., Pool # E61778, 6.50% due 4/1/2008 ...................... 141,549
13,652 Federal Home Loan Mortgage Corp., Pool # E65962, 7.00% due 5/1/2008 ...................... 14,134
492,353 Federal Home Loan Mortgage Corp. CMO Series 2137 Class TM, 6.50% due 1/15/2028 505,917
4,500,000 Federal Home Loan Mortgage Corp. CMO Series 2603 Class TN, 4.00% due 10/15/2011 .......... 4,542,066
391,000 Federal National Mortgage Association, 5.125% due 2/13/2004 .............................. 396,752
1,425,000 Federal National Mortgage Association, 3.10% due 7/28/2006 ............................... 1,432,609
175,440 Federal National Mortgage Association, Pool # 008307, 8.00% due 5/1/2008 ................. 189,451
46,339 Federal National Mortgage Association, Pool # 019535, 10.25% due 7/1/2008 ................ 49,773
204,094 Federal National Mortgage Association, Pool # 033356, 9.25% due 8/1/2016 ................. 226,542
9,388 Federal National Mortgage Association, Pool # 040526, 9.25% due 1/1/2017 ................. 10,030
142,236 Federal National Mortgage Association, Pool # 044003, 8.00% due 6/1/2017 ................. 155,555
131,028 Federal National Mortgage Association, Pool # 050811, 7.50% due 12/1/2012 ................ 139,958
190,190 Federal National Mortgage Association, Pool # 050832, 7.50% due 6/1/2013 ................. 203,378
139,888 Federal National Mortgage Association, Pool # 076388, 9.25% due 9/1/2018 ................. 155,315
58,765 Federal National Mortgage Association, Pool # 077725, 9.75% due 10/1/2018 ................ 64,196
441,574 Federal National Mortgage Association, Pool # 100286, 7.50% due 8/1/2009 ................. 472,270
78,022 Federal National Mortgage Association, Pool # 112067, 9.50% due 10/1/2016 ................ 87,280
128,812 Federal National Mortgage Association, Pool # 156156, 8.50% due 4/1/2021 ................. 140,683
106,959 Federal National Mortgage Association, Pool # 190555, 7.00% due 1/1/2014 ................. 113,781
108,254 Federal National Mortgage Association, Pool # 190703, 7.00% due 3/1/2009 ................. 115,289
244,656 Federal National Mortgage Association, Pool # 190836, 7.00% due 6/1/2009 ................. 260,555
169,708 Federal National Mortgage Association, Pool # 250387, 7.00% due 11/1/2010 ................ 180,698
184,321 Federal National Mortgage Association, Pool # 250481, 6.50% due 11/1/2015 ................ 193,153
121,156 Federal National Mortgage Association, Pool # 251258, 7.00% due 9/1/2007 ................. 127,878
242,265 Federal National Mortgage Association, Pool # 251759, 6.00% due 5/1/2013 ................. 253,435
597,644 Federal National Mortgage Association, Pool # 252648, 6.50% due 5/1/2022 ................. 626,062
142,273 Federal National Mortgage Association, Pool # 252787, 7.00% due 8/1/2006 ................. 146,736
193,217 Federal National Mortgage Association, Pool # 303383, 7.00% due 12/1/2009 ................ 203,937
173,634 Federal National Mortgage Association, Pool # 312663, 7.50% due 6/1/2010 ................. 185,682
323,973 Federal National Mortgage Association, Pool # 323706, 7.00% due 2/1/2009 ................. 341,949
172,136 Federal National Mortgage Association, Pool # 334996, 7.00% due 2/1/2011 ................. 183,282
708,713 Federal National Mortgage Association, Pool # 342947, 7.25% due 4/1/2024 ................. 757,479
80,800 Federal National Mortgage Association, Pool # 345775, 8.50% due 12/1/2024 ................ 88,246
132,916 Federal National Mortgage Association, Pool # 373942, 6.50% due 12/1/2008 ................ 140,801
1,866,089 Federal National Mortgage Association, Pool # 380488, 6.10% due 7/1/2008 ................. 2,062,972
2,815,646 Federal National Mortgage Association, Pool # 380633, 6.18% due 9/1/2008 ................. 3,123,476
1,738,870 Federal National Mortgage Association, Pool # 381146, 6.04% due 1/1/2009 ................. 1,919,795
903,225 Federal National Mortgage Association, Pool # 382450, 7.86% due 6/1/2010 ................. 1,080,036
1,305,145 Federal National Mortgage Association, Pool # 382616, 7.40% due 8/1/2010 ................. 1,530,789
1,072,586 Federal National Mortgage Association, Pool # 382709, 7.40% due 8/1/2008 ................. 1,230,004
308,415 Federal National Mortgage Association, Pool # 382889, 7.35% due 12/1/2010 ................ 354,195
342,896 Federal National Mortgage Association, Pool # 382926, 7.37% due 12/1/2010 ................ 393,044
3,540,598 Federal National Mortgage Association, Pool # 383363, 6.235% due 3/1/2011 ................ 3,874,742
1,814,900 Federal National Mortgage Association, Pool # 383849, 6.65% due 8/1/2011 ................. 2,076,451
1,058,495 Federal National Mortgage Association, Pool # 384193, 6.17% due 9/1/2011 ................. 1,185,072
630,664 Federal National Mortgage Association, Pool # 384243, 6.10% due 10/1/2011 ................ 683,679
1,081,657 Federal National Mortgage Association, Pool # 384746, 5.86% due 2/1/2009 ................. 1,183,209
1,478,266 Federal National Mortgage Association, Pool # 385263, 5.41% due 11/1/2006 ................ 1,573,620
3,254,570 Federal National Mortgage Association, Pool # 385714, 4.70% due 1/1/2010 ................. 3,337,968
12,051 Federal National Mortgage Association, Pool # 400569, 6.00% due 4/1/2009 ................. 12,313
467,631 Federal National Mortgage Association, Pool # 406384, 8.25% due 12/1/2024 ................ 508,752
518,552 Federal National Mortgage Association, Pool # 443909, 6.50% due 9/1/2018 ................. 542,432
3,500,000 Federal National Mortgage Association, Pool # 460568, 5.20% due 12/1/2006 ................ 3,655,700
755,130 Federal National Mortgage Association, Pool # 516363, 5.00% due 3/1/2014 ................. 773,927
728,355 Federal National Mortgage Association, Pool # 555207, 7.00% due 11/1/2017 ................ 763,314
432,590 Federal National Mortgage Association CMO Series 1992-22 Class HC, 7.00% due 3/25/2007 ... 454,862
750,000 Federal National Mortgage Association CMO Series 1993-101 Class PJ, 7.00% due 6/25/2008 .. 820,121
438,571 Federal National Mortgage Association CMO Series 1993-112 Class EC, 7.00% due 1/25/2011 .. 441,338
250,000 Federal National Mortgage Association CMO Series 1993-122 Class D, 6.50% due 6/25/2023 ... 270,152
437,896 Federal National Mortgage Association CMO Series 1993-32 Class H, 6.00% due 3/25/2023 .... 461,916
1,148,818 Federal National Mortgage Association CMO Series 1993-35 Class G, 6.50% due 11/25/2006 ... 1,213,806
9,000,000 Federal National Mortgage Association Discount Notes, 1.02% due 10/15/2003 ............... 8,996,430
146,733 Government National Mortgage Association, Pool # 000623, 8.00% due 9/20/2016 ............. 159,469
163,615 Government National Mortgage Association, Pool # 016944, 7.50% due 5/15/2007 ............. 172,447
48,489 Government National Mortgage Association, Pool # 296697, 9.50% due 10/15/2005 ............ 51,259
85,836 Government National Mortgage Association, Pool # 306636, 8.25% due 12/15/2006 ............ 91,445
78,600 Government National Mortgage Association, Pool # 313403, 6.80% due 5/20/2023 ............. 83,563
253,277 Government National Mortgage Association, Pool # 357090, 6.80% due 4/20/2025 ............. 268,793
265,292 Government National Mortgage Association, Pool # 369693, 7.00% due 1/15/2009 ............. 283,119
137,413 Government National Mortgage Association, Pool # 409921, 7.50% due 8/15/2010 ............. 147,403
108,038 Government National Mortgage Association, Pool # 410240, 7.00% due 12/15/2010 ............ 115,350
93,560 Government National Mortgage Association, Pool # 410271, 7.50% due 8/15/2010 ............. 100,361
155,404 Government National Mortgage Association, Pool # 410846, 7.00% due 12/15/2010 ............ 165,922
159,964 Government National Mortgage Association, Pool # 430150, 7.25% due 12/15/2026 ............ 171,169
267,516 Government National Mortgage Association, Pool # 447040, 7.75% due 5/15/2027 ............. 288,345
230,105 Government National Mortgage Association, Pool # 453928, 7.00% due 7/15/2017 ............. 246,554
77,177 Government National Mortgage Association, Pool # 780063, 7.00% due 9/15/2008 ............. 82,140
341,858 Government National Mortgage Association, Pool # 780448, 6.50% due 8/15/2011 ............. 363,410
278,840 Government National Mortgage Association CMO Series 2002-67 Class VA, 6.00% due 3/20/2013 295,246
1,794,168 Government National Mortgage Association CMO Series 2003-31 Class YA, 4.00% due 5/16/2021 1,827,250
3,861,916 Government National Mortgage Association CMO Series 2003-67 Class PN, 4.00% due 11/20/2020 3,951,826
103,529 Guaranteed Export Trust 1995-A Certificate, 6.28% due 6/15/2004 .......................... 105,977
2,875,200 Overseas Private Investment Corp., 4.10% due 11/15/2014 .................................. 2,921,376
1,000,000 Private Export Funding Corp., 4.974% due 8/15/2013 ....................................... 1,050,108
2,000,000 Private Export Funding Corp. Secured Note Series M, 5.34% due 3/15/2006 .................. 2,166,066
1,000,000 Private Export Funding Corp. Secured Note Series P, 5.685% due 5/15/2012 ................. 1,102,834
3,000,000 Tennessee Valley Authority, 4.75% due 8/1/2013 ........................................... 3,094,965
1,895,864 United States Government General Services, 7.62% due 9/15/2010 ........................... 2,237,119
Total U.S. Government Agencies (Cost $108,199,634) ....................................... 114,043,373
United States Treasury (52.60%)
$ 7,750,000 United States Treasury Notes, 7.25% due 5/15/2004 ........................................ $ 8,046,980
3,700,000 United States Treasury Notes, 7.25% due 8/15/2004 ........................................ 3,897,865
10,000,000 United States Treasury Notes, 1.50% due 2/28/2005 ........................................ 10,046,090
4,900,000 United States Treasury Notes, 6.50% due 5/15/2005 ........................................ 5,311,904
4,500,000 United States Treasury Notes, 6.50% due 8/15/2005 ........................................ 4,924,863
7,000,000 United States Treasury Notes, 5.75% due 11/15/2005 ....................................... 7,615,783
3,000,000 United States Treasury Notes, 5.625% due 2/15/2006 ....................................... 3,278,556
5,500,000 United States Treasury Notes, 4.625% due 5/15/2006 ....................................... 5,902,831
2,000,000 United States Treasury Notes, 7.00% due 7/15/2006 ........................................ 2,278,438
9,000,000 United States Treasury Notes, 4.375% due 5/15/2007 ....................................... 9,661,644
4,000,000 United States Treasury Notes, 6.125% due 8/15/2007 ....................................... 4,556,248
10,000,000 United States Treasury Notes, 2.625% due 5/15/2008 ....................................... 9,973,830
10,000,000 United States Treasury Notes, 5.50% due 5/15/2009 ........................................ 11,311,720
15,000,000 United States Treasury Notes, 6.50% due 2/15/2010 ........................................ 17,800,200
6,000,000 United States Treasury Notes, 5.75% due 8/15/2010 ........................................ 6,869,298
20,000,000 United States Treasury Notes, 3.625% due 5/15/2013 ....................................... 19,630,460
Total United States Treasury (Cost $129,922,991) ......................................... 131,106,710
TOTAL INVESTMENTS (100%) (Cost $238,122,625) ............................................. $245,150,083
<FN>
See notes to financial statements.
</FN>
Thornburg Limited Term Income Fund
September 30, 2003
CUSIPS: CLASS A - 885-215-509, CLASS C - 885-215-764, CLASS I - 885-215-681, CLASS R-1 - 885-215-483
NASDAQ SYMBOLS: CLASS A - THIFX, CLASS C - THICX, CLASS I - THIIX, CLASS R-1 - THIRX
Principal Credit Rating+
Amount* Security Name Moody's/S&P Value
U.S. TREASURY SECURITIES - 5.20%
$ 1,100,000 United States Treasury Notes, 6.50% due 5/15/2005 ....................................... Aaa/AAA $ 1,192,468
4,500,000 United States Treasury Notes, 4.625% due 5/15/2006 ...................................... Aaa/AAA 4,829,589
1,500,000 United States Treasury Notes, 4.75% due 11/15/2008 ...................................... Aaa/AAA 1,633,887
2,500,000 United States Treasury Notes, 5.75% due 8/15/2010 ....................................... Aaa/AAA 2,862,208
5,000,000 United States Treasury Notes, 3.625% due 5/15/2013 ...................................... Aaa/AAA 4,907,615
Total U.S. Treasury Securities (Cost $14,708,199)
15,425,767 U. S. GOVERNMENT AGENCIES - 5.70%
210,000 Export Funding Trust Series 1994-A Pass Through Certificate, 7.89% due 2/15/2005 Aaa/AAA 219,948
500,000 Federal Agricultural Mortgage Corp., 4.85% due 11/4/2003 Aaa/AAA 501,711
710,000 Federal Farm Credit Bank, 5.96% due 6/16/2008 Aaa/AAA 800,629
100,000 Federal Home Loan Bank, 5.38% due 11/24/2003 Aaa/AAA 100,624
50,000 Federal Home Loan Bank, 6.00% due 8/25/2005 Aaa/AAA 54,196
2,000,000 Federal Home Loan Bank, 2.25% due 5/15/2006 Aaa/AAA 2,011,096
150,000 Federal Home Loan Bank, 4.875% due 5/15/2007 Aaa/AAA 161,534
500,000 Federal Home Loan Bank, 5.833% due 1/23/2008 Aaa/AAA 557,112
75,000 Federal Home Loan Bank, 5.785% due 4/14/2008 Aaa/AAA 83,624
300,000 Federal Home Loan Bank, 5.835% due 7/15/2008 Aaa/AAA 336,501
480,000 Federal Home Loan Bank, 5.48% due 9/22/2008 Aaa/AAA 531,486
250,000 Federal Home Loan Bank, 5.085% due 10/7/2008 Aaa/AAA 271,816
200,000 Federal Home Loan Bank, 5.038% due 10/14/2008 Aaa/AAA 217,004
75,000 Federal Home Loan Bank, 5.365% due 12/11/2008 Aaa/AAA 82,629
85,000 Federal Home Loan Bank, 5.985% due 4/9/2009 Aaa/AAA 96,319
16,609 Federal Home Loan Mortgage Corp., Pool # 850082, 9.00% due 10/1/2005 Aaa/AAA 17,373
162,951 Federal National Mortgage Association, Pool # 020155, 7.491% due 8/1/2014 Aaa/AAA 167,767
224,200 Federal National Mortgage Association, Pool # 190534, 6.00% due 12/1/2008 Aaa/AAA 234,873
50,490 Federal National Mortgage Association, Pool # 297033, 8.00% due 12/1/2009 Aaa/AAA 54,126
124,165 Federal National Mortgage Association, Pool # 303777, 7.00% due 3/1/2011 Aaa/AAA 132,205
586,948 Federal National Mortgage Association, Pool # 382398, 8.00% due 5/1/2011 Aaa/AAA 690,581
1,219,731 Federal National Mortgage Association, Pool # 383398, 6.42% due 4/1/2011 Aaa/AAA 1,363,876
482,907 Federal National Mortgage Association, Pool # 384471, 5.185% due 11/1/2008 Aaa/AAA 513,682
130,333 Federal National Mortgage Association, Pool # 384521, 5.095% due 12/1/2011 Aaa/AAA 136,963
800,000 Federal National Mortgage Association, Pool # 460568, 5.20% due 12/1/2006 Aaa/AAA 835,589
531,024 Federal National Mortgage Association CMO Series 2003-66 Class PM, 3.50% due 12/25/2008 Aaa/AAA 533,810
64,850 Government National Mortgage Association, Pool # 003007, 8.50% due 11/20/2015 Aaa/AAA 72,192
43,185 Government National Mortgage Association, Pool # 827148, 4.375% due 2/20/2024 Aaa/AAA 44,128
3,923,714 Government National Mortgage Association CMO Series 2003-67 Class PN, 4.00% due 11/20/2020 Aaa/AAA 4,015,063
2,000,000 Tennessee Valley Authority, 4.75% due 8/1/2013 .......................................... Aaa/AAA 2,063,310
Total U. S. Government Agencies (Cost $16,339,451) 16,901,767
ASSET BACKED SECURITIES - 0.90%
$ 873,443 Associates Manufactured Housing Trust 1996-1 A5, 7.60% due 3/15/2027 Aaa/AAA $ 923,447
137,723 Bank America Mortgage Secs Inc. Series 02-7, Class-2A4, 5.75% due 8/25/2032 ............. Aa2/NA 140,115
111,338 Centex Home Equity Series 2001-A A3, 5.93% due 11/24/2025 ............................... Aaa/AAA 112,298
250,000 Chase Credit Card Owner Trust 2001-5 A, 1.22% due 2/15/2007 ............................. Aaa/AAA 250,052
147,716 Chase Mortgage Finance Trust 1999-S9 A3, 6.25% due 7/25/2014 NR/AAA 151,151
765,879 CNH Equipment Trust, 1.37% due 7/17/2006 ................................................ Aaa/AAA 766,595
125,129 Residential Asset Security Mortgage Pass Thru, 5.751% due 3/25/2027 ..................... Aaa/AAA 125,864
213,272 Washington Mutual Series 02-AR10, Class-A6, 4.816% due 10/25/2032 ....................... Aaa/AAA 216,521
Total Asset Backed Securities (Cost $2,661,246) 2,686,043
CORPORATE BONDS - 62.00%
BANKS
1,565,000 Capital One Bank, 6.70% due 5/15/2008 ................................................... Baa2/BBB- 1,729,899
2,500,000 Fifth Third Bank, 3.375% due 8/15/2008 .................................................. Aa1/AA- 2,514,580
700,000 HSBC USA Inc., 8.375% due 2/15/2007 ..................................................... A1/A+ 818,977
500,000 KeyCorp, 8.00% due 7/1/2004 ............................................................. A3/BBB+ 523,639
1,000,000 Mercantile Bancorp, 7.30% due 6/15/2007 ................................................. A1/A 1,161,617
250,000 Nations Bank Corp. Medium Term Note, 7.23% due 8/15/2012 ................................ Aa2/A+ 292,445
500,000 Northern Trust Co. Medium Term Note, 6.25% due 6/2/2008 ................................. A1/A+ 559,119
95,000 PNC Funding Corp., 6.875% due 7/15/2007 ................................................. A3/BBB+ 108,051
120,000 Union Planters Corp., 6.75% due 11/1/2005 ............................................... A3/BBB- 131,304
2,900,000 United States Central Credit Union, 2.75% due 5/30/2008 ................................. Aa1/AAA 2,848,383
385,000 US Bank, 5.625% due 11/30/2005 .......................................................... Aa2/AA- 416,983
400,000 US Bank, 6.30% due 7/15/2008 ............................................................ Aa3/A+ 454,688
11,559,685
CAPITAL GOODS
250,000 Caterpillar Financial Services Corp., 6.40% due 2/15/2008 ............................. A2/A 276,134
800,000 Emerson Electric Co., 5.75% due 11/1/2011 ............................................. A2/A 871,022
400,000 Energy East Corp., 7.75% due 11/15/2003 ............................................... Baa2/BBB 402,696
600,000 Gatx Capital Corp., 6.875% due 11/1/2004 .............................................. Baa3/BBB- 611,581
244,497 General American Railcar Corp., 6.69% due 9/20/2016 Aa2/AA ............................ 250,900
1,000,000 Hubbell Inc., 6.375% due 5/15/2012 A3/A+ .............................................. 1,137,235
200,000 Illinois Tool Works Inc., 5.75% due 3/1/2009 .......................................... Aa3/AA- 223,224
450,000 John Deere Capital Corp., 5.125% due 10/19/2006 ....................................... A3/A- 485,173
1,000,000 Johnson Controls Inc., 5.00% due 11/15/2006 ........................................... A2/A 1,079,534
1,000,000 Pentair Inc., 7.85% due 10/15/2009 Baa3/BBB 1,178,045
900,000 Pitney Bowes Inc., 5.875% due 5/1/2006 ................................................ Aa3/AA 983,086
900,000 Pitney Bowes Inc., 4.625% due 10/1/2012 ............................................... Aa3/AA 912,234
5,000,000 Pitney Bowes Inc., 3.875% due 6/15/2013 ............................................... Aa3/AA 4,760,120
260,000 Textron Financial Corp., 5.95% due 3/15/2004 .......................................... A3/A- 264,776
13,435,760
COMMERCIAL SERVICES & SUPPLIES
$ 250,000 Aramark Services Inc., 7.00% due 7/15/2006 Baa3/BBB- $ 275,828
250,000 Science Applications International Corp., 6.75% due 2/1/2008 A3/A- 277,264
1,000,000 Science Applications International Corp., 6.25% due 7/1/2012 A3/A- 1,105,671
1,650,000 Valassis Communications, 6.625% due 1/15/2009 Baa3/BBB- 1,821,283
1,000,000 Waste Management Inc., 6.50% due 11/15/2008 ............................................. Baa3/BBB 1,116,814
725,000 Waste Management Inc., 6.875% due 5/15/2009 ............................................. Baa3/BBB 821,546
500,000 Waste Management Inc., 7.375% due 8/1/2010 Baa3/BBB 584,482
215,000 WMX Technologies Inc., 6.375% due 12/1/2003 ............................................. Baa3/BBB 216,488
1,010,000 WMX Technologies Inc., 7.00% due 5/15/2005 Baa3/BBB 1,085,014
550,000 WMX Technologies Inc., 7.00% due 10/15/2006 ............................................. Baa3/BBB 615,884
7,920,274
DIVERSIFIED FINANCIALS
200,000 American General Finance Corp. Medium Term Note, 4.625% due 9/1/2010 A1/A+ 204,948
1,000,000 Beneficial Corp., 6.80% due 7/22/2005 ................................................. A1/A 1,077,405
1,000,000 Berkshire Hathaway Finance Corp., 4.625% due 10/15/2013(b) ............................ Aaa/AAA 995,070
75,000 Dun & Bradstreet Corp., 6.625% due 3/15/2006 .......................................... NR/BBB+ 81,529
150,000 Ford Motor Credit, 6.24% due 12/15/2004 ............................................... A3/BBB 153,558
2,900,000 General Electric Capital Corp., 5.00% due 2/15/2007 Aaa/AAA 3,116,552
200,000 General Electric Capital Corp., 7.75% due 6/9/2009 .................................... Aaa/AAA 239,938
400,000 General Electric Capital Corp., 7.375% due 1/19/2010 .................................. Aaa/AAA 475,000
400,000 Household Finance Corp., 5.20% due 8/15/2005 .......................................... A1/A 417,828
100,000 Household Finance Corp., 5.90% due 5/15/2006 .......................................... A1/A 106,311
550,000 Household Finance Corp., 7.20% due 7/15/2006 .......................................... A1/A 619,602
400,000 Household Finance Corp., 5.75% due 1/30/2007 .......................................... A1/A 436,656
400,000 Household Finance Corp., 6.40% due 9/15/2009 .......................................... A1/A 429,475
950,000 International Lease Finance Corp. Medium Term Note, 5.95% due 6/6/2005 ................ A1/AA- 1,008,117
2,600,000 Jefferies Group Inc. Senior Note Series B, 7.50% due 8/15/2007 ........................ Baa2/BBB- 2,944,100
700,000 Lehman Brothers Holdings Inc., 3.50% due 8/7/2008 ..................................... A2/A 701,409
800,000 Schwab Charles Corp. Medium Term Note, 6.30% due 4/28/2006 ............................ A2/A- 874,802
1,400,000 SLM Corp., 5.00% due 10/1/2013 ........................................................ A2/A 1,415,304
800,000 Toyota Motor Credit Corp., 2.875% due 8/1/2008 ........................................ Aaa/AAA 794,719
16,092,323
ENERGY
575,000 Allete Inc., 7.80% due 2/15/2008 ...................................................... Baa2/BBB 635,774
850,000 Amerenenergy Generating Co., 7.75% due 11/1/2005 ...................................... A3/A- 946,075
1,150,000 Ashland Inc., 7.83% due 8/15/2005 Baa2/BBB 1,244,194
75,000 BJ Services Co. Note Series B, 7.00% due 2/1/2006 ..................................... Baa2/BBB+ 81,248
975,000 Commonwealth Edison Co., 4.74% due 8/15/2010 .......................................... A3/A- 1,011,256
700,000 El Paso Corp., 7.00% due 5/15/2011 Caa1/B 577,500
250,000 Enterprise Products Participating LP, 7.50% due 2/1/2011 .............................. Baa2/BBB 294,919
350,000 EOG Resources Inc., 6.50% due 9/15/2004 ............................................... Baa1/BBB+ 365,551
450,000 EOG Resources Inc., 6.00% due 12/15/2008 .............................................. Baa1/BBB+ 504,652
1,250,000 Kinder Morgan Energy Partners, 8.00% due 3/15/2005 .................................... Baa1/BBB+ 1,360,674
$ 290,000 Louis Dreyfus Natural Gas Corp., 6.875% due 12/1/2007 ................................. A3/BBB+ $ 327,313
650,000 Murphy Oil Corp., 6.375% due 5/1/2012 ................................................. Baa1/A- 726,590
750,000 Noram Energy Corp., 6.375% due 11/1/2003 .............................................. Ba1/BBB 751,500
120,000 Northern Border Pipeline Co., 6.25% due 5/1/2007 ...................................... A3/A- 132,152
800,000 Occidental Petroleum Corp., 5.875% due 1/15/2007 ...................................... Baa1/BBB+ 881,040
300,000 Occidental Petroleum Corp., 7.375% due 11/15/2008 ..................................... Baa1/BBB+ 346,079
315,000 Occidental Petroleum Corp., 10.125% due 9/15/2009 ..................................... Baa1/BBB+ 414,550
201,615 Oil Enterprises Ltd., 6.239% due 6/30/2008 (Insured: MBIA) ............................ Aaa/AAA 223,601
250,000 Oneok Inc., 7.75% due 3/1/2005 (Insured: MBIA) ........................................ Aaa/AAA 270,333
1,100,000 Panenergy Corp., 7.00% due 10/15/2006 ................................................. Baa3/BBB 1,207,236
250,000 Phillips Petroleum Co., 8.75% due 5/25/2010 ........................................... A3/A- 317,462
900,000 Phillips Petroleum Co., 9.375% due 2/15/2011 .......................................... A3/A- 1,170,080
350,000 Questar Pipeline Co., 6.05% due 12/1/2008 ............................................. A2/A+ 386,746
875,000 Rio Tinto Finance, 5.75% due 7/3/2006 ................................................. Aa3/A+ 953,106
600,000 Smith International Inc. Senior Note, 7.00% due 9/15/2007 ............................. Baa1/BBB+ 685,114
500,000 Sonat Inc., 7.625% due 7/15/2011 ...................................................... Caa1/B 412,500
525,000 Texas Eastern Transmission Corp. Senior Note, 5.25% due 7/15/2007 ..................... Baa2/BBB+ 561,671
200,000 Transocean SedCo. Forex Inc., 9.125% due 12/15/2003 Baa2/A- ........................... 202,322
190,000 Transocean SedCo. Forex Inc., 6.75% due 4/15/2005 ..................................... Baa2/A- 203,184
515,000 Transocean SedCo. Forex Inc., 6.95% due 4/15/2008 ..................................... Baa2/A- 585,350
85,000 Transocean SedCo. Forex Inc., 6.625% due 4/15/2011 .................................... Baa2/A- 95,449
200,000 Union Oil Co. California, 7.90% due 4/18/2008 ......................................... Baa2/BBB+ 232,514
18,107,735
FOOD BEVERAGE & TOBACCO
1,150,000 Anheuser Busch Co. Inc., 5.625% due 10/1/2010 ......................................... A1/A+ 1,273,157
2,000,000 Anheuser Busch Co. Inc., 4.375% due 1/15/2013 ......................................... A1/A+ 2,000,640
1,550,000 Anheuser Busch Co. Inc., 4.95% due 1/15/2014 .......................................... A1/A+ 1,601,806
515,000 Coca Cola Co., 4.00% due 6/1/2005 Aa3/A+ 535,820
200,000 Coca Cola Co., 5.75% due 3/15/2011 Aa3/A+ 221,952
325,000 Conagra Inc., 7.50% due 9/15/2005 Baa1/BBB+ 358,749
150,000 Conagra Inc., 7.875% due 9/15/2010 Baa1/BBB+ 183,850
4,000,000 Diageo Capital PLC, 3.375% due 3/20/2008 .............................................. A2/A+ 4,032,564
250,000 General Mills, 4.75% due 10/8/2003 Baa2/BBB+ 250,104
300,000 General Mills, 5.50% due 1/12/2009 Baa2/BBB+ 324,876
125,000 Grand Metropolitan Investment Corp., 0% due 1/6/2004 .................................. A2/A+ 124,446
215,000 Kellogg Co., 6.625% due 1/29/2004 Baa2/BBB 218,547
186,000 Kellogg Co., 4.875% due 10/15/2005 Baa2/BBB 197,396
900,000 Sara Lee Corp. Medium Term Note, 6.00% due 1/15/2008 .................................. A3/A+ 997,578
1,000,000 Sysco International Co., 6.10% due 6/1/2012 ........................................... A1/AA- 1,128,431
13,449,916
HEALTHCARE EQUIPMENT & SERVICES
500,000 Baxter International Inc., 5.25% due 5/1/2007 ......................................... A3/A 539,663
250,000 Boston Scientific Corp., 6.625% due 3/15/2005 ......................................... Baa1/A- 266,492
2,900,000 Johnson & Johnson, 3.80% due 5/15/2013 ................................................ Aaa/AAA 2,799,988
3,606,143
HOUSEHOLD & PERSONAL PRODUCTS
$ 2,000,000 Gillette Co., 4.00% due 6/30/2005 Aa3/AA- $ 2,085,082
2,000,000 Gillette Co., 2.875% due 3/15/2008 Aa3/AA- 1,975,672
900,000 Nike Inc., 5.50% due 8/15/2006 ........................................................ A2/A 984,282
300,000 Procter & Gamble Co., 4.75% due 6/15/2007 ............................................. Aa3/AA- 321,545
2,000,000 Procter & Gamble Co., 4.30% due 8/15/2008 ............................................. Aa3/AA- 2,110,464
7,477,045
HOTELS RESTAURANTS & LEISURE
225,000 Hyatt Equities LLC, 9.25% due 5/15/2005 ............................................... Baa3/BBB 243,890
500,000 Wendy's International Inc., 6.35% due 12/15/2005 ...................................... Baa1/BBB+ 536,672
780,562
INSURANCE
800,000 AIG Sunamerica Global Financing, 5.10% due 1/17/2007 .................................. Aaa/AAA 870,175
900,000 Allstate Corp., 5.375% due 12/1/2006 .................................................. A1/A+ 981,414
200,000 AON Corp., 6.90% due 7/1/2004 ......................................................... Baa2/A- 207,270
170,000 Equitable Iowa Cos., 8.50% due 2/15/2005 .............................................. A1/A+ 182,754
1,000,000 Hartford Financial Services Group Inc., 4.625% due 7/15/2013 A3/A- .................... 978,329
300,000 Hartford Life Inc., 7.10% due 6/15/2007 ............................................... A3/A- 341,038
1,000,000 Liberty Mutual Insurance Co., 8.20% due 5/4/2007 ...................................... Baa2/BBB+ 1,069,894
855,000 Manufacturers Life Insurance Co., 7.875% due 4/15/2005 ................................ A1/AA- 920,687
550,000 Marsh & Mclennan Cos. Inc., 4.85% due 2/15/2013 ....................................... A2/AA- 557,929
450,000 Metlife Inc., 5.25% due 12/1/2006 A2/A ................................................ 489,054
1,800,000 Old Republic International Corp., 7.00% due 6/15/2007 ................................. Aa3/A+ 2,029,797
700,000 Principal Financial Group Australia, 8.20% due 8/15/2009 .............................. A3/A 842,986
2,000,000 Principal Life Global Funding I, 4.40% due 10/1/2010 .................................. Aa3/AA 2,037,054
2,450,000 Unumprovident Corp., 7.625% due 3/1/2011 .............................................. Baa3/BBB- 2,695,000
900,000 USF&G Corp., 7.125% due 6/1/2005 ...................................................... A3/BBB+ 971,914
15,175,295
MATERIALS
75,000 Chevron Phillips Chemical, 5.375% due 6/15/2007 ....................................... Baa1/BBB+ 80,499
500,000 Chevron Phillips Chemical, 7.00% due 3/15/2011 ........................................ Baa1/BBB+ 568,891
1,400,000 Chevrontexaco Capital Co., 3.50% due 9/17/2007 ........................................ Aa2/AA 1,437,723
350,000 Dow Chemical Co., 5.75% due 12/15/2008 ................................................ A3/A- 378,020
200,000 E.I. du Pont de Nemours & Co., 8.25% due 9/15/2006 .................................... Aa3/AA- 234,188
1,000,000 E.I. du Pont de Nemours & Co., 4.75% due 11/15/2012 Aa3/AA- 1,032,837
325,000 E.I. du Pont de Nemours & Co., 4.125% due 3/6/2013 .................................... Aa3/AA- 316,510
475,000 Eastman Chemical Co., 6.375% due 1/15/2004 Baa2/BBB 480,934
400,000 Hoechst Celanese Corp., 6.125% due 2/1/2004 ........................................... Baa2/NR 405,987
200,000 Hoechst Celanese Corp., 7.125% due 3/15/2009 .......................................... Baa2/A+ 218,748
75,000 Lafarge Corp., 6.375% due 7/15/2005 ................................................... Baa1/BBB 80,438
635,000 Lubrizol Corp. Senior Note, 5.875% due 12/1/2008 ...................................... A2/A+ 692,572
2,000,000 Minnesota Mining & Manufacturing Co., 4.15% due 6/30/2005 ............................. Aa1/AA 2,083,532
2,900,000 Praxair Inc., 3.95% due 6/1/2013 ...................................................... A3/A- 2,767,235
10,778,114
MEDIA
$ 750,000 AOL Time Warner Inc., 6.75% due 4/15/2011 ............................................. Baa1/BBB+ $ 837,511
80,000 E W Scripps Co. Ohio, 5.75% due 7/15/2012 ............................................. A2/A 87,244
300,000 New York Times Co., 4.625% due 6/25/2007 .............................................. A1/A+ 318,282
255,000 Scholastic Corp., 5.75% due 1/15/2007 ................................................. Baa2/BBB 277,216
2,900,000 Thomson Corp., 4.25% due 8/15/2009 A3/A- 2,957,991
200,000 Time Warner Inc., 8.05% due 1/15/2016 ................................................. Baa1/BBB+ 240,888
125,000 Tribune Co., 6.875% due 11/1/2006 A3/NR 140,860
4,859,992
PHARMACEUTICALS & BIOTECHNOLOGY
1,000,000 Abbott Labs, 6.40% due 12/1/2006 ...................................................... Aa3/AA 1,127,266
500,000 Bristol Myers Squibb Co., 4.75% due 10/1/2006 ......................................... A1/AA- 533,283
1,850,000 Eli Lilly & Co., 5.50% due 7/15/2006 .................................................. Aa3/AA 2,015,941
1,825,000 Pfizer Inc., 3.30% due 3/2/2009 ....................................................... Aaa/AAA 1,831,837
2,000,000 Pharmacia Corp., 5.75% due 12/1/2005 .................................................. A1/AAA 2,171,938
1,900,000 Watson Pharmaceuticals Inc., 7.125% due 5/15/2008 ..................................... Ba1/BBB- 2,079,204
9,759,469
REAL ESTATE MANAGEMENT & DEVELOPMENT
1,000,000 Mission Valley Finance Corp. Commercial Mortgage Note Class-A2 144A, 6.78% due 12/15/2004 NA/AA 1,055,133
405,000 Prime Property Funding II Inc., 7.00% due 8/15/2004 A2/A 422,746
1,477,879
RETAILING
500,000 Costco Wholesale Corp., 5.50% due 3/15/2007 ............................................. A2/A 550,334
100,000 Dayton Hudson Corp., 9.625% due 2/1/2008 ................................................ A2/A+ 123,840
150,000 Dillard's Inc., 7.375% due 6/1/2006 ..................................................... Ba3/BB 150,750
1,400,000 Duty Free International Inc., 7.00% due 1/15/2004 ....................................... NR/NR 686,000
1,000,000 Target Corp., 3.375% due 3/1/2008 A2/A+ 1,011,321
700,000 Target Corp., 5.875% due 3/1/2012 A2/A+ 772,336
900,000 Wal-Mart Stores Inc., 6.875% due 8/10/2009 Aa2/AA 1,057,963
530,052 Wal-Mart Stores Inc., 8.57% due 1/2/2010 ................................................ Aa2/AA 617,473
290,449 Wal-Mart Stores Inc., 1992-A1 Pass Through Certificate, 7.49% due 6/21/2007 ............. Aa2/AA 321,760
5,291,777
SOFTWARE & SERVICES
250,000 Electronic Data Systems Corp., 6.85% due 10/15/2004 Baa3/BBB 259,062
2,500,000 Electronic Data Systems Corp., 7.125% due 10/15/2009 .................................... Baa3/BBB 2,612,500
1,000,000 Electronic Data Systems Corp., 6.00% due 8/1/2013 ....................................... Baa3/BBB 961,190
3,832,752
TECHNOLOGY - HARDWARE & EQUIPMENT
$ 2,000,000 Computer Sciences Corp, 3.50% due 4/15/2008 ............................................ A2/A $ 2,016,694
158,000 Computer Sciences Corp., 7.50% due 8/8/2005 ............................................ A2/A 174,107
350,000 Computer Sciences Corp., 6.75% due 6/15/2006 ........................................... A2/A 390,689
300,000 Computer Sciences Corp., 6.25% due 3/15/2009 ........................................... A2/A 340,872
1,317,000 Computer Sciences Corp., 7.375% due 6/15/2011 .......................................... A2/A 1,569,203
110,000 First Data Corp., 6.375% due 12/15/2007 ................................................ A1/A+ 123,158
900,000 First Data Corp., 5.625% due 11/1/2011 ................................................. A1/A+ 965,681
1,875,000 First Data Corp., 4.70% due 8/1/2013 ................................................... A1/A+ 1,884,366
500,000 International Business Machines, 4.875% due 10/1/2006 .................................. A1/A+ 538,079
2,825,000 International Business Machines, 2.375% due 11/1/2006 .................................. A1/A+ 2,841,117
1,000,000 International Business Machines, 4.25% due 9/15/2009 ................................... A1/A+ 1,039,449
500,000 Jabil Circuit Inc., 5.875% due 7/15/2010 ............................................... Baa3/BB+ 519,302
1,800,000 Oracle Corp., 6.72% due 2/15/2004 A3/A- 1,835,728
1,200,000 Oracle Corp., 6.91% due 2/15/2007 A3/A- 1,361,318
1,950,000 Sun Microsystems Inc., 7.50% due 8/15/2006 Baa1/BBB 2,191,654
17,791,417
TELECOMMUNICATION SERVICES
900,000 Cingular Wireless, 5.625% due 12/15/2006 ................................................ A3/A+ 980,838
50,000 TCI Communications Inc., 8.00% due 8/1/2005 ............................................. Baa3/BBB 55,112
1,500,000 Verizon Wireless Capital LLC, 5.375% due 12/15/2006 A3/A+ ............................... 1,621,725
2,657,675
TRANSPORTATION
210,671 Continental Airlines Pass Through Certificate Series 1997 4 Class-4A, 6.90% due 1/2/2018 Baa3/A- 203,422
225,000 CSX Corp., 7.45% due 5/1/2007 ........................................................... Baa2/BBB 260,550
374,627 Delta Air Lines Inc. EETC Series 2001-1 Class-A, 6.619% due 3/18/2011 Baa2/A 368,909
132,400 Northwest Airlines 1999-2 Class-A, 7.575% due 3/1/2019 .................................. Baa2/A+ 133,876
244,451 Southwest Airlines Co., 5.10% due 5/1/2006 Aa2/AA+ 260,193
1,012,000 Southwest Airlines Co., 7.875% due 9/1/2007 ............................................. Baa1/A 1,167,867
695,745 US Air Inc. EETC, 7.50% due 4/15/2008 (a) ............................................... Ba3/NR 180,059
2,574,876
UTILITIES
175,000 Appalachian Power Co., 6.60% due 5/1/2009 (Insured: MBIA) ............................... Aaa/AAA 198,202
1,245,000 Duke Capital Corp. Senior Note, 7.25% due 10/1/2004 Baa3/BBB 1,300,323
200,000 Entergy Mississippi Inc., 6.45% due 4/1/2008 (Insured: AMBAC) ........................... Aaa/AAA 205,361
925,000 Gulf Power Co., 4.35% due 7/15/2013 ..................................................... A2/A 904,048
950,000 Madison Gas & Electric Co., 6.02% due 9/15/2008 ......................................... Aa3/AA- 1,054,820
900,000 Minnesota Power & Light Co., 7.00% due 2/15/2007 ........................................ Baa1/A 1,007,393
250,000 Pacificorp, 6.75% due 4/1/2005 .......................................................... A3/A 267,848
210,000 Pennsylvania Power & Light Co., 6.55% due 3/1/2006 (Insured: MBIA) ...................... Aaa/AAA 231,314
245,000 PSI Energy Inc., 6.65% due 6/15/2006 .................................................... A3/A- 271,903
500,000 PSI Energy Inc., 7.85% due 10/15/2007 ................................................... Baa1/BBB 584,991
1,000,000 Public Service Co. Colorado 1st Collateral Trust Bond Series 11144A, 4.875% due 3/1/2013 Baa1/BBB+ 1,006,351
275,000 Public Service Electric & Gas Co., 6.75% due 3/1/2006 (Insured: MBIA) Aaa/AAA 305,166
50,000 Virginia Electric & Power Co., 8.00% due 3/1/2004 (Insured: MBIA) ....................... Aaa/AAA 51,423
80,000 Wisconsin Electric Power Co., 7.25% due 8/1/2004 ........................................ Aa2/A- 83,617
350,000 Wisconsin Energy Corp., 5.50% due 12/1/2008 ............................................. A2/BBB+ 379,471
1,150,000 Wisconsin Public Service Corp., 6.125% due 8/1/2011 Aa1/AA- 1,288,459
9,140,690
MISCELLANEOUS
500,000 Stanford University, 5.85% due 3/15/2009 ................................................ Aaa/NA 557,266
YANKEE
745,000 Manitoba Province Canada, 6.125% due 1/19/2004 .......................................... Aa2/AA- 755,611
715,000 National Westminster Bank, 7.375% due 10/1/2009 ......................................... Aa2/A+ 848,691
500,000 Nova Scotia Province Canada, 5.75% due 2/27/2012 ........................................ A3/A- 553,239
250,000 Ontario Province Canada, 3.282% due 3/28/2008 ........................................... Aa2/AA 251,661
5,000,000 Ontario Province Canada, 3.125% due 5/2/2008 ............................................ Aa2/AA 5,029,685
7,438,887
Total Corporate Bonds (Cost $176,418,889) 183,765,532
TAXABLE MUNICIPAL BONDS - 22.50%
4,250,000 American Campus Properties Student Housing, 7.38% due 9/1/2012 (Insured: MBIA) Aaa/AAA 5,018,230
150,000 American Fork City Utah Sales, 2.40% due 3/1/2005 (Insured: FSA) Aaa/AAA 151,596
300,000 American Fork City Utah Sales, 4.89% due 3/1/2012 (Insured: FSA) Aaa/AAA 308,325
120,000 American Fork City Utah Sales, 5.07% due 3/1/2013 (Insured: FSA) Aaa/AAA 123,436
169,000 Arkansas Electric Coop Corp., 7.33% due 6/30/2008 A2/AA- 185,059
300,000 Arkansas State Taxable Water Waste Disposal Series A, 5.50% due 7/1/2005 Aa2/AA 319,527
1,000,000 Ashaubenon Wisconsin, 3.00% due 6/1/2008 Aa2/NR 982,450
230,000 Aurora Indiana School Building Corp. Taxable Refunding 1st Mortgage, 2.30% due 2/10/2004 NR/AA- 230,653
235,000 Aurora Indiana School Building Corp. Taxable Refunding 1st Mortgage, 2.50% due 8/10/2004 NR/AA- 236,610
800,000 Baton Rouge Louisiana Taxable Series B, 2.60% due 1/15/2005 (Insured: AMBAC) Aaa/AAA 811,432
1,115,000 Bessemer Alabama Water Revenue Taxable Warrants Series B, 7.375% due 7/1/2008 (Insured: FSA)Aaa/AAA 1,234,171
150,000 Brockton MA Taxable Economic Development Series A, 6.45% due 5/1/2017 (Insured: FGIC) Aaa/AAA 168,215
370,000 Burbank California Waste Disposal Revenue, 5.29% due 5/1/2007 (Insured: FSA) Aaa/AAA 399,378
310,000 Burbank California Waste Disposal Revenue, 5.48% due 5/1/2008 (Insured: FSA) Aaa/AAA 338,120
200,000 Chicago Illinois Taxable Neighborhoods Alive Series B, 5.20% due 1/1/2006 (Insured: FGIC) Aaa/AAA 216,158
2,125,000 Cleveland Cuyahoga County Ohio, 6.10% due 5/15/2013 NR/NR 2,125,000
1,025,000 Connecticut State Development Authority, 8.55% due 8/15/2005 NR/A+ 1,100,932
1,870,000 Connecticut State Housing Finance Authority, 3.10% due 6/15/2032 (Insured: AMBAC) Aaa/AAA 1,904,632
600,000 Cook County Illinois Community College District 508, 6.90% due 5/1/2010 (Insured: AMBAC) Aaa/AAA 670,338
250,000 Cook County Illinois School District 083, 4.625% due 12/1/2010 (Insured: FSA) Aaa/NR 257,615
150,000 Cook County Illinois School District 083, 4.875% due 12/1/2011 (Insured: FSA) Aaa/NR 154,836
465,000 Coos County Oregon, 3.04% due 6/1/2009 (Insured: FGIC) Aaa/NR 451,971
635,000 Coos County Oregon, 3.47% due 6/1/2010 (Insured: FGIC) Aaa/NR 620,388
900,000 Denver City & County Special Facilities Taxable Refunding & Improvement
Series B, 7.15% due 1/1/2008 (Insured: MBIA) Aaa/AAA 1,041,021
500,000 Duke University Revenue, 6.19% due 6/1/2004 (Duke University Hospital Project A) Aa3/AA 516,060
130,000 Duquesne Pennsylvania General Obligation, 6.95% due 12/15/2003 (Insured: MBIA) Aaa/AAA 131,547
240,000 Elkhart Indiana Redevelopment District Revenue, 4.80% due 6/15/2011 NR/NR 234,038
245,000 Elkhart Indiana Redevelopment District Revenue, 4.80% due 12/15/2011 NR/NR 239,220
515,000 Elkhart Indiana Redevelopment District Revenue, 5.05% due 12/15/2012 NR/NR 500,740
540,000 Elkhart Indiana Redevelopment District Revenue, 5.25% due 12/15/2013 NR/NR 521,867
365,000 Green Bay Wisconsin Series B, 4.875% due 4/1/2011 (Insured: MBIA) Aaa/NR 379,049
68,005 Green Tree Financial Corp. 93-2 Mfd Housing Sr/Sub Certificate Class-A4, 6.90% due 7/15/2018 Aa2/NR 69,864
305,000 Hancock County Mississippi, 4.20% due 8/1/2008 (Insured: MBIA) Aaa/NR 313,528
245,000 Hancock County Mississippi, 4.80% due 8/1/2010 (Insured: MBIA) Aaa/NR 251,578
315,000 Hancock County Mississippi, 4.90% due 8/1/2011 (Insured: MBIA) Aaa/NR 322,047
845,000 Idaho Housing Multi Family Housing Revenue Series 94-B, 8.15% due 7/1/2004 A2/NR 887,073
40,000 Illinois Housing Development Authority Taxable Multi Family Program, 7.85% due 3/1/2005 A1/A+ 42,136
440,000 Indiana Bond Bank Taxable School Severance, 2.54% due 7/15/2004 (Insured: FGIC) Aaa/AAA 444,180
450,000 Indiana Bond Bank Taxable School Severance, 2.74% due 1/15/2005 (Insured: FGIC) Aaa/AAA 457,236
500,000 Jefferson County Texas Navigation Taxable Refunding, 5.50% due 5/1/2010 (Insured: FSA) Aaa/NR 533,215
575,000 Jersey City New Jersey Municipal Utilities Authority, 3.72% due 5/15/2009 (Insured: MBIA) Aaa/AAA 576,196
365,000 Kendall Kane County Illinois School 308, 5.50% due 10/1/2011 (Insured: FGIC) Aaa/NR 394,908
405,000 King County Washington General Obligation, 7.55% due 12/1/2005 Aa1/AA+ 453,300
2,775,000 Los Angeles County California Metropolitan Transport, 4.56% due 7/1/2010 Aaa/AAA 2,870,155
440,000 Maryland State Economic Development Corp., 7.25% due 6/1/2008
(Maryland Tech. Development Center Project) NR/NR 489,610
240,000 McKeesport Pennsylvania Taxable Series B, 6.60% due 3/1/2006 (Insured: MBIA) Aaa/AAA 265,733
140,000 Mississippi State Taxable Business Series V, 7.125% due 9/1/2006 NR/AA 158,451
100,000 Montgomery County Maryland Revenue Authority, 5.00% due 2/15/2012 Aa2/AA+ 103,205
410,000 New Jersey Health Care Facilities Financing, 10.75% due 7/1/2010 NR/NR 531,733
150,000 New Rochelle New York Industrial Development Agency, 7.15% due 10/1/2014 Aa3/A+ 163,899
3,500,000 New York Environmental Facilities, 5.85% due 3/15/2011 NR/AA- 3,874,920
1,400,000 New York Urban Development Corp., 4.75% due 12/15/2011(b) NR/AA 1,452,416
845,000 Newark New Jersey, 4.70% due 4/1/2011 (Insured: MBIA) Aaa/NR 868,119
1,225,000 Newark New Jersey, 4.90% due 4/1/2012 (Insured: MBIA) Aaa/NR 1,254,951
360,000 Niagara Falls New York Public Water, 4.30% due 7/15/2010 Aaa/AAA 367,855
1,000,000 North Carolina Municipal Power Agency Taxable Series B, 3.26% due 1/1/2005 Baa1/BBB+ 1,011,640
2,825,000 Northern States Power Co. Minnesota, 4.75% due 8/1/2010 A3/BBB+ 2,938,890
1,600,000 Northwest Open Access Network Washington Revenue, 6.18% due 12/1/2008 (Insured: AMBAC) Aaa/AAA 1,797,056
985,000 Ohio Petroleum Underground Storage, 6.75% due 8/15/2008 (Insured: MBIA) Aaa/AAA 1,007,931
205,000 Oregon State Department Administrative Lottery Revenue Taxable B, 4.90% due 4/1/2005
(Insured: FSA) Aaa/AAA 214,756
250,000 Passaic County New Jersey Multi Modal Taxable Refunding Series B, 6.23% due 9/1/2005
(Insured: FSA) Aaa/AAA 270,827
555,000 Pima County Arizona Industrial Development Authority Series E, 9.05% due 7/1/2008 Baa3/NR 636,468
540,000 San Francisco City & County Redevelopment Project Series B, 7.80% due 8/1/2004 A2/A 568,426
1,000,000 Short Pump Town Center Community Development, 6.26% due 2/1/2009(b) NR/NR 1,004,390
2,190,000 Sisters Providence Obligation Group Direct Obligation Notes Series 1997, 7.47% due 10/1/2007 A1/AA- 2,513,244
400,000 South Dakota Building Authority Revenue, 7.00% due 9/1/2005 (escrowed to maturity) Aaa/AAA 438,312
2,240,000 St. Louis Municipal Finance Corp. Firemans Retirement System, 6.35% due 8/1/2005
(Insured: MBIA) Aaa/AAA 2,420,656
500,000 Tennessee State Taxable Series B, 6.00% due 2/1/2013 Aa2/AA 543,110
5,000,000 Texas Municipal Gas Corp., 2.60% due 7/1/2007 Aaa/AAA 5,039,950
400,000 Texas State Public Finance Authority Revenue, 3.125% due 6/15/2007 Aa2/AA 403,144
245,000 Texas Tech University Revenue, 6.00% due 8/15/2011 (Insured: MBIA) Aaa/AAA 273,168
1,000,000 University Illinois Revenue, 6.35% due 4/1/2011 (Insured: FGIC) Aaa/AAA 1,135,770
90,000 University of New Mexico Revenue, 3.90% due 6/1/2010 (Insured: AMBAC) Aaa/AAA 90,185
250,000 University of New Mexico Revenue, 4.15% due 6/1/2011 (Insured: AMBAC) Aaa/AAA 250,150
180,000 University of New Mexico Revenue, 4.375% due 6/1/2012 (Insured: AMBAC) Aaa/AAA 179,411
270,000 University of New Mexico Revenue, 4.50% due 6/1/2013 (Insured: AMBAC) Aaa/AAA 267,792
1,000,000 Victor New York Taxable Tax Increment, 9.20% due 5/1/2014 NR/NR 1,063,180
505,000 Virginia Housing Development Authority Taxable Rental Housing Series I, 7.30% due 2/1/2008 Aa1/AA+ 581,109
285,000 Washington Pennsylvania 4.30% due 9/1/2005 (Insured: FGIC) Aaa/AAA 297,862
1,510,000 Weber Basin Utah Water Conservation Taxable Series B, 2.36% due 10/1/2003 (Insured: AMBAC) Aaa/NR 1,510,045
1,500,000 West Valley City Utah Municipal Building Lease Refunding Taxable, 7.67% due 5/1/2006 Aa2/NR 1,684,560
Total Taxable Municipal Bonds (Cost $64,332,393) 66,860,954
FOREIGN SECURITIES - 1.30%
2,000,000 British Columbia Province, 9.00% due 6/21/2004 (Canadian Dollars) Aa2/AA- 1,547,708
2,000,000 Federal Republic of Germany, 5.00% due 8/19/2005 (EURO) Aaa/AAA 2,444,286
Total Foreign Securities (Cost $3,336,174) 3,991,994
COMMERCIAL PAPER - 2.40%
2,000,000 American General Finance, 1.10% due 10/1/2003 A1/P1 2,000,000
2,000,000 American General Finance, 1.10% due 10/2/2003 A1/P1 1,999,939
3,000,000 American General Finance, 1.10% due 10/6/2003 A1/P1 2,999,541
Total Commercial Paper (Cost $6,999,480) 6,999,480
TOTAL INVESTMENTS (100%) (Cost $284,795,832) $ 296,631,537
<FN>
* Principal amount in U.S. Dollars unless otherwise indicated,
value is in U.S. Dollar.
+ Credit ratings are unaudited.
(a) Bond in default, non-income - producing security.
(b) When issued security. See notes to financial statements.
</FN>
Report of Independent Auditors
Thornburg Limited Term Income Fund
September 30, 2003
To the Trustees and Shareholders of
Thornburg Limited Term Income Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules 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 Limited Term U.S.
Government Fund and Thornburg Limited Term Income Fund, each a series of
Thornburg Investment Trust, (the "Funds") at September 30, 2003, the results of
each of their operations for the year then ended, the changes in each of their
net assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
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 audits, which included
confirmation of securities at September 30, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
Index Comparisons
GOVERNMENT FUND
Index Comparisons
The charts below compare performance of the Government Fund Class A shares and
Class C shares to the Lehman Brothers Intermediate Government Bond Index and the
Consumer Price Index for the periods ended September 30, 2003. On September 30,
2003, the weighted average securities ratings of the Index and the Fund were AAA
and AAA, respectively, and the weighted average portfolio maturities of the
Index and the Fund were 4.0 years and 4.5 years, respectively. Class A shares
became available on November 16, 1987, and Class C shares became available on
September 1, 1994. Past performance of the Index and the Fund may not be
indicative of future performance. The performance data and graph do not reflect
the deduction of taxes that a shareholder would pay on distributions or the
redemption of fund shares.
Thornburg Limited Term U.S. Government Fund Class A Total Returns, Since
November 30, 1987, versus Lehman Brothers Intermediate Government Bond Index and
Consumer Price Index (C.P.I.)
Lehman Govt. Int. Index
Fund A Shares
CPI
Average Annual Total Returns
(periods ending 9/30/03) (at max. offering price)
A Shares
One Year: 1.76%
Five Years: 5.63%
Ten Years: 5.62%
From Inception (11/16/87): 6.82%
Thornburg Limited Term U.S. Government Fund Class C Total Returns,
Since Inception, versus Lehman Brothers Intermediate Government Bond Index
and Consumer Price Index (C.P.I.)
Lehman Govt. Int. Index
Fund C Shares
CPI
Average Annual Total Returns
(periods ending 9/30/03)
C Shares
One Year: 2.46%
Five Years: 5.57%
From Inception (9/1/94): 6.11%
The Lehman Brothers Intermediate Government Bond Index is an unmanaged
market-weighted index generally representative of all public obligations of the
U.S. Government, its agencies and instrumentalities having maturities of up to
ten years.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
Index Comparisons
INCOME FUND
Index Comparisons
The charts below compare performance of the Income Fund Class A shares and Class
C shares to the Lehman Brothers Intermediate Government/Credit Index and the
Consumer Price Index for the periods ended September 30, 2003. On September 30,
2003, the weighted average securities ratings of the Index and the Fund were A
and AA, respectively, and the weighted average portfolio maturities of the Index
and the Fund were 4.5 years and 4.7 years, respectively. Class A shares became
available on October 1, 1992 and Class C shares became available on September 1,
1994. Past performance of the Index and the Fund may not be indicative of future
performance. The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on distributions or the redemption of fund
shares.
Thornburg Limited Term Income Fund Class A Total Returns, Since Inception,
versus Lehman Brothers Government/Credit Index and Consumer Price Index (C.P.I.)
Lehman Gov./Credit. Index
Fund A Shares
CPI
Average Annual Total Returns
(periods ending 9/30/03) (at max. offering price)
A Shares
One Year: 3.98%
Five Years: 5.97%
Ten Years: 6.08%
From Inception (10/1/92): 6.37%
Thornburg Limited Term Income Fund Class C Total Returns, Since Inception,
versus Lehman Brothers Government/Credit Index and Consumer Price Index (C.P.I.)
Lehman Gov./Credit. Index
Fund C Shares
CPI
Average Annual Total Returns
(periods ending 9/30/03)
C Shares
One Year: 4.70%
Five Years: 5.89%
From Inception (9/1/94): 6.43%
The Lehman Brothers Intermediate Government/Credit Bond Index is an unmanaged,
market-weighted index generally representative of intermediate government and
investment grade corporate debt securities having maturities of up to ten years.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
TRUSTEES and Officers
Thornburg Limited Term Income Funds
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
Thornburg Limited Term U.S. Government Fund
A Shares
Outperformed U.S. Government Money Market Index
(Unaudited)
Investors sometimes ask us to compare the returns of the Limited Term U.S.
Government Fund to money market fund returns. These investments have certain
differences, and investors in the Limited Term U.S. Government Fund took more
risk than money market fund investors to earn their higher returns.
Return from a hypothetical $10,000 investment 9/30/93 through 9/30/03 (after
sales charge and fund expenses)
Lipper U.S. Gov't
Money Market Index $4,839
Thornburg Limited Term
U.S. Government Fund $7,274
The chart above is for the Fund's Class A Shares only. Class B, Class C, Class I
and Class R-1 Shares have different sales charges and expenses. See the inside
front cover page for the 30-day SEC yield and the total returns at the maximum
offering prices for one year, three years, five years, and since inception for
the Class A, B, C, I and R-1 shares of the Fund. Return for the money fund
average is based upon 30-day yield quotations for taxable money funds as quoted
in "Lipper U.S. Government Money Market Index" for the months covered by this
analysis. The return for Limited Term U.S. Government Fund is based upon the
dividends paid for the months covered by this analysis, the beginning offering
price of $13.12 per share and the ending NAV of $13.23 per share. These
investments returned the $10,000 initial investment in addition to the amounts
shown above.
Note 1: Future performance of any of these investments may bear no
relationship to prior performance.
Note 2: This analysis does not take into
account the effect, if any, caused by taxes. The average money market fund
increases shown above may differ from the return of a particular money market
fund. It is not possible to invest in this money fund average.
Note 3:
Generally, money market funds seek to maintain an investment portfolio with an
average maturity of 90 days or less. Limited Term U.S. Government Fund invests
in short-to-intermediate maturity U.S. Government and agency obligations. The
net asset value of the money funds did not fluctuate. The net asset value of the
Class A Shares of LTUSX did vary from time to time, and will continue to vary in
the future due to the effect of changes in interest rates on the value of the
investments the Fund holds. The analysis assumes that the investor received the
net asset value of the shares owned, plus accrued income, at time of sale.
Redemptions are made at the then current net asset value, which may give you a
gain or loss when you sell your shares.
Note 4: This analysis assumes that the
dividends from each of these investment vehicles were reinvested and compounded
monthly. Most money funds declare dividends daily and pay them monthly. LTUSX
also declares dividends daily and pays them monthly.
Thornburg Limited Term Income Fund
a shares
Outperformed Lipper Money Market Index
(Unaudited)
Investors sometimes ask us to compare the returns of the Limited Term Income
Fund to money market fund returns. These investments have certain differences,
and investors in the Limited Term Income Fund took more risk than money market
fund investors to earn their higher returns.
Return from a hypothetical $10,000 investment 9/30/93 through 9/30/03 (after
sales charge and fund expenses)
Lipper Taxable Money
Market Index $5,000
Thornburg Limited Term
Income Fund $8,048
The chart above is for the Fund's Class A Shares only. Class B, Class C, Class I
and Class R-1 Shares have different sales charges and expenses. See the inside
front cover page for the 30-day SEC yield and the total returns at the maximum
offering prices for one year, three years, five years, and since inception for
the Class A, B, C, I and R-1 shares of the Fund. Return for the money fund
average is based upon 30-day yield quotations for taxable money funds as quoted
in "Lipper Money Market Index" for the months covered by this analysis. The
return for Limited Term Income Fund is based upon the dividends paid for the
months covered by this analysis, the beginning offering price of $12.74 per
share and the ending NAV of $12.99 per share. These investments returned the
$10,000 initial investment in addition to the amounts shown above.
Note 1: Future performance of any of these investments may bear no relationship
to prior performance.
Note 2: This analysis does not take into account the effect, if any, caused by
taxes. The average money market fund increases shown above may differ from the
return of a particular money market fund. It is not possible to invest in this
money fund average.
Note 3: Generally, money market funds seek to maintain an
investment portfolio with an average maturity of 90 days or less. Limited Term
Income Fund invests in short-to-intermediate maturity fixed income obligations.
The net asset value of the money funds did not fluctuate. The net asset value of
the Class A Shares of THIFX did vary from time to time, and will continue to
vary in the future due to the effect of changes in interest rates on the value
of the investments the Fund holds. The analysis assumes that the investor
received the net asset value of the shares owned, plus accrued income, at time
of sale. Redemptions are made at the then current net asset value, which may
give you a gain or loss when you sell your shares.
Note 4: This analysis assumes that the dividends from each of these investment
vehicles were reinvested and compounded monthly. Most money funds declare
dividends daily and pay them monthly. THIFX also declares dividends daily and
pays them monthly.
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
www.thornburg.com
This report is submitted for the general information of shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective prospectus, which includes
information regarding the Funds' 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.
Thornburg Limited Term Income Funds I Shares
Annual Report
September 30, 2003
Thornburg Limited Term Income Funds ALL DATA AS OF 9/30/03.
FUND FACTS: Thornburg Limited Term U.S. Government Fund*
I Shares
Annualized Distribution Rate (at NAV) 3.07%
SEC Yield 2.48%
NAV $13.22
Maximum Offering Price $13.22
TOTAL RETURNS: (Annual Average - After Subtracting Maximum Sales Charge)
One Year 3.51%
Three Years 8.29%
Five Years 6.31%
Ten Years N/A
Since Inception 6.96%
Inception Date 7/5/1996
FUND FACTS: Thornburg Limited Term Income Fund
I Shares
Annualized Distribution Rate (at NAV) 4.05%
SEC Yield 2.87%
NAV $12.99
Maximum Offering Price $12.99
TOTAL RETURNS: (Annual Average - After Subtracting Maximum Sales Charge)
One Year 5.89%
Three Years 8.49%
Five Years 6.61%
Ten Years N/A
Since Inception 7.24%
Inception Date 7/5/1996
The investment return and principal value of an investment in the fund will
fluctuate so that, when redeemed, an investor's shares may be worth more or less
than their original cost.
The data quoted represent past performance and may not be construed as a
guarantee of future results.
The SEC Yield is computed in accordance with SEC standards measuring the net
investment income per share over a specified 30-day period expressed as a
percentage of the maximum offering price of the Fund's shares at the end of the
period.
The distribution rate is calculated by taking the sum of the month's total
distribution factors and dividing this sum by a 30-day period and annualizing to
360-day year. The value is then divided by the ending NAV to arrive at the
annualized distribution yield. The yield is calculated on a periodic basis and
is subject to change depending on the fund's NAV and current distributions.
Letter to shareholders
Dear Fellow Shareholder,
I am pleased to present the Annual Report for the Thornburg Limited Term Income
Fund and the Thornburg Limited Term U.S. Government Fund for the year ended
September 30, 2003. The net asset value of an I share of the Thornburg Limited
Term Income Fund ended the year at $12.99. If you were invested for the entire
period, you received dividends of 54.6 cents per share. If you reinvested your
dividends, you received 55.7 cents per share. The net asset value of an I share
of the Thornburg Limited Term U.S. Government Fund ended the year at $13.22. If
you were invested for the entire period, you received dividends of 50.6 cents
per share. If you reinvested your dividends, you received 51.5 cents per share.
Please read the accompanying exhibits for more detailed information and history.
Some market economists are calling this the "job loss recovery" as the US
economy has shed over one million jobs since the end of the recession in 2001.
At the same time, GDP has averaged 2% annual growth over this time period. While
the GDP growth is not anything to write home about, it is growth. This growth
has come about primarily from consumer spending, which is up 3% on an annual
basis. The U.S. consumer has kept spending up mostly through savings from
refinancing mortgages. But this refinancing wave is most likely over. U.S.
corporations have hardly contributed to GDP growth, as they have spent the last
few years cutting costs by closing sites, firing employees, and lowering capital
expenditures. While this has led to improved profitability at lower revenues,
this has been thin gruel to those who are unemployed or underemployed. Unless
new jobs are created, consumer spending will probably slow. Falling imports can
make for a larger GDP number, but do not add to future growth. US corporations
must pick up their capital expenditures and add employees for GDP to grow at or
above trend.
The yield curve has steepened over the last year as short-term rates have
dropped while interest rates on bonds due in five years or more have moved up
slightly. The Fed has stated that, with inflation not a serious concern, they
shall wait to raise interest rates until it is clear that the U.S. economy has
above-trend growth. All this means that short-term rates are probably going to
stay low for some time. Many people have avoided buying bonds for fear that
interest rates will head higher. They might be leaving a lot of extra interest
income on the table. The yield curve is quite steep (the 10-year Treasury note
yields 247 basis points more than the two-year Treasury note, as of September
30) and there is quite a pick up in yield by buying short/intermediate bonds
rather than staying in cash.
Regardless of the direction of interest rates, we believe your funds are well
positioned. The Thornburg Limited Term Income Fund and the Thornburg Limited
Term U.S. Government Fund are laddered portfolios of short to intermediate
bonds. We do not speculate on the direction of interest rates. We keep the
portfolios laddered over a time period ranging from one day to approximately ten
years, with the average maturity of the portfolios always no more than five
years. Some of the bonds are always coming close to maturity, but never too many
at one time. We feel a laddered maturity portfolio of short to intermediate
bonds is a sensible strategy over time. Intermediate bonds have proven to be a
sensible part of a portfolio; they can provide stability to the underlying
principal, they can provide income for the portfolio, and, over the years, they
have provided an attractive return versus money market instruments. Please
review the charts at the back of this report, which show the return on an
investment in the Thornburg Limited Term Income Fund and the Thornburg Limited
Term U.S. Government Fund versus the average of taxable money market funds.
Thank you for investing in our funds. We believe the Thornburg Limited Term U.S.
Government Fund and the Thornburg Limited Term Income Fund are appropriate
investments for investors who want a short to intermediate bond portfolio. While
future performance cannot be guaranteed, we feel that we are well positioned,
and we will maintain a steady course.
Steven J. Bohlin
Portfolio Manager
Statements of assets and liabilities
September 30, 2003
Limited Term U.S. Limited Term
Government Fund Income Fund
ASSETS
Investments at value (cost $238,122,625 and $284,795,832 respectively) . $ 245,150,083 $ 296,631,537
Cash ................................................................... 2,175,281 988,525
Receivable for investments sold ........................................ 2,000,000 478,627
Principal receivable ................................................... 100,128 0
Receivable for fund shares sold ........................................ 348,691 1,672,653
Interest receivable .................................................... 2,400,135 3,495,677
Prepaid expenses and other assets ...................................... 32,635 31,701
Total Assets ......................................... 252,206,953 303,298,720
LIABILITIES
Payable for securities purchased ....................................... 2,000,000 3,458,195
Payable for fund shares redeemed ....................................... 620,953 474,593
Accounts payable and accrued expenses .................................. 166,767 146,360
Payable to investment advisor (Note 3) ................................. 88,947 102,424
Dividends payable ...................................................... 130,313 220,572
Total Liabilities .................................... 3,006,980 4,402,144
NET ASSETS ............................................................. $ 249,199,973 $ 298,896,576
NET ASSETS CONSIST OF:
Undistributed (distribution in excess of) net investment income $ 83,335 $ 5,946
Net unrealized appreciation (depreciation) .................... 7,027,458 11,836,975
Accumulated net realized (gain) loss .......................... (3,217,833) (1,683,076)
Net capital paid in on shares of beneficial interest .......... 245,307,013 288,736,731
$ 249,199,973 $ 298,896,576
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share ($176,875,586
and $184,497,130 applicable to 13,373,297 and 14,200,703
shares of beneficial interest outstanding - Note 4) ............... $ 13.23 $ 12.99
Maximum sales charge, 1.50% of offering price .............................. 0.20 0.20
Maximum Offering Price Per Share ........................................... $ 13.43 $ 13.19
Class B Shares:
Net asset value and offering price per share*
($3,072,596 applicable to 232,337 shares of beneficial
interest outstanding - Note 4) .................................... $ 13.22 $ 0
Class C Shares:
Net asset value and offering price per share * ($56,166,467 and $54,926,477
applicable to 4,220,665 and 4,234,338 shares of
beneficial interest outstanding - Note 4) ......................... $ 13.31 $ 12.97
Class I Shares:
Net asset value, offering and redemption price per share ($13,085,249 and
$59,472,894 applicable to 989,485 and 4,577,496 shares
of beneficial interest outstanding - Note 4) ...................... $ 13.22 $ 12.99
Class R-1 Shares:
Net asset value, offering and redemption price per share ($75 and $75
applicable to 6 and 6 shares
of beneficial interest outstanding - Note 4) ...................... $ 13.23 $ 12.99
<FN>
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges. See notes to financial statements.
</FN>
Statements of operations
Thornburg Limited Term Income Funds
Year Ended September 30, 2003
Limited Term U.S. Limited Term
INVESTMENT INCOME: Government Fund Income Fund
Interest income (net of premium amortized
of $1,611,234 and $1,092,070, respectively) $ 10,186,107 $ 11,550,369
EXPENSES:
Investment advisory fees (Note 3) ............................... 864,982 1,178,688
Administration fees (Note 3)
Class A Shares ......................................... 218,658 178,356
Class B Shares ......................................... 2,157
Class C Shares ......................................... 54,946 52,861
Class I Shares ......................................... 5,026 25,382
Distribution and service fees (Note 3)
Class A Shares ......................................... 367,252 256,848
Class B Shares ......................................... 17,254
Class C Shares ......................................... 439,572 422,891
Transfer agent fees
Class A Shares ......................................... 167,714 145,027
Class B Shares ......................................... 15,901
Class C Shares ......................................... 60,119 60,101
Class I Shares ......................................... 18,631 30,213
Class R-1 Shares ....................................... 2,002 2,002
Registration and filing fees ....................................
Class A Shares 15,222 11,686
Class B Shares ......................................... 13,360
Class C Shares ......................................... 9,026 8,905
Class I Shares ......................................... 9,932 9,648
Class R-1 Shares ....................................... 3,918 3,918
Custodian fees (Note 3) ......................................... 115,312 149,334
Professional fees ............................................... 45,546 68,245
Accounting fees ................................................. 10,374 17,960
Trustee fees .................................................... 5,298 5,238
Other expenses .................................................. 64,844 62,875
Total Expenses ................................ 2,527,046 2,690,178
Less:
Expenses reimbursed by investment advisor (Note 3) ..... (58,706) (147,162)
Distribution and service fees waived (Note 3) .......... (228,413) (211,445)
Fees paid indirectly (Note 3) .......................... (36,837) (3,999)
Net Expenses .................................. 2,203,090 2,327,572
Net Investment Income ......................... $ 7,983,017 $ 9,222,797
Limited Term U.S. Limited Term
Government Fund Income Fund
REALIZED AND UNREALIZED GAIN (LOSS) Net Realized Gain (loss) on:
Investments ............................................ $ 4,695,491 $ 1,068,074
Foreign currency transactions .......................... 0 7,131
4,695,491 1,075,205
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ (5,709,054) 2,952,369
Foreign currency translation ........................... 0 1,755
(5,709,054) 2,954,124
Net Realized and Unrealized
Gain (Loss) on Investments ................. (1,013,563) 4,029,329
Net Increase (Decrease) in Net Assets Resulting
from Operations ............................ $ 6,969,454 $ 13,252,126
<FN>
See notes to financial statements ...............................
</FN>
Statements of changes in net assets
Thornburg Limited Term U.S. Government Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ................................. $ 7,983,017 $ 6,276,998
Net realized gain (loss) on investments sold .......... 4,695,491 (45,823)
Increase (Decrease) in unrealized appreciation ........ (5,709,054) 6,659,263
Net Increase (Decrease) in Net Assets
Resulting from Operations ........ 6,969,454 12,890,438
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares ............................... (6,174,157) (5,307,301)
Class B Shares ............................... (50,597) 0
Class C Shares ............................... (1,378,892) (738,851)
Class I Shares ............................... (379,370) (230,846)
Class R-1 Shares ............................. (1) 0
FUND SHARE TRANSACTIONS (Note 4):
Class A Shares ............................... 21,836,105 45,137,805
Class B Shares ............................... 3,080,205 0
Class C Shares ............................... 25,756,540 16,875,559
Class I Shares ............................... 6,129,775 2,740,106
Class R-1 Shares ............................. 76 0
Net Increase (Decrease) in Net Assets 55,789,138 71,366,910
NET ASSETS:
Beginning of year ............................ 193,410,835 122,043,925
End of year .................................. $ 249,199,973 $ 193,410,835
<FN>
See notes to financial statements.
</FN>
Statements of changes in net assets
Thornburg Limited Term Income Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ................................................... $ 9,222,797 $ 6,161,024
Net realized gain (loss) on investments and foreign currency transactions 1,075,205
(1,194,478)
Increase (Decrease) in unrealized appreciation
of investments and foreign currency translation ................ 2,954,124 4,980,417
Net Increase (Decrease) in Net Assets
Resulting from Operations .......................... 13,252,126 9,946,963
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares ................................................. (5,571,809) (3,809,143)
Class C Shares ................................................. (1,505,535) (901,134)
Class I Shares ................................................. (2,145,452) (1,450,747)
Class R-1 Shares ............................................... (1) 0
FUND SHARE TRANSACTIONS (Note 4):
Class A Shares ................................................. 77,437,936 46,400,735
Class C Shares ................................................. 23,908,108 14,339,460
Class I Shares ................................................. 19,271,605 14,170,007
Class R-1 Shares ............................................... 76 0
Net Increase (Decrease) in Net Assets ................. 124,647,054 78,696,141
NET ASSETS:
Beginning of year .............................................. 174,249,522 95,553,381
End of year .................................................... $ 298,896,576 $ 174,249,522
<FN>
See notes to financial statements.
</FN>
Notes to financial statements
Thornburg Limited Term Income Funds
September 30, 2003
NOTE 1 - ORGANIZATION
Thornburg Limited Term U.S. Government Fund (the "Government Fund") and
Thornburg Limited Term Income Fund (the "Income Fund"), hereafter referred to
collectively as the "Funds", are diversified series of Thornburg Investment
Trust (the "Trust"). The Trust is 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 eight series of shares
of beneficial interest in addition to those of the Funds: Thornburg Florida
Intermediate Municipal Fund, Thornburg New York Intermediate Municipal Fund,
Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate
Municipal Fund, Thornburg Value Fund, Thornburg International Value Fund,
Thornburg Core Growth Fund, and Thornburg Investment Income Builder Fund. Each
series is considered to be a separate entity for financial reporting and tax
purposes and bears expenses directly attributable to it. The Funds' objectives
are to obtain as high a level of current income as is consistent with the
preservation of capital.
The Government Fund currently offers five classes of shares of beneficial
interest, Class A, Class B, Class C, Institutional Class (Class I), and
Retirement Class (Class R-1) shares. The Income Fund currently offers four
classes of shares of beneficial interest, Class A, Class C, Institutional Class
(Class I), and Retirement Class (Class R-1) shares. Each class of shares of a
fund represents an interest in the same portfolio of investments of that 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 B 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
and bear both a service fee and distribution fee, (iii) 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 and bear both a
service fee and a distribution fee, (iv) Class I shares are sold at net asset
value without a sales charge at the time of purchase, (v) Class R-1 shares are
sold at net asset value without a sales charge, but bear both a service fee and
a distribution fee, and (vi) 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
Funds are limited to service and distribution fees, administrative fees and
certain registration and transfer agent expenses.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the
Fund are as follows:
Valuation of Investments: In determining net asset value, the Funds utilize an
independent pricing service approved by the Trustees. Debt investment securities
have a primary market over the counter and are valued on the basis of valuations
furnished by the pricing service. The pricing service values portfolio
securities at quoted bid prices, normally at 4:00 pm EST or the yield
equivalents when quotations are not readily available. Securities for which
quotations are not readily available are valued at fair value as determined by
the pricing service using methods which include consideration of yields or
prices of obligations of comparable quality, type of issue, coupon, maturity,
and rating; indications as to value from dealers and general market conditions.
The valuation procedures used by the pricing service and the portfolio
valuations received by the Funds are reviewed by the officers of the Trust under
the general supervision of the Trustees. Short-term instruments having a
maturity of 60 days or less are valued at amortized cost, which approximates
market value.
Federal Income Taxes: It is the policy of the Funds to comply with the
provisions of the Internal Revenue code applicable to "regulated investment
companies" and to distribute all of their taxable income, including any net
realized gain on investments to its shareholders. Therefore no provision for
Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Funds may engage in
when-issued or delayed delivery transactions. To the extent the Funds engage in
such transactions, they will do so for the purpose of acquiring portfolio
securities consistent with their investment objectives and not for the purpose
of investment leverage or to speculate on interest rate changes. At the time a
fund makes a commitment to purchase a security on a when-issued basis, it will
record the transaction and reflect the value in determining each fund's net
asset value. When effecting such transactions, assets of the Funds of an amount
sufficient to make payment for the portfolio securities to be purchased will be
segregated on the Funds' records at the trade date. Securities purchased on a
when-issued or delayed delivery basis do not earn interest until the settlement
date.
Dividends: Net investment income of the Funds are declared daily as a dividend
on shares for which the Funds have received payment. Dividends are paid monthly
and are reinvested in additional shares of the Funds 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 capital gains, to the extent available,
will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Premiums and discounts on securities
purchased are amortized over the life of the respective securities. Realized
gains and losses from the sale of securities are recorded on an identified cost
basis. The Funds invest in various mortgage-backed securities. Such securities
pay interest and a portion of principal each month, which is then available for
investment in securities at prevailing prices. Net investment income, other than
class specific expenses, and realized and unrealized gains and losses, are
allocated daily to each class of shares based upon the relative net asset value
of outstanding shares (or the value of the dividend-eligible shares, as
appropriate) of each class of shares at the beginning of the day (after
adjusting for the current share activity of the respective class). Expenses
common to all funds are allocated among the funds comprising the Trust based
upon their relative net asset values or other appropriate allocation methods.
Foreign Currency Transactions: With respect to the Income Fund, portfolio
securities and other assets and liabilities denominated in foreign currencies
are translated into U.S. dollars based on the rate of exchange of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
portfolio securities and interest denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
The Income Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of interest recorded on the Income Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Funds. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services to
the Funds for which the fees are payable at the end of each month. For the year
ended September 30, 2003, these fees were payable at annual rates ranging from
..375 of 1% to .275 of 1% of the average daily net assets of the Government Fund
and .50 of 1% to .275 of 1% of the average daily net assets of the Income Fund
depending on each fund's asset size. The Funds also have an administrative
services agreement with the Advisor, whereby the Advisor will perform certain
administrative services for the shareholders of each class of each fund's
shares, and for which fees will be payable at an annual rate of up to .125 of 1%
of the average daily net assets attributable to Class A, Class B, Class C, and
Class R-1 shares, and up to .05 of 1% of the average daily net assets
attributable to Class I shares. For the year ended September 30, 2003, the
Advisor voluntarily reimbursed certain class specific expenses and
administrative fees of $25,229, $9,538, $18,019, and $5,920 for the Class B, C,
I, and R-1 shares, respectively, of the Government Fund and $69,643, $35,730,
$35,869, and $5,920 for the Class A, C, I, and R-1 shares, respectively, of the
Income Fund.
The Funds have underwriting agreements with Thornburg Securities Corporation
(the "Distributor"), which acts as the distributor of each fund's shares. For
the year ended September 30, 2003, the Distributor has advised the Funds that it
earned net commissions aggregating $4,694 and $246 from the sales of Class A
shares of the Government Fund and Income Fund, respectively, and collected
contingent deferred sales charges aggregating $16,456 and $14,111 from
redemptions of Class C shares of the Government Fund and Income Fund,
respectively.
Pursuant to a service plan under Rule 12b-1 of the Investment Company Act of
1940, the Funds may reimburse to the Advisor an amount not to exceed .25 of 1%
per annum of its average daily net assets attributable to the Class A, Class B,
Class C, and Class R-1 shares of the Funds for payments made by the Advisor to
securities dealers and other financial institutions to obtain various
shareholder related services. The Advisor may pay out of its own resources
additional expenses for distribution of each fund's shares. The Funds have also
adopted distribution plans pursuant to Rule 12b-1, applicable to each fund's
Class B, Class C, and Class R-1 shares under which the Funds compensate the
Distributor for services in promoting the sale of Class B, C, and R-1 shares of
the Funds at an annual rate of up to .75 of 1% of the average daily net assets
attributable to these classes. Total fees incurred by each class of shares of
the Funds under their respective service and distribution plans for the year
ended September 30, 2003 are set forth in the statement of operations.
Distribution fees of $8,627 for Class B shares of the Government Fund were
waived. Distribution fees of $219,786 and $211,445 respectively for Class C
shares of the Government Fund and Income Fund were waived.
The Funds have an agreement with the custodian bank to indirectly pay a portion
of the custodian's fees through credits earned by each fund's cash on deposit
with the bank. This deposit agreement is an alternative to overnight
investments. Custodial fees have been adjusted to reflect amounts that would
have been paid without this agreement, with a corresponding adjustment reflected
as fees paid indirectly in the statements of operations.
For the year ended September 30, 2003, the fees paid indirectly were $36,837 and
$3,999 for the Government Fund and Income Fund respectively.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4- SHARES OF BENEFICIAL INTEREST
At September 30, 2003 there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
GOVERNMENT FUND
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold ........................................... 7,033,728 $ 93,088,730 5,830,978 $ 74,915,518
Shares issued to shareholders in ...................... 352,071 4,651,838 308,530 3,936,572
reinvestment of dividends
Shares repurchased .................................... (5,757,412) (75,904,463) (2,644,186) (33,714,285)
Net Increase (Decrease) ............................... 1,628,387 $ 21,836,105 3,495,322 $ 45,137,805
Class B Shares*
Shares sold ........................................... 265,526 $ 3,519,557 -- $ --
Shares issued to shareholders in ...................... 2,704 35,753 -- --
reinvestment of dividends
Shares repurchased .................................... (35,893) (475,105) -- --
Net Increase (Decrease) ............................... 232,337 $ 3,080,205 -- $ --
Class C Shares
Shares sold ........................................... 2,733,738 $ 36,415,998 1,809,321 $ 23,357,218
Shares issued to shareholders in ...................... 83,795 1,113,966 49,185 632,519
reinvestment of dividends
Shares repurchased .................................... (887,516) (11,773,424) (556,607) (7,114,178)
Net Increase (Decrease) ............................... 1,930,017 $ 25,756,540 1,301,899 $ 16,875,559
*Effective date of Class B shares was November 1, 2002
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class I Shares
Shares sold ........................................... 808,309 $ 10,671,009 405,851 $ 5,212,897
Shares issued to shareholders in ...................... 24,410 322,502 15,459 197,119
reinvestment of dividends
Shares repurchased .................................... (367,766) (4,863,736) (209,432) (2,669,910)
Net Increase (Decrease) ............................... 464,953 $ 6,129,775 211,878 $ 2,740,106
Class R-1 Shares*
Shares sold ........................................... 6 $ 75 -- $ --
Shares issued to shareholders in ...................... 0 1 -- --
reinvestment of dividends
Shares repurchased .................................... 0 -- -- --
Net Increase (Decrease) ............................... 6 $ 76 -- $ --
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold ........................................... 7,033,728 $ 93,088,730 5,830,978 $ 74,915,518
Shares issued to shareholders in ...................... 352,071 4,651,838 308,530 3,936,572
reinvestment of dividends
Shares repurchased .................................... (5,757,412) (75,904,463) (2,644,186) (33,714,285)
Net Increase (Decrease) ............................... 1,628,387 $ 21,836,105 3,495,322 $ 45,137,805
Class B Shares*
Shares sold ........................................... 265,526 $ 3,519,557 -- $ --
Shares issued to shareholders in ...................... 2,704 35,753 -- --
reinvestment of dividends
Shares repurchased .................................... (35,893) (475,105) -- --
Net Increase (Decrease) ............................... 232,337 $ 3,080,205 -- $ --
Class C Shares
Shares sold ........................................... 2,733,738 $ 36,415,998 1,809,321 $ 23,357,218
Shares issued to shareholders in ...................... 83,795 1,113,966 49,185 632,519
reinvestment of dividends
Shares repurchased .................................... (887,516) (11,773,424) (556,607) (7,114,178)
Net Increase (Decrease) ............................... 1,930,017 $ 25,756,540 1,301,899 $ 16,875,559
*Effective date of Class B shares was November 1, 2002
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class I Shares
Shares sold ........................................... 808,309 $ 10,671,009 405,851 $ 5,212,897
Shares issued to shareholders in ...................... 24,410 322,502 15,459 197,119
reinvestment of dividends
Shares repurchased .................................... (367,766) (4,863,736) (209,432) (2,669,910)
Net Increase (Decrease) ............................... 464,953 $ 6,129,775 211,878 $ 2,740,106
Class R-1 Shares*
Shares sold ........................................... 6 $ 75 -- $ --
Shares issued to shareholders in ...................... 0 1 -- --
reinvestment of dividends
Shares repurchased .................................... 0 -- -- --
Net Increase (Decrease) ............................... 6 $ 76 -- $ --
INCOME FUND
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold .......................................... 8,212,612 $ 105,632,467 4,883,164 $ 60,723,116
Shares issued to shareholders in ..................... 317,279 4,076,963 216,337 2,686,604
reinvestment of dividends
Shares repurchased ................................... (2,518,725) (32,271,494) (1,375,041) (17,008,985)
Net Increase (Decrease) .............................. 6,011,166 $ 77,437,936 3,724,460 $ 46,400,735
Class C Shares
Shares sold .......................................... 2,753,770 $ 35,318,563 1,608,495 $ 19,981,690
Shares issued to shareholders in ..................... 83,893 1,076,023 57,332 707,055
reinvestment of dividends
Shares repurchased ................................... (973,489) (12,486,478) (510,378) (6,349,285)
Net Increase (Decrease) .............................. 1,864,174 $ 23,908,108 1,155,449 $ 14,339,460
Class I Shares
Shares sold .......................................... 2,435,755 $ 31,247,349 1,845,923 $ 22,978,197
Shares issued to shareholders in ..................... 150,329 1,931,913 96,298 1,197,933
reinvestment of dividends
Shares repurchased ................................... (1,080,571) (13,907,657) (806,185) (10,006,123)
Net Increase (Decrease) .............................. 1,505,513 $ 19,271,605 1,136,036 $ 14,170,007
Class R-1 Shares*
Shares sold .......................................... 6 $ 75 -- $ --
Shares issued to shareholders in ..................... -- 1 -- --
reinvestment of dividends
Shares repurchased ................................... -- -- -- --
Net Increase (Decrease) .............................. 6 $ 76 -- $ --
<FN>
* Effective date of Class R-1 Shares was July 1, 2003
</FN>
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003, portfolio purchase and sale transactions
(excluding short-term securities) were $143,743,069 and $77,220,696 for the
Government Fund and $166,153,784 and $41,699,436 for the Income Fund,
respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components of capital is as
follows:
Government Income
Fund Fund
Cost of investments
for tax purpose ........... $ 238,122,625 $ 284,968,923
Gross tax unrealized
appreciation .............. $ 8,607,808 13,951,669
Gross tax unrealized
depreciation .............. (1,580,350) (2,289,055)
Net tax unrealized
appreciation (depreciation)
on investments $ .......... 7,027,458 $ 11,662,614
Distributable earnings-
ordinary income ........... $ 83,335 $ 179,037
At September 30, 2003, the Government Fund had tax basis capital losses, which
may be carried over to offset future capital gains. Such losses expire as
follows: Capital loss carryovers expiring in:
2004 $ 2,026,055
2008 17,646
2009 1,160,521
2010 13,611
$ 3,217,833
At September 30, 2003, the Income Fund had tax basis capital losses, which may
be carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2004 $ 225,978
2008 497,824
2009 650,941
2010 308,333
$ 1,683,076
The Government Fund utilized $4,568,542 and the Income Fund utilized $98,558 of
loss carry forwards during the year ended September 30, 2003. Unutilized tax
basis capital losses may be carried forward to offset realized gains in future
years. To the extent such carry forwards are used, capital gains distributions
may be reduced to the extent provided by regulations.
During the year ended September 30, 2003, $78,173 and $489,157 of capital loss
carryforwards from prior years expired for the Government Fund and Income Fund
respectively. These amounts were reclassed to paid-in capital.
For tax purposes, distributions for the years ended September 30, 2003 and
September 30, 2002, were paid from ordinary income.
For the Income Fund, net investment income differs for financial statement and
tax purposes due to differing treatments of defaulted securities.
Financial highlights
Thornburg Limited Term U.S. Government Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class I Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ................... $ 13.27 $ 12.77 $ 12.03 $ 12.05 $ 12.65
Income from investment operations:
Net investment income ............................ 0.51 0.62 0.72 0.72 0.70
Net realized and unrealized
gain (loss) on investments ..................... (0.05) 0.50 0.74 (0.02) (0.60)
Total from investment operations ..................... 0.46 1.12 1.46 0.70 0.10
Less dividends from:
Net investment income ............................ (0.51) (0.62) (0.72) (0.72) (0.70)
Change in net asset value ............................ (0.05) 0.50 0.74 (0.02) (0.60)
Net asset value, end of year ......................... $ 13.22 $ 13.27 $ 12.77 $ 12.03 $ 12.05
Total return ......................................... 3.51% 9.11% 12.45% 6.07% 0.82%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ............................ 3.77% 4.86% 5.79% 6.06% 5.69%
Expenses, after expense reductions ............... 0.64% 0.61% 0.61% 0.60% 0.60%
Expenses, after expense reductions
and net of custody credits ..................... 0.62% 0.60% -- -- --
Expenses, before expense reductions .............. 0.82% 1.04% 1.21% 1.08% 1.06%
Portfolio turnover rate .............................. 35.06% 4.34% 15.23% 19.66% 19.39%
Net assets at end of year (000) ..................... $ 13,085 $ 6,960 $ 3,992 $ 3,819 $ 5,612
Thornburg Limited Term Income Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class I Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ................ $ 12.79 $ 12.55 $ 11.90 $ 11.93 $ 12.50
Income from investment operations:
Net investment income ......................... 0.55 0.65 0.77 0.77 0.73
Net realized and unrealized
gain (loss) on investments .................. 0.20 0.24 0.65 (0.03) (0.57)
Total from investment operations .................. 0.75 0.89 1.42 0.74 0.16
Less dividends from:
Net investment income ......................... (0.55) (0.65) (0.77) (0.77) (0.68)
Return of Capital ............................. -- -- -- -- (0.05)
Change in net asset value ......................... 0.20 0.24 0.65 (0.03) (0.57)
Net asset value, end of year ...................... $ 12.99 $ 12.79 $ 12.55 $ 11.90 $ 11.93
Total return ...................................... 5.89% 7.38% 12.29% 6.46% 1.32%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ....................... 4.23% 5.19% 6.24% 6.54% 5.99%
Expenses, after expense reductions .......... 0.69% 0.69% 0.70% 0.69% 0.69%
Expenses, after expense reductions
and net of custody credits ................ 0.69% 0.69% -- -- --
Expenses, before expense reductions ......... 0.76% 0.78% 0.89% 1.00% 1.01%
Portfolio turnover rate ......................... 18.86% 21.63% 20.54% 59.46% 48.50%
Net assets at end of year (000) ................. $ 59,473 $ 39,281 $ 24,298 $ 12,094 $ 9,928
Schedule of investments
Thornburg Limited Term U.S. Government Fund
September 30, 2003
CUSIPS: CLASS A - 885-215-103, CLASS B - 885-215-848, CLASS C - 885-215-830, CLASS I - 885-215-699, CLASS R-1 - 885-215-491
NASDAQ SYMBOLS: CLASS A - LTUSX, CLASS B - LTUBX, CLASS C - LTUCX, CLASS I - LTUIX, CLASS R-1 - LTURX
Principal
Amount Security Name Value
U.S. Government Agencies (47.40%)
$ 900,000 Federal Agricultural Mortgage Corp., 5.86% due 3/3/2006 .................................. $ 985,193
1,000,000 Federal Agricultural Mortgage Corp., 8.07% due 7/17/2006 ................................. 1,161,241
200,000 Federal Agricultural Mortgage Corp., 6.71% due 7/28/2014 ................................. 238,969
4,650,000 Federal Farm Credit Bank, 1.875% due 1/16/2007 ........................................... 4,595,860
350,000 Federal Farm Credit Bank, 6.75% due 7/7/2009 ............................................. 412,361
1,900,000 Federal Farm Credit Bank Consolidated MTN, 5.875% due 7/28/2008 .......................... 2,137,998
1,300,000 Federal Farm Credit Bank Consolidated MTN, 5.87% due 9/2/2008 ............................ 1,463,783
200,000 Federal Farm Credit Bank Consolidated MTN, 5.35% due 12/11/2008 .......................... 220,522
300,000 Federal Farm Credit Bank Consolidated MTN, 5.80% due 3/19/2009 ........................... 337,279
240,000 Federal Farm Credit Bank Consolidated MTN, 6.06% due 5/28/2013 ........................... 272,413
265,000 Federal Home Loan Bank, 6.55% due 3/7/2005 ............................................... 284,079
100,000 Federal Home Loan Bank, 6.345% due 11/1/2005 ............................................. 109,679
225,000 Federal Home Loan Bank, 5.24% due 12/7/2005 .............................................. 241,850
100,000 Federal Home Loan Bank, 5.37% due 1/20/2006 .............................................. 108,018
3,000,000 Federal Home Loan Bank, 2.25% due 5/15/2006 .............................................. 3,016,644
100,000 Federal Home Loan Bank, 6.09% due 6/2/2006 ............................................... 110,512
200,000 Federal Home Loan Bank, 7.76% due 11/21/2006 ............................................. 233,066
1,000,000 Federal Home Loan Bank, 6.37% due 9/26/2007 .............................................. 1,130,216
475,000 Federal Home Loan Bank, 6.075% due 1/2/2008 .............................................. 533,449
150,000 Federal Home Loan Bank, 7.00% due 2/15/2008 .............................................. 174,703
2,050,000 Federal Home Loan Bank, 5.98% due 6/18/2008 .............................................. 2,310,721
570,000 Federal Home Loan Bank, 5.015% due 10/8/2008 ............................................. 617,898
225,000 Federal Home Loan Bank, 5.53% due 11/24/2008 ............................................. 249,659
1,250,000 Federal Home Loan Bank, 5.48% due 1/8/2009 ............................................... 1,384,374
1,465,000 Federal Home Loan Bank, 5.67% due 2/26/2009 .............................................. 1,635,626
3,000,000 Federal Home Loan Bank, 5.70% due 3/3/2009 ............................................... 3,355,701
3,000,000 Federal Home Loan Bank, 5.985% due 4/9/2009 .............................................. 3,399,495
200,000 Federal Home Loan Bank, 5.79% due 4/27/2009 .............................................. 224,553
2,000,000 Federal Home Loan Bank, 4.00% due 9/30/2010 .............................................. 2,000,000
75,000 Federal Home Loan Mortgage Corp., 5.98% due 12/8/2005 .................................... 81,751
300,000 Federal Home Loan Mortgage Corp., 6.80% due 3/19/2007 .................................... 344,683
105,954 Federal Home Loan Mortgage Corp., Pool # 141016, 9.25% due 11/1/2016 ..................... 116,302
316,699 Federal Home Loan Mortgage Corp., Pool # 141412, 8.50% due 4/1/2017 ...................... 346,329
37,462 Federal Home Loan Mortgage Corp., Pool # 160043, 8.75% due 4/1/2008 ...................... 40,247
42,891 Federal Home Loan Mortgage Corp., Pool # 181730, 8.50% due 5/1/2008 ...................... 46,160
723 Federal Home Loan Mortgage Corp., Pool # 200075, 9.00% due 9/1/2004 ...................... 743
49,664 Federal Home Loan Mortgage Corp., Pool # 252986, 10.75% due 4/1/2010 ..................... 54,904
29,726 Federal Home Loan Mortgage Corp., Pool # 256764, 8.75% due 10/1/2014 ..................... 31,935
65,589 Federal Home Loan Mortgage Corp., Pool # 260486, 9.00% due 1/1/2010 ...................... 71,347
187,164 Federal Home Loan Mortgage Corp., Pool # 273822, 8.50% due 4/1/2009 ...................... 200,256
17,558 Federal Home Loan Mortgage Corp., Pool # 291880, 8.25% due 5/1/2017 ...................... 19,132
69,813 Federal Home Loan Mortgage Corp., Pool # 294817, 9.75% due 1/1/2017 ...................... 78,075
29,915 Federal Home Loan Mortgage Corp., Pool # 298107, 10.25% due 8/1/2017 ..................... 33,686
139,169 Federal Home Loan Mortgage Corp., Pool # 770297, 4.00% due 6/1/2018 ...................... 141,777
110,805 Federal Home Loan Mortgage Corp., Pool # C90041, 6.50% due 11/1/2013 ..................... 116,537
13,165 Federal Home Loan Mortgage Corp., Pool # D06907, 9.00% due 4/1/2017 ...................... 14,002
33,229 Federal Home Loan Mortgage Corp., Pool # D06908, 9.50% due 9/1/2017 ...................... 36,536
157,540 Federal Home Loan Mortgage Corp., Pool # D37120, 7.00% due 7/1/2023 ...................... 167,068
134,511 Federal Home Loan Mortgage Corp., Pool # E00170, 8.00% due 7/1/2007 ...................... 142,277
94,430 Federal Home Loan Mortgage Corp., Pool # E49074, 6.50% due 7/1/2008 ...................... 99,712
135,074 Federal Home Loan Mortgage Corp., Pool # E61778, 6.50% due 4/1/2008 ...................... 141,549
13,652 Federal Home Loan Mortgage Corp., Pool # E65962, 7.00% due 5/1/2008 ...................... 14,134
492,353 Federal Home Loan Mortgage Corp. CMO Series 2137 Class TM, 6.50% due 1/15/2028 505,917
4,500,000 Federal Home Loan Mortgage Corp. CMO Series 2603 Class TN, 4.00% due 10/15/2011 .......... 4,542,066
391,000 Federal National Mortgage Association, 5.125% due 2/13/2004 .............................. 396,752
1,425,000 Federal National Mortgage Association, 3.10% due 7/28/2006 ............................... 1,432,609
175,440 Federal National Mortgage Association, Pool # 008307, 8.00% due 5/1/2008 ................. 189,451
46,339 Federal National Mortgage Association, Pool # 019535, 10.25% due 7/1/2008 ................ 49,773
204,094 Federal National Mortgage Association, Pool # 033356, 9.25% due 8/1/2016 ................. 226,542
9,388 Federal National Mortgage Association, Pool # 040526, 9.25% due 1/1/2017 ................. 10,030
142,236 Federal National Mortgage Association, Pool # 044003, 8.00% due 6/1/2017 ................. 155,555
131,028 Federal National Mortgage Association, Pool # 050811, 7.50% due 12/1/2012 ................ 139,958
190,190 Federal National Mortgage Association, Pool # 050832, 7.50% due 6/1/2013 ................. 203,378
139,888 Federal National Mortgage Association, Pool # 076388, 9.25% due 9/1/2018 ................. 155,315
58,765 Federal National Mortgage Association, Pool # 077725, 9.75% due 10/1/2018 ................ 64,196
441,574 Federal National Mortgage Association, Pool # 100286, 7.50% due 8/1/2009 ................. 472,270
78,022 Federal National Mortgage Association, Pool # 112067, 9.50% due 10/1/2016 ................ 87,280
128,812 Federal National Mortgage Association, Pool # 156156, 8.50% due 4/1/2021 ................. 140,683
106,959 Federal National Mortgage Association, Pool # 190555, 7.00% due 1/1/2014 ................. 113,781
108,254 Federal National Mortgage Association, Pool # 190703, 7.00% due 3/1/2009 ................. 115,289
244,656 Federal National Mortgage Association, Pool # 190836, 7.00% due 6/1/2009 ................. 260,555
169,708 Federal National Mortgage Association, Pool # 250387, 7.00% due 11/1/2010 ................ 180,698
184,321 Federal National Mortgage Association, Pool # 250481, 6.50% due 11/1/2015 ................ 193,153
121,156 Federal National Mortgage Association, Pool # 251258, 7.00% due 9/1/2007 ................. 127,878
242,265 Federal National Mortgage Association, Pool # 251759, 6.00% due 5/1/2013 ................. 253,435
597,644 Federal National Mortgage Association, Pool # 252648, 6.50% due 5/1/2022 ................. 626,062
142,273 Federal National Mortgage Association, Pool # 252787, 7.00% due 8/1/2006 ................. 146,736
193,217 Federal National Mortgage Association, Pool # 303383, 7.00% due 12/1/2009 ................ 203,937
173,634 Federal National Mortgage Association, Pool # 312663, 7.50% due 6/1/2010 ................. 185,682
323,973 Federal National Mortgage Association, Pool # 323706, 7.00% due 2/1/2009 ................. 341,949
172,136 Federal National Mortgage Association, Pool # 334996, 7.00% due 2/1/2011 ................. 183,282
708,713 Federal National Mortgage Association, Pool # 342947, 7.25% due 4/1/2024 ................. 757,479
80,800 Federal National Mortgage Association, Pool # 345775, 8.50% due 12/1/2024 ................ 88,246
132,916 Federal National Mortgage Association, Pool # 373942, 6.50% due 12/1/2008 ................ 140,801
1,866,089 Federal National Mortgage Association, Pool # 380488, 6.10% due 7/1/2008 ................. 2,062,972
2,815,646 Federal National Mortgage Association, Pool # 380633, 6.18% due 9/1/2008 ................. 3,123,476
1,738,870 Federal National Mortgage Association, Pool # 381146, 6.04% due 1/1/2009 ................. 1,919,795
903,225 Federal National Mortgage Association, Pool # 382450, 7.86% due 6/1/2010 ................. 1,080,036
1,305,145 Federal National Mortgage Association, Pool # 382616, 7.40% due 8/1/2010 ................. 1,530,789
1,072,586 Federal National Mortgage Association, Pool # 382709, 7.40% due 8/1/2008 ................. 1,230,004
308,415 Federal National Mortgage Association, Pool # 382889, 7.35% due 12/1/2010 ................ 354,195
342,896 Federal National Mortgage Association, Pool # 382926, 7.37% due 12/1/2010 ................ 393,044
3,540,598 Federal National Mortgage Association, Pool # 383363, 6.235% due 3/1/2011 ................ 3,874,742
1,814,900 Federal National Mortgage Association, Pool # 383849, 6.65% due 8/1/2011 ................. 2,076,451
1,058,495 Federal National Mortgage Association, Pool # 384193, 6.17% due 9/1/2011 ................. 1,185,072
630,664 Federal National Mortgage Association, Pool # 384243, 6.10% due 10/1/2011 ................ 683,679
1,081,657 Federal National Mortgage Association, Pool # 384746, 5.86% due 2/1/2009 ................. 1,183,209
1,478,266 Federal National Mortgage Association, Pool # 385263, 5.41% due 11/1/2006 ................ 1,573,620
3,254,570 Federal National Mortgage Association, Pool # 385714, 4.70% due 1/1/2010 ................. 3,337,968
12,051 Federal National Mortgage Association, Pool # 400569, 6.00% due 4/1/2009 ................. 12,313
467,631 Federal National Mortgage Association, Pool # 406384, 8.25% due 12/1/2024 ................ 508,752
518,552 Federal National Mortgage Association, Pool # 443909, 6.50% due 9/1/2018 ................. 542,432
3,500,000 Federal National Mortgage Association, Pool # 460568, 5.20% due 12/1/2006 ................ 3,655,700
755,130 Federal National Mortgage Association, Pool # 516363, 5.00% due 3/1/2014 ................. 773,927
728,355 Federal National Mortgage Association, Pool # 555207, 7.00% due 11/1/2017 ................ 763,314
432,590 Federal National Mortgage Association CMO Series 1992-22 Class HC, 7.00% due 3/25/2007 ... 454,862
750,000 Federal National Mortgage Association CMO Series 1993-101 Class PJ, 7.00% due 6/25/2008 .. 820,121
438,571 Federal National Mortgage Association CMO Series 1993-112 Class EC, 7.00% due 1/25/2011 .. 441,338
250,000 Federal National Mortgage Association CMO Series 1993-122 Class D, 6.50% due 6/25/2023 ... 270,152
437,896 Federal National Mortgage Association CMO Series 1993-32 Class H, 6.00% due 3/25/2023 .... 461,916
1,148,818 Federal National Mortgage Association CMO Series 1993-35 Class G, 6.50% due 11/25/2006 ... 1,213,806
9,000,000 Federal National Mortgage Association Discount Notes, 1.02% due 10/15/2003 ............... 8,996,430
146,733 Government National Mortgage Association, Pool # 000623, 8.00% due 9/20/2016 ............. 159,469
163,615 Government National Mortgage Association, Pool # 016944, 7.50% due 5/15/2007 ............. 172,447
48,489 Government National Mortgage Association, Pool # 296697, 9.50% due 10/15/2005 ............ 51,259
85,836 Government National Mortgage Association, Pool # 306636, 8.25% due 12/15/2006 ............ 91,445
78,600 Government National Mortgage Association, Pool # 313403, 6.80% due 5/20/2023 ............. 83,563
253,277 Government National Mortgage Association, Pool # 357090, 6.80% due 4/20/2025 ............. 268,793
265,292 Government National Mortgage Association, Pool # 369693, 7.00% due 1/15/2009 ............. 283,119
137,413 Government National Mortgage Association, Pool # 409921, 7.50% due 8/15/2010 ............. 147,403
108,038 Government National Mortgage Association, Pool # 410240, 7.00% due 12/15/2010 ............ 115,350
93,560 Government National Mortgage Association, Pool # 410271, 7.50% due 8/15/2010 ............. 100,361
155,404 Government National Mortgage Association, Pool # 410846, 7.00% due 12/15/2010 ............ 165,922
159,964 Government National Mortgage Association, Pool # 430150, 7.25% due 12/15/2026 ............ 171,169
267,516 Government National Mortgage Association, Pool # 447040, 7.75% due 5/15/2027 ............. 288,345
230,105 Government National Mortgage Association, Pool # 453928, 7.00% due 7/15/2017 ............. 246,554
77,177 Government National Mortgage Association, Pool # 780063, 7.00% due 9/15/2008 ............. 82,140
341,858 Government National Mortgage Association, Pool # 780448, 6.50% due 8/15/2011 ............. 363,410
278,840 Government National Mortgage Association CMO Series 2002-67 Class VA, 6.00% due 3/20/2013 295,246
1,794,168 Government National Mortgage Association CMO Series 2003-31 Class YA, 4.00% due 5/16/2021 1,827,250
3,861,916 Government National Mortgage Association CMO Series 2003-67 Class PN, 4.00% due 11/20/2020 3,951,826
103,529 Guaranteed Export Trust 1995-A Certificate, 6.28% due 6/15/2004 .......................... 105,977
2,875,200 Overseas Private Investment Corp., 4.10% due 11/15/2014 .................................. 2,921,376
1,000,000 Private Export Funding Corp., 4.974% due 8/15/2013 ....................................... 1,050,108
2,000,000 Private Export Funding Corp. Secured Note Series M, 5.34% due 3/15/2006 .................. 2,166,066
1,000,000 Private Export Funding Corp. Secured Note Series P, 5.685% due 5/15/2012 ................. 1,102,834
3,000,000 Tennessee Valley Authority, 4.75% due 8/1/2013 ........................................... 3,094,965
1,895,864 United States Government General Services, 7.62% due 9/15/2010 ........................... 2,237,119
Total U.S. Government Agencies (Cost $108,199,634) ....................................... 114,043,373
United States Treasury (52.60%)
$ 7,750,000 United States Treasury Notes, 7.25% due 5/15/2004 ........................................ $ 8,046,980
3,700,000 United States Treasury Notes, 7.25% due 8/15/2004 ........................................ 3,897,865
10,000,000 United States Treasury Notes, 1.50% due 2/28/2005 ........................................ 10,046,090
4,900,000 United States Treasury Notes, 6.50% due 5/15/2005 ........................................ 5,311,904
4,500,000 United States Treasury Notes, 6.50% due 8/15/2005 ........................................ 4,924,863
7,000,000 United States Treasury Notes, 5.75% due 11/15/2005 ....................................... 7,615,783
3,000,000 United States Treasury Notes, 5.625% due 2/15/2006 ....................................... 3,278,556
5,500,000 United States Treasury Notes, 4.625% due 5/15/2006 ....................................... 5,902,831
2,000,000 United States Treasury Notes, 7.00% due 7/15/2006 ........................................ 2,278,438
9,000,000 United States Treasury Notes, 4.375% due 5/15/2007 ....................................... 9,661,644
4,000,000 United States Treasury Notes, 6.125% due 8/15/2007 ....................................... 4,556,248
10,000,000 United States Treasury Notes, 2.625% due 5/15/2008 ....................................... 9,973,830
10,000,000 United States Treasury Notes, 5.50% due 5/15/2009 ........................................ 11,311,720
15,000,000 United States Treasury Notes, 6.50% due 2/15/2010 ........................................ 17,800,200
6,000,000 United States Treasury Notes, 5.75% due 8/15/2010 ........................................ 6,869,298
20,000,000 United States Treasury Notes, 3.625% due 5/15/2013 ....................................... 19,630,460
Total United States Treasury (Cost $129,922,991) ......................................... 131,106,710
TOTAL INVESTMENTS (100%) (Cost $238,122,625) ............................................. $245,150,083
<FN>
See notes to financial statements.
</FN>
Thornburg Limited Term Income Fund
September 30, 2003
CUSIPS: CLASS A - 885-215-509, CLASS C - 885-215-764, CLASS I - 885-215-681, CLASS R-1 - 885-215-483
NASDAQ SYMBOLS: CLASS A - THIFX, CLASS C - THICX, CLASS I - THIIX, CLASS R-1 - THIRX
Principal Credit Rating+
Amount* Security Name Moody's/S&P Value
U.S. TREASURY SECURITIES - 5.20%
$ 1,100,000 United States Treasury Notes, 6.50% due 5/15/2005 ....................................... Aaa/AAA $ 1,192,468
4,500,000 United States Treasury Notes, 4.625% due 5/15/2006 ...................................... Aaa/AAA 4,829,589
1,500,000 United States Treasury Notes, 4.75% due 11/15/2008 ...................................... Aaa/AAA 1,633,887
2,500,000 United States Treasury Notes, 5.75% due 8/15/2010 ....................................... Aaa/AAA 2,862,208
5,000,000 United States Treasury Notes, 3.625% due 5/15/2013 ...................................... Aaa/AAA 4,907,615
Total U.S. Treasury Securities (Cost $14,708,199)
15,425,767 U. S. GOVERNMENT AGENCIES - 5.70%
210,000 Export Funding Trust Series 1994-A Pass Through Certificate, 7.89% due 2/15/2005 Aaa/AAA 219,948
500,000 Federal Agricultural Mortgage Corp., 4.85% due 11/4/2003 Aaa/AAA 501,711
710,000 Federal Farm Credit Bank, 5.96% due 6/16/2008 Aaa/AAA 800,629
100,000 Federal Home Loan Bank, 5.38% due 11/24/2003 Aaa/AAA 100,624
50,000 Federal Home Loan Bank, 6.00% due 8/25/2005 Aaa/AAA 54,196
2,000,000 Federal Home Loan Bank, 2.25% due 5/15/2006 Aaa/AAA 2,011,096
150,000 Federal Home Loan Bank, 4.875% due 5/15/2007 Aaa/AAA 161,534
500,000 Federal Home Loan Bank, 5.833% due 1/23/2008 Aaa/AAA 557,112
75,000 Federal Home Loan Bank, 5.785% due 4/14/2008 Aaa/AAA 83,624
300,000 Federal Home Loan Bank, 5.835% due 7/15/2008 Aaa/AAA 336,501
480,000 Federal Home Loan Bank, 5.48% due 9/22/2008 Aaa/AAA 531,486
250,000 Federal Home Loan Bank, 5.085% due 10/7/2008 Aaa/AAA 271,816
200,000 Federal Home Loan Bank, 5.038% due 10/14/2008 Aaa/AAA 217,004
75,000 Federal Home Loan Bank, 5.365% due 12/11/2008 Aaa/AAA 82,629
85,000 Federal Home Loan Bank, 5.985% due 4/9/2009 Aaa/AAA 96,319
16,609 Federal Home Loan Mortgage Corp., Pool # 850082, 9.00% due 10/1/2005 Aaa/AAA 17,373
162,951 Federal National Mortgage Association, Pool # 020155, 7.491% due 8/1/2014 Aaa/AAA 167,767
224,200 Federal National Mortgage Association, Pool # 190534, 6.00% due 12/1/2008 Aaa/AAA 234,873
50,490 Federal National Mortgage Association, Pool # 297033, 8.00% due 12/1/2009 Aaa/AAA 54,126
124,165 Federal National Mortgage Association, Pool # 303777, 7.00% due 3/1/2011 Aaa/AAA 132,205
586,948 Federal National Mortgage Association, Pool # 382398, 8.00% due 5/1/2011 Aaa/AAA 690,581
1,219,731 Federal National Mortgage Association, Pool # 383398, 6.42% due 4/1/2011 Aaa/AAA 1,363,876
482,907 Federal National Mortgage Association, Pool # 384471, 5.185% due 11/1/2008 Aaa/AAA 513,682
130,333 Federal National Mortgage Association, Pool # 384521, 5.095% due 12/1/2011 Aaa/AAA 136,963
800,000 Federal National Mortgage Association, Pool # 460568, 5.20% due 12/1/2006 Aaa/AAA 835,589
531,024 Federal National Mortgage Association CMO Series 2003-66 Class PM, 3.50% due 12/25/2008 Aaa/AAA 533,810
64,850 Government National Mortgage Association, Pool # 003007, 8.50% due 11/20/2015 Aaa/AAA 72,192
43,185 Government National Mortgage Association, Pool # 827148, 4.375% due 2/20/2024 Aaa/AAA 44,128
3,923,714 Government National Mortgage Association CMO Series 2003-67 Class PN, 4.00% due 11/20/2020 Aaa/AAA 4,015,063
2,000,000 Tennessee Valley Authority, 4.75% due 8/1/2013 .......................................... Aaa/AAA 2,063,310
Total U. S. Government Agencies (Cost $16,339,451) 16,901,767
ASSET BACKED SECURITIES - 0.90%
$ 873,443 Associates Manufactured Housing Trust 1996-1 A5, 7.60% due 3/15/2027 Aaa/AAA $ 923,447
137,723 Bank America Mortgage Secs Inc. Series 02-7, Class-2A4, 5.75% due 8/25/2032 ............. Aa2/NA 140,115
111,338 Centex Home Equity Series 2001-A A3, 5.93% due 11/24/2025 ............................... Aaa/AAA 112,298
250,000 Chase Credit Card Owner Trust 2001-5 A, 1.22% due 2/15/2007 ............................. Aaa/AAA 250,052
147,716 Chase Mortgage Finance Trust 1999-S9 A3, 6.25% due 7/25/2014 NR/AAA 151,151
765,879 CNH Equipment Trust, 1.37% due 7/17/2006 ................................................ Aaa/AAA 766,595
125,129 Residential Asset Security Mortgage Pass Thru, 5.751% due 3/25/2027 ..................... Aaa/AAA 125,864
213,272 Washington Mutual Series 02-AR10, Class-A6, 4.816% due 10/25/2032 ....................... Aaa/AAA 216,521
Total Asset Backed Securities (Cost $2,661,246) 2,686,043
CORPORATE BONDS - 62.00%
BANKS
1,565,000 Capital One Bank, 6.70% due 5/15/2008 ................................................... Baa2/BBB- 1,729,899
2,500,000 Fifth Third Bank, 3.375% due 8/15/2008 .................................................. Aa1/AA- 2,514,580
700,000 HSBC USA Inc., 8.375% due 2/15/2007 ..................................................... A1/A+ 818,977
500,000 KeyCorp, 8.00% due 7/1/2004 ............................................................. A3/BBB+ 523,639
1,000,000 Mercantile Bancorp, 7.30% due 6/15/2007 ................................................. A1/A 1,161,617
250,000 Nations Bank Corp. Medium Term Note, 7.23% due 8/15/2012 ................................ Aa2/A+ 292,445
500,000 Northern Trust Co. Medium Term Note, 6.25% due 6/2/2008 ................................. A1/A+ 559,119
95,000 PNC Funding Corp., 6.875% due 7/15/2007 ................................................. A3/BBB+ 108,051
120,000 Union Planters Corp., 6.75% due 11/1/2005 ............................................... A3/BBB- 131,304
2,900,000 United States Central Credit Union, 2.75% due 5/30/2008 ................................. Aa1/AAA 2,848,383
385,000 US Bank, 5.625% due 11/30/2005 .......................................................... Aa2/AA- 416,983
400,000 US Bank, 6.30% due 7/15/2008 ............................................................ Aa3/A+ 454,688
11,559,685
CAPITAL GOODS
250,000 Caterpillar Financial Services Corp., 6.40% due 2/15/2008 ............................. A2/A 276,134
800,000 Emerson Electric Co., 5.75% due 11/1/2011 ............................................. A2/A 871,022
400,000 Energy East Corp., 7.75% due 11/15/2003 ............................................... Baa2/BBB 402,696
600,000 Gatx Capital Corp., 6.875% due 11/1/2004 .............................................. Baa3/BBB- 611,581
244,497 General American Railcar Corp., 6.69% due 9/20/2016 Aa2/AA ............................ 250,900
1,000,000 Hubbell Inc., 6.375% due 5/15/2012 A3/A+ .............................................. 1,137,235
200,000 Illinois Tool Works Inc., 5.75% due 3/1/2009 .......................................... Aa3/AA- 223,224
450,000 John Deere Capital Corp., 5.125% due 10/19/2006 ....................................... A3/A- 485,173
1,000,000 Johnson Controls Inc., 5.00% due 11/15/2006 ........................................... A2/A 1,079,534
1,000,000 Pentair Inc., 7.85% due 10/15/2009 Baa3/BBB 1,178,045
900,000 Pitney Bowes Inc., 5.875% due 5/1/2006 ................................................ Aa3/AA 983,086
900,000 Pitney Bowes Inc., 4.625% due 10/1/2012 ............................................... Aa3/AA 912,234
5,000,000 Pitney Bowes Inc., 3.875% due 6/15/2013 ............................................... Aa3/AA 4,760,120
260,000 Textron Financial Corp., 5.95% due 3/15/2004 .......................................... A3/A- 264,776
13,435,760
COMMERCIAL SERVICES & SUPPLIES
$ 250,000 Aramark Services Inc., 7.00% due 7/15/2006 Baa3/BBB- $ 275,828
250,000 Science Applications International Corp., 6.75% due 2/1/2008 A3/A- 277,264
1,000,000 Science Applications International Corp., 6.25% due 7/1/2012 A3/A- 1,105,671
1,650,000 Valassis Communications, 6.625% due 1/15/2009 Baa3/BBB- 1,821,283
1,000,000 Waste Management Inc., 6.50% due 11/15/2008 ............................................. Baa3/BBB 1,116,814
725,000 Waste Management Inc., 6.875% due 5/15/2009 ............................................. Baa3/BBB 821,546
500,000 Waste Management Inc., 7.375% due 8/1/2010 Baa3/BBB 584,482
215,000 WMX Technologies Inc., 6.375% due 12/1/2003 ............................................. Baa3/BBB 216,488
1,010,000 WMX Technologies Inc., 7.00% due 5/15/2005 Baa3/BBB 1,085,014
550,000 WMX Technologies Inc., 7.00% due 10/15/2006 ............................................. Baa3/BBB 615,884
7,920,274
DIVERSIFIED FINANCIALS
200,000 American General Finance Corp. Medium Term Note, 4.625% due 9/1/2010 A1/A+ 204,948
1,000,000 Beneficial Corp., 6.80% due 7/22/2005 ................................................. A1/A 1,077,405
1,000,000 Berkshire Hathaway Finance Corp., 4.625% due 10/15/2013(b) ............................ Aaa/AAA 995,070
75,000 Dun & Bradstreet Corp., 6.625% due 3/15/2006 .......................................... NR/BBB+ 81,529
150,000 Ford Motor Credit, 6.24% due 12/15/2004 ............................................... A3/BBB 153,558
2,900,000 General Electric Capital Corp., 5.00% due 2/15/2007 Aaa/AAA 3,116,552
200,000 General Electric Capital Corp., 7.75% due 6/9/2009 .................................... Aaa/AAA 239,938
400,000 General Electric Capital Corp., 7.375% due 1/19/2010 .................................. Aaa/AAA 475,000
400,000 Household Finance Corp., 5.20% due 8/15/2005 .......................................... A1/A 417,828
100,000 Household Finance Corp., 5.90% due 5/15/2006 .......................................... A1/A 106,311
550,000 Household Finance Corp., 7.20% due 7/15/2006 .......................................... A1/A 619,602
400,000 Household Finance Corp., 5.75% due 1/30/2007 .......................................... A1/A 436,656
400,000 Household Finance Corp., 6.40% due 9/15/2009 .......................................... A1/A 429,475
950,000 International Lease Finance Corp. Medium Term Note, 5.95% due 6/6/2005 ................ A1/AA- 1,008,117
2,600,000 Jefferies Group Inc. Senior Note Series B, 7.50% due 8/15/2007 ........................ Baa2/BBB- 2,944,100
700,000 Lehman Brothers Holdings Inc., 3.50% due 8/7/2008 ..................................... A2/A 701,409
800,000 Schwab Charles Corp. Medium Term Note, 6.30% due 4/28/2006 ............................ A2/A- 874,802
1,400,000 SLM Corp., 5.00% due 10/1/2013 ........................................................ A2/A 1,415,304
800,000 Toyota Motor Credit Corp., 2.875% due 8/1/2008 ........................................ Aaa/AAA 794,719
16,092,323
ENERGY
575,000 Allete Inc., 7.80% due 2/15/2008 ...................................................... Baa2/BBB 635,774
850,000 Amerenenergy Generating Co., 7.75% due 11/1/2005 ...................................... A3/A- 946,075
1,150,000 Ashland Inc., 7.83% due 8/15/2005 Baa2/BBB 1,244,194
75,000 BJ Services Co. Note Series B, 7.00% due 2/1/2006 ..................................... Baa2/BBB+ 81,248
975,000 Commonwealth Edison Co., 4.74% due 8/15/2010 .......................................... A3/A- 1,011,256
700,000 El Paso Corp., 7.00% due 5/15/2011 Caa1/B 577,500
250,000 Enterprise Products Participating LP, 7.50% due 2/1/2011 .............................. Baa2/BBB 294,919
350,000 EOG Resources Inc., 6.50% due 9/15/2004 ............................................... Baa1/BBB+ 365,551
450,000 EOG Resources Inc., 6.00% due 12/15/2008 .............................................. Baa1/BBB+ 504,652
1,250,000 Kinder Morgan Energy Partners, 8.00% due 3/15/2005 .................................... Baa1/BBB+ 1,360,674
$ 290,000 Louis Dreyfus Natural Gas Corp., 6.875% due 12/1/2007 ................................. A3/BBB+ $ 327,313
650,000 Murphy Oil Corp., 6.375% due 5/1/2012 ................................................. Baa1/A- 726,590
750,000 Noram Energy Corp., 6.375% due 11/1/2003 .............................................. Ba1/BBB 751,500
120,000 Northern Border Pipeline Co., 6.25% due 5/1/2007 ...................................... A3/A- 132,152
800,000 Occidental Petroleum Corp., 5.875% due 1/15/2007 ...................................... Baa1/BBB+ 881,040
300,000 Occidental Petroleum Corp., 7.375% due 11/15/2008 ..................................... Baa1/BBB+ 346,079
315,000 Occidental Petroleum Corp., 10.125% due 9/15/2009 ..................................... Baa1/BBB+ 414,550
201,615 Oil Enterprises Ltd., 6.239% due 6/30/2008 (Insured: MBIA) ............................ Aaa/AAA 223,601
250,000 Oneok Inc., 7.75% due 3/1/2005 (Insured: MBIA) ........................................ Aaa/AAA 270,333
1,100,000 Panenergy Corp., 7.00% due 10/15/2006 ................................................. Baa3/BBB 1,207,236
250,000 Phillips Petroleum Co., 8.75% due 5/25/2010 ........................................... A3/A- 317,462
900,000 Phillips Petroleum Co., 9.375% due 2/15/2011 .......................................... A3/A- 1,170,080
350,000 Questar Pipeline Co., 6.05% due 12/1/2008 ............................................. A2/A+ 386,746
875,000 Rio Tinto Finance, 5.75% due 7/3/2006 ................................................. Aa3/A+ 953,106
600,000 Smith International Inc. Senior Note, 7.00% due 9/15/2007 ............................. Baa1/BBB+ 685,114
500,000 Sonat Inc., 7.625% due 7/15/2011 ...................................................... Caa1/B 412,500
525,000 Texas Eastern Transmission Corp. Senior Note, 5.25% due 7/15/2007 ..................... Baa2/BBB+ 561,671
200,000 Transocean SedCo. Forex Inc., 9.125% due 12/15/2003 Baa2/A- ........................... 202,322
190,000 Transocean SedCo. Forex Inc., 6.75% due 4/15/2005 ..................................... Baa2/A- 203,184
515,000 Transocean SedCo. Forex Inc., 6.95% due 4/15/2008 ..................................... Baa2/A- 585,350
85,000 Transocean SedCo. Forex Inc., 6.625% due 4/15/2011 .................................... Baa2/A- 95,449
200,000 Union Oil Co. California, 7.90% due 4/18/2008 ......................................... Baa2/BBB+ 232,514
18,107,735
FOOD BEVERAGE & TOBACCO
1,150,000 Anheuser Busch Co. Inc., 5.625% due 10/1/2010 ......................................... A1/A+ 1,273,157
2,000,000 Anheuser Busch Co. Inc., 4.375% due 1/15/2013 ......................................... A1/A+ 2,000,640
1,550,000 Anheuser Busch Co. Inc., 4.95% due 1/15/2014 .......................................... A1/A+ 1,601,806
515,000 Coca Cola Co., 4.00% due 6/1/2005 Aa3/A+ 535,820
200,000 Coca Cola Co., 5.75% due 3/15/2011 Aa3/A+ 221,952
325,000 Conagra Inc., 7.50% due 9/15/2005 Baa1/BBB+ 358,749
150,000 Conagra Inc., 7.875% due 9/15/2010 Baa1/BBB+ 183,850
4,000,000 Diageo Capital PLC, 3.375% due 3/20/2008 .............................................. A2/A+ 4,032,564
250,000 General Mills, 4.75% due 10/8/2003 Baa2/BBB+ 250,104
300,000 General Mills, 5.50% due 1/12/2009 Baa2/BBB+ 324,876
125,000 Grand Metropolitan Investment Corp., 0% due 1/6/2004 .................................. A2/A+ 124,446
215,000 Kellogg Co., 6.625% due 1/29/2004 Baa2/BBB 218,547
186,000 Kellogg Co., 4.875% due 10/15/2005 Baa2/BBB 197,396
900,000 Sara Lee Corp. Medium Term Note, 6.00% due 1/15/2008 .................................. A3/A+ 997,578
1,000,000 Sysco International Co., 6.10% due 6/1/2012 ........................................... A1/AA- 1,128,431
13,449,916
HEALTHCARE EQUIPMENT & SERVICES
500,000 Baxter International Inc., 5.25% due 5/1/2007 ......................................... A3/A 539,663
250,000 Boston Scientific Corp., 6.625% due 3/15/2005 ......................................... Baa1/A- 266,492
2,900,000 Johnson & Johnson, 3.80% due 5/15/2013 ................................................ Aaa/AAA 2,799,988
3,606,143
HOUSEHOLD & PERSONAL PRODUCTS
$ 2,000,000 Gillette Co., 4.00% due 6/30/2005 Aa3/AA- $ 2,085,082
2,000,000 Gillette Co., 2.875% due 3/15/2008 Aa3/AA- 1,975,672
900,000 Nike Inc., 5.50% due 8/15/2006 ........................................................ A2/A 984,282
300,000 Procter & Gamble Co., 4.75% due 6/15/2007 ............................................. Aa3/AA- 321,545
2,000,000 Procter & Gamble Co., 4.30% due 8/15/2008 ............................................. Aa3/AA- 2,110,464
7,477,045
HOTELS RESTAURANTS & LEISURE
225,000 Hyatt Equities LLC, 9.25% due 5/15/2005 ............................................... Baa3/BBB 243,890
500,000 Wendy's International Inc., 6.35% due 12/15/2005 ...................................... Baa1/BBB+ 536,672
780,562
INSURANCE
800,000 AIG Sunamerica Global Financing, 5.10% due 1/17/2007 .................................. Aaa/AAA 870,175
900,000 Allstate Corp., 5.375% due 12/1/2006 .................................................. A1/A+ 981,414
200,000 AON Corp., 6.90% due 7/1/2004 ......................................................... Baa2/A- 207,270
170,000 Equitable Iowa Cos., 8.50% due 2/15/2005 .............................................. A1/A+ 182,754
1,000,000 Hartford Financial Services Group Inc., 4.625% due 7/15/2013 A3/A- .................... 978,329
300,000 Hartford Life Inc., 7.10% due 6/15/2007 ............................................... A3/A- 341,038
1,000,000 Liberty Mutual Insurance Co., 8.20% due 5/4/2007 ...................................... Baa2/BBB+ 1,069,894
855,000 Manufacturers Life Insurance Co., 7.875% due 4/15/2005 ................................ A1/AA- 920,687
550,000 Marsh & Mclennan Cos. Inc., 4.85% due 2/15/2013 ....................................... A2/AA- 557,929
450,000 Metlife Inc., 5.25% due 12/1/2006 A2/A ................................................ 489,054
1,800,000 Old Republic International Corp., 7.00% due 6/15/2007 ................................. Aa3/A+ 2,029,797
700,000 Principal Financial Group Australia, 8.20% due 8/15/2009 .............................. A3/A 842,986
2,000,000 Principal Life Global Funding I, 4.40% due 10/1/2010 .................................. Aa3/AA 2,037,054
2,450,000 Unumprovident Corp., 7.625% due 3/1/2011 .............................................. Baa3/BBB- 2,695,000
900,000 USF&G Corp., 7.125% due 6/1/2005 ...................................................... A3/BBB+ 971,914
15,175,295
MATERIALS
75,000 Chevron Phillips Chemical, 5.375% due 6/15/2007 ....................................... Baa1/BBB+ 80,499
500,000 Chevron Phillips Chemical, 7.00% due 3/15/2011 ........................................ Baa1/BBB+ 568,891
1,400,000 Chevrontexaco Capital Co., 3.50% due 9/17/2007 ........................................ Aa2/AA 1,437,723
350,000 Dow Chemical Co., 5.75% due 12/15/2008 ................................................ A3/A- 378,020
200,000 E.I. du Pont de Nemours & Co., 8.25% due 9/15/2006 .................................... Aa3/AA- 234,188
1,000,000 E.I. du Pont de Nemours & Co., 4.75% due 11/15/2012 Aa3/AA- 1,032,837
325,000 E.I. du Pont de Nemours & Co., 4.125% due 3/6/2013 .................................... Aa3/AA- 316,510
475,000 Eastman Chemical Co., 6.375% due 1/15/2004 Baa2/BBB 480,934
400,000 Hoechst Celanese Corp., 6.125% due 2/1/2004 ........................................... Baa2/NR 405,987
200,000 Hoechst Celanese Corp., 7.125% due 3/15/2009 .......................................... Baa2/A+ 218,748
75,000 Lafarge Corp., 6.375% due 7/15/2005 ................................................... Baa1/BBB 80,438
635,000 Lubrizol Corp. Senior Note, 5.875% due 12/1/2008 ...................................... A2/A+ 692,572
2,000,000 Minnesota Mining & Manufacturing Co., 4.15% due 6/30/2005 ............................. Aa1/AA 2,083,532
2,900,000 Praxair Inc., 3.95% due 6/1/2013 ...................................................... A3/A- 2,767,235
10,778,114
MEDIA
$ 750,000 AOL Time Warner Inc., 6.75% due 4/15/2011 ............................................. Baa1/BBB+ $ 837,511
80,000 E W Scripps Co. Ohio, 5.75% due 7/15/2012 ............................................. A2/A 87,244
300,000 New York Times Co., 4.625% due 6/25/2007 .............................................. A1/A+ 318,282
255,000 Scholastic Corp., 5.75% due 1/15/2007 ................................................. Baa2/BBB 277,216
2,900,000 Thomson Corp., 4.25% due 8/15/2009 A3/A- 2,957,991
200,000 Time Warner Inc., 8.05% due 1/15/2016 ................................................. Baa1/BBB+ 240,888
125,000 Tribune Co., 6.875% due 11/1/2006 A3/NR 140,860
4,859,992
PHARMACEUTICALS & BIOTECHNOLOGY
1,000,000 Abbott Labs, 6.40% due 12/1/2006 ...................................................... Aa3/AA 1,127,266
500,000 Bristol Myers Squibb Co., 4.75% due 10/1/2006 ......................................... A1/AA- 533,283
1,850,000 Eli Lilly & Co., 5.50% due 7/15/2006 .................................................. Aa3/AA 2,015,941
1,825,000 Pfizer Inc., 3.30% due 3/2/2009 ....................................................... Aaa/AAA 1,831,837
2,000,000 Pharmacia Corp., 5.75% due 12/1/2005 .................................................. A1/AAA 2,171,938
1,900,000 Watson Pharmaceuticals Inc., 7.125% due 5/15/2008 ..................................... Ba1/BBB- 2,079,204
9,759,469
REAL ESTATE MANAGEMENT & DEVELOPMENT
1,000,000 Mission Valley Finance Corp. Commercial Mortgage Note Class-A2 144A, 6.78% due 12/15/2004 NA/AA 1,055,133
405,000 Prime Property Funding II Inc., 7.00% due 8/15/2004 A2/A 422,746
1,477,879
RETAILING
500,000 Costco Wholesale Corp., 5.50% due 3/15/2007 ............................................. A2/A 550,334
100,000 Dayton Hudson Corp., 9.625% due 2/1/2008 ................................................ A2/A+ 123,840
150,000 Dillard's Inc., 7.375% due 6/1/2006 ..................................................... Ba3/BB 150,750
1,400,000 Duty Free International Inc., 7.00% due 1/15/2004 ....................................... NR/NR 686,000
1,000,000 Target Corp., 3.375% due 3/1/2008 A2/A+ 1,011,321
700,000 Target Corp., 5.875% due 3/1/2012 A2/A+ 772,336
900,000 Wal-Mart Stores Inc., 6.875% due 8/10/2009 Aa2/AA 1,057,963
530,052 Wal-Mart Stores Inc., 8.57% due 1/2/2010 ................................................ Aa2/AA 617,473
290,449 Wal-Mart Stores Inc., 1992-A1 Pass Through Certificate, 7.49% due 6/21/2007 ............. Aa2/AA 321,760
5,291,777
SOFTWARE & SERVICES
250,000 Electronic Data Systems Corp., 6.85% due 10/15/2004 Baa3/BBB 259,062
2,500,000 Electronic Data Systems Corp., 7.125% due 10/15/2009 .................................... Baa3/BBB 2,612,500
1,000,000 Electronic Data Systems Corp., 6.00% due 8/1/2013 ....................................... Baa3/BBB 961,190
3,832,752
TECHNOLOGY - HARDWARE & EQUIPMENT
$ 2,000,000 Computer Sciences Corp, 3.50% due 4/15/2008 ............................................ A2/A $ 2,016,694
158,000 Computer Sciences Corp., 7.50% due 8/8/2005 ............................................ A2/A 174,107
350,000 Computer Sciences Corp., 6.75% due 6/15/2006 ........................................... A2/A 390,689
300,000 Computer Sciences Corp., 6.25% due 3/15/2009 ........................................... A2/A 340,872
1,317,000 Computer Sciences Corp., 7.375% due 6/15/2011 .......................................... A2/A 1,569,203
110,000 First Data Corp., 6.375% due 12/15/2007 ................................................ A1/A+ 123,158
900,000 First Data Corp., 5.625% due 11/1/2011 ................................................. A1/A+ 965,681
1,875,000 First Data Corp., 4.70% due 8/1/2013 ................................................... A1/A+ 1,884,366
500,000 International Business Machines, 4.875% due 10/1/2006 .................................. A1/A+ 538,079
2,825,000 International Business Machines, 2.375% due 11/1/2006 .................................. A1/A+ 2,841,117
1,000,000 International Business Machines, 4.25% due 9/15/2009 ................................... A1/A+ 1,039,449
500,000 Jabil Circuit Inc., 5.875% due 7/15/2010 ............................................... Baa3/BB+ 519,302
1,800,000 Oracle Corp., 6.72% due 2/15/2004 A3/A- 1,835,728
1,200,000 Oracle Corp., 6.91% due 2/15/2007 A3/A- 1,361,318
1,950,000 Sun Microsystems Inc., 7.50% due 8/15/2006 Baa1/BBB 2,191,654
17,791,417
TELECOMMUNICATION SERVICES
900,000 Cingular Wireless, 5.625% due 12/15/2006 ................................................ A3/A+ 980,838
50,000 TCI Communications Inc., 8.00% due 8/1/2005 ............................................. Baa3/BBB 55,112
1,500,000 Verizon Wireless Capital LLC, 5.375% due 12/15/2006 A3/A+ ............................... 1,621,725
2,657,675
TRANSPORTATION
210,671 Continental Airlines Pass Through Certificate Series 1997 4 Class-4A, 6.90% due 1/2/2018 Baa3/A- 203,422
225,000 CSX Corp., 7.45% due 5/1/2007 ........................................................... Baa2/BBB 260,550
374,627 Delta Air Lines Inc. EETC Series 2001-1 Class-A, 6.619% due 3/18/2011 Baa2/A 368,909
132,400 Northwest Airlines 1999-2 Class-A, 7.575% due 3/1/2019 .................................. Baa2/A+ 133,876
244,451 Southwest Airlines Co., 5.10% due 5/1/2006 Aa2/AA+ 260,193
1,012,000 Southwest Airlines Co., 7.875% due 9/1/2007 ............................................. Baa1/A 1,167,867
695,745 US Air Inc. EETC, 7.50% due 4/15/2008 (a) ............................................... Ba3/NR 180,059
2,574,876
UTILITIES
175,000 Appalachian Power Co., 6.60% due 5/1/2009 (Insured: MBIA) ............................... Aaa/AAA 198,202
1,245,000 Duke Capital Corp. Senior Note, 7.25% due 10/1/2004 Baa3/BBB 1,300,323
200,000 Entergy Mississippi Inc., 6.45% due 4/1/2008 (Insured: AMBAC) ........................... Aaa/AAA 205,361
925,000 Gulf Power Co., 4.35% due 7/15/2013 ..................................................... A2/A 904,048
950,000 Madison Gas & Electric Co., 6.02% due 9/15/2008 ......................................... Aa3/AA- 1,054,820
900,000 Minnesota Power & Light Co., 7.00% due 2/15/2007 ........................................ Baa1/A 1,007,393
250,000 Pacificorp, 6.75% due 4/1/2005 .......................................................... A3/A 267,848
210,000 Pennsylvania Power & Light Co., 6.55% due 3/1/2006 (Insured: MBIA) ...................... Aaa/AAA 231,314
245,000 PSI Energy Inc., 6.65% due 6/15/2006 .................................................... A3/A- 271,903
500,000 PSI Energy Inc., 7.85% due 10/15/2007 ................................................... Baa1/BBB 584,991
1,000,000 Public Service Co. Colorado 1st Collateral Trust Bond Series 11144A, 4.875% due 3/1/2013 Baa1/BBB+ 1,006,351
275,000 Public Service Electric & Gas Co., 6.75% due 3/1/2006 (Insured: MBIA) Aaa/AAA 305,166
50,000 Virginia Electric & Power Co., 8.00% due 3/1/2004 (Insured: MBIA) ....................... Aaa/AAA 51,423
80,000 Wisconsin Electric Power Co., 7.25% due 8/1/2004 ........................................ Aa2/A- 83,617
350,000 Wisconsin Energy Corp., 5.50% due 12/1/2008 ............................................. A2/BBB+ 379,471
1,150,000 Wisconsin Public Service Corp., 6.125% due 8/1/2011 Aa1/AA- 1,288,459
9,140,690
MISCELLANEOUS
500,000 Stanford University, 5.85% due 3/15/2009 ................................................ Aaa/NA 557,266
YANKEE
745,000 Manitoba Province Canada, 6.125% due 1/19/2004 .......................................... Aa2/AA- 755,611
715,000 National Westminster Bank, 7.375% due 10/1/2009 ......................................... Aa2/A+ 848,691
500,000 Nova Scotia Province Canada, 5.75% due 2/27/2012 ........................................ A3/A- 553,239
250,000 Ontario Province Canada, 3.282% due 3/28/2008 ........................................... Aa2/AA 251,661
5,000,000 Ontario Province Canada, 3.125% due 5/2/2008 ............................................ Aa2/AA 5,029,685
7,438,887
Total Corporate Bonds (Cost $176,418,889) 183,765,532
TAXABLE MUNICIPAL BONDS - 22.50%
4,250,000 American Campus Properties Student Housing, 7.38% due 9/1/2012 (Insured: MBIA) Aaa/AAA 5,018,230
150,000 American Fork City Utah Sales, 2.40% due 3/1/2005 (Insured: FSA) Aaa/AAA 151,596
300,000 American Fork City Utah Sales, 4.89% due 3/1/2012 (Insured: FSA) Aaa/AAA 308,325
120,000 American Fork City Utah Sales, 5.07% due 3/1/2013 (Insured: FSA) Aaa/AAA 123,436
169,000 Arkansas Electric Coop Corp., 7.33% due 6/30/2008 A2/AA- 185,059
300,000 Arkansas State Taxable Water Waste Disposal Series A, 5.50% due 7/1/2005 Aa2/AA 319,527
1,000,000 Ashaubenon Wisconsin, 3.00% due 6/1/2008 Aa2/NR 982,450
230,000 Aurora Indiana School Building Corp. Taxable Refunding 1st Mortgage, 2.30% due 2/10/2004 NR/AA- 230,653
235,000 Aurora Indiana School Building Corp. Taxable Refunding 1st Mortgage, 2.50% due 8/10/2004 NR/AA- 236,610
800,000 Baton Rouge Louisiana Taxable Series B, 2.60% due 1/15/2005 (Insured: AMBAC) Aaa/AAA 811,432
1,115,000 Bessemer Alabama Water Revenue Taxable Warrants Series B, 7.375% due 7/1/2008 (Insured: FSA)Aaa/AAA 1,234,171
150,000 Brockton MA Taxable Economic Development Series A, 6.45% due 5/1/2017 (Insured: FGIC) Aaa/AAA 168,215
370,000 Burbank California Waste Disposal Revenue, 5.29% due 5/1/2007 (Insured: FSA) Aaa/AAA 399,378
310,000 Burbank California Waste Disposal Revenue, 5.48% due 5/1/2008 (Insured: FSA) Aaa/AAA 338,120
200,000 Chicago Illinois Taxable Neighborhoods Alive Series B, 5.20% due 1/1/2006 (Insured: FGIC) Aaa/AAA 216,158
2,125,000 Cleveland Cuyahoga County Ohio, 6.10% due 5/15/2013 NR/NR 2,125,000
1,025,000 Connecticut State Development Authority, 8.55% due 8/15/2005 NR/A+ 1,100,932
1,870,000 Connecticut State Housing Finance Authority, 3.10% due 6/15/2032 (Insured: AMBAC) Aaa/AAA 1,904,632
600,000 Cook County Illinois Community College District 508, 6.90% due 5/1/2010 (Insured: AMBAC) Aaa/AAA 670,338
250,000 Cook County Illinois School District 083, 4.625% due 12/1/2010 (Insured: FSA) Aaa/NR 257,615
150,000 Cook County Illinois School District 083, 4.875% due 12/1/2011 (Insured: FSA) Aaa/NR 154,836
465,000 Coos County Oregon, 3.04% due 6/1/2009 (Insured: FGIC) Aaa/NR 451,971
635,000 Coos County Oregon, 3.47% due 6/1/2010 (Insured: FGIC) Aaa/NR 620,388
900,000 Denver City & County Special Facilities Taxable Refunding & Improvement
Series B, 7.15% due 1/1/2008 (Insured: MBIA) Aaa/AAA 1,041,021
500,000 Duke University Revenue, 6.19% due 6/1/2004 (Duke University Hospital Project A) Aa3/AA 516,060
130,000 Duquesne Pennsylvania General Obligation, 6.95% due 12/15/2003 (Insured: MBIA) Aaa/AAA 131,547
240,000 Elkhart Indiana Redevelopment District Revenue, 4.80% due 6/15/2011 NR/NR 234,038
245,000 Elkhart Indiana Redevelopment District Revenue, 4.80% due 12/15/2011 NR/NR 239,220
515,000 Elkhart Indiana Redevelopment District Revenue, 5.05% due 12/15/2012 NR/NR 500,740
540,000 Elkhart Indiana Redevelopment District Revenue, 5.25% due 12/15/2013 NR/NR 521,867
365,000 Green Bay Wisconsin Series B, 4.875% due 4/1/2011 (Insured: MBIA) Aaa/NR 379,049
68,005 Green Tree Financial Corp. 93-2 Mfd Housing Sr/Sub Certificate Class-A4, 6.90% due 7/15/2018 Aa2/NR 69,864
305,000 Hancock County Mississippi, 4.20% due 8/1/2008 (Insured: MBIA) Aaa/NR 313,528
245,000 Hancock County Mississippi, 4.80% due 8/1/2010 (Insured: MBIA) Aaa/NR 251,578
315,000 Hancock County Mississippi, 4.90% due 8/1/2011 (Insured: MBIA) Aaa/NR 322,047
845,000 Idaho Housing Multi Family Housing Revenue Series 94-B, 8.15% due 7/1/2004 A2/NR 887,073
40,000 Illinois Housing Development Authority Taxable Multi Family Program, 7.85% due 3/1/2005 A1/A+ 42,136
440,000 Indiana Bond Bank Taxable School Severance, 2.54% due 7/15/2004 (Insured: FGIC) Aaa/AAA 444,180
450,000 Indiana Bond Bank Taxable School Severance, 2.74% due 1/15/2005 (Insured: FGIC) Aaa/AAA 457,236
500,000 Jefferson County Texas Navigation Taxable Refunding, 5.50% due 5/1/2010 (Insured: FSA) Aaa/NR 533,215
575,000 Jersey City New Jersey Municipal Utilities Authority, 3.72% due 5/15/2009 (Insured: MBIA) Aaa/AAA 576,196
365,000 Kendall Kane County Illinois School 308, 5.50% due 10/1/2011 (Insured: FGIC) Aaa/NR 394,908
405,000 King County Washington General Obligation, 7.55% due 12/1/2005 Aa1/AA+ 453,300
2,775,000 Los Angeles County California Metropolitan Transport, 4.56% due 7/1/2010 Aaa/AAA 2,870,155
440,000 Maryland State Economic Development Corp., 7.25% due 6/1/2008
(Maryland Tech. Development Center Project) NR/NR 489,610
240,000 McKeesport Pennsylvania Taxable Series B, 6.60% due 3/1/2006 (Insured: MBIA) Aaa/AAA 265,733
140,000 Mississippi State Taxable Business Series V, 7.125% due 9/1/2006 NR/AA 158,451
100,000 Montgomery County Maryland Revenue Authority, 5.00% due 2/15/2012 Aa2/AA+ 103,205
410,000 New Jersey Health Care Facilities Financing, 10.75% due 7/1/2010 NR/NR 531,733
150,000 New Rochelle New York Industrial Development Agency, 7.15% due 10/1/2014 Aa3/A+ 163,899
3,500,000 New York Environmental Facilities, 5.85% due 3/15/2011 NR/AA- 3,874,920
1,400,000 New York Urban Development Corp., 4.75% due 12/15/2011(b) NR/AA 1,452,416
845,000 Newark New Jersey, 4.70% due 4/1/2011 (Insured: MBIA) Aaa/NR 868,119
1,225,000 Newark New Jersey, 4.90% due 4/1/2012 (Insured: MBIA) Aaa/NR 1,254,951
360,000 Niagara Falls New York Public Water, 4.30% due 7/15/2010 Aaa/AAA 367,855
1,000,000 North Carolina Municipal Power Agency Taxable Series B, 3.26% due 1/1/2005 Baa1/BBB+ 1,011,640
2,825,000 Northern States Power Co. Minnesota, 4.75% due 8/1/2010 A3/BBB+ 2,938,890
1,600,000 Northwest Open Access Network Washington Revenue, 6.18% due 12/1/2008 (Insured: AMBAC) Aaa/AAA 1,797,056
985,000 Ohio Petroleum Underground Storage, 6.75% due 8/15/2008 (Insured: MBIA) Aaa/AAA 1,007,931
205,000 Oregon State Department Administrative Lottery Revenue Taxable B, 4.90% due 4/1/2005
(Insured: FSA) Aaa/AAA 214,756
250,000 Passaic County New Jersey Multi Modal Taxable Refunding Series B, 6.23% due 9/1/2005
(Insured: FSA) Aaa/AAA 270,827
555,000 Pima County Arizona Industrial Development Authority Series E, 9.05% due 7/1/2008 Baa3/NR 636,468
540,000 San Francisco City & County Redevelopment Project Series B, 7.80% due 8/1/2004 A2/A 568,426
1,000,000 Short Pump Town Center Community Development, 6.26% due 2/1/2009(b) NR/NR 1,004,390
2,190,000 Sisters Providence Obligation Group Direct Obligation Notes Series 1997, 7.47% due 10/1/2007 A1/AA- 2,513,244
400,000 South Dakota Building Authority Revenue, 7.00% due 9/1/2005 (escrowed to maturity) Aaa/AAA 438,312
2,240,000 St. Louis Municipal Finance Corp. Firemans Retirement System, 6.35% due 8/1/2005
(Insured: MBIA) Aaa/AAA 2,420,656
500,000 Tennessee State Taxable Series B, 6.00% due 2/1/2013 Aa2/AA 543,110
5,000,000 Texas Municipal Gas Corp., 2.60% due 7/1/2007 Aaa/AAA 5,039,950
400,000 Texas State Public Finance Authority Revenue, 3.125% due 6/15/2007 Aa2/AA 403,144
245,000 Texas Tech University Revenue, 6.00% due 8/15/2011 (Insured: MBIA) Aaa/AAA 273,168
1,000,000 University Illinois Revenue, 6.35% due 4/1/2011 (Insured: FGIC) Aaa/AAA 1,135,770
90,000 University of New Mexico Revenue, 3.90% due 6/1/2010 (Insured: AMBAC) Aaa/AAA 90,185
250,000 University of New Mexico Revenue, 4.15% due 6/1/2011 (Insured: AMBAC) Aaa/AAA 250,150
180,000 University of New Mexico Revenue, 4.375% due 6/1/2012 (Insured: AMBAC) Aaa/AAA 179,411
270,000 University of New Mexico Revenue, 4.50% due 6/1/2013 (Insured: AMBAC) Aaa/AAA 267,792
1,000,000 Victor New York Taxable Tax Increment, 9.20% due 5/1/2014 NR/NR 1,063,180
505,000 Virginia Housing Development Authority Taxable Rental Housing Series I, 7.30% due 2/1/2008 Aa1/AA+ 581,109
285,000 Washington Pennsylvania 4.30% due 9/1/2005 (Insured: FGIC) Aaa/AAA 297,862
1,510,000 Weber Basin Utah Water Conservation Taxable Series B, 2.36% due 10/1/2003 (Insured: AMBAC) Aaa/NR 1,510,045
1,500,000 West Valley City Utah Municipal Building Lease Refunding Taxable, 7.67% due 5/1/2006 Aa2/NR 1,684,560
Total Taxable Municipal Bonds (Cost $64,332,393) 66,860,954
FOREIGN SECURITIES - 1.30%
2,000,000 British Columbia Province, 9.00% due 6/21/2004 (Canadian Dollars) Aa2/AA- 1,547,708
2,000,000 Federal Republic of Germany, 5.00% due 8/19/2005 (EURO) Aaa/AAA 2,444,286
Total Foreign Securities (Cost $3,336,174) 3,991,994
COMMERCIAL PAPER - 2.40%
2,000,000 American General Finance, 1.10% due 10/1/2003 A1/P1 2,000,000
2,000,000 American General Finance, 1.10% due 10/2/2003 A1/P1 1,999,939
3,000,000 American General Finance, 1.10% due 10/6/2003 A1/P1 2,999,541
Total Commercial Paper (Cost $6,999,480) 6,999,480
TOTAL INVESTMENTS (100%) (Cost $284,795,832) $ 296,631,537
<FN>
* Principal amount in U.S. Dollars unless otherwise indicated,
value is in U.S. Dollar.
+ Credit ratings are unaudited.
(a) Bond in default, non-income - producing security.
(b) When issued security. See notes to financial statements.
</FN>
Report of Independent Auditors
Thornburg Limited Term Income Fund
September 30, 2003
To the Trustees and Class I Shareholders of
Thornburg Limited Term Income Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules 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 Limited Term U.S.
Government Fund and Thornburg Limited Term Income Fund, each a series of
Thornburg Investment Trust, (the "Funds") at September 30, 2003, the results of
each of their operations for the year then ended, the changes in each of their
net assets for each of the two years in the period then ended and the financial
highlights for Class I shares for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, 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
audits, which included confirmation of securities at September 30, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
Index Comparisons
GOVERNMENT FUND
Index Comparisons
The chart below compares performance of the Government Fund Class I shares to
the Lehman Brothers Intermediate Government Bond Index and the Consumer Price
Index for the periods ended September 30, 2003. On September 30, 2003, the
weighted average securities ratings of the Index and the Fund were AAA and AAA,
respectively, and the weighted average portfolio maturities of the Index and the
Fund were 4.0 years and 4.5 years, respectively. Class I shares became available
on July 5, 1996. Past performance of the Index and the Fund may not be
indicative of future performance. The performance data and graph do not reflect
the deduction of taxes that a shareholder would pay on distributions or the
redemption of fund shares.
Thornburg Limited Term U.S. Government Fund Class I Total Returns, Since July 5,
1996 versus Lehman Brothers Intermediate Government Bond Index and Consumer
Price Index (C.P.I.)
Lehman Govt. Int. Index
Fund I Shares
CPI
Average Annual Total Returns
(periods ending 9/30/03) (at max. offering price)
I Shares
One Year: 3.51%
Five Years: 6.31%
From Inception (7/5/96): 6.96%
The Lehman Brothers Intermediate Government Bond Index is an unmanaged
market-weighted index generally representative of all public obligations of the
U.S. Government, its agencies and instrumentalities having maturities of up to
ten years.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
Index Comparisons
INCOME FUND
Index Comparisons
The charts below compare performance of the Income Fund Class I shares to the
Lehman Brothers Intermediate Government/Credit Index and the Consumer Price
Index for the periods ended September 30, 2003. On September 30, 2003, the
weighted average securities ratings of the Index and the Fund were A and AA,
respectively, and the weighted average portfolio maturities of the Index and the
Fund were 4.5 years and 4.7 years, respectively. Class I shares became available
on July 5, 1996. Past performance of the Index and the Fund may not be
indicative of future performance. The performance data and graph do not reflect
the deduction of taxes that a shareholder would pay on distributions or the
redemption of fund shares.
Thornburg Limited Term Income Fund Class I Total Returns, Since Inception,
versus Lehman Brothers Government/Credit Index and Consumer Price Index (C.P.I.)
Lehman Gov./Credit. Index
Fund I Shares
CPI
Average Annual Total Returns
(periods ending 9/30/03) (at max. offering price)
I Shares
One Year: 5.89%
Five Years: 6.61%
From Inception (7/5/96): 7.24%
The Lehman Brothers Intermediate Government/Credit Bond Index is an unmanaged,
market-weighted index generally representative of intermediate government and
investment grade corporate debt securities having maturities of up to ten years.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
TRUSTEES and Officers
Thornburg Limited Term Income Funds
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
Thornburg Limited Term U.S. Government Fund
I Shares
Outperformed U.S. Government Money Market Index
(Unaudited)
Investors sometimes ask us to compare the returns of the Limited Term U.S.
Government Fund to money market fund returns. These investments have certain
differences, and investors in the Limited Term U.S. Government Fund took more
risk than money market fund investors to earn their higher returns.
Return from a hypothetical $10,000 investment 9/30/93 through 9/30/03* (after
sales charge and fund expenses)
Lipper U.S. Gov't
Money Market Index $4,839
Thornburg Limited Term
U.S. Government Fund $8,122
The chart above is for the Fund's Class I Shares only. Class A, Class B, Class C
and Class R-1 Shares have different sales charges and expenses. See the inside
front cover page for the 30-day SEC yield and the total returns at the maximum
offering prices for one year, three years, five years, and since inception for
the Class I shares of the Fund.
*Prior to 7/5/96 the illustration includes actual returns of the Class A shares
adjusted for the lower Institutional expenses. Return for the money fund average
is based upon 30-day yield quotations for taxable money funds as quoted in
"Lipper U.S. Government Money Market Index" for the months covered by this
analysis. The return for Limited Term U.S. Government Fund is based upon the
dividends paid for the months covered by this analysis, the beginning offering
price of $13.12 per share and the ending NAV of $13.22 per share. These
investments returned the $10,000 initial investment in addition to the amounts
shown above.
Note 1: Future performance of any of these investments may bear no
relationship to prior performance.
Note 2: This analysis does not take into
account the effect, if any, caused by taxes. The average money market fund
increases shown above may differ from the return of a particular money market
fund. It is not possible to invest in this money fund average.
Note 3:
Generally, money market funds seek to maintain an investment portfolio with an
average maturity of 90 days or less. Limited Term U.S. Government Fund invests
in short-to-intermediate maturity U.S. Government and agency obligations. The
net asset value of the money funds did not fluctuate. The net asset value of the
Class A Shares of LTUSX did vary from time to time, and will continue to vary in
the future due to the effect of changes in interest rates on the value of the
investments the Fund holds. The analysis assumes that the investor received the
net asset value of the shares owned, plus accrued income, at time of sale.
Redemptions are made at the then current net asset value, which may give you a
gain or loss when you sell your shares.
Note 4: This analysis assumes that the
dividends from each of these investment vehicles were reinvested and compounded
monthly. Most money funds declare dividends daily and pay them monthly. LTUSX
also declares dividends daily and pays them monthly.
Thornburg Limited Term Income Fund
I shares
Outperformed Lipper Money Market Index
(Unaudited)
Investors sometimes ask us to compare the returns of the Limited Term Income
Fund to money market fund returns. These investments have certain differences,
and investors in the Limited Term Income Fund took more risk than money market
fund investors to earn their higher returns.
Return from a hypothetical $10,000 investment 9/30/93 through 9/30/03 (after
sales charge and fund expenses)
Lipper Taxable Money
Market Index $5,000
Thornburg Limited Term
Income Fund $8,770
The chart above is for the Fund's Class A Shares only. Class B, Class C, Class I
and Class R-1 Shares have different sales charges and expenses. See the inside
front cover page for the 30-day SEC yield and the total returns at the maximum
offering prices for one year, three years, five years, and since inception for
the Class A, B, C, I and R-1 shares of the Fund. Return for the money fund
average is based upon 30-day yield quotations for taxable money funds as quoted
in "Lipper Money Market Index" for the months covered by this analysis. The
return for Limited Term Income Fund is based upon the dividends paid for the
months covered by this analysis, the beginning offering price of $12.74 per
share and the ending NAV of $12.99 per share. These investments returned the
$10,000 initial investment in addition to the amounts shown above.
Note 1: Future performance of any of these investments may bear no relationship
to prior performance.
Note 2: This analysis does not take into account the effect, if any, caused by
taxes. The average money market fund increases shown above may differ from the
return of a particular money market fund. It is not possible to invest in this
money fund average.
Note 3: Generally, money market funds seek to maintain an
investment portfolio with an average maturity of 90 days or less. Limited Term
Income Fund invests in short-to-intermediate maturity fixed income obligations.
The net asset value of the money funds did not fluctuate. The net asset value of
the Class A Shares of THIFX did vary from time to time, and will continue to
vary in the future due to the effect of changes in interest rates on the value
of the investments the Fund holds. The analysis assumes that the investor
received the net asset value of the shares owned, plus accrued income, at time
of sale. Redemptions are made at the then current net asset value, which may
give you a gain or loss when you sell your shares.
Note 4: This analysis assumes that the dividends from each of these investment
vehicles were reinvested and compounded monthly. Most money funds declare
dividends daily and pay them monthly. THIFX also declares dividends daily and
pays them monthly.
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
www.thornburg.com
This report is submitted for the general information of shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective prospectus, which includes
information regarding the Funds' 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.
Thornburg New Mexico Intermediate Municipal Fund
ALL DATA AS OF 9/30/03.
FUND FACTS: Thornburg New Mexico Intermediate Municipal Fund
A Shares D Shares
Annualized Distribution Rate (at NAV) 3.45% 3.17%
SEC Yield 2.13% 1.88%
NAV $13.46 $13.47
Maximum Offering Price $13.73 $13.47
TOTAL RETURNS: (Annual Average - After Subtracting Maximum Sales Charge)
One Year 1.88% 3.63%
Three Years 5.02% 5.46%
Five Years 3.98% N/A
Ten Years 4.48% N/A
Since Inception 5.59% 4.55%
Inception Date 6/18/1991 6/1/1999
The investment return and principal value of an investment in the fund will
fluctuate so that, when redeemed, an investor's shares may be worth more or less
than their original cost.
Maximum sales charge of the Fund's Class A Shares is 2.00%.
The data quoted represent past performance and may not be construed as a
guarantee of future results.
The SEC Yield is computed in accordance with SEC standards measuring the net
investment income per share over a specified 30-day period expressed as a
percentage of the maximum offering price of the Fund's shares at the end of the
period.
The distribution rate is calculated by taking the sum of the month's total
distribution factors and dividing this sum by a 30-day period and annualizing to
360-day year. The value is then divided by the ending NAV to arrive at the
annualized distribution yield. The yield is calculated on a periodic basis and
is subject to change depending on the fund's NAV and current distributions.
Letter to shareholders
Thornburg New Mexico Intermediate Municipal Fund
October 20, 2003
Dear Fellow Shareholder:
I am pleased to present the Annual Report for your Thornburg New Mexico
Intermediate Fund. The net asset value of the A shares increased by 4 cents to
$13.46 during the year ending September 30, 2003. If you were with us for the
entire period, you received dividends of 47.6 cents per share. If you reinvested
dividends, you received 48.3 cents per share. Investors who owned D shares
received dividends of 43.8 and 44.4 cents per share respectively.
Interest rates on short-term municipal bonds have fallen somewhat over the last
year, while interest rates on intermediate and long-term bonds have risen. Since
bond prices move in the opposite direction of interest rates, your Fund's heavy
allocation to short-term bonds has helped it perform quite well over the last
year. Going forward, we expect that the very steep yield curve (measured by the
difference in yield between short-term and long-term bonds) will help the Fund's
future performance. When the yield curve is steep, the market price of
intermediate-term bonds tends to rise as the bonds move closer to maturity.
Investors in money market funds and short-term CDs, susceptible to reinvestment
risk are still feeling the pinch of reduced income flow. To see how your fund
has performed relative to the money market fund averages, turn to the back of
this report.
Your Thornburg New Mexico Intermediate Fund is a laddered portfolio of over 170
municipal obligations from all over New Mexico. Today, your fund's weighted
average maturity is 7.9 years. We always keep it below 10 years. We ladder the
maturity dates of the bonds in your portfolio so that some of the bonds are
scheduled to mature during each of the coming years. Laddering intermediate
bonds accomplishes two goals. First, the staggered bond maturities contained in
a ladder defuse interest-rate risk and dampen the Fund's price volatility.
Second, laddering gives the Fund a steady cash flow stream from maturing bonds
to reinvest toward the top of the ladder where yields are typically higher. The
laddering strategy is what truly differentiates your fund from most bond mutual
funds. It will be particularly useful if interest rates rise, because it will
allow your fund to gradually increase the yield of the portfolio without having
to sell bonds prior to maturity at reduced prices. The following chart describes
the percentages of your fund's bond portfolio maturing in each of the coming
years:
% of portfolio Cumulative %
maturing within maturing by end of
2 years = 15% Year 2 = 15%
2 to 4 years = 15% Year 4 = 30%
4 to 6 years = 11% Year 6 = 41%
6 to 8 years = 15% Year 8 = 56%
8 to 10 years = 11% Year 10 = 67%
10 to 12 years = 8% Year 12 = 75%
12 to 14 years = 12% Year 14 = 87%
14 to 16 years = 5% Year 16 = 92%
16 to 18 years = 5% Year 18 = 97%
18 to 20 years = 1% Year 20 = 98%
Percentages can and do vary. Data as of 9/30/03.
We are gradually seeing more and more reasons to feel optimistic about the U.S.
economic recovery. Many economists expect GDP growth of 5-6% for the current
quarter, but question its sustainability. The current strength seems to be
largely driven by tax cuts, Federal Government spending, and continued cash
flows from the home refinancing boom. If we are to enter the next phase of
recovery, we will have to see corporate capital spending and hiring pick up.
Meanwhile, despite higher prices for items such as housing, insurance and health
care, there is virtually no evidence of widespread inflation. In fact, official
measurements of inflation such as the Core Consumer Price Index have continued
to decline. So we don't see any reason for Federal Reserve policy to change for
the foreseeable future.
We do, however, continue to believe that phase two of the recovery will
eventually materialize. It will probably happen in conjunction with a weakened
dollar and a heavier calendar of Treasury bond offerings. These factors would
likely cause interest rates to rise on short-term and long-term bonds. We have
kept your Fund's duration shorter than normal to prepare for such an
environment. Doing so has detracted somewhat from price appreciation as interest
rates fell, but should allow your Fund to better take advantage of higher
interest rates if and when they arrive.
Most of the states are currently dealing with very sluggish revenue growth
following a terrible 2002, when revenues dropped over 10%. The New Mexico
economy has generally fared better than most of the country. State revenues have
benefited from higher natural gas and oil prices. The state finance office
recently raised revenue estimates for the next fiscal year by $120 million.
However, the state does face significant challenges in paying for planned income
tax reductions and while dealing with double digit Medicaid expenditure
increases. In the face of these and other challenges, the Fund continues to
maintain high credit quality, with 94% of the portfolio rated A or above by one
of the major rating agencies and 46% rated AAA.
Over the years, our practice of laddering a diversified portfolio of short and
intermediate maturity municipal bonds has allowed your fund to perform
consistently well in varying interest rate environments. Thank you for investing
in Thornburg New Mexico Intermediate Municipal Fund.
Sincerely,
George Strickland
Portfolio Manager
Statement of assets and liabilities
Thornburg New Mexico Intermediate Municipal Fund
September 30, 2003
ASSETS
Investments at value (cost $219,918,561) .........................$ 230,509,438
Receivable for fund shares sold .................................. 337,740
Interest receivable .............................................. 2,923,011
Prepaid expenses and other assets ................................ 701
Total Assets ................................... 233,770,890
LIABILITIES
Payable for securities purchased ................................. 1,307,502
Funds advanced by custodian ...................................... 385,631
Payable for fund shares redeemed ................................. 146,753
Accounts payable and accrued expenses ............................ 137,249
Payable to investment advisor (Note 3) ........................... 115,989
Dividends payable ................................................ 253,604
Total Liabilities .............................. 2,346,728
NET ASSETS .......................................................$ 231,424,162
NET ASSETS CONSIST OF:
Net unrealized appreciation (depreciation)on investments $ 10,590,877
Accumulated net realized gain (loss) .................... (1,659,008)
Net capital paid in on shares of beneficial interest .... 222,492,293
$ 231,424,162
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($216,765,785 applicable to 16,104,274 shares of beneficial
interest outstanding - Note 4) ................................$ 13.46
Maximum sales charge, 2.00% of offering price .................... 0.27
Maximum Offering Price Per Share .................................$ 13.73
Class D Shares:
Net asset value, offering and redemption price per share
($14,658,377 applicable to 1,088,480 shares of beneficial
interest outstanding - Note 4) ................................$ 13.47
See notes to financial statements ................................
Statement of operations
Thornburg New Mexico Intermediate Municipal Fund
Year Ended September 30, 2003
INVESTMENT INCOME:
Interest income (net of premium amortized
of $1,230,024) .................................................. $ 10,143,473
EXPENSES:
Investment advisory fees (Note 3) ............................... 1,122,875
Administration fees (Note 3)
Class A Shares ......................................... 265,590
Class D Shares ......................................... 15,129
Distribution and service fees (Note 3)
Class A Shares ......................................... 460,965
Class D Shares ......................................... 121,029
Transfer agent fees
Class A Shares ......................................... 79,947
Class D Shares ......................................... 19,378
Registration and filing fees
Class A Shares ......................................... 519
Class D Shares ......................................... 519
Custodian fees (Note 3) ......................................... 117,220
Professional fees ............................................... 27,094
Accounting fees ................................................. 12,990
Trustee fees .................................................... 5,391
Other expenses .................................................. 35,527
Total Expenses ................................ 2,284,173
Less:
Expenses reimbursed by investment advisor (Note 3) ..... (15,657)
Distribution and service fees waived (Note 3) .......... (60,514)
Fees paid indirectly (Note 3) .......................... (4,795)
Net Expenses .................................. 2,203,207
Net Investment Income ......................... 7,940,266
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments ......................... 35,461
Increase (Decrease) in unrealized appreciation of investments ... 519,875
Net Realized and Unrealized
Gain (Loss) on Investments ................. 555,336
Net Increase (Decrease) in Net Assets Resulting
From Operations ........................... $ 8,495,602
See notes to financial statements.
Statements of changes in net assets
Thornburg New Mexico Intermediate Municipal Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ....................................... $ 7,940,266 $ 7,128,825
Net realized gain (loss) on investments ..................... 35,461 (129,378)
Increase (Decrease) in unrealized appreciation of investments 519,875 4,162,371
Net Increase (Decrease) in Net Assets
Resulting from Operations .............. 8,495,602 11,161,818
DIVIDENDS TO SHAREHOLDERS:
From net investment income ..................................
Class A Shares (7,548,644) (6,941,398)
Class D Shares ..................................... (391,622) (187,427)
FUND SHARE TRANSACTIONS (Note 4):
Class A Shares ..................................... 23,500,283 30,250,437
Class D Shares ..................................... 4,900,950 6,708,501
Net Increase (Decrease) in Net Assets ..... 28,956,569 40,991,931
NET ASSETS:
Beginning of year .................................. 202,467,593 161,475,662
End of year ........................................ $ 231,424,162 $ 202,467,593
<FN>
See notes to financial statements.
</FN>
Notes to financial statements
Thornburg New Mexico Intermediate Municipal Fund
September 30, 2003
NOTE 1 - ORGANIZATION
Thornburg New Mexico Intermediate Municipal Fund (the "Fund") is a
non-diversified series of Thornburg Investment Trust (the "Trust"). The Trust is
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 nine series of shares of beneficial interest in addition to
those of the Fund: Thornburg Florida Intermediate Municipal Fund, Thornburg New
York Intermediate Municipal Fund, Thornburg Intermediate Municipal Fund,
Thornburg Limited Term U.S. Government Fund, Thornburg Limited Term Income Fund,
Thornburg Value Fund, Thornburg International Value Fund, Thornburg Core Growth
Fund, and Thornburg Investment Income Builder Fund. Each series is considered to
be a separate entity for financial reporting and tax purposes and bears expenses
directly attributable to it. The Fund's investment objective is to obtain as
high a level of current income exempt from Federal income tax as is consistent
with the preservation of capital.
The Fund currently offers two classes of shares of beneficial interest, Class A
and Class D shares. Each class of shares of the 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 D shares are sold at net asset
value without a sales charge at the time of purchase or redemption and bear both
a service fee and a distribution fee, and (iii) 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 service and distribution fees, administration fees
and certain registration and transfer agent expenses.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the
Fund are as follows:
Valuation of Investments: In determining net asset value, the Fund utilizes an
independent pricing service approved by the Trustees. Debt investment securities
have a primary market over the counter and are valued on the basis of valuations
furnished by the pricing service. The pricing service values portfolio
securities at quoted bid prices, normally at 4:00 pm EST or the yield
equivalents when quotations are not readily available. Securities for which
quotations are not readily available are valued at fair value as determined by
the pricing service using methods which include consideration of yields or
prices of municipal obligations of comparable quality, type of issue, coupon,
maturity, and rating; indications as to value from dealers and general market
conditions. The valuation procedures used by the pricing service and the
portfolio valuations received by the Fund are reviewed by the officers of the
Trust under the general supervision of the 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 (if any) and tax exempt 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 interest rate 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 the Fund's 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. Securities purchased on a
when-issued or delayed delivery basis do not earn interest until the settlement
date.
Dividends: Net investment income of the Fund is declared daily as a dividend on
shares for which the Fund has received payment. Dividends are paid monthly 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 capital gains, to the extent available, will be
distributed at least annually.
General: Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Premiums and discounts on securities
purchased are amortized to call dates or maturity dates of the respective
securities. Realized gains and losses from the sale of securities are recorded
on an identified cost basis. Net investment income, other than class specific
expenses, and realized and unrealized gains and losses, are allocated daily to
each class of shares based upon the relative net asset value of shares
outstanding (or the value of the dividend-eligible shares, as appropriate) of
each class of shares at the beginning of the day (after adjusting for the
current share activity of the respective class). Expenses common to all Funds
are allocated among the Funds comprising the Trust based upon their relative net
asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Fund. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services for
which the fees are payable at the end of each month. For the year ended
September 30, 2003, these fees were payable at annual rates ranging from .50 of
1% to .275 of 1% of the average daily net assets of the Fund. The Fund also has
an administrative services agreement with the Advisor, whereby the Advisor 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
..125 of 1% of the average daily net assets attributable to each class of shares.
For the year ended September 30, 2003, the Advisor voluntarily reimbursed
certain class specific expenses and administrative fees of $15,657 for Class D
shares.
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, 2003, the Distributor has advised the Fund that it earned
net commissions aggregating $2,780 from the sale of Class A shares.
Pursuant to a service plan, under Rule 12b-1 of the Investment Company Act of
1940, the Fund may reimburse to the Advisor an amount not to exceed .25 of 1%
per annum of the average daily net assets attributable to each class of shares
of the Fund for payments made by the Advisor to securities dealers and other
financial institutions to obtain various shareholder related services. The
Advisor may pay out of its own resources additional expenses for distribution of
the Fund's shares.
The Fund has also adopted a distribution plan pursuant to Rule 12b-1, applicable
only to the Fund's Class D shares under which the Fund compensates the
Distributor for services in promoting the sale of Class D shares of the Fund at
an annual rate of up to .75% of the average daily net assets attributable to
Class D 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,
2003, are set forth in the statement of operations. Distribution fees in the
amount of $60,514 were waived for Class D shares.
The Fund has an agreement with the custodian bank to indirectly pay a portion of
the custodian's fees through credits earned by the Fund's cash on deposit with
the bank. This deposit agreement is an alternative to overnight investments.
Custodial fees have been adjusted to reflect amounts that would have been paid
without this agreement, with a corresponding adjustment reflected as fees paid
indirectly in the statements of operations. For the year ended September 30,
2003, the fees paid indirectly were $4,795.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4 - SHARES OF BENEFICIAL INTEREST
At September 30, 2003 there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold .................... 5,821,374 $ 77,915,699 4,647,451 $ 61,083,594
Shares issued to shareholders in 347,915 4,650,412 311,621 4,095,157
reinvestment of dividends
Shares repurchased ............. (4,424,642) (59,065,828) (2,659,103) (34,928,314)
Net Increase (Decrease) ........ 1,744,647 $ 23,500,283 2,299,969 $ 30,250,437
Class D Shares
Shares sold .................... 766,729 $ 10,266,219 623,578 $ 8,213,936
Shares issued to shareholders in 23,004 307,781 11,585 152,656
reinvestment of dividends
Shares repurchased ............. (424,944) (5,673,050) (126,490) (1,658,091)
Net Increase (Decrease) ........ 364,789 $ 4,900,950 508,673 $ 6,708,501
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003, the Fund had purchase and sale
transactions (excluding short-term securities) of $78,777,470 and $35,171,876,
respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components of capital is as
follows:
Cost of investments for tax purpose $ 219,920,074
Gross tax unrealized appreciation $ 10,660,354
Gross tax unrealized depreciation (70,990)
Net tax unrealized appreciation
(depreciation) on investments $ 10,589,364
At September 30, 2003, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2004 $ 554,899
2006 7,178
2007 33,677
2008 595,638
2009 320,666
2011 145,437
$ 1,657,495
Unutilized tax basis capital losses may be carried forward to offset realized
gains in future years. To the extent such carry forwards are used, capital gain
distributions may be reduced to the extent provided by regulations.
During the year ended September 30, 2003, $90,419 of capital loss carry forwards
from prior years expired. This amount was reclassed to paid in capital.
Dividends paid by the Fund for the years ended September 30, 2003 and September
30, 2002 represent exempt interest dividends, which are excludable by
shareholders from gross income for Federal income tax purposes.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sale losses.
Financial highlights
Thornburg New Mexico Intermediate Municipal Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class A Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ......................... $ 13.42 $ 13.16 $ 12.85 $ 12.92 $ 13.45
Income from investment operations:
Net investment income .................................. 0.48 0.53 0.59 0.62 0.61
Net realized and unrealized
gain (loss) on investments ........................... 0.04 0.26 0.31 (0.07) (0.53)
Total from investment operations ........................... 0.52 0.79 0.90 0.55 0.08
Less dividends from:
Net investment income .................................. (0.48) (0.53) (0.59) (0.62) (0.61)
Change in net asset value .................................. 0.04 0.26 0.31 (0.07) (0.53)
Net asset value, end of year ............................... $ 13.46 $ 13.42 $ 13.16 $ 12.85 $ 12.92
Total return (a) ........................................... 3.93% 6.16% 7.12% 4.36% 0.55%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income .................................. 3.55% 4.01% 4.49% 4.81% 4.57%
Expenses, after expense reductions ..................... 0.97% 0.98% 1.01% 0.99% 0.99%
Expenses, after expense reductions
and net of custody credits ........................... 0.97% 0.98% -- -- --
Expenses, before expense reductions .................... 0.97% 1.00% 1.01% 1.03% 1.01%
Portfolio turnover rate .................................... 16.53% 21.35% 18.77% 30.23% 15.93%
Net assets at end of year (000) ...........................$ 216,766 $ 192,749 $ 158,645 $ 147,279 $ 155,540
<FN>
(a) Sales loads are not reflected in computing total return
</FN>
Thornburg New Mexico Intermediate Municipal Fund
Year Ended September 30, Period Ended
September 30,
2003 2002 2001 2000 1999(c)
Class D Shares:
Per Share Performance ......................................
(for a share outstanding throughout the period)
Net asset value, beginning of period ....................... $ 13.43 $ 13.16 $ 12.85 $ 12.93 $ 13.20
Income from investment operations:
Net investment income .................................. 0.44 0.49 0.55 0.58 0.19
Net realized and unrealized
gain (loss) on investments ........................... 0.04 0.27 0.31 (0.08) (0.27)
Total from investment operations ........................... 0.48 0.76 0.86 0.50 (0.08)
Less dividends from:
Net investment income .................................. (0.44) (0.49) (0.55) (0.58) (0.19)
Change in net asset value .................................. 0.04 0.27 0.31 (0.08) (0.27)
Net asset value, end of period ............................. $ 13.47 $ 13.43 $ 13.16 $ 12.85 $ 12.93
Total return (a) ........................................... 3.63% 5.94% 6.84% 4.00% (0.61)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income .................................. 3.24% 3.64% 4.23% 4.55% 4.20%(b)
Expenses, after expense reductions ..................... 1.25% 1.25% 1.27% 1.25% 1.27%
(b)
Expenses, after expense reductions
and net of custody credits ........................... 1.25% 1.25% -- -- --
Expenses, before expense reductions .................... 1.88% 2.00% 2.40% 2.73% 3.70%
(b)
Portfolio turnover rate .................................... 16.53% 21.35% 18.77% 30.23% 15.93%
Net assets at end of period (000) .......................... $ 14,658 $ 9,719 $ 2,831 $ 2,151 $ 1,122
<FN>
(a) Total return is not annualized for periods less than one year.
(b) Annualized.
(c) Sale of Class D shares commenced on June 1, 1999.
</FN>
Schedule of Investments
Thornburg New Mexico Intermediate Municipal Fund
CUSIPS: CLASS A - 885-215-301, CLASS D - 885-215-624
NASDAQ SYMBOLS: CLASS A - THNMX, CLASS D - THNDX
Principal Credit Rating
Amount Isssuer-Description Moody's/S&P Value
3,000,000 Alamogordo Hospital Revenue, 5.30% due 1/1/2013 (Insured: Radian) NR/AA $ 3,148,560
1,000,000 Albuquerque Airport Revenue, 5.00% due 7/1/2007 Aaa/AAA 1,097,640
326,000 Albuquerque Collateralized Mortgage Municipal Class B-2, 0% due 5/15/2011 Aaa/AAA 182,762
(Insured: FGIC)
100,000 Albuquerque Educational Facilities Revenue Refunding, 1.15% due 10/15/2016 put VMIG1/AA 100,000
10/7/2003 (Albuquerque Academy Project; Insured: Bank of America) (weekly demand
notes)
2,835,000 Albuquerque General Purpose Series A, 5.00% due 7/1/2005 Aa3/AA 3,024,832
840,000 Albuquerque Gross Receipts Prerefunded Series B, 0% due 7/1/2005 (ETM)* Aaa/AAA 821,856
820,000 Albuquerque Gross Receipts Prerefunded Series B, 0% due 7/1/2012 Aaa/AAA 593,377
50,000 Albuquerque Gross Receipts Tax Revenue, 6.20% due 7/1/2005 A1/AA 50,705
1,195,000 Albuquerque Gross Receipts Unrefunded Balance Series B, 0% due 7/1/2005 (Insured: Aaa/AAA 1,167,144
FSA)
1,180,000 Albuquerque Gross Receipts Unrefunded Balance Series B, 0% due 7/1/2012 (Insured: Aaa/AAA 835,039
FSA)
3,735,000 Albuquerque Hospital Revenue Series A, 6.375% due 8/1/2007 (Insured: MBIA) Aaa/AAA 3,837,078
1,180,000 Albuquerque Industrial Development Revenue, 5.80% due 6/1/2007 (Universal Printing A1/NR 1,236,369
& Publishing Project; LOC: Wells Fargo)
1,170,000 Albuquerque Industrial Revenue Refunding, 5.15% due 4/1/2016 (MCT Industries Inc. Aa3/NR 1,217,537
Project; LOC: Bank of the West)
1,600,000 Albuquerque Joint Water & Sewage Revenue Series A, 0% due 7/1/2008 (Insured: FGIC) Aaa/AAA 1,413,152
1,685,000 Albuquerque Joint Water & Sewage Systems Refunding Series A, 4.50% due 7/1/2004 Aa3/AA 1,728,844
1,000,000 Albuquerque Joint Water & Sewage Systems Revenue, 6.00% due 7/1/2005 Aa3/AA 1,083,170
1,000,000 Albuquerque Joint Water & Sewage Systems Revenue, 6.00% due 7/1/2006 Aa3/AA 1,120,880
1,135,000 Albuquerque Joint Water & Sewage Systems Revenue Refunding & Improvement Series A, Aa3/AA 1,291,074
5.25% due 7/1/2011
2,240,000 Albuquerque Municipal School District 12 Refunding, 5.00% due 8/1/2009 Aa2/AA 2,529,677
760,000 Albuquerque Municipal School District 12 Refunding, 5.10% due 8/1/2014 Aa2/AA 830,247
1,175,000 Albuquerque Municipal School District 12 Refunding, 5.00% due 8/1/2015 Aa2/AA 1,273,324
2,140,000 Albuquerque New Mexico Industrial Revenue Refunding, 5.10% due 4/1/2017 Aa3/NR 2,231,036
415,000 Albuquerque Refuse Removal & Disposal Revenue Refunding Series B, 5.00% due Aaa/AAA 465,779
7/1/2010 (Insured: FSA)
1,000,000 Albuquerque Refuse Removal & Disposal Revenue Refunding Series B, 5.00% due Aaa/AAA 1,116,850
7/1/2011 (Insured: FSA)
2,200,000 Albuquerque Series B, 5.00% due 7/1/2006 Aa3/AA 2,410,584
220,000 Albuquerque Special Assessment District Series A, 6.45% due 1/1/2015 (Cottonwood NR/AA- 221,274
Mall Project; LOC: Bank of America)
585,000 Belen Gasoline Tax Revenue Refunding & Improvement, 5.40% due 1/1/2011 NR/NR 605,791
400,000 Bernalillo County General Obligation, 7.00% due 2/1/2006 Aa1/AA+ 451,316
410,000 Bernalillo County General Obligation, 7.00% due 2/1/2007 Aa1/AA+ 478,515
525,000 Bernalillo County Gross Receipts, 5.10% due 10/1/2010 Aa3/AA 584,939
3,000,000 Bernalillo County Gross Receipts Series B, 5.00% due 4/1/2021 (Insured: MBIA) Aaa/AAA 3,229,530
495,000 Bernalillo County Gross Receipts Tax Revenue, 5.50% due 10/1/2011 Aa3/AA 563,765
1,000,000 Bernalillo County Gross Receipts Tax Revenue, 5.25% due 10/1/2012 Aa3/AA 1,136,630
2,000,000 Bernalillo County Gross Receipts Tax Revenue, 5.75% due 10/1/2015 Aa3/AA 2,292,980
2,300,000 Bernalillo County Multi Family Housing Revenue Series 1988, 5.80% due 11/1/2025 NR/AA 2,330,038
put 11/1/2006 (Sunchase Apartments Project; Insured: AXA Reinsurance Co.)
4,500,000 Bernalillo County Multi Family Housing Revenue Series 1994-A, 6.50% due 10/1/2019 NR/AA 4,615,830
put 10/1/2005 (Village Apartments Project; Insured: AXA Reinsurance Co.)
1,000,000 Chaves County Gross Receipts Tax Revenue, 5.00% due 7/1/2017 (Insured: FGIC) Aaa/NR 1,073,120
1,030,000 Chaves County Gross Receipts Tax Revenue, 5.05% due 7/1/2019 (Insured: FGIC) Aaa/NR 1,093,366
495,000 Cibola County Gross Receipts Tax Revenue, 5.875% due 11/1/2008 (Insured: AMBAC) Aaa/AAA 578,071
555,000 Cibola County Gross Receipts Tax Revenue, 6.00% due 11/1/2010 (Insured: AMBAC) Aaa/AAA 658,263
500,000 Eastern New Mexico University Revenues Refunding & Improvement, 4.95% due 4/1/2006 Aaa/AAA 501,525
(Insured: AMBAC)
1,000,000 Farmington Municipal School District 5 Refunding, 5.00% due 9/1/2011 (Insured: Aaa/NR 1,102,720
FSA)
1,710,000 Farmington Pollution Control Revenue, 5.875% due 6/1/2023 (Insured: MBIA) Aaa/AAA 1,749,313
400,000 Farmington Pollution Control Revenue, 1.20% due 9/1/2024 put 10/1/2003 (LOC: P1/A1+ 400,000
Barclays Bank) (daily demand notes)
3,000,000 Farmington Utility Systems Revenue Refunding Series A, 5.00% due 5/15/2011 Aaa/AAA 3,354,720
(Insured: FSA)
6,095,000 Farmington Utility Systems Revenue Refunding Series A, 5.00% due 5/15/2012 Aaa/AAA 6,721,261
(Insured: FSA)
7,960,000 Gallup Pollution Control Revenue Refunding, 6.65% due 8/15/2017 (Plains Electric Aaa/AAA 8,074,942
Generation Project; Insured: MBIA)
1,500,000 Gallup Pollution Control Revenue Refunding Series 1992, 6.45% due 8/15/2006 Aaa/AAA 1,521,180
(Insured: MBIA)
1,310,000 Grant County Hospital Facility Revenue, 5.50% due 8/1/2009 (Gila Regional Medical NR/AA 1,472,152
Center Project; Insured: Radian)
1,385,000 Grant County Hospital Facility Revenue, 5.50% due 8/1/2010 (Gila Regional Medical NR/AA 1,545,798
Center Project; Insured: Radian)
1,115,000 Las Cruces Gross Receipts Tax Revenue Refunding & Improvement, 5.00% due 6/1/2009 Aaa/NR 1,255,680
(Insured: MBIA)
1,000,000 Las Cruces Health Facilities Revenue, 6.45% due 12/1/2017 (Evangelical Lutheran Aaa/AAA 1,024,450
Project; Insured: FSA)
420,000 Las Cruces Joint Utility Refunding & Improvement Revenue, 6.50% due 7/1/2007 A1/NR 430,143
(ETM)*
1,000,000 Las Cruces School District 2, 5.50% due 8/1/2010 Aa3/NR 1,135,410
2,600,000 Las Cruces School District 2 Refunding, 4.00% due 8/1/2007 Aa3/NR 2,801,630
2,600,000 Lordsburg Pollution Control Revenue, 6.50% due 4/1/2013 (Phelps Dodge Project) Baa3/BBB- 2,659,280
1,300,000 Los Alamos County Utility Series A, 5.80% due 7/1/2006 (Insured: FSA) Aaa/AAA 1,370,421
3,445,000 Los Alamos County Utility Series A, 6.00% due 7/1/2008 (Insured: FSA) Aaa/AAA 3,638,368
350,000 Milan General Obligation Sanitary Sewer Series 1994, 7.00% due 9/1/2013 NR/NR 368,557
305,000 New Mexico Educational Assistance Foundation Revenue, 5.50% due 11/1/2003 NR/NR 305,949
1,140,000 New Mexico Educational Assistance Foundation Revenue, 6.65% due 3/1/2007 Aaa/NR 1,203,897
2,000,000 New Mexico Educational Assistance Foundation Series A 3, 4.95% due 3/1/2009 Aaa/NR 2,151,800
10,000 New Mexico Educational Assistance Foundation Student Loan Revenue, 5.40% due Aa/NR 10,109
8/1/2004
1,290,000 New Mexico Educational Assistance Student Loan, 6.50% due 3/1/2004 Aaa/NR 1,290,155
385,000 New Mexico Educational Assistance Student Loan Series 2-B, 5.75% due 12/1/2008 NR/NR 395,060
1,295,000 New Mexico Finance Authority Revenue Court Facilities Fee Bifurcated, 5.00% due Aaa/AAA 1,408,002
6/15/2014 (Insured: MBIA)
2,000,000 New Mexico Finance Authority Revenue Court Facilities Fee Revenue Series A, 5.50% Aaa/AAA 2,193,380
due 6/15/2020 (Insured: MBIA)
425,000 New Mexico Finance Authority Revenue Federal Highway Grant Anticipation Series A, Aaa/AAA 448,362
4.10% due 9/1/2005 (Insured: AMBAC)
2,660,000 New Mexico Finance Authority Revenue Refunding, 5.00% due 6/1/2014 (Public Project Aaa/AAA 2,934,273
Revolving Fund B; Insured: MBIA)
960,000 New Mexico Finance Authority Revenue Series C, 5.15% due 6/1/2012 (Insured: MBIA) Aaa/AAA 1,061,040
220,000 New Mexico Finance Authority Revenue Series C, 5.25% due 6/1/2013 (Insured: MBIA) Aaa/AAA 244,396
220,000 New Mexico Finance Authority Revenue Series C, 5.35% due 6/1/2014 (Insured: MBIA) Aaa/AAA 244,336
245,000 New Mexico Finance Authority Revenue Series C, 5.45% due 6/1/2015 (Insured: MBIA) Aaa/AAA 274,172
1,725,000 New Mexico Finance Authority Revenue State Office Building Tax Series A, 5.00% due Aa1/AAA 1,904,848
6/1/2012
1,325,000 New Mexico Finance Authority Revenue State Office Building Tax Series A, 5.00% due Aa1/AAA 1,451,352
6/1/2013
1,875,000 New Mexico Finance Authority Revenue State Office Building Tax Series A, 5.00% due Aa1/AAA 2,038,144
6/1/2014
2,000,000 New Mexico Highway Commission Revenue Senior Subordinated Lien Tax Series A, 5.50% Aa2/AA+ 2,264,220
due 6/15/2013
2,000,000 New Mexico Highway Commission Revenue Senior Subordinated Lien Tax Series A, 5.50% Aa2/AA+ 2,249,400
due 6/15/2014
4,355,000 New Mexico Highway Commission Tax Revenue, 5.125% due 6/15/2010 Aa2/AA+ 4,847,855
500,000 New Mexico Highway Commission Tax Revenue Senior Subordinated Lien Series A, 5.00% Aa2/AA+ 562,305
due 6/15/2010
5,000,000 New Mexico Highway Commission Tax Senior Subordinated Lien, 6.00% due 6/15/2011 Aa2/AA+ 5,856,600
1,140,000 New Mexico Hospital Equipment Loan, 5.20% due 12/1/2010 pre-refunded 12/1/2007 @ Aa2/AA 1,301,264
101 (Catholic Health Initiatives Project)
5,205,000 New Mexico Hospital Equipment Loan Series A, 5.75% due 8/1/2016 (Presbyterian A1/A+ 5,663,404
Healthcare Project)
1,160,000 New Mexico Housing Authority Region III Multi Family Housing Revenue Series A, Aaa/AAA 1,192,654
5.30% due 12/1/2022 (Senior El Paseo Apartments Project; Insured: AMBAC)
2,325,000 New Mexico Housing Authority, Multi Family Housing Revenue, 1.10% due 1/15/2033 NR/A1+ 2,325,000
put 10/7/2003 (Arbors/Courtyard Apartments Project) (weekly demand notes)
660,000 New Mexico MFA Forward Mortgage Series C, 6.50% due 7/1/2025 (Collateralized: NR/AAA 694,096
FNMA/GNMA)
775,000 New Mexico MFA General, 5.80% due 9/1/2019 NR/A+ 815,959
235,000 New Mexico MFA SFMR, 5.70% due 9/1/2014 (Collateralized: FNMA/GNMA) NR/AAA 245,899
655,000 New Mexico MFA SFMR, 5.75% due 3/1/2017 (Collateralized: FNMA/GNMA) NR/AAA 695,014
885,000 New Mexico MFA SFMR, 0% due 9/1/2019 NR/AAA 625,483
405,000 New Mexico MFA SFMR Series 1992 A1, 6.90% due 7/1/2008 (Collateralized: FNMA/GNMA) NR/AAA 421,791
310,000 New Mexico MFA SFMR Series A3, 6.15% due 9/1/2017 (Collateralized: FNMA/GNMA) NR/AAA 327,546
80,000 New Mexico MFA SFMR Series B2, 5.80% due 1/1/2009 (Collateralized: FNMA/GNMA) NR/AAA 81,169
620,000 New Mexico MFA SFMR Series B3, 5.80% due 9/1/2016 (Collateralized: FNMA/GNMA) NR/AAA 664,783
1,075,000 New Mexico MFA SFMR Series C2, 6.05% due 9/1/2021 (Collateralized: FNMA/GNMA) NR/AAA 1,128,761
1,470,000 New Mexico MFA SFMR Series D2, 5.875% due 9/1/2021 (Collateralized: FNMA/GNMA) NR/AAA 1,525,933
170,000 New Mexico MFA SFMR Series H, 5.45% due 1/1/2006 (Collateralized: FNMA/GNMA) NR/AAA 180,434
175,000 New Mexico MFA SFMR Series H, 5.45% due 7/1/2006 (Collateralized: FNMA/GNMA) NR/AAA 187,658
60,000 New Mexico MFA SFMR Series PG-B2, 5.80% due 7/1/2009 (Collateralized: FNMA/GNMA) NR/AAA 60,937
710,000 New Mexico MFA Single Family Series E2, 5.875% due 9/1/2020 NR/AAA 760,275
1,000,000 New Mexico Mortgage Finance Multi Family Refunding Series B, 5.00% due 7/1/2031 Aaa/NR 1,052,000
put 7/1/2011 (Sombra Del Oso Apartments Project; Collateralized: FNMA)
1,910,000 New Mexico Mortgage Finance Multi Family Refunding Series C, 5.00% due 7/1/2031 Aaa/NR 2,009,320
put 7/1/2011 (Riverwalk Apartments Project; Collateralized: FNMA)
2,785,000 New Mexico Mortgage Finance Multi Family Refunding Series D, 5.00% due 7/1/2031 Aaa/NR 2,929,820
put 7/1/2011 (Tierra Pointe I Apartments Project; Collateralized: FNMA)
1,000,000 New Mexico Mortgage Finance Multi Family Series A, 6.05% due 7/1/2028 (Sandpiper NR/AAA 1,050,700
Apartments Project; Insured: FHA)
1,350,000 New Mexico State, 4.00% due 3/1/2005 Aa1/AA+ 1,405,174
5,000,000 New Mexico State, 4.00% due 9/1/2005 Aa1/AA+ 5,268,350
1,000,000 New Mexico State Highway Commission Revenue Infrastructure Senior Subordinated Aa2/AA+ 1,113,850
Lien C, 5.00% due 6/15/2012
750,000 New Mexico State Highway Commission Tax Revenue Senior Subordinated Lien, 5.75% Aa2/AA+ 873,765
due 6/15/2009
500,000 New Mexico State Hospital Equipment Loan Council Hospital Revenue Series A, 4.80% A1/A+ 532,990
due 8/1/2010 (Presbyterian Healthcare Project)
1,000,000 New Mexico State Refunding Series B, 5.00% due 9/1/2005 Aa1/AA+ 1,072,590
650,000 New Mexico State Refunding Series B, 5.00% due 9/1/2006 Aa1/AA+ 715,130
2,650,000 New Mexico State Severance Tax, 5.00% due 7/1/2005 Aa2/AA 2,826,967
1,475,000 New Mexico State Severance Tax, 5.00% due 7/1/2007 Aa2/AA 1,643,224
1,645,000 New Mexico State Severance Tax Refunding Series A, 5.00% due 7/1/2007 Aa2/AA 1,831,987
550,000 New Mexico State Severance Tax Refunding Series A, 5.00% due 7/1/2008 Aa2/AA 604,747
1,000,000 New Mexico State Supplemental Severance Series A, 5.00% due 7/1/2011 Aa3/A+ 1,097,470
1,260,000 New Mexico State University Revenues Refunding & Improvement, 4.00% due 4/1/2006 Aaa/AAA 1,315,415
(Insured: FSA)
1,000,000 New Mexico State University Revenues Refunding & Improvement, 5.00% due 4/1/2013 Aaa/AAA 1,113,100
(Insured: FSA)
5,000,000 New Mexico Supplemental Severance Series A, 5.00% due 7/1/2008 Aa3/A+ 5,492,000
570,000 Otero County Refunding, 4.00% due 8/1/2005 (Insured: MBIA) Aaa/NR 598,603
550,000 Puerto Rico Public Buildings Authority Revenue Guaranteed Government Facilities Aaa/AAA 602,629
Series G, 5.00% due 7/1/2011 (Insured: XLCA)
1,000,000 Puerto Rico Public Buildings Authority Revenue Refunding Government Facilities Aaa/AAA 1,128,690
Series F, 5.25% due 7/1/2019 (Insured: XLCA)
1,000,000 Rio Rancho Water & Wastewater System, 6.50% due 5/15/2006 (Insured: FSA) Aaa/AAA 1,128,790
1,695,000 Rio Rancho Water & Wastewater System, 5.25% due 5/15/2007 (Insured: AMBAC) Aaa/AAA 1,896,824
250,000 Ruidoso Municipal School District 3, 6.35% due 8/1/2006 (Insured: FSA) Aaa/AAA 282,888
400,000 San Juan County Gasoline Tax/Motor Vehicle Revenue Refunding & Improvement, 5.25% A1/NR 438,380
due 5/15/2014
1,725,000 San Juan County Gasoline Tax/Motor Vehicle Revenue Refunding & Improvement, 5.25% A1/NR 1,797,674
due 5/15/2022
500,000 San Juan County Gross Receipts, 5.30% due 9/15/2009 A1/NR 557,110
1,000,000 San Juan County Gross Receipts Gas Tax Refunding Revenue Series B, 7.00% due A1/NR 1,066,510
9/15/2009 pre-refunded 9/15/2004 @ 101
1,180,000 San Juan County Gross Receipts Tax Revenue Senior Series B, 5.50% due 9/15/2016 Aaa/AAA 1,329,553
(Insured: AMBAC)
1,000,000 San Juan County Gross Receipts Tax Revenue Subordinated Series A, 5.75% due Aaa/AAA 1,125,080
9/15/2021 (Insured: AMBAC)
400,000 Sandoval County Landfill Revenue, 5.70% due 7/15/2013 NR/NR 407,208
1,420,000 Sandoval County Landfill Revenue Refunding & Improvement, 5.50% due 8/15/2015 Baa2/NR 1,459,703
1,335,000 Sandoval County Landfill Revenue Refunding & Improvement, 5.75% due 8/15/2018 Baa2/NR 1,372,954
840,000 Sandoval County Revenue Refunding Series B, 5.75% due 2/1/2010 (Intel Project) NR/NR 890,812
640,000 Santa Fe County, 5.00% due 7/1/2007 (Insured: MBIA) Aaa/NR 693,485
785,000 Santa Fe County, 5.00% due 7/1/2008 (Insured: MBIA) Aaa/NR 856,804
1,900,000 Santa Fe County, 7.25% due 7/1/2029 (Rancho Viejo Improvement District Project) NR/NR 1,998,420
515,000 Santa Fe County Correctional Systems Revenue, 5.20% due 2/1/2012 (Insured: FSA) Aaa/AAA 577,686
1,000,000 Santa Fe County Correctional Systems Revenue, 5.00% due 2/1/2018 (Insured: FSA) Aaa/AAA 1,093,360
443,000 Santa Fe County Revenue Series 1990, 9.00% due 7/1/2004 (Office & Training Aaa/NR 469,292
Facilities Project) (ETM)*
626,000 Santa Fe County Revenue Series 1990, 9.00% due 1/1/2008 (Office & Training Aaa/NR 801,699
Facilities Project) (ETM)*
1,250,000 Santa Fe County Revenue Series A, 5.50% due 5/15/2015 (El Castillo Retirement NR/NR 1,156,212
Project)
200,000 Santa Fe Educational Facilities Revenue, 5.00% due 3/1/2007 (St. John's College NR/BBB 210,706
Project)
210,000 Santa Fe Educational Facilities Revenue, 5.10% due 3/1/2008 (St. John's College NR/BBB 221,880
Project)
1,215,000 Santa Fe Educational Facilities Revenue, 5.40% due 3/1/2017 (St. John's College NR/BBB 1,207,382
Project)
1,000,000 Santa Fe Educational Facilities Revenue Improvement, 6.25% due 10/1/2026 (College NR/BBB- 1,017,850
of Santa Fe Project)
25,000 Santa Fe Housing Development Corp. Multi Family Revenue Refunding Series 1993-A, A2/NR 25,036
5.50% due 2/1/2004 (Villa Camino Consuelo Project)
370,000 Santa Fe Refuse Disposal Systems Improvement Net Revenue Series 1996-B, 5.50% due A3/NR 379,846
6/1/2004
600,000 Santa Fe Revenue Series A, 5.95% due 6/1/2009 pre-refunded 6/1/2004 @ 100 Aaa/AAA 619,812
(Insured: AMBAC)
255,000 Santa Fe SFMR, 5.25% due 11/1/2005 (Collateralized: FNMA/GNMA) Aaa/NR 270,892
150,000 Santa Fe SFMR, 6.00% due 11/1/2010 (Collateralized: FNMA/GNMA) Aaa/NR 157,455
215,000 Santa Fe SFMR, 6.10% due 11/1/2011 (Collateralized: FNMA/GNMA) Aaa/NR 224,150
255,000 Santa Fe SFMR, 6.20% due 11/1/2016 (Collateralized: FNMA/GNMA) Aaa/NR 260,368
875,000 Santa Fe Solid Waste Management Agency Facilities Revenue, 6.10% due 6/1/2007 NR/NR 975,957
745,000 Santa Fe Solid Waste Management Agency Facility Revenue, 5.75% due 6/1/2004 NR/NR 765,502
760,000 Santa Fe Solid Waste Management Agency Facility Revenue, 5.90% due 6/1/2005 NR/NR 808,405
775,000 Santa Fe Solid Waste Management Agency Facility Revenue, 6.00% due 6/1/2006 NR/NR 846,819
210,000 Santa Rosa Consolidated School District 8 Guadalupe & San Miguel Counties GO Baa3/NR 210,949
Series 1991, 7.00% due 8/1/2004
190,000 Socorro Health Facility Refunding Revenue, 6.00% due 5/1/2008 (Evangelical Aaa/AAA 199,150
Lutheran Good Samaritan Project; Insured: AMBAC)
1,000,000 Taos County Gross Receipts Tax Revenue Refunding & Improvement, 4.00% due Aaa/NR 1,072,220
10/1/2006 (County Education Project; Insured: MBIA)
450,000 Taos Municipal School District 1 Refunding, 5.00% due 9/1/2008 (Insured: FSA) Aaa/NR 506,425
1,730,000 University of New Mexico Revenue Refunding & Improvement Subordinated Lien Systems Aa3/AA 1,896,305
Series A, 5.25% due 6/1/2017
1,000,000 University of New Mexico Revenue Refunding & Improvement Subordinated Lien Systems Aa3/AA 1,063,620
Series A, 5.25% due 6/1/2021
645,000 University of New Mexico Revenue Refunding Subordinated Lien, 5.25% due 6/1/2016 Aa3/AA 710,990
1,825,000 University of New Mexico Revenue Refunding Subordinated Lien A, 5.25% due 6/1/2018 Aa3/AA 1,985,052
600,000 University of New Mexico Revenue Series A, 6.00% due 6/1/2021 Aa3/AA 721,404
1,195,000 University of New Mexico Revenues Refunding Subordinated Lien Systems Series A, Aa3/AA 1,338,161
5.25% due 6/1/2015
1,200,000 University of New Mexico Revenues Refunding Subordinated Lien Systems Series A, Aa3/AA 1,315,200
5.25% due 6/1/2018
665,000 University of New Mexico University Revenues Series A, 5.25% due 6/1/2013 Aa3/AA 744,587
335,000 University of New Mexico University Revenues Series A, 5.25% due 6/1/2014 Aa3/AA 372,145
1,105,000 Villa Hermosa Multi Family Housing Revenue, 5.85% due 11/20/2016 (Collateralized: NR/AAA 1,165,333
GNMA)
1,385,000 Western New Mexico University System Revenue Series 1995, 7.75% due 6/15/2019 Baa1/NR 1,450,663
pre-refunded 6/15/2004
TOTAL INVESTMENTS (Cost $219,918,561) $ 230,509,438
<FN>
+ Credit ratings are unaudited.
* Escrowed to maturity.
(a) When issued security.
See notes to financial statements.
</FN>
Report of Independent Auditors
Thornburg New Mexico Intermediate Municipal Fund
September 30, 2003
To the Trustees and Shareholders of
Thornburg New Mexico Intermediate Municipal Fund
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 New Mexico Intermediate
Municipal Fund series of Thornburg Investment Trust (the "Fund") at September
30, 2003, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America. 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 audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, 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
audits, which included confirmation of securities at September 30, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
Index Comparisons
Thornburg New Mexico Intermediate Municipal Fund
September 30, 2003
Index Comparison
Compares performance of the Thornburg New Mexico Intermediate Municipal Fund,
the Merrill Lynch Municipal Bond (7-12 year) Index and the Consumer Price Index,
June 30, 1991 to September 30, 2003. On September 30, 2003, the weighted average
securities ratings of the Index and the Fund were AA and AA, respectively, and
the weighted average portfolio maturities of the Index and the Fund were 9.5
years and 7.9 years, respectively. Past performance of the Index and the Fund
may not be indicative of future performance. The performance data and graph do
not reflect the deduction of taxes that a shareholder would pay on distributions
or the redemption of fund shares.
Thornburg New Mexico Intermediate Municipal Fund Class A Total Returns, Since
June 30, 1991, versus Merrill Lynch 7-12 Year Municipal Index and Consumer Price
Index (C.P.I.)
ML Muni 7-12 yrs
Fund A Shares
CPI
Class A Shares
Average Annual Total Returns
(periods ending 9/30/03)(at max. offering price)
One year: 1.88%
Three years: 5.02%
Five years: 3.98%
Ten years: 4.48%
Since inception (6/18/91): 5.59%
Thornburg New Mexico Intermediate Municipal Fund Class D Total Returns, Since
Inception, versus Merrill Lynch 7-12 Year Municipal Index and Consumer Price
Index (C.P.I.)
ML Muni 7-12 yrs
Fund D Shares
CPI
Class D Shares
Average Annual Total Returns
(periods ending 9/30/03)
One year: 3.63%
Three years: 5.46%
Since inception (6/1/99): 4.55%
The Merrill Lynch 7-12 Year Municipal Bond Index representing a broad measure of
market performance. It is a model portfolio of municipal obligations throughout
the U.S., with an average maturity which ranges from seven to twelve years.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
TRUSTEES and Officers
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
Thornburg New Mexico INTERMEDIATE municipal fund
a shares
Outperformed Tax-Free Money Market Funds
(Unaudited)
Investors sometimes ask us to compare Thornburg New Mexico Intermediate
Municipal Fund to money market fund returns. These investments have certain
differences, and investors in Thornburg New Mexico Intermediate Municipal Fund
took more risk than money market fund investors to earn their higher returns.
Return from a hypothetical $10,000 investment 9/30/93 through 9/30/03 (after
sales charge and fund expenses)
Lipper Tax-free Money
Market Fund Average $2,933
Thornburg New Mexico
Intermediate Municipal Fund $5,466
The chart above is for the Fund's Class A Shares only. See the inside front
cover page for the 30-day SEC yield and the total returns at the maximum
offering prices for one year, three years, five years and since inception for
each class of shares of the Fund.
Note 1: Future increases, if any, of any of these investments may bear no
relationship to prior increases. Quotations for the money fund averages are
based upon 30-day yield quotations for tax-exempt money funds as sourced from
the "Lipper Tax-free Money Market Average" for the months covered by this
analysis. The increase for the Class A Shares of New Mexico Intermediate
Municipal Fund is based upon the dividends paid for the months covered by this
analysis, the beginning offering price at $13.63 per share and the ending NAV at
$13.46 per share. These investments returned the $10,000 initial investment in
addition to the amounts shown above.
Note 2: This analysis does not take into
account the effect, if any, caused by state and local income taxes. The portion
of the increase, if any, of Thornburg New Mexico Intermediate Municipal Fund
representing appreciation of the share price is assumed to be taxed at a 15%
federal tax rate. The average money market fund increases shown above may differ
from the return of a particular money market fund. It is not possible to invest
in this money fund average.
Note 3: Generally, money market funds seek to maintain an investment portfolio
with an average maturity of 90 days or less. Thornburg New Mexico Intermediate
Municipal Fund invests in short-to-intermediate maturity municipal obligations.
The net asset value of the money funds did not fluctuate. The net asset value of
the Class A Shares of THNMX did vary from time to time, and will continue to
vary in the future due to the effect of changes in interest rates on the value
of the investments the Fund holds. The analysis assumes that the investor
received the net asset value of the shares owned, plus accrued income, at time
of sale. Redemptions are made at the then current net asset value, which may
give you a gain or loss when you sell your shares.
Note 4: This analysis assumes
that the dividends from each of these investment vehicles were reinvested and
compounded monthly. Most money funds declare dividends daily and pay them
monthly. Thornburg New Mexico Intermediate Municipal Fund also declares
dividends daily and pays them monthly.
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
www.thornburg.com
This report is submitted for the general information of 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.
Thornburg Intermediate Municipal Fund
Annual Report
September 30, 2003
Thornburg Intermediate Municipal Fund
ALL DATA AS OF 9/30/03
FUND FACTS: Thornburg Intermediate Municipal Fund
A Shares C Shares
Annualized Distribution Rate (at NAV) 3.89% 3.65%
SEC Yield 2.70% 2.50%
NAV $13.56 $13.58
Maximum Offering Price $13.84 $13.58
TOTAL RETURNS: Annual Average - (After Subtracting Maximum Sales Charge)
One Year 1.04% 2.12%
Three Years 5.74% 6.07%
Five Years 3.84% 3.86%
Ten Years 4.73% N/A
Since Inception 5.94% 4.95%
Inception Date 7/22/1991 9/1/1994
The investment return and principal value of an investment in the Fund will
fluctuate so that, when redeemed, an investor's shares may be worth more or less
than their original cost.
Maximum sales charge of the Fund's Class A Shares is 2.00%.
The data quoted represent past performance and may not be construed as a
guarantee of future results.
The SEC Yield is computed in accordance with SEC standards measuring the net
investment income per share over a specified 30-day period expressed as a
percentage of the maximum offering price of the Fund's shares at the end of the
period.
The distribution rate is calculated by taking the sum of the month's total
distribution factors and dividing this sum by a 30-day period and annualizing to
360-day year. The value is then divided by the ending NAV to arrive at the
annualized distribution yield. The yield is calculated on a periodic basis and
is subject to change depending on the Fund's NAV and current distributions.
Letter to shareholders
Thornburg Intermediate Municipal Fund
October 20, 2003
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg Intermediate
Municipal Fund. The net asset value of the A shares decreased by 11 cents to
$13.56 during the year ending September 30, 2003. If you were with us for the
entire period, you received dividends of 52.2 cents per share. If you reinvested
dividends, you received 53.1 cents per share. Investors who owned C shares
received dividends of 47.4 and 48.1 cents per share, respectively.
Interest rates on intermediate-term municipal bonds have risen somewhat over the
last year. For example, the interest rate on a ten-year AAA-rated municipal bond
rose from 3.40% on September 30, 2002 to 3.67% on September 30, 2003. Since
rising interest rates cause bond prices to fall, a ten-year bond that was worth
100% of par value on September 30, 2002 would be worth 97.95% of par on
September 30, 2003 (a 2.05% loss).
The price of your Fund has depreciated 0.80% over the one-year period ending
September 30, 2003. This is consistent with our goal of having lower price
volatility than comparable maturity bonds such as the one mentioned above.
Meanwhile your Fund has paid a steady monthly dividend, while short-term
interest rates have plummeted. Investors in money market funds and short-term
CDs, susceptible to reinvestment risk, are still feeling the pinch of reduced
income flow. To see how your Fund has performed relative to the money market
fund averages, turn to the back of this report.
Your Thornburg Intermediate Municipal Fund is a laddered portfolio of over 330
municipal obligations from 43 states. Today, your fund's weighted average
maturity is 8.5 years. We always keep it below 10 years. We ladder the maturity
dates of the bonds in your portfolio so that some of the bonds are scheduled to
mature during each of the coming years.
Laddering intermediate bonds accomplishes two goals. First, the staggered bond
maturities contained in a ladder defuse interest-rate risk and dampen the fund's
price volatility. Second, laddering gives the fund a steady cash flow stream
from maturing bonds to reinvest toward the top of the ladder where yields are
typically higher. The laddering strategy is what truly differentiates this fund
from most bond mutual funds. It will be particularly useful if interest rates
rise, because it will allow the fund to gradually increase the yield of the
portfolio without having to sell bonds prior to maturity at reduced prices. The
chart below describes the percentages of your fund's bond portfolio maturing in
each of the coming years.
% of portfolio Cumulative %
maturing within maturing by end of
2 years = 11% year 2 = 11%
2 to 4 years = 10% year 4 = 21%
4 to 6 years = 8% year 6 = 29%
6 to 8 years = 13% year 8 = 42%
8 to 10 years = 15% year 10 = 57%
10 to 12 years = 16% year 12 = 73%
12 to 14 years = 13% year 14 = 86%
14 to 16 years = 5% year 16 = 91%
16 to 18 years = 7% year 18 = 98%
18 to 20 years = 1% year 20 = 99%
Percentages can and do vary. Data as of 9/30/03
We are gradually seeing more and more reasons to feel optimistic about the U.S.
economic recovery. Many economists expect GDP growth of 5-6% for the current
quarter, but question its sustainability. The current strength seems to be
largely driven by tax cuts, federal government spending, and continued cash
flows from the home refinancing boom. If we are to enter the next phase of
recovery, corporate capital spending and hiring must pick up. Meanwhile, despite
higher prices for items such as housing, insurance and health care, there is
virtually no evidence of widespread inflation. In fact, official measurements of
inflation, such as the Core Consumer Price Index, have continued to decline. So
we don't see any reason for Federal Reserve policy to change for the foreseeable
future.
We do, however, continue to believe that phase two of the recovery will
eventually materialize. It will probably happen in conjunction with a weakened
dollar and a heavier calendar of Treasury bond offerings. These factors would
likely cause interest rates to rise on short-term and long-term bonds. We have
kept your Fund's duration shorter than normal to prepare for such an
environment. Doing so has detracted somewhat from price appreciation as interest
rates fell, but should allow the fund to better take advantage of higher
interest rates if and when they arrive.
Most of the states are currently dealing with very sluggish revenue growth
following a terrible 2002, when revenues dropped over 10%. The Nelson A.
Rockefeller Institute of Government recently reported that State tax revenue
grew by 3.1% in the second quarter of 2003. Virtually all of the growth came
from enacted tax increases. Without the tax hikes, revenue would have only risen
0.4%. Yet, despite this difficult environment, Moody's Investment Services
announced that the number of upgrades exceeded the number of downgrades in the
second quarter of 2003. I believe that this is because many of the smaller
issuers that we tend to favor are faring better than the large state issuers. We
expect this trend to continue for the time being. Your Fund continues to
maintain high credit quality, with 88% of the portfolio rated A or above by one
of the major rating agencies, and 53% rated AAA.
Over the years, our practice of laddering a diversified portfolio of short and
intermediate maturity municipal bonds has allowed your fund to perform
consistently well in varying interest rate environments. Thank you for investing
in Thornburg Intermediate Municipal Fund.
Sincerely,
George Strickland
Portfolio Manager
Statement of assets and liabilities
Thornburg Intermediate Municipal Fund
September 30, 2003
ASSETS
Investments at value (cost $435,056,913) .........................$ 463,680,684
Cash ............................................................. 144,074
Receivable for investments sold .................................. 578,299
Receivable for fund shares sold .................................. 910,151
Interest receivable .............................................. 6,299,941
Prepaid expenses and other assets ................................ 30,399
Total Assets ................................... 471,643,548
LIABILITIES
Payable for fund shares redeemed ................................. 489,409
Accounts payable and accrued expenses ............................ 247,042
Payable to investment advisor (Note 3) ........................... 221,160
Dividends payable ................................................ 567,001
Total Liabilities .............................. 1,524,612
NET ASSETS .......................................................$ 470,118,936
NET ASSETS CONSIST OF:
Net unrealized appreciation (depreciation) on investments .$ 28,623,771
Accumulated net realized gain (loss) ...................... (11,971,771)
Net capital paid in on shares of beneficial interest ...... 453,466,936
$ 470,118,936
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($390,079,589 applicable to 28,758,558 shares of beneficial
interest outstanding - Note 4) ..........................$ 13.56
Maximum sales charge, 2.00% of offering price .................... 0.28
Maximum Offering Price Per Share .................................$ 13.84
Class C Shares:
Net asset value and offering price per share *
($60,706,654 applicable to 4,470,083 shares of beneficial
interest outstanding - Note 4) ..........................$ 13.58
Class I Shares:
Net asset value, offering and redemption price per share
($19,332,693 applicable to 1,427,432 shares of beneficial
interest outstanding - Note 4) ..........................$ 13.54
* 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
Thornburg Intermediate Municipal Fund
Year Ended September 30, 2003
INVESTMENT INCOME:
Interest income (net of premium amortized of $1,992,676) ....... $ 22,893,132
EXPENSES:
Investment advisory fees (Note 3) .............................. 2,355,854
Administration fees (Note 3) ...................................
Class A Shares 500,423
Class C Shares ........................................ 66,042
Class I Shares 9,000
Distribution and service fees (Note 3)
Class A Shares ........................................ 960,651
Class C Shares ........................................ 528,337
Transfer agent fees
Class A Shares ........................................ 183,558
Class C Shares ........................................ 37,014
Class I Shares ........................................ 18,620
Registration and filing fees
Class A Shares ........................................ 13,629
Class C Shares ........................................ 9,527
Class I Shares ........................................ 10,778
Custodian fees (Note 3) ........................................ 228,400
Professional fees .............................................. 52,301
Accounting fees ................................................ 33,110
Trustee fees ................................................... 11,367
Other expenses ................................................. 88,469
Total Expenses ............................... 5,107,080
Less:
Expenses reimbursed by investment advisor (Note 3) .... (89,672)
Distribution and service fees waived (Note 3) ......... (211,335)
Fees paid indirectly (Note 3) ......................... (3,630)
Net Expenses ................................. 4,802,443
Net Investment Income ........................ 18,090,689
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments ........................ (4,597,883)
Increase (Decrease) in unrealized appreciation of investments .. 581,701
Net Realized and Unrealized
Gain (Loss) on Investments ................ (4,016,182)
Net Increase (Decrease) in Net Assets Resulting
from Operations ........................... $ 14,074,507
See notes to financial statements ..............................
Statements of changes in net assets
Thornburg Intermediate Municipal Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ....................................... $ 18,090,689 $ 17,948,811
Net realized gain (loss) on investments sold ................ (4,597,883)
404,094
Increase (Decrease) in unrealized appreciation of investments 581,701
13,589,207
Net Increase (Decrease) in Net Assets
Resulting from Operations .............. 14,074,507 31,942,112
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares ..................................... (15,480,099) (15,604,559)
Class C Shares ..................................... (1,849,255) (1,580,424)
Class I Shares ..................................... (761,335) (763,828)
FUND SHARE TRANSACTIONS (Note 4):
Class A Shares ..................................... (20,552,567) 63,181,761
Class C Shares ..................................... 13,877,646 5,751,936
Class I Shares ..................................... 1,174,895 517,290
Net Increase (Decrease) in Net Assets ..... (9,516,208) 83,444,288
NET ASSETS:
Beginning year ..................................... 479,635,144 396,190,856
End of year ........................................ $ 470,118,936 $ 479,635,144
<FN>
See notes to financial statements ...........................
</FN>
Notes to financial statements
Thornburg Intermediate Municipal Fund
September 30, 2003
NOTE 1 - ORGANIZATION
Thornburg Intermediate Municipal Fund (the "Fund") is a diversified series of
Thornburg Investment Trust (the "Trust"). The Trust is 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 nine
series of shares of beneficial interest in addition to those of the Fund:
Thornburg Florida Intermediate Municipal Fund, Thornburg New York Intermediate
Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg Limited Term
U.S. Government Fund, Thornburg Limited Term Income Fund, Thornburg Value Fund,
Thornburg International Value Fund, Thornburg Core Growth Fund, and Thornburg
Investment Income Builder Fund. Each series is considered to be a separate
entity for financial reporting and tax purposes and bears expenses directly
attributable to it. The Fund's investment objective is to obtain as high a level
of current income exempt from Federal income taxes as is consistent with the
preservation of capital.
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 the
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 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 service and distribution fees, administration fees, and
certain registration and transfer agent expenses.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the
Fund are as follows:
Valuation of Investments: In determining net asset value, the Fund utilizes an
independent pricing service approved by the Trustees. Debt investment securities
have a primary market over the counter and are valued on the basis of valuations
furnished by the pricing service. The pricing service values portfolio
securities at quoted bid prices, normally at 4:00 pm EST or the yield
equivalents when quotations are not readily available. Securities for which
quotations are not readily available are valued at fair value as determined by
the pricing service using methods which include consideration of yields or
prices of municipal obligations of comparable quality, type of issue, coupon,
maturity, and rating; indications as to value from dealers and general market
conditions. The valuation procedures used by the pricing service and the
portfolio valuations received by the Fund are reviewed by the officers of the
Trust under the general supervision of the 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 (if any) and tax exempt 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 interest rate 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 at the trade date. Securities purchased on a when-issued or
delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on
shares for which the Fund has received payment. Dividends are paid monthly 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 capital gains, to the extent available, will be
distributed at least annually.
General: Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Premiums and discounts on securities
purchased are amortized to call dates or maturity dates of the respective
securities. Realized gains and losses from the sale of securities are recorded
on an identified cost basis. Net investment income, other than class specific
expenses, and realized and unrealized gains and losses, are allocated daily to
each class of shares based upon the relative net asset value of outstanding
shares (or the value of the dividend-eligible shares, as appropriate) of each
class of shares at the beginning of the day (after adjusting for the current
share activity of the respective class). Expenses common to all funds are
allocated among the funds comprising the Trust based upon their relative net
asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Fund. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services for
which the fees are payable at the end of each month. For the year ended
September 30, 2003, these fees were payable at annual rates ranging from .50 of
1% to .275 of 1% of the average daily net assets of the Fund. The Fund also has
an administrative services agreement with the Advisor, whereby the Advisor 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
..125 of 1% of the average daily net assets attributable to each class of shares.
For the year ended September 30, 2003, the Advisor voluntarily reimbursed
certain class specific expenses and administrative fees of $30,296 for Class A
shares, $26,697 for Class C shares, and $32,679 for Class I shares.
The Fund has an underwriting agreement with Thornburg Securities Corporation
(the "Distributor"), which acts as the Distributor of the Fund shares. For the
year ended September 30, 2003, the Distributor has advised the Fund that it
earned net commissions aggregating $2,928 from the sale of Class A shares and
collected contingent deferred sales charges aggregating $5,723 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 Advisor an amount not to exceed .25 of 1%
per annum of the average daily net assets attributable to each class of shares
of the Fund for payments made by the Advisor to securities dealers and other
financial institutions to obtain various shareholder related services. The
Advisor may pay out of its own resources additional expenses for distribution of
the Fund'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 compensates the
Distributor for services in promoting the sale of Class C shares of the Fund at
an annual rate of up to .75% 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,
2003, are set forth in the statement of operations. Distribution fees in the
amount of $211,335 were waived for Class C shares.
The Fund has an agreement with the custodian bank to indirectly pay a portion of
the custodian's fees through credits earned by the Fund's cash on deposit with
the bank. This deposit agreement is an alternative to overnight investments.
Custodial fees have been adjusted to reflect amounts that would have been paid
without this agreement, with a corresponding adjustment reflected as fees paid
indirectly in the statement of operations. For the year ended September 30, 2003
fees paid indirectly were $3,630.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4 - SHARES OF BENEFICIAL INTEREST
At September 30, 2003, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold .................... 6,705,141 $ 90,330,472 9,552,738 $ 126,489,062
Shares issued to shareholders in
reinvestment of dividends ... 649,800 8,760,445 685,346 9,083,944
Shares repurchased ............. (8,890,248) (119,643,484) (5,466,398) (72,391,245)
Net Increase (Decrease) ........ (1,535,307) $ (20,552,567) 4,771,686 $ 63,181,761
Class C Shares
Shares sold .................... 1,632,604 $ 22,060,706 1,233,340 $ 16,354,222
Shares issued to shareholders in
reinvestment of dividends ... 102,429 1,382,647 95,055 1,261,742
Shares repurchased ............. (709,799) (9,565,707) (891,701) (11,864,028)
Net Increase (Decrease) ........ 1,025,234 $ 13,877,646 436,694 $ 5,751,936
Class I Shares
Shares sold .................... 807,931 $ 10,899,236 597,867 $ 7,883,195
Shares issued to shareholders in
reinvestment of dividends ... 39,457 531,139 38,405 508,597
Shares repurchased ............. (762,688) (10,255,480) (594,962) (7,874,502)
Net Increase (Decrease) ........ 84,700 $ 1,174,895 41,310 $ 517,290
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003, the Fund had purchase and sale
transactions (excluding short-term securities) of $68,493,852 and $74,637,014,
respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components of capital is as
follows:
Cost of investments for tax purpose $ 435,056,913
Gross tax unrealized appreciation $ 30,440,766
Gross tax unrealized depreciation (1,816,995)
Net tax unrealized appreciation
(depreciation) on investments $ 28,623,771
At September 30, 2003, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2004 $ 2,201,912
2005 200,249
2006 27,737
2007 6,140
2008 2,563,342
2009 2,374,508
2011 11,597
$ 7,385,485
Unutilized tax basis capital losses may be carried forward to offset realized
gains in future years. To the extent such carry forwards are used, capital gain
distributions may be reduced to the extent provided by regulations.
During the year ended September 30, 2003, $832,412 of capital loss carry
forwards from prior years expired. This amount was reclassed to paid in capital.
At September 30, 2003, the Fund had deferred capital losses occurring subsequent
to October 31, 2002 of $4,586,286. For tax purposes, such losses will be
reflected in the year ending September 30, 2004.
Dividends paid by the Fund for the years ended September 30, 2003 and September
30, 2002 represent exempt interest dividends, which are excludable by
shareholders from gross income for Federal income tax purposes.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of losses realized subsequent to October
31 on the sale of securities.
Financial highlights
Thornburg Intermediate Municipal Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class A Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ......................... $ 13.67 $ 13.28 $ 12.78 $ 13.00 $ 13.76
Income from investment operations:
Net investment income ............................. 0.52 0.56 0.62 0.63 0.62
Net realized and unrealized
gain (loss) on investments ............... (0.11) 0.39 0.50 (0.22) (0.76)
Total from investment operations ........................... 0.41 0.95 1.12 0.41 (0.14)
Less dividends from:
Net investment income .................................. (0.52) (0.56) (0.62) (0.63) (0.62)
Change in net asset value .................................. (0.11) 0.39 0.50 (0.22) (0.76)
Net asset value, end of year ............................... $ 13.56 $ 13.67 $ 13.28 $ 12.78 $ 13.00
Total return (a) ........................................... 3.11% 7.39% 8.94% 3.23% (1.09)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ............................. 3.87% 4.23% 4.73% 4.89% 4.59%
Expenses, after expense reductions ................ 0.99% 0.92% 0.82% 0.89% 0.99%
Expenses, after expense reductions
and net of custody credits ............... 0.99% 0.92% -- -- --
Expenses, before expense reductions 1.00% 1.00% 1.02% 1.02% 1.02%
Portfolio turnover rate .................................... 15.13% 16.36% 18.24% 21.97% 23.17%
Net assets at end of year (000) ........................... $ 390,080 $ 414,150 $ 338,931 $ 322,942 $ 363,908
<FN>
(a) Sales loads are not reflected in computing total return
</FN>
Thornburg Intermediate Municipal Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class C Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ......................... $ 13.69 $ 13.30 $ 12.79 $ 13.02 $ 13.77
Income from investment operations:
Net investment income ............................. 0.47 0.51 0.57 0.57 0.56
Net realized and unrealized
gain (loss) on investments ............... (0.11) 0.39 0.51 (0.23) (0.75)
Total from investment operations ........................... 0.36 0.90 1.08 0.34 (0.19)
Less dividends from:
Net investment income .................................. (0.47) (0.51) (0.57) (0.57) (0.56)
Change in net asset value .................................. (0.11) 0.39 0.51 (0.23) (0.75)
Net asset value, end of year ............................... $ 13.58 $ 13.69 $ 13.30 $ 12.79 $ 13.02
Total return ............................................... 2.73% 6.97% 8.59% 2.70% (1.48)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ............................. 3.50% 3.84% 4.33% 4.44% 4.19%
Expenses, after expense reductions ................ 1.35% 1.30% 1.21% 1.34% 1.40%
Expenses, after expense reductions
and net of custody credits ............... 1.35% 1.30% -- -- --
Expenses, before expense reductions ............... 1.80% 1.80% 1.83% 1.83% 1.85%
Portfolio turnover rate .................................... 15.13% 16.36% 18.24% 21.97% 23.17%
Net assets at end of year (000) ............................ $ 60,707 $ 47,155 $ 40,002 $ 33,353 $ 32,477
Thornburg Intermediate Municipal Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class I Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ......................... $ 13.65 $ 13.26 $ 12.76 $ 12.98 $ 13.74
Income from investment operations:
Net investment income ............................. 0.57 0.61 0.65 0.65 0.66
Net realized and unrealized
gain (loss) on investments ............... (0.11) 0.39 0.50 (0.22) (0.76)
Total from investment operations ........................... 0.46 1.00 1.15 0.43 (0.10)
Less dividends from:
Net investment income .................................. (0.57) (0.61) (0.65) (0.65) (0.66)
Change in net asset value .................................. (0.11) 0.39 0.50 (0.22) (0.76)
Net asset value, end of year ............................... $ 13.54 $ 13.65 $ 13.26 $ 12.76 $ 12.98
Total return (a) ........................................... 3.49% 7.75% 9.23% 3.45% (0.79)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ............................. 4.23% 4.57% 4.99% 5.10% 4.89%
Expenses, after expense reductions ................ 0.62% 0.58% 0.55% 0.68% 0.69%
Expenses, after expense reductions
and net of custody credits ............... 0.62% 0.58% -- -- --
Expenses, before expense reductions ............... 0.80% 0.79% 0.79% 0.80% 0.79%
Portfolio turnover rate .................................... 15.13% 16.36% 18.24% 21.97% 23.17%
Net assets at end of year (000) ............................ $ 19,333 $ 18,330 $ 17,258 $ 17,563 $ 18,772
<FN>
(a) Sales loads are not reflected in computing total return.
</FN>
Schedule of Investments
Thornburg Intermediate Municipal Fund
CUSIPS: CLASS A - 885-215-202, CLASS C - 885-215-780, CLASS I - 885-215-673
NASDAQ SYMBOLS: CLASS A - THIMX, CLASS C - THMCX, CLASS I - THMIX
Alabama (1.30%)
800,000 Alabama Docks Revenue, 6.00% due 10/1/2008 (Insured: MBIA) Aaa/AAA $937,472
55,000 Birmingham South Medical Clinic, 6.30% due 11/1/2003 (ETM)* NR/AAA 55,251
2,525,000 Huntsville Health Care Series A, 4.65% due 6/1/2024 put 6/1/2005 (Insured: MBIA) Aaa/AAA 2,645,039
505,000 Huntsville Series A, 6.25% due 2/1/2006 Aa2/AA 543,400
1,600,000 Lauderdale County & Florence Health Group Series A, 5.75% due 7/1/2013 (Insured: Aaa/AAA 1,803,504
MBIA)
Alaska (0.40%)
515,000 Anchorage Alaska Prerefunded, 5.25% due 10/1/2008 (Insured: FGIC) Aaa/AAA 556,900
485,000 Anchorage Alaska Unrefunded, 5.25% due 10/1/2008 (Insured: FGIC) Aaa/AAA 522,452
500,000 Anchorage School Refunding, 6.00% due 10/1/2012 (Insured: FGIC) Aaa/AAA 597,095
Arizona (1.90%)
4,580,000 Maricopa County Industrial Development Capital Appreciation Series B, 4.80% due NR/BBB 4,683,416
12/1/2031 put 12/1/2004 (Waste Management Inc. Project)
2,715,000 Pima County Industrial Development Authority Series C, 6.70% due 7/1/2021 Baa3/NR 2,735,797
(Arizona Charter Schools Project)
400,000 Tucson General Obligation Series D, 9.75% due 7/1/2012 (ETM)* Aa2/AA 588,260
500,000 Tucson General Obligation Series D, 9.75% due 7/1/2013 (ETM)* Aa2/AA 751,605
Arkansas (0.70%)
500,000 Conway Electric Revenue Refunding, 2.00% due 8/1/2004 A2/NR 502,825
1,135,000 Jefferson County Hospital Revenue Refunding & Improvement, 5.75% due 6/1/2012 NR/A 1,254,118
(Regional Medical Center Project)
1,200,000 Jefferson County Hospital Revenue Refunding & Improvement, 5.75% due 6/1/2013 NR/A 1,318,332
(Regional Medical Center Project)
California (5.10%)
3,000,000 California Department of Water Resources Power Series A, 5.75% due 5/1/2017 A3/BBB+ 3,325,680
675,000 California HFA Revenue Series 1985-B, 9.875% due 2/1/2017 Aa2/AA- 726,131
4,500,000 California Statewide Community Development Authority Certificate of Aaa/AAA 5,149,620
Participation, 5.50% due 10/1/2007 (Unihealth America Project; Insured: AMBAC)
(ETM)*
1,000,000 Camino Hospital District Revenue Series A, 6.25% due 8/15/2017 (ETM)* Aaa/AAA 1,178,830
1,740,000 Escondido Joint Powers Financing Authority Lease Revenue, 0% due 9/1/2007 (Center Aaa/AAA 1,520,673
for the Arts Project; Insured: AMBAC)
2,140,000 Golden West Schools Financing Authority Capital Appreciation, 0% due 8/1/2018 Aaa/AAA 972,523
(Insured: MBIA)
500,000 Irvine Improvement Bond Act 1915, 1.20% due 9/2/2023 put 10/1/2003 (daily demand VMIG1/NR 500,000
notes)
200,000 Irvine Improvement Bond Act 1915 Limited Obligation Assessment District, 1.15% VMIG1/A1+ 200,000
due 9/2/2025 put 10/1/2003 (daily demand notes)
500,000 Irwindale Community Redevelopment Agency, 6.60% due 8/1/2018 pre-refunded Baa3/NR 557,735
8/1/2005
1,590,000 Los Angeles Regional Airport Lease Refunding, 5.25% due 1/1/2009 (Facilities Aaa/AAA 1,747,983
Laxfuel Corp. La International Project)
2,280,000 Orange County Refunding Recovery, 6.50% due 6/1/2005 (Insured: MBIA) Aaa/AAA 2,481,073
1,500,000 Sacramento Municipal Utility District Electric Revenue, 9.43% due 11/15/2006 Aaa/AAA 1,576,650
(Insured: FSA)
500,000 San Diego County Water Authority Revenue & Refunding Series 1993-A, 10.174% due Aaa/AAA 630,740
4/25/2007 (Insured: FGIC)
145,000 San Marcos Certificate of Participation Series C, 0% due 8/15/2005 (ETM)* NR/AAA 141,295
740,000 San Marcos Certificate of Participation Series D, 0% due 9/2/2005 (ETM)* NR/AAA 720,597
700,000 Sulphur Springs School District General Obligation Series B, 5.60% due 3/1/2004 NR/A 713,020
800,000 Sulphur Springs School District General Obligation Series B, 5.70% due 3/1/2005 NR/A 850,472
450,000 Sunline Transit Agency Certificate of Participation Series A, 5.625% due 7/1/2004 A2/NR 464,306
215,000 Sunline Transit Agency Certificate of Participation Series A, 5.75% due 7/1/2005 A2/NR 221,742
Colorado (4.90%)
1,265,000 Adams County Communication Center Series A, 5.75% due 12/1/2016 Baa1/NR 1,339,724
100,000 Arvada Industrial Development Revenue, 5.25% due 12/1/2007 (Wanco Inc. Project; NR/NR 105,419
LOC: U.S. Bank, N.A.)
450,000 Arvada Industrial Development Revenue, 5.60% due 12/1/2012 (Wanco Inc. Project; NR/NR 455,224
LOC: U.S. Bank, N.A.)
1,000,000 Central Platte Valley Metropolitan District, 5.15% due 12/1/2013 pre-refunded NR/AAA 1,157,560
12/1/2009
2,000,000 Central Platte Valley Metropolitan District Refunding Series A, 5.00% due NR/A1+ 2,190,640
12/1/2031 put 12/1/2009 (LOC: US Bank)
500,000 Colorado Educational & Cultural Facilities Refunding, 6.00% due 4/1/2021 (Charter Baa2/NR 507,225
School Cherry Creek Project)
100,000 Colorado Housing Finance Authority Single Family Program Subordinated Series C, A1/A+ 101,726
5.75% due 10/1/2007
1,545,000 Colorado Student Obligation Bond Student Loan Senior Subordinated Series B, 6.20% A2/NR 1,640,156
due 12/1/2008
2,070,000 Denver City & County Certificates of Participation Series B, 5.00% due 12/1/2009 Aa2/AA 2,307,677
2,465,000 Denver City & County Certificates of Participation Series B, 5.00% due 12/1/2011 Aa2/AA 2,697,573
500,000 El Paso County School District 11, 7.10% due 12/1/2013 Aa3/AA- 647,495
2,395,000 Interstate South Metropolitan District Refunding, 6.00% due 12/1/2020 (LOC: BNP NR/AA- 2,472,790
Paribas)
2,830,000 Larimer County General Obligation, 8.45% due 12/15/2005 (Poudre School District Aa3/NR 3,267,433
Project)
1,005,000 Northwest Parkway Public Highway Authority Capital Appreciation Senior Aaa/AAA 758,021
Convertible C, 0% due 6/15/2014 (Insured: FSA)
2,500,000 Plaza Metropolitan District 1 Colorado Revenue Public Improvement Fee/Tax NR/NR 2,518,725
Increment, 7.70% due 12/1/2017
350,000 Superior Metropolitan District 1 Water Refunding & Improvement Series B, 5.45% NR/A 364,560
due 12/1/2020 put 12/1/2004 @ 100 (LOC: Allied Irish)
75,000 Thornton County Single Family Mortgage Revenue Series 1992-A, 8.05% due 8/1/2009 A3/NR 75,733
Delaware (0.30%)
1,500,000 Delaware State Health Facilities Authority Revenue Series A, 5.25% due 5/1/2016 NR/AA 1,602,465
(Nanticoke Memorial Hospital Project; Insured: Radian)
District of (1.10%)
Columbia
600,000 District of Columbia Hospital Revenue, 5.375% due 8/15/2015 (ETM)* Aaa/AAA 679,176
3,000,000 District of Columbia Refunding Series B, 6.00% due 6/1/2015 (Insured: MBIA) Aaa/AAA 3,585,930
250,000 District of Columbia Revenue, 0% due 2/15/2004 (Assoc. of American Medical NR/AA- 248,490
Colleges Project)
1,500,000 District of Columbia Tax Increment Capital Appreciation, 0% due 7/1/2019 Aaa/AAA 666,120
(Mandarin Oriental Project; Insured: FSA)
Florida (3.80%)
1,000,000 Broward County Resource Recovery Revenue, 5.00% due 12/1/2007 A3/AA- 1,100,450
60,000 Duval County HFA Single Family Housing Revenue Series 94, 6.10% due 4/1/2006 Aaa/NR 63,055
(Collateralized: GNMA)
60,000 Duval County HFA Single Family Housing Revenue Series 94, 6.10% due 10/1/2006 Aaa/NR 63,021
(Collateralized: GNMA)
1,700,000 Duval County Multi Family Housing Revenue Refunding, 5.90% due 9/1/2016 (St. NR/A+ 1,770,431
Augustine Apartments Project)
1,675,000 Enterprise Community Development District Assessment Bonds, 6.00% due 5/1/2010 Aaa/AAA 1,739,236
(Insured: MBIA)
3,000,000 Escambia County Health Facility Revenue, 5.95% due 7/1/2020 (Florida Health Care Aaa/NR 3,225,060
Facility Loan Project; Insured: AMBAC)
155,000 Florida Board of Education Capital Outlay, 9.125% due 6/1/2014 (ETM)* Aaa/AAA 216,747
905,000 Florida Board of Education Capital Outlay, 9.125% due 6/1/2014 Aa2/AA+ 1,270,186
1,460,000 Florida Board of Education Capital Outlay Refunding Public Education Series D, Aa2/AA+ 1,669,583
5.75% due 6/1/2018
700,000 Florida State Department of Corrections, 6.25% due 3/1/2015 (Okeechobee Aaa/AAA 760,116
Correctional Project)
500,000 Orlando & Orange County Expressway Revenue, 8.25% due 7/1/2014 (Insured: FGIC) Aaa/AAA 703,000
150,000 Osceola County Health Facilities Revenue Series 1994, 5.75% due 5/1/2004 Aaa/AAA 154,131
(Evangelical Lutheran Good Samaritan Project; Insured: AMBAC)
1,000,000 Palm Beach County Solid Waste Revenue Refunding Series A, 6.00% due 10/1/2010 Aaa/AAA 1,182,670
(Insured: AMBAC)
1,200,000 Pasco County Housing Finance Authority MFHR, 5.50% due 6/1/2027 put 6/1/2008 NR/AA- 1,272,804
(Cypress Trail Apartments Project; Guaranty: Axa Reinsurance)
650,000 Pensacola Apartment Revenue Series A, 6.25% due 10/1/2004 (Insured: MBIA) Aaa/AAA 682,084
600,000 Sarasota County Public Hospital Board, 1.23% due 7/1/2037 put 10/1/2003 (Sarasota VMIG1/A1+ 600,000
Memorial Hospital Project) (daily demand notes)
1,000,000 Turtle Run Community Development District Refunding Water Management Benefit Aaa/AAA 1,105,040
Special Assessment, 5.00% due 5/1/2011 (Insured: MBIA)
Georgia (0.10%)
235,000 Georgia Municipal Electric Authority Power Revenue Unrefunded Series Y, 10.00% A2/NR 321,363
due 1/1/2010
Hawaii (0.70%)
2,000,000 Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Insured: MBIA) Aaa/AAA 2,444,100
970,000 Hawaii Housing Finance Development Corp. Series B, 5.85% due 7/1/2017 Aaa/AAA 998,208
(Collateralized: FNMA)
Idaho (0.20%)
985,000 Boise City Industrial Development Corp., 5.40% due 12/15/2009 (Western Trailer A1/NR 1,007,192
Co. Project; LOC: First Security)
Illinois (13.20%)
1,930,000 Bedford Park Tax Increment Revenue Refunding Series 1993, 8.00% due 12/1/2010 NR/BBB- 2,083,628
pre-refunded 12/1/2004
300,000 Central Lake County Joint Action Water Agency Series 1991, 0% due 5/1/2005 Aaa/AAA 293,727
(Insured: MBIA)
800,000 Champaign County Community Unit Series C, 0% due 1/1/2011 pre-refunded 1/1/2010 @ Aaa/AAA 613,048
94.672 (Insured: FGIC)
3,000,000 Chicago Housing Authority Capital, 5.00% due 7/1/2008 Aa3/AA 3,318,420
600,000 Chicago Park District Harbor, 5.75% due 1/1/2011 A2/A 697,458
2,285,000 Chicago Tax Increment Allocation Lincoln Belmont A, 5.30% due 1/1/2014 (Insured: NR/A 2,397,468
ACA)
650,000 Chicago Wastewater Transmission Revenue Refunding Second Lien, 5.50% due 1/1/2013 Aaa/AAA 742,567
(Insured: MBIA)
500,000 Cook County Capital Improvement, 5.50% due 11/15/2008 (Insured: FGIC) Aaa/AAA 563,710
4,200,000 Cook County School District Class A, 0% due 12/1/2022 NR/NR 1,349,838
655,000 Du Page County School District Capital Appreciation, 0% due 2/1/2010 (Insured: Aaa/NR 526,057
FGIC)
1,500,000 Freeport Illinois, 5.375% due 1/1/2018 Aaa/AAA 1,653,225
1,385,000 Hoffman Estates Tax Increment Revenue, 0% due 5/15/2004 Baa1/NR 1,356,123
2,860,000 Illinois Development Finance Authority Revenue, 6.00% due 11/15/2012 (Insured: Aaa/AAA 3,303,014
MBIA)
500,000 Illinois Development Financing Authority, 7.125% due 3/15/2007 (Children's Home & NR/A-1 507,340
Aid Society Project; LOC: Bank One)
2,400,000 Illinois Development Financing Authority Debt Restructuring Revenue Series 1994, NR/A 2,601,936
7.25% due 11/15/2009 (East St. Louis Project)
2,160,000 Illinois Educational Facilities Authority Revenues Adjusted Medium Term, 4.75% A2/A 2,215,037
due 11/1/2036 put 11/1/2016 @ 100 (Field Museum Project)
475,000 Illinois Educational Facilities Authority Revenues Capital Appreciation, 0% due Aaa/AAA 247,261
7/1/2014 pre-refunded 7/1/2009 @ 57.17 (Insured: MBIA)
230,000 Illinois Educational Facilities Authority Revenues Loyola University A, 6.00% due Aaa/AAA 274,162
7/1/2012 (Insured: MBIA) (ETM)*
1,500,000 Illinois Educational Facilities Authority Revenues Midwestern University B, 5.50% NR/A 1,557,570
due 5/15/2018 (Insured: ACA)
2,000,000 Illinois Educational Facilities Authority Revenues Series B, 4.40% due 7/1/2025 Aa1/AA 2,049,700
put 7/1/2004 (University of Chicago Project)
1,540,000 Illinois Educational Facilities Authority Revenues Unrefunded Balance Loyola A, Aaa/AAA 1,673,903
5.00% due 7/1/2006 (Insured: MBIA)
770,000 Illinois Educational Facilities Authority Revenues Unrefunded Balance Loyola A, Aaa/AAA 908,261
6.00% due 7/1/2011 (ETM)*
970,000 Illinois Educational Facilities Authority Revenues Unrefunded Balance Loyola A, Aaa/AAA 1,131,505
6.00% due 7/1/2012 (ETM)*
261,000 Illinois Health Facilities Authority Revenue, 7.60% due 8/15/2010 (Insured: FSA) Aaa/AAA 269,743
1,900,000 Illinois Health Facilities Authority Revenue, 5.75% due 8/15/2013 (Children's Aaa/AAA 2,144,150
Memorial Hospital Series A Project; Insured: AMBAC)
990,000 Illinois Health Facilities Authority Revenue, 5.70% due 2/20/2021 (Midwest Care Aaa/NR 1,055,271
Center Project; Collateralized: GNMA)
1,250,000 Illinois Health Facilities Authority Revenue Healthcare Systems, 6.25% due A2/A 1,348,950
11/15/2019 (OSF Healthcare Project)
37,000 Illinois Health Facilities Authority Revenue Series A, 7.60% due 8/15/2010 Aaa/AAA 37,183
(Insured: FSA)
870,000 Illinois Health Facilities Authority Revenue Series A, 6.10% due 8/15/2014 Aa2/AA+ 922,374
(Northwestern Memorial Hospital Project)
1,205,000 Illinois University Revenues, 5.25% due 1/15/2018 (UIC South Campus Development Aaa/AAA 1,324,572
Project)
680,000 Jackson & Williamson Countys, Illinois, 7.50% due 12/1/2009 (Insured: AMBAC) Aaa/AAA 861,309
1,000,000 Lake County Community Consolidated School District 73, 9.00% due 1/1/2006 Aaa/NR 1,165,000
(Insured: FSA)
5,550,000 Lake County Community High School Capital Appreciation Series B, 0% due 12/1/2012 Aaa/NR 3,842,931
(Insured: FGIC)
755,000 Marion Refunding, 5.00% due 9/15/2012 (Insured: FGIC) Aaa/AAA 839,454
710,000 McHenry County School District Woodstock General Obligation, 6.80% due 1/1/2006 Aaa/AAA 794,036
(Insured: FSA)
1,015,000 Melrose Park Tax Increment Series B, 6.50% due 12/15/2015 (Insured: FSA) Aaa/AAA 1,221,065
800,000 Sangamon County Property Tax Lease Receipts, 7.45% due 11/15/2006 Aa3/NR 900,552
2,400,000 Sangamon County School District Series A, 5.875% due 8/15/2018 (Hay Edwards NR/A 2,503,440
Project)
1,170,000 Sherman Revenue Refunding Mortgage, 6.10% due 10/1/2014 (Collateralized: GNMA) Aaa/AAA 1,288,041
1,600,000 Sherman Revenue Refunding Mortgage, 6.20% due 10/1/2019 (Collateralized: GNMA) Aaa/AAA 1,735,856
1,425,000 Southern Illinois University Revenues, 0% due 4/1/2014 (Insured: MBIA) Aaa/AAA 912,442
500,000 Southwestern Illinois Development Authority Revenue, 5.375% due 8/15/2015 Baa2/BBB+ 509,120
1,590,000 University of Illinois Revenue Capital Appreciation, 0% due 4/1/2014 (Insured: Aaa/AAA 1,019,142
MBIA)
1,000,000 West Chicago Industrial Development Revenue, 6.90% due 9/1/2024 (Leggett & Platt NR/A+ 1,068,350
Inc. Project)
1,000,000 Will & Kendall Counties Community Series B, 5.125% due 1/1/2014 (Insured: FSA) Aaa/AAA 1,091,860
3,000,000 Will County Community School 365-U Capital Appreciation, 0% due 11/1/2011 Aaa/AAA 2,210,970
(Insured: FSA)
Indiana (6.30%)
895,000 Allen County Economic Development, 5.80% due 12/30/2012 (Indiana Institute of NR/NR 962,242
Technology Project)
1,355,000 Allen County Economic Development, 5.75% due 12/30/2015 (Indiana Institute of NR/NR 1,481,191
Technology Project)
1,000,000 Allen County War Memorial Series A, 5.25% due 11/1/2013 (Insured: AMBAC) Aaa/NR 1,112,130
1,000,000 Boone County Hospital Association, 5.625% due 1/15/2015 (Insured: FGIC) Aaa/AAA 1,116,520
80,000 Carmel Economic Development Revenue Refunding FHA Loan, 5.875% due 9/1/2005 Aa2/NR 81,174
(Insured: FHA)
1,515,000 Dyer Redevelopment Authority, 6.40% due 7/15/2015 NR/BBB+ 1,659,576
1,910,000 Dyer Redevelopment Authority, 6.50% due 7/15/2016 NR/BBB+ 2,092,902
350,000 East Chicago Elementary School Building First Mortgage Series A, 6.25% due NR/A 401,919
7/5/2008
1,000,000 Gary Building Corp. - Lake County First Mortgage Series 1994-B, 8.25% due NR/NR 1,045,000
7/1/2010 (Sears Building Project)
1,020,000 Goshen Chandler School Building Capital Appreciation Refunding, 0% due 1/15/2011 Aaa/AAA 777,383
(Insured: MBIA)
2,600,000 Hamilton Southeastern Indiana, 6.25% due 7/15/2006 (North Delaware School Aaa/AAA 2,931,084
Building Project; Insured: AMBAC)
1,000,000 Huntington Economic Development Revenue, 6.40% due 5/1/2015 (United Methodist NR/NR 1,050,010
Memorial Project)
700,000 Indiana Bond Bank Common School Fund Advanced Purchase Funding, 5.00% due Aaa/AAA 783,811
2/1/2009 (Insured: AMBAC)
1,500,000 Indiana Bond Bank Special Program Hendrick's Redevelopment Series B, 6.20% due NR/A+ 1,500,165
2/1/2023 (LOC: Canadian Imperial Bank)
575,000 Indiana Health Facility Hospital Revenue, 5.75% due 9/1/2015 (ETM)* NR/AA- 594,533
800,000 Indiana Health Facility Hospital Revenue, 5.40% due 2/15/2016 (Clarian Health Aaa/AAA 880,168
Obligation Group Project; Insured: MBIA)
910,000 Indiana Public School Building Corp. First Mortgage, 6.00% due 7/5/2007 (Insured: NR/AA 1,037,300
State Aid Witholding)
1,065,000 Indiana State Educational Facilities Authority Revenue, 5.65% due 10/1/2015 NR/A- 1,129,475
(University of Indianapolis Project)
1,025,000 Indiana State Educational Facilities Authority Revenue, 5.70% due 10/1/2016 NR/A- 1,083,435
(University of Indianapolis Project)
500,000 Indianapolis Economic Development Revenue, 5.50% due 6/1/2014 Aa3/NR 540,615
740,000 Indianapolis Local Public Improvement Bond Bank, 0% due 7/1/2009 (ETM)* Aa2/AA- 623,850
500,000 Portage Township Multi School Bldg., 5.50% due 7/15/2015 (Insured: FGIC) Aaa/AAA 564,190
2,500,000 Rockport Pollution Control Revenue Series A, 4.90% due 6/1/2025 put 6/1/2007 Baa2/BBB 2,600,200
(Indiana Michigan Power Co. Project)
1,200,000 Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2012 NR/AA- 1,349,088
1,685,000 West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2017 (Insured: Aaa/AAA 1,902,651
FGIC and State Aid Withholding)
Iowa (2.10%)
2,590,000 Iowa Department of General Services Certificate of Participation Series 1992, Aaa/AAA 2,627,296
6.50% due 7/1/2006 (Insured: AMBAC) (ETM)*
1,000,000 Iowa Finance Authority Health Care Facilities, 6.00% due 7/1/2013 (Genesis A1/NR 1,100,180
Medical Center Project)
1,000,000 Iowa Finance Authority Hospital Facility Revenue, 6.00% due 7/1/2012 (Trinity Aaa/AAA 1,168,120
Regional Hospital Project; Insured: FSA)
1,000,000 Iowa Finance Authority Hospital Facility Revenue, 6.75% due 2/15/2016 A1/NR 1,125,050
2,000,000 Iowa Finance Authority Revenue, 6.00% due 12/1/2018 (Catholic Health Initiatives Aa2/AA 2,218,840
Project)
1,250,000 Iowa Finance Authority Revenue Refunding Trinity Health Series B, 5.75% due Aa3/AA- 1,372,375
12/1/2015
Kansas (1.00%)
4,200,000 Wichita Hospital Revenue Refunding Improvement Series XI, 6.75% due 11/15/2019 NR/A+ 4,715,928
(Christi Health System Project)
Kentucky (1.30%)
4,000,000 Kentucky Economic Development Finance Authority Series C, 0% due 10/1/2015 Aaa/AAA 4,115,920
(Norton Healthcare Project; Insured: MBIA)
1,120,000 Paintsville First Mortgage Revenue Refunding Series 1991, 8.65% due 9/1/2005 NR/NR 1,134,683
(Paul B. Hall Medical Center Project)
785,000 Wilmore Housing Facilities Revenue, 5.55% due 7/1/2013 (LOC: Allied Irish Bank) NR/NR 835,177
Louisiana (2.00%)
2,992 East Baton Rouge Mortgage Financing Authority Purchase Revenue, 8.25% due Aaa/AAA 3,040
2/25/2011 (Collateralized: GNMA)
1,595,000 Jefferson Sales Tax District Revenue Series B, 5.50% due 12/1/2008 (Insured: Aaa/AAA 1,840,104
AMBAC)
390,000 Louisiana Local Government Environment Series A, 4.10% due 9/1/2007 (Housing Baa1/NR 389,150
Bellemont Apts. Project)
320,000 Louisiana Public Facilities Authority MFHR, 5.95% due 6/15/2019 put 6/15/2005 NR/AA 321,139
(Carlyle Apts. Project; Insured: AXA)
1,709,550 Louisiana Public Facilities Authority Revenue Refinancing, 8.00% due 10/1/2009 NR/NR 355,586
(Schwegman Westside Expressway Project A) (a)
3,250,000 Louisiana State Offshore Term Refunding Series D, 4.00% due 9/1/2023 put 9/1/2008 A3/A-1 3,396,055
(Loop LLC Project)
3,000,000 Morehouse Parish Pollution Revenue Refunding Series A, 5.25% due 11/15/2013 Baa2/BBB 3,136,470
(International Paper Co. Project)
Maryland (0.20%)
935,000 Ann Arundel County Multi Family Housing Revenue, 7.45% due 12/1/2024 put NR/BBB- 938,918
12/1/2003 (Twin Coves Apartment Project; HUD Section 8)
Massachusetts (1.20%)
1,280,000 Massachusetts Development Finance Agency Refunding, 6.25% due 1/1/2015 (Odd NR/NR 1,178,790
Fellows Home Project)
2,510,000 Massachusetts Housing Finance Authority Insured Rental Housing Series 1994-A, Aaa/AAA 2,615,521
6.20% due 1/1/2006 (Insured: AMBAC)
1,905,000 Massachusetts Industrial Financing Agency Revenue Series A, 6.125% due 12/1/2011 Aaa/AAA 1,969,446
(Insured: MBIA)
Michigan (1.80%)
350,000 Auburn Hills Economic Limited Obligation Revenue Refunding & Improvement, 6.15% NR/NR 348,908
due 12/1/2005 (Foamade Industries Project; LOC: Comerica Bank)
650,000 Kalamazoo Hospital Finance Authority Revenue Series 1994-A, 6.25% due 6/1/2014 Aaa/AAA 796,913
(Borgess Medical Center Project) (ETM)*
1,000,000 Kent Hospital Finance Authority Michigan Hospital, 7.25% due 1/15/2013 (Insured: Aaa/AAA 1,240,270
MBIA)
750,000 Livonia Public School District, 5.50% due 5/1/2014 Aaa/AAA 767,528
415,000 Michigan Housing Redevelopment Authority Ltd. Obligation, 6.50% due 9/15/2007 Aaa/AAA 429,301
(Greenwood Villa Project; Insured: FSA)
2,450,000 Michigan State Building Authority Revenue Refunding Facilities Program Series I, Aaa/AAA 2,726,899
5.25% due 10/15/2017
400,000 Michigan State Hospital Finance Authority Revenue Pooled Loan Program, 5.50% due Aaa/AAA 409,388
11/1/2013
1,530,000 Southfield Economic Development Corp. Refunding Revenue N.W. 12 Limited NR/NR 1,528,684
Partnership, 7.25% due 12/1/2010
Minnesota (0.20%)
700,000 Southern Minnesota Municipal Power Agency Supply, Prerefunded to various dates, Aaa/AAA 716,135
Series A, 5.75% due 1/1/2018 (Insured: MBIA)
Mississippi (0.50%)
1,500,000 Mississippi Higher Educational Authority Series C, 7.50% due 9/1/2009 A2/NR 1,534,215
825,000 Mississippi Hospital Equipment Revenue, 6.40% due 1/1/2007 (Rush Foundation Baa3/AAA 856,185
Project; Guaranty: Connie Lee)
Missouri (0.90%)
2,025,000 Missouri Development Finance Board Healthcare Series A, 5.40% due 11/1/2018 A2/NR 2,092,108
(Lutheran Home Aged Project; LOC: Commerce Bank)
2,000,000 Missouri Environment Improvement Energy Refunding, 3.90% due 1/2/2012 put VMIG1/A-2 2,041,040
9/1/2004 (Kansas City Power & Light Project)
Nebraska (0.20%)
845,000 Madison County Hospital Authority 1 Hospital Revenue, 5.50% due 7/1/2014 (Faith NR/AA 923,974
Regional Health Services Project; Insured: Radian)
Nevada (1.90%)
640,000 Clark County Pollution Control Revenue Series B, 6.60% due 6/1/2019 (Nevada Power Aaa/AAA 660,192
Company Project; Insured: FGIC)
1,265,000 Las Vegas Special Improvement District Refunding Senior Local Improvement Series Aaa/AAA 1,393,676
A, 5.375% due 6/1/2013 (Insured: FSA)
2,600,000 Washoe County Capital Appreciation Reno Sparks Series B, 0% due 7/1/2011 Aaa/AAA 1,937,468
(Insured: FSA)
2,250,000 Washoe County Hospital Facility Revenue Series 1993 A, 6.00% due 6/1/2015 (Washoe A2/A+ 2,297,385
Medical Center Project)
2,350,000 Washoe County School District Refunding Series B, 5.00% due 6/1/2010 (Insured: Aaa/AAA 2,636,018
FGIC)
New Hampshire (1.80%)
5,140,000 Manchester Housing & Redevelopment Authority, 0% due 1/1/2017 NR/AA 2,540,034
4,990,000 Manchester Housing & Redevelopment Authority Capital Appreciation Series B, 0% NR/AA 2,591,357
due 1/1/2016 (Insured: Radian)
3,000,000 New Hampshire Pollution Refunding Central Maine Power Co., 5.375% due 5/1/2014 A3/BBB+ 3,208,590
New Jersey (1.30%)
285,000 New Jersey EDA Refunding Revenue, 7.50% due 12/1/2019 (Spectrum for Living A3/A 286,419
Development Project; LOC: PNC Bank)
65,000 New Jersey State Transit Corp. Capital Grant Anticipation Notes Series A, 5.125% Aaa/AAA 65,193
due 2/1/2004 (Insured: AMBAC)
5,000,000 New Jersey State Transport Trust Fund Authority Series C, 5.50% due 6/15/2017 Aa3/AA- 5,593,900
(Transportation Systems Project)
New Mexico (1.80%)
1,500,000 Albuquerque Educational Facilities Revenue Refunding, 1.15% due 10/15/2016 put VMIG1/AA 1,500,000
10/7/2003 (Albuquerque Academy Project; Insured: Bank of America) (weekly demand
notes)
2,000,000 Farmington Pollution Control Revenue, 1.20% due 5/1/2024 put 10/1/2003 (LOC: Bank P1/A1+ 2,000,000
of America) (daily demand notes)
650,000 Farmington Pollution Control Revenue, 1.20% due 9/1/2024 put 10/1/2003 (LOC: P1/A1+ 650,000
Barclays Bank) (daily demand notes)
2,800,000 New Mexico Housing Authority, Multi Family Housing Revenue, 1.10% due 1/15/2033 NR/A1+ 2,800,000
put 10/7/2003 (Arbors/Courtyard Apartments Project) (weekly demand notes)
590,000 Sandia Pueblo General Obligation, 5.40% due 12/1/2003 (LOC: Wells Fargo) NR/AA- 593,941
600,000 Sandia Pueblo General Obligation, 5.60% due 12/1/2005 (LOC: Wells Fargo) NR/AA- 603,846
New York (3.10%)
2,000,000 Long Island Power Authority General Series B, 5.00% due 12/1/2006 Baa1/A- 2,180,100
1,080,000 Metro Transportation Authority New York Service Control Series B, 5.25% due A3/AA- 1,185,721
7/1/2006
1,000,000 Nassau Health Care Corp., 6.00% due 8/1/2011 (Insured: FSA) Aaa/AAA 1,158,850
1,935,000 New York City General Obligation Series E, 6.00% due 8/1/2008 (Insured: FGIC) Aaa/AAA 2,182,970
1,175,000 New York City Industrial Development Agency Series A, 5.00% due 6/1/2010 (Lycee NR/A 1,265,863
Francais De New York Project; Insured: ACA)
875,000 New York City Trust Cultural Resources, 5.75% due 7/1/2015 (Museum of American NR/A 957,329
Folk Art Project; Insured: ACA)
220,000 New York Housing Finance Service Series A, 6.375% due 9/15/2015 pre-refunded A3/AAA 257,946
9/15/2007 @ 100
800,000 New York Series B-2, Subseries B-4, 1.15% due 8/15/2023 put 10/1/2003 (daily VMIG1/A1+ 800,000
demand notes)
1,290,000 New York State Dormitory Authority Revenues, 5.75% due 7/1/2022 NR/AAA 1,330,635
2,200,000 Port Authority New York & New Jersey Special Obligation, 6.25% due 12/1/2011 (JFK Aaa/AAA 2,549,734
International Air Terminal 6 Project)
500,000 Port Authority New York & New Jersey Special Obligation, 1.15% due 5/1/2019 put VMIG1/A1+ 500,000
10/1/2003 (daily demand notes)
North Carolina (0.40%)
650,000 Craven County Industrial Facilities Pollution Control Financing Authority Solid Baa2/NR 658,209
Waste Revenue, 7.875% due 6/1/2005 (Weyerhaeuser Co. Project)
1,200,000 North Carolina Eastern Municipal Power Refunding Series A, 5.70% due 1/1/2013 Aaa/AAA 1,364,880
(Insured: MBIA)
North Dakota (0.10%)
365,000 Grand Forks Health Care System Revenue Bonds Series 1997, 6.25% due 8/15/2006 Aaa/AAA 410,037
(Altra Health Systems Obligated Group Project; Insured: MBIA)
Ohio (2.60%)
1,000,000 Butler County Transportation Improvement, 6.00% due 4/1/2010 (Insured: FSA) Aaa/AAA 1,164,680
1,610,000 Cleveland Cuyahoga County Development Bond Fund A, 6.25% due 5/15/2016 (LOC: NR/NR 1,645,468
FifthThird Bank)
1,100,000 Franklin County Health Care Revenue Series 1995-A, 6.00% due 11/1/2010 Aa2/NR 1,168,992
(Heinzerling Foundation Project; LOC: Banc One)
500,000 Franklin County Hospital, 5.80% due 12/1/2005 (Doctors Project) (ETM)* A3/NR 513,810
500,000 Middleburg Heights Ohio Refunding, 6.75% due 8/15/2005 (Southwest General Health Aaa/AAA 551,050
Center Project; Insured: FSA)
685,000 North Ridgeville Economic Development, 0% due 2/1/2015 NR/A 272,466
2,000,000 Ohio Pollution Control Revenue Refunding, 5.625% due 3/1/2015 (General Motors Baa1/BBB 2,143,680
Corp. Project)
1,600,000 Ohio State Higher Educational Facility Revenue, 5.05% due 7/1/2037 put 7/1/16 A2/A 1,675,536
(Kenyon College Project)
760,000 Reynoldsburg Health Care Facilities Revenue Bonds Series 1997, 5.70% due Aaa/NR 823,855
10/20/2012 (Collateralized: GNMA)
2,000,000 Trumbull County Ohio Health Refunding & Improvement, 1.23% due 10/1/2031 put NR/A-1 2,000,000
10/1/2003 (daily demand notes)
Oklahoma (2.40%)
340,000 Grady County Industrial Authority Correctional Facilities, 5.00% due 11/1/2004 Aaa/AAA 346,627
(Insured: MBIA)
1,020,000 Oklahoma City Municipal Improvement Authority, 0% due 7/1/2008 (Insured: AMBAC) Aaa/AAA 902,996
500,000 Oklahoma City Municipal Water & Sewer Capital Appreciation Series C, 0% due Aaa/AAA 477,235
7/1/2006 (Insured: AMBAC)
1,125,000 Oklahoma City Municipal Water & Sewer Series C, 0% due 7/1/2011 (Insured: AMBAC) Aaa/AAA 846,664
1,485,000 Oklahoma City Municipal Water & Sewer Series C, 0% due 7/1/2013 (Insured: AMBAC) Aaa/AAA 1,004,379
825,000 Oklahoma Development Finance Authority Hospital Association Pooled Hospital A, Aaa/AAA 911,773
5.40% due 6/1/2013 (Insured: AMBAC)
750,000 Oklahoma Industrial Authority Revenue Refunding, 6.00% due 8/15/2010 (Integris Aaa/AAA 869,363
Baptist Project; Insured: AMBAC)
2,800,000 Tulsa County Independent School District Combined Purpose, 4.50% due 8/1/2007 Aa3/A+ 3,067,596
1,485,000 Tulsa Industrial Development Authority Hospital Revenue, 6.10% due 2/15/2009 Aa3/AA 1,647,266
pre-refunded 2/15/2006 @ 100 (St. John's Medical Center Project)
500,000 Tulsa Public Facilities Authority Solid Waste Revenue, 5.65% due 11/1/2006 (Ogden Aaa/AAA 554,760
Martin Project; Insured: AMBAC)
500,000 Woodward Municipal Hospital Authority Revenue Series 1994, 8.25% due 11/1/2009 NR/NR 515,580
Oregon (0.60%)
705,000 Albany Hospital Facility Authority Gross Revenue & Refunding Series 1994, 7.00% NR/NR 725,001
due 10/1/2005 (Mennonite Home Project)
800,000 Forest Grove Campus Improvement & Refunding Pacific University, 6.00% due NR/AA 902,760
5/1/2015 (Insured: Radian)
1,070,000 Oregon Economic Development Department of Revenue Series CLII, 7.70% due Aa2/NR 1,147,757
12/1/2014 (Smokecraft Project; LOC: Seafirst Bank)
Pennsylvania (2.00%)
380,000 Admiral Peary Area Vocational School, 5.25% due 2/1/2005 NR/A 381,284
500,000 Allegheny County Hospital Development, 7.00% due 8/1/2015 (ETM)* NR/AAA 638,930
1,400,000 Allegheny County Hospital Development Health Series B, 6.50% due 5/1/2012 (South Baa1/NR 1,444,436
Hills Health Systems Project)
1,900,000 Carbon County Industrial Development Authority Refunding, 6.65% due 5/1/2010 NR/BBB- 2,031,138
(Panther Creek Partners Project)
795,000 Lancaster County Capital Appreciation Series B, 0% due 5/1/2014 (Insured: FGIC) Aaa/NR 503,060
795,000 Lancaster County Capital Appreciation Series B, 0% due 11/1/2014 (Insured: FGIC) Aaa/NR 490,308
800,000 Lancaster County Capital Appreciation Series B, 0% due 5/1/2015 (Insured: FGIC) Aaa/NR 474,488
785,000 Lehigh County General Purpose Shepard Rehab. Hospital, 6.00% due 11/15/2007 Aaa/AAA 904,508
(Insured: AMBAC)
800,000 McKeesport Area School District Series B, 0% due 10/1/2004 NR/A 788,496
2,032,839 Pennsylvania Higher Education University Series 14, 0% due 7/1/2020 (Insured: Aaa/AAA 592,878
AMBAC)
500,000 Pennsylvania State Higher Educational Facility Allegheny Delaware Valley Aaa/AAA 565,505
Obligation A, 5.60% due 11/15/2009 (Insured: MBIA)
365,000 Philadelphia Water & Sewer Revenue 10th Series, 7.35% due 9/1/2004 (ETM)* Aaa/AAA 384,776
Rhode Island (0.90%)
1,840,000 Providence Series C, 5.50% due 1/15/2011 (Insured: FGIC) Aaa/AAA 2,112,670
1,000,000 Rhode Island Health & Education Building Refunding, 6.00% due 8/1/2014 (Credit NR/AAA 1,112,340
Support: FHA)
1,065,000 Rhode Island Health & Education Building Refunding Higher Education State NR/AA 1,142,042
University, 5.00% due 3/15/2014 (Insured: Radian)
South Dakota (0.20%)
1,000,000 South Dakota Housing Development Authority Homeownership Series B, 4.85% due Aa1/AAA 1,072,810
5/1/2009
Tennessee (0.50%)
2,000,000 Knox County Health, 4.90% due 6/1/2031 put 6/1/2011 (Collateralized: FNMA) NR/AAA 2,096,620
Texas (16.90%)
500,000 Austin Utility Systems Revenue Refunding Comb Series A, 5.75% due 11/15/2013 Aaa/AAA 511,835
(Insured: MBIA)
1,250,000 Bexar County Health Facilities Development Corp., 6.125% due 7/1/2022 (Army NR/BBB- 1,289,200
Retirement Residence Project)
600,000 Bexar County Housing Finance Corp., 5.50% due 1/1/2016 (Insured: MBIA) Aaa/NR 638,412
1,035,000 Bexar County Housing Finance Corp., 5.70% due 1/1/2021 (Insured: MBIA) Aaa/NR 1,091,356
2,000,000 Bexar County Housing Finance Corp., 6.50% due 12/1/2021 A3/NR 1,985,040
1,200,000 Bexar County Housing Finance Corp. Multi Family Housing, 5.40% due 8/1/2012 Aaa/NR 1,257,972
(Dymaxion & Marrach Park Apts. A Project; Insured: MBIA)
1,270,000 Bexar County Housing Finance Corp. Multi Family Housing, 5.95% due 8/1/2020 Aaa/NR 1,365,555
(Dymaxion & Marrach Park Apts. A Project; Insured: MBIA)
975,000 Bexar County Housing Finance Corp. Series A, 5.875% due 4/1/2014 (Honey Creek Aaa/NR 1,027,357
Apartments Project; Insured: MBIA)
800,000 Bexar County Housing Finance Corp. Series A, 6.125% due 4/1/2020 (Honey Creek Aaa/NR 839,688
Apartments Project; Insured: MBIA)
2,800,000 Birdville Independent School District Refunding, 0% due 2/15/2012 (Guaranty: PSF) Aaa/AAA 2,006,284
1,130,000 Carroll Independent School District Capital Appreciation Refunding, 0% due Aaa/AAA 829,025
2/15/2011 (Guaranty: PSF)
5,000,000 Coppell Independent School District Capital Appreciation Refunding, 0% due NR/AAA 3,118,000
8/15/2013 (Guaranty: PSF)
1,100,000 De Soto Independent School District Refunding, 5.125% due 8/15/2017 (Guaranty: NR/AAA 1,103,069
PSF)
3,360,000 Duncanville Independent School District Capital Appreciation Refunding Series B, Aaa/AAA 2,156,549
0% due 2/15/2014 (ETM)*
3,000,000 Duncanville Independent School District Capital Appreciation Refunding Series B, Aaa/AAA 1,622,100
0% due 2/15/2016 (Guaranty: PSF)
3,750,000 El Paso Independent School District Capital Appreciation Refunding, 0% due Aaa/AAA 2,834,250
8/15/2010 (Guaranty: PSF)
2,500,000 El Paso Independent School District Capital Appreciation Refunding, 0% due Aaa/AAA 1,762,050
8/15/2011 (Guaranty: PSF)
2,460,000 Ennis Independent School District Refunding, 0% due 8/15/2012 (Guaranty: PSF) Aaa/NR 1,693,390
2,490,000 Ennis Independent School District Refunding, 0% due 8/15/2013 (Guaranty: PSF) Aaa/NR 1,594,820
2,525,000 Ennis Independent School District Refunding, 0% due 8/15/2014 (Guaranty: PSF) Aaa/NR 1,505,835
1,000,000 Fort Worth Water & Sewer Revenue, 5.25% due 2/15/2009 Aa2/AA 1,133,230
1,375,000 Gulf Coast Center Revenue, 6.75% due 9/1/2020 (Mental Health Retardation Center NR/BBB+ 1,468,376
Project)
6,245,000 Hays Consolidated Independent School District Capital Appreciation, 0% due Aaa/AAA 4,009,727
8/15/2013 (Guaranty: PSF)
880,000 Houston Water Conveyance System Contract Certificate of Participation Series F, Aaa/AAA 942,550
7.20% due 12/15/2004 (Insured: AMBAC)
470,000 Irving Hospital Authority Series B, 5.80% due 7/1/2009 (Irving Healthcare Systems Aaa/AAA 492,696
Project; Insured: FSA)
1,500,000 Irving Waterworks & Sewer Revenue Refunding & Improvement, 5.375% due 8/15/2014 Aa2/AA 1,661,775
2,000,000 Leander Independent School District Unlimited Tax School Building & Refunding Aaa/NR 1,946,740
Series 1992, 0% due 8/15/2005 (Guaranty: PSF)
1,420,000 Mesquite Independent School District Refunding, 0% due 8/15/2012 (Guaranty: PSF) NR/AAA 962,348
1,000,000 Midlothian Independent School District Capital Appreciation Refunding, 0% due Aaa/NR 716,530
2/15/2012 (Guaranty: PSF)
400,000 Midtown Redevelopment Authority Tax, 5.50% due 1/1/2004 (Insured: Radian) Baa2/AA 404,196
735,000 Midtown Redevelopment Authority Tax, 6.00% due 1/1/2012 (Insured: Radian) Baa2/AA 829,168
500,000 Midtown Redevelopment Authority Tax, 6.00% due 1/1/2013 (Insured: Radian) Baa2/AA 560,710
500,000 North Central Texas Health Facility Development, 5.50% due 4/1/2005 (Zale Lipshy Aaa/AAA 531,075
University Hospital Project; Insured: FSA)
2,400,000 North Central Texas Health Facility Development Series B, 5.75% due 2/15/2015 Aaa/AAA 2,733,552
(Insured: MBIA)
1,000,000 Pharr San Juan Alamo Independent Building, 5.75% due 2/1/2013 (Guaranty: PSF) Aaa/AAA 1,145,990
1,000,000 Sabine River Authority Texas Pollution Refunding Series A, 5.80% due 7/1/2022 Baa2/BBB 983,080
(TXU Energy Co. Project)
3,000,000 Sam Rayburn Municipal Power Agency Refunding, 6.00% due 10/1/2016 Baa2/BBB- 3,168,600
1,775,000 Stafford Economic Development, 6.00% due 9/1/2017 (Insured: FGIC) Aaa/AAA 2,092,246
715,000 Tarrant County Health Facilities, 6.00% due 9/1/2004 (Harris Methodist Health Aaa/AAA 747,425
Systems Project; Insured: AMBAC) (ETM)*
3,500,000 Tarrant County Health Facilities, 6.625% due 11/15/2020 (Adventist/Sunbelt) A3/A 3,850,735
500,000 Texarkana Health Facilities Hospital Refunding Series A, 5.75% due 10/1/2009 Aaa/AAA 575,615
(Wadley Regional Medical Center Project; Insured: MBIA)
2,500,000 Texarkana Health Facilities Hospital Refunding Series A, 5.75% due 10/1/2011 Aaa/AAA 2,874,975
(Insured: MBIA)
1,000,000 Texas State Capital Appreciation Refunding Superconducting Series C, 0% due Aaa/AAA 994,900
4/1/2004 (ETM)*
1,000,000 Texas State Turnpike Authority Central Turnpike Systems Bond Anticipation Notes Aa3/AA 1,108,980
Second Tier, 5.00% due 6/1/2007
2,420,000 Texas State Unrefunded Balance, 7.00% due 8/1/2020 (Water Development Board Aa1/AA 2,533,861
Project)
2,000,000 Travis County Health Facilities Development Series A, 5.75% due 11/15/2010 Aaa/AAA 2,283,020
(Ascension Health Project; Insured: MBIA)
3,000,000 Travis County Health Facilities Development Series A, 6.25% due 11/15/2014 Aaa/AAA 3,644,850
(Ascension Health Project; Insured: MBIA)
600,000 Upper Trinity Regional Water District Regional Treated Water Supply Systems Aaa/AAA 729,978
Series A, 7.125% due 8/1/2008 (Insured: FGIC)
870,000 Waco Health Facilities Development Corp. Series A, 6.00% due 11/15/2015 Aa2/AAA 1,046,958
pre-refunded 11/15/2009 (Ascension Health)
1,050,000 Waco Health Facilities Development Corp. Series A, 6.00% due 11/15/2016 Aa2/AAA 1,263,570
pre-refunded 11/15/2009 (Ascension Health)
500,000 West Harris County Municipal Utility Refunding, 6.00% due 3/1/2017 (Insured: NR/AA 558,345
Radian)
Utah (1.30%)
1,085,000 Salt Lake City Municipal Building Series B, 5.30% due 10/15/2012 (Insured: AMBAC) Aaa/AAA 1,215,059
595,000 Utah Board Regents Auxiliary Refunding Series A, 5.25% due 5/1/2013 NR/AA 661,967
1,000,000 Utah County Municipal Building Authority, 5.50% due 11/1/2016 (Insured: AMBAC) Aaa/NR 1,125,510
1,425,000 Utah Housing Finance Agency, 6.05% due 7/1/2016 (Credit Support: FHA) NR/AAA 1,505,456
380,000 Utah Housing Finance Agency Single Family Mortgage D-2 Class I, 5.85% due Aa2/AA 395,059
7/1/2015
940,000 Utah Water Finance Agency Revenue Pooled Loan Financing Program Series A, 5.00% Aaa/NR 1,045,017
due 10/1/2012 (Insured: AMBAC)
Virginia (4.10%)
2,000,000 Alexandria Industrial Development Authority, 5.90% due 10/1/2020 (Insured: AMBAC) Aaa/AAA 2,301,280
1,500,000 Alexandria Industrial Development Authority Institute For Defense Analyses Series Aaa/AAA 1,767,435
A, 6.00% due 10/1/2014 (Insured: AMBAC)
1,590,000 Alexandria Industrial Development Authority Institute For Defense Analyses Series Aaa/AAA 1,873,481
A, 6.00% due 10/1/2015 (Insured: AMBAC)
500,000 Arlington County Industrial Development, 6.30% due 7/1/2016 NR/A 511,645
2,000,000 Capital Region Airport Commission Refunding Series B, 8.125% due 7/1/2014 Aaa/AAA 2,141,780
(Insured: AMBAC)
1,000,000 Fauquier County Industrial Development Authority, 5.50% due 10/1/2016 (Insured: NR/AA 1,112,770
Radian)
2,000,000 Hampton Redevelopment Housing Authority Multi Family Housing Refunding Series Baa1/A1+ 2,049,340
1994, 7.00% due 7/1/2024 put 7/1/2004 (Chase Hampton Apartments Project; LOC:
Credit Suisse)
795,000 Hanover County Industrial Development Authority Medical Facilities Revenue, 6.00% Aaa/AAA 797,782
due 10/1/2021 (Insured: MBIA) (ETM)*
1,635,000 Norton Industrial Development Authority Hospital Refunding, 6.00% due 12/1/2014 NR/A 1,832,606
(Norton Community Hospital Project; Insured: ACA)
2,095,000 Spotsylvania County Industrial Development, 6.00% due 9/1/2019 put 9/1/2008 NR/NR 2,219,632
(Walter Grinders Project; LOC: Deutsche Bank)
2,000,000 Suffolk Redevelopment Housing Authority MFHR, 7.00% due 7/1/2024 put 7/1/2004 Baa2/NR 2,023,800
(Chase Heritage @ Dulles Project)
500,000 Virginia College Building Authority, 5.55% due 11/1/2019 put 11/1/2004 @ 100 Aa1/AA 522,660
(University of Richmond Project)
Washington (5.50%)
1,500,000 Benton County Public Utility District Refunding Series A, 5.625% due 11/1/2012 Aaa/AAA 1,719,000
(Insured: FSA)
1,000,000 Energy Northwest Washington Series A, 5.60% due 7/1/2015 (Wind Project) A3/A- 1,052,570
745,000 Energy Northwest Washington Series B, 5.10% due 7/1/2009 (Wind Project) A3/A- 792,404
415,000 Grant County Public Utility District-2 Wanapum Hydro Electric Revenue Series C, Aaa/AAA 457,276
6.00% due 1/1/2006 (Insured: AMBAC)
1,100,000 Pilchuck Development Public Corp. IDRB Series 1993, 6.25% due 8/1/2010 (Little Aa2/NR 1,102,013
Neck Properties Project; LOC: U.S. Bancorp)
500,000 Snohomish County Public Utility 001 Systems Notes, 5.00% due 12/1/2005 A1/SP1+ 533,695
750,000 Tacoma Electric Systems Revenue Series A, 5.50% due 1/1/2012 (Insured: FSA) Aaa/AAA 851,138
1,350,000 University of Washington Revenue Refunding, 5.25% due 8/15/2009 (University of Aaa/AAA 1,522,922
Washington Medical Center Project; Insured: MBIA)
2,690,000 Washington Health Care Facilities, 5.50% due 12/1/2010 (Insured: MBIA) Aaa/AAA 3,031,710
1,735,000 Washington Health Care Facilities, 6.00% due 12/1/2014 (Insured: MBIA) Aaa/AAA 2,000,490
1,945,000 Washington Health Care Facilities, 6.00% due 12/1/2015 (Insured: MBIA) Aaa/AAA 2,242,624
1,500,000 Washington Health Care Facilities Refunding, 6.375% due 10/1/2010 (Insured: FGIC) Aaa/AAA 1,779,090
1,025,000 Washington Health Care Facilities Sea Mar Community Health Center, 5.60% due Aa3/NR 1,091,748
1/1/2018 (LOC: U.S. Bancorp)
500,000 Washington Nonprofit Housing, 5.60% due 7/1/2011 (Kline Galland Center Project; NR/AA 549,975
Insured: Radian)
1,000,000 Washington Nonprofit Housing, 5.875% due 7/1/2019 (Kline Galland Center Project; NR/AA 1,081,430
Insured: Radian)
1,000,000 Washington Public Power Supply Capital Appreciation Refunding Series B, 0% due Aa1/AA- 733,940
7/1/2011
3,030,000 Washington Public Power Supply Refunding Series A, 5.00% due 7/1/2011 (Insured: Aaa/AAA 3,310,305
FSA)
960,000 Washington Public Power Supply System, 0% due 7/1/2010 (Project 3) Aa1/AA- 747,485
1,000,000 Washington State Multi Family Mortgage Revenue, 6.30% due 1/1/2021 (LOC: U.S. NR/AA- 1,087,040
Bank N.A.)
Wisconsin (0.70%)
115,000 Bass Lake PCRB, 6.50% due 4/1/2005 (Johnson Timber Corp. Project; SBA Guaranty) NR/NR 115,213
1,000,000 Wisconsin Health & Educational Facilities, 5.75% due 8/15/2020 (Eagle River NR/AA 1,079,900
Memorial Hospital Inc. Project; Insured: Radian)
2,000,000 Wisconsin Housing & Economic Development Housing Series A, 5.875% due 11/1/2016 Aaa/AAA 2,129,380
(Insured: AMBAC)
Other (0.50%)
Steventon Parsonage LLC, (83.33% of members interest) (b) NR/NR 2,250,000
TOTAL INVESTMENTS (100%) (Cost $435,056,913) $ 463,680,683
<FN>
+ Credit ratings are unaudited.
* Escrowed to maturity
(a) Bond in default, non income-producing security.
(b) Non income-producing security.
See notes to financial statements.
</FN>
Report of Independent Auditors
Thornburg Intermediate Municipal Fund
September 30, 2003
To the Trustees and Shareholders of
Thornburg Intermediate Municipal Fund
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 Intermediate Municipal
Fund series of Thornburg Investment Trust (the "Fund") at September 30, 2003,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
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 audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
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 audits, which included
confirmation of securities at September 30, 2003 by correspondence with the
custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
Index Comparisons
Thornburg Intermediate Municipal Fund
September 30, 2003
Index Comparison
Compares performance of Intermediate Municipal Fund, the Merrill Lynch Municipal
Bond (7-12 year) Index and the Consumer Price Index, for periods ending
September 30, 2003. On September 30, 2003, the weighted average securities
ratings of the Index and the Fund were AA and AA, respectively, and the weighted
average portfolio maturities of the Index and the Fund were 9.5 years and 8.5
years, respectively. Class C shares became available on September 1, 1994. Past
performance of the Index and the Fund may not be indicative of future
performance. The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on distributions or the redemption of fund
shares.
Thornburg Intermediate Municipal Fund Class A Total Returns, Since July 31,
1991, versus Merrill Lynch 7-12 Year
Municipal Index and Consumer Price Index (CPI)
ML Muni 7-12 yrs
Fund A Shares
CPI
Class A Shares
Average Annual Total Returns
(periods ending 9/30/03)(at max. offering price)
One year: 1.04%
Five years: 3.84%
Ten years: 4.73%
Since inception: (7/22/91): 5.94%
Thornburg Intermediate Municipal Fund Class C Total Returns, Since Inception,
versus Merrill Lynch 7-12 Year
Municipal Index and Consumer Price Index (CPI)
ML Muni 7-12 yrs
Fund C Shares
CPI
Class C Shares
Average Annual Total Returns
(periods ending 9/30/03)
One year: 2.12%
Five years: 3.86%
Since inception: (9/1/94): 4.95%
The Merrill Lynch 7-12 Year Municipal Bond Index representing a broad measure of
market performance. It is a model portfolio of municipal obligations throughout
the U.S., with an average maturity which ranges from seven to twelve years.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
TRUSTEES and Officers
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
Thornburg INTERMEDIATE municipal fund national portfolio a shares Outperformed
Tax-Free Money Market Funds
(Unaudited)
Investors sometimes ask us to compare Intermediate Municipal Fund to money
market fund returns. These investments have certain differences, and investors
in Intermediate Municipal Fund took more risk than money market fund investors
to earn their higher returns.
Return from a hypothetical $10,000 investment 9/30/93 through 9/30/03 (after
sales charges and fund expenses)
Lipper Tax-free Money
Market Fund Average $ 2,933
Thornburg Intermediate
Municipal Fund Nat'l Portfolio $ 5,844
The chart above is for the Fund's Class A Shares only. Class C and Class I
Shares have different sales charges and expenses. See the inside front cover
page for the 30-day SEC yield and the total returns at the maximum offering
prices for one year, three years, five years, ten years, and since inception for
each class of shares of the Fund.
Note 1: Future increases, if any, of any of
these investments may bear no relationship to prior increases. Quotations for
the money fund averages are based upon 30-day yield quotations for tax-exempt
money funds as sourced from the " Lipper Tax-free Money Market Average" for the
months covered by this analysis. The increase for the Class A Shares of
Intermediate Municipal Fund - National Portfolio is based upon the dividends
paid for the months covered by this analysis, the beginning offering price at
$13.74 per share and the ending NAV at $13.56 per share. These investments
returned the $10,000 initial investment in addition to the amounts shown above.
Note 2: This analysis does not take into account the effect, if any, caused by
state and local income taxes. The portion of the increase, if any, of
Intermediate Municipal Fund representing appreciation of the share price is
assumed to be taxed at a 15% federal tax rate. The average money market fund
increases shown above may differ from the return of a particular money market
fund. It is not possible to invest in this money fund average.
Note 3:
Generally, money market funds seek to maintain an investment portfolio with an
average maturity of 90 days or less. Intermediate Municipal Fund invests in
short-to-intermediate maturity municipal obligations. The net asset value of the
money funds did not fluctuate. The net asset value of the Class A Shares of
THIMX did vary from time to time, and will continue to vary in the future due to
the effect of changes in interest rates on the value of the investments the Fund
holds. The analysis assumes that the investor received the net asset value of
the shares owned, plus accrued income, at time of sale. Redemptions are made at
the then current net asset value, which may give you a gain or loss when you
sell your shares.
Note 4: This analysis assumes that the dividends from each of these investment
vehicles were reinvested and compounded monthly. Most money funds declare
dividends daily and pay them monthly. Intermediate Municipal Fund also declares
dividends daily and pays them monthly.
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
www.thornburg.com
This report is submitted for the general information of 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.
September 30, 2003
Thornburg Intermediate Municipal Fund - I Shares
ALL DATA AS OF 9/30/03
FUND FACTS: Thornburg Intermediate Municipal Fund
I Shares
Annualized Distribution Rate (at NAV) 4.21%
SEC Yield 3.08%
NAV $13.54
Maximum Offering Price $13.54
TOTAL RETURNS: (Annual Average - After Subtracting Maximum Sales Charge)
One Year 3.49%
Three Years 6.80%
Five Years 4.57%
Since Inception 5.58%
Inception Date 7/5/1996
The investment return and principal value of an investment in the Fund will
fluctuate so that, when redeemed, an investor's shares may be worth more or less
than their original cost.
The data quoted represent past performance and may not be construed as a
guarantee of future results.
The SEC Yield is computed in accordance with SEC standards measuring the net
investment income per share over a specified 30-day period expressed as a
percentage of the maximum offering price of the Fund's shares at the end of the
period.
The distribution rate is calculated by taking the sum of the month's total
distribution factors and dividing this sum by a 30-day period and annualizing to
360-day year. The value is then divided by the ending NAV to arrive at the
annualized distribution yield. The yield is calculated on a periodic basis and
is subject to change depending on the Fund's NAV and current distributions.
Letter to shareholders
Thornburg Intermediate Municipal Fund
October 20, 2003
Dear Fellow Shareholder:
I am pleased to present the Annual Report for your Thornburg Intermediate
Municipal Fund. The net asset value of the I shares decreased by 11 cents to
$13.54 during the year ending September 30, 2003. If you were with us for the
entire period, you received dividends of 57.2 cents per share. If you reinvested
dividends, you received 58.3 cents per share.
Interest rates on intermediate-term municipal bonds have risen somewhat over the
last year. For example, the interest rate on a ten-year AAA-rated municipal bond
rose from 3.40% on September 30, 2002 to 3.67% on September 30, 2003. Since
rising interest rates cause bond prices to fall, a ten-year bond that was worth
100% of par value on September 30, 2002 would be worth 97.95% of par on
September 30, 2003 (a 2.05% loss).
The price of your Fund has depreciated 0.80% over the one-year period ending
September 30, 2003. This is consistent with our goal of having lower price
volatility than comparable maturity bonds such as the one mentioned above.
Meanwhile your Fund has paid a steady monthly dividend, while short-term
interest rates have plummeted. Investors in money market funds and short-term
CDs, susceptible to reinvestment risk, are still feeling the pinch of reduced
income flow. To see how your Fund has performed relative to the money market
fund averages, turn to the back of this report.
Your Thornburg Intermediate Municipal Fund is a laddered portfolio of over 330
municipal obligations from 43 states. Today, your fund's weighted average
maturity is 8.5 years. We always keep it below 10 years. We ladder the maturity
dates of the bonds in your portfolio so that some of the bonds are scheduled to
mature during each of the coming years. Laddering intermediate bonds
accomplishes two goals. First, the staggered bond maturities contained in a
ladder defuse interest-rate risk and dampen the fund's price volatility. Second,
laddering gives the fund a steady cash flow stream from maturing bonds to
reinvest toward the top of the ladder where yields are typically higher. The
laddering strategy is what truly differentiates this fund from most bond mutual
funds. It will be particularly useful if interest rates rise, because it will
allow the fund to gradually increase the yield of the portfolio without having
to sell bonds prior to maturity at reduced prices. The chart below describes the
percentages of your fund's bond portfolio maturing in each of the coming years.
% of portfolio Cumulative %
maturing within maturing by end of
2 years = 11% year 2 = 11%
2 to 4 years = 10% year 4 = 21%
4 to 6 years = 8% year 6 = 29%
6 to 8 years = 13% year 8 = 42%
8 to 10 years = 15% year 10 = 57%
10 to 12 years = 16% year 12 = 73%
12 to 14 years = 13% year 14 = 86%
14 to 16 years = 5% year 16 = 91%
16 to 18 years = 7% year 18 = 98%
18 to 20 years = 1% year 20 = 99%
Percentages can and do vary. Data as of 9/30/03
We are gradually seeing more and more reasons to feel optimistic about the U.S.
economic recovery. Many economists expect GDP growth of 5-6% for the current
quarter, but question its sustainability. The current strength seems to be
largely driven by tax cuts, federal government spending, and continued cash
flows from the home refinancing boom. If we are to enter the next phase of
recovery, corporate capital spending and hiring must pick up. Meanwhile, despite
higher prices for items such as housing, insurance and health care, there is
virtually no evidence of widespread inflation. In fact, official measurements of
inflation, such as the Core Consumer Price Index, have continued to decline. So
we don't see any reason for Federal Reserve policy to change for the foreseeable
future.
We do, however, continue to believe that phase two of the recovery will
eventually materialize. It will probably happen in conjunction with a weakened
dollar and a heavier calendar of Treasury bond offerings. These factors would
likely cause interest rates to rise on short-term and long-term bonds. We have
kept your Fund's duration shorter than normal to prepare for such an
environment. Doing so has detracted somewhat from price appreciation as interest
rates fell, but should allow the fund to better take advantage of higher
interest rates if and when they arrive.
Most of the states are currently dealing with very sluggish revenue growth
following a terrible 2002, when revenues dropped over 10%. The Nelson A.
Rockefeller Institute of Government recently reported that State tax revenue
grew by 3.1% in the second quarter of 2003. Virtually all of the growth came
from enacted tax increases. Without the tax hikes, revenue would have only risen
0.4%. Yet, despite this difficult environment, Moody's Investment Services
announced that the number of upgrades exceeded the number of downgrades in the
second quarter of 2003. I believe that this is because many of the smaller
issuers that we tend to favor are faring better than the large state issuers. We
expect this trend to continue for the time being. Your Fund continues to
maintain high credit quality, with 88% of the portfolio rated A or above by one
of the major rating agencies and 53% rated AAA.
Over the years, our practice of laddering a diversified portfolio of short and
intermediate maturity municipal bonds has allowed your fund to perform
consistently well in varying interest rate environments. Thank you for investing
in Thornburg Intermediate Municipal Fund.
Sincerely,
George Strickland
Portfolio Manager
Statement of assets and liabilities
Thornburg Intermediate Municipal Fund
September 30, 2003
ASSETS
Investments at value (cost $435,056,913) .........................$ 463,680,684
Cash ............................................................. 144,074
Receivable for investments sold .................................. 578,299
Receivable for fund shares sold .................................. 910,151
Interest receivable .............................................. 6,299,941
Prepaid expenses and other assets ................................ 30,399
Total Assets ................................... 471,643,548
LIABILITIES
Payable for fund shares redeemed ................................. 489,409
Accounts payable and accrued expenses ............................ 247,042
Payable to investment advisor (Note 3) ........................... 221,160
Dividends payable ................................................ 567,001
Total Liabilities .............................. 1,524,612
NET ASSETS .......................................................$ 470,118,936
NET ASSETS CONSIST OF:
Net unrealized appreciation (depreciation) on investments .$ 28,623,771
Accumulated net realized gain (loss) ...................... (11,971,771)
Net capital paid in on shares of beneficial interest ...... 453,466,936
$ 470,118,936
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($390,079,589 applicable to 28,758,558 shares of beneficial
interest outstanding - Note 4) ..........................$ 13.56
Maximum sales charge, 2.00% of offering price .................... 0.28
Maximum Offering Price Per Share .................................$ 13.84
Class C Shares:
Net asset value and offering price per share *
($60,706,654 applicable to 4,470,083 shares of beneficial
interest outstanding - Note 4) ..........................$ 13.58
Class I Shares:
Net asset value, offering and redemption price per share
($19,332,693 applicable to 1,427,432 shares of beneficial
interest outstanding - Note 4) ..........................$ 13.54
* 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
Thornburg Intermediate Municipal Fund
Year Ended September 30, 2003
INVESTMENT INCOME:
Interest income (net of premium amortized of $1,992,676) ....... $ 22,893,132
EXPENSES:
Investment advisory fees (Note 3) .............................. 2,355,854
Administration fees (Note 3) ...................................
Class A Shares 500,423
Class C Shares ........................................ 66,042
Class I Shares 9,000
Distribution and service fees (Note 3)
Class A Shares ........................................ 960,651
Class C Shares ........................................ 528,337
Transfer agent fees
Class A Shares ........................................ 183,558
Class C Shares ........................................ 37,014
Class I Shares ........................................ 18,620
Registration and filing fees
Class A Shares ........................................ 13,629
Class C Shares ........................................ 9,527
Class I Shares ........................................ 10,778
Custodian fees (Note 3) ........................................ 228,400
Professional fees .............................................. 52,301
Accounting fees ................................................ 33,110
Trustee fees ................................................... 11,367
Other expenses ................................................. 88,469
Total Expenses ............................... 5,107,080
Less:
Expenses reimbursed by investment advisor (Note 3) .... (89,672)
Distribution and service fees waived (Note 3) ......... (211,335)
Fees paid indirectly (Note 3) ......................... (3,630)
Net Expenses ................................. 4,802,443
Net Investment Income ........................ 18,090,689
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments ........................ (4,597,883)
Increase (Decrease) in unrealized appreciation of investments .. 581,701
Net Realized and Unrealized
Gain (Loss) on Investments ................ (4,016,182)
Net Increase (Decrease) in Net Assets Resulting
from Operations ........................... $ 14,074,507
See notes to financial statements ..............................
Statements of changes in net assets
Thornburg Intermediate Municipal Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ....................................... $ 18,090,689 $ 17,948,811
Net realized gain (loss) on investments sold ................ (4,597,883)
404,094
Increase (Decrease) in unrealized appreciation of investments 581,701
13,589,207
Net Increase (Decrease) in Net Assets
Resulting from Operations .............. 14,074,507 31,942,112
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares ..................................... (15,480,099) (15,604,559)
Class C Shares ..................................... (1,849,255) (1,580,424)
Class I Shares ..................................... (761,335) (763,828)
FUND SHARE TRANSACTIONS (Note 4):
Class A Shares ..................................... (20,552,567) 63,181,761
Class C Shares ..................................... 13,877,646 5,751,936
Class I Shares ..................................... 1,174,895 517,290
Net Increase (Decrease) in Net Assets ..... (9,516,208) 83,444,288
NET ASSETS:
Beginning year ..................................... 479,635,144 396,190,856
End of year ........................................ $ 470,118,936 $ 479,635,144
<FN>
See notes to financial statements ...........................
</FN>
Notes to financial statements
Thornburg Intermediate Municipal Fund
September 30, 2003
NOTE 1 - ORGANIZATION
Thornburg Intermediate Municipal Fund (the "Fund") is a diversified series of
Thornburg Investment Trust (the "Trust"). The Trust is 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 nine
series of shares of beneficial interest in addition to those of the Fund:
Thornburg Florida Intermediate Municipal Fund, Thornburg New York Intermediate
Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg Limited Term
U.S. Government Fund, Thornburg Limited Term Income Fund, Thornburg Value Fund,
Thornburg International Value Fund, Thornburg Core Growth Fund, and Thornburg
Investment Income Builder Fund. Each series is considered to be a separate
entity for financial reporting and tax purposes and bears expenses directly
attributable to it. The Fund's investment objective is to obtain as high a level
of current income exempt from Federal income taxes as is consistent with the
preservation of capital.
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 the
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 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 service and distribution fees, administration fees, and
certain registration and transfer agent expenses.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the
Fund are as follows:
Valuation of Investments: In determining net asset value, the Fund utilizes an
independent pricing service approved by the Trustees. Debt investment securities
have a primary market over the counter and are valued on the basis of valuations
furnished by the pricing service. The pricing service values portfolio
securities at quoted bid prices, normally at 4:00 pm EST or the yield
equivalents when quotations are not readily available. Securities for which
quotations are not readily available are valued at fair value as determined by
the pricing service using methods which include consideration of yields or
prices of municipal obligations of comparable quality, type of issue, coupon,
maturity, and rating; indications as to value from dealers and general market
conditions. The valuation procedures used by the pricing service and the
portfolio valuations received by the Fund are reviewed by the officers of the
Trust under the general supervision of the 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 (if any) and tax exempt 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 interest rate 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 at the trade date. Securities purchased on a when-issued or
delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on
shares for which the Fund has received payment. Dividends are paid monthly 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 capital gains, to the extent available, will be
distributed at least annually.
General: Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Premiums and discounts on securities
purchased are amortized to call dates or maturity dates of the respective
securities. Realized gains and losses from the sale of securities are recorded
on an identified cost basis. Net investment income, other than class specific
expenses, and realized and unrealized gains and losses, are allocated daily to
each class of shares based upon the relative net asset value of outstanding
shares (or the value of the dividend-eligible shares, as appropriate) of each
class of shares at the beginning of the day (after adjusting for the current
share activity of the respective class). Expenses common to all funds are
allocated among the funds comprising the Trust based upon their relative net
asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Fund. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services for
which the fees are payable at the end of each month. For the year ended
September 30, 2003, these fees were payable at annual rates ranging from .50 of
1% to .275 of 1% of the average daily net assets of the Fund. The Fund also has
an administrative services agreement with the Advisor, whereby the Advisor 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
..125 of 1% of the average daily net assets attributable to each class of shares.
For the year ended September 30, 2003, the Advisor voluntarily reimbursed
certain class specific expenses and administrative fees of $30,296 for Class A
shares, $26,697 for Class C shares, and $32,679 for Class I shares.
The Fund has an underwriting agreement with Thornburg Securities Corporation
(the "Distributor"), which acts as the Distributor of the Fund shares. For the
year ended September 30, 2003, the Distributor has advised the Fund that it
earned net commissions aggregating $2,928 from the sale of Class A shares and
collected contingent deferred sales charges aggregating $5,723 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 Advisor an amount not to exceed .25 of 1%
per annum of the average daily net assets attributable to each class of shares
of the Fund for payments made by the Advisor to securities dealers and other
financial institutions to obtain various shareholder related services. The
Advisor may pay out of its own resources additional expenses for distribution of
the Fund'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 compensates the
Distributor for services in promoting the sale of Class C shares of the Fund at
an annual rate of up to .75% 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,
2003, are set forth in the statement of operations. Distribution fees in the
amount of $211,335 were waived for Class C shares.
The Fund has an agreement with the custodian bank to indirectly pay a portion of
the custodian's fees through credits earned by the Fund's cash on deposit with
the bank. This deposit agreement is an alternative to overnight investments.
Custodial fees have been adjusted to reflect amounts that would have been paid
without this agreement, with a corresponding adjustment reflected as fees paid
indirectly in the statement of operations. For the year ended September 30, 2003
fees paid indirectly were $3,630.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4 - SHARES OF BENEFICIAL INTEREST
At September 30, 2003, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold .................... 6,705,141 $ 90,330,472 9,552,738 $ 126,489,062
Shares issued to shareholders in
reinvestment of dividends ... 649,800 8,760,445 685,346 9,083,944
Shares repurchased ............. (8,890,248) (119,643,484) (5,466,398) (72,391,245)
Net Increase (Decrease) ........ (1,535,307) $ (20,552,567) 4,771,686 $ 63,181,761
Class C Shares
Shares sold .................... 1,632,604 $ 22,060,706 1,233,340 $ 16,354,222
Shares issued to shareholders in
reinvestment of dividends ... 102,429 1,382,647 95,055 1,261,742
Shares repurchased ............. (709,799) (9,565,707) (891,701) (11,864,028)
Net Increase (Decrease) ........ 1,025,234 $ 13,877,646 436,694 $ 5,751,936
Class I Shares
Shares sold .................... 807,931 $ 10,899,236 597,867 $ 7,883,195
Shares issued to shareholders in
reinvestment of dividends ... 39,457 531,139 38,405 508,597
Shares repurchased ............. (762,688) (10,255,480) (594,962) (7,874,502)
Net Increase (Decrease) ........ 84,700 $ 1,174,895 41,310 $ 517,290
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003, the Fund had purchase and sale
transactions (excluding short-term securities) of $68,493,852 and $74,637,014,
respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components of capital is as
follows:
Cost of investments for tax purpose $ 435,056,913
Gross tax unrealized appreciation $ 30,440,766
Gross tax unrealized depreciation (1,816,995)
Net tax unrealized appreciation
(depreciation) on investments $ 28,623,771
At September 30, 2003, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2004 $ 2,201,912
2005 200,249
2006 27,737
2007 6,140
2008 2,563,342
2009 2,374,508
2011 11,597
$ 7,385,485
Unutilized tax basis capital losses may be carried forward to offset realized
gains in future years. To the extent such carry forwards are used, capital gain
distributions may be reduced to the extent provided by regulations.
During the year ended September 30, 2003, $832,412 of capital loss carry
forwards from prior years expired. This amount was reclassed to paid in capital.
At September 30, 2003, the Fund had deferred capital losses occurring subsequent
to October 31, 2002 of $4,586,286. For tax purposes, such losses will be
reflected in the year ending September 30, 2004.
Dividends paid by the Fund for the years ended September 30, 2003 and September
30, 2002 represent exempt interest dividends, which are excludable by
shareholders from gross income for Federal income tax purposes.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of losses realized subsequent to October
31 on the sale of securities.
Financial highlights
Thornburg Intermediate Municipal Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class I Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ......................... $ 13.65 $ 13.26 $ 12.76 $ 12.98 $ 13.74
Income from investment operations:
Net investment income ............................. 0.57 0.61 0.65 0.65 0.66
Net realized and unrealized
gain (loss) on investments ............... (0.11) 0.39 0.50 (0.22) (0.76)
Total from investment operations ........................... 0.46 1.00 1.15 0.43 (0.10)
Less dividends from:
Net investment income .................................. (0.57) (0.61) (0.65) (0.65) (0.66)
Change in net asset value .................................. (0.11) 0.39 0.50 (0.22) (0.76)
Net asset value, end of year ............................... $ 13.54 $ 13.65 $ 13.26 $ 12.76 $ 12.98
Total return (a) ........................................... 3.49% 7.75% 9.23% 3.45% (0.79)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ............................. 4.23% 4.57% 4.99% 5.10% 4.89%
Expenses, after expense reductions ................ 0.62% 0.58% 0.55% 0.68% 0.69%
Expenses, after expense reductions
and net of custody credits ............... 0.62% 0.58% -- -- --
Expenses, before expense reductions ............... 0.80% 0.79% 0.79% 0.80% 0.79%
Portfolio turnover rate .................................... 15.13% 16.36% 18.24% 21.97% 23.17%
Net assets at end of year (000) ............................ $ 19,333 $ 18,330 $ 17,258 $ 17,563 $ 18,772
<FN>
(a) Sales loads are not reflected in computing total return.
</FN>
Schedule of Investments
Thornburg Intermediate Municipal Fund
CUSIPS: CLASS A - 885-215-202, CLASS C - 885-215-780, CLASS I - 885-215-673
NASDAQ SYMBOLS: CLASS A - THIMX, CLASS C - THMCX, CLASS I - THMIX
Alabama (1.30%)
800,000 Alabama Docks Revenue, 6.00% due 10/1/2008 (Insured: MBIA) Aaa/AAA $937,472
55,000 Birmingham South Medical Clinic, 6.30% due 11/1/2003 (ETM)* NR/AAA 55,251
2,525,000 Huntsville Health Care Series A, 4.65% due 6/1/2024 put 6/1/2005 (Insured: MBIA) Aaa/AAA 2,645,039
505,000 Huntsville Series A, 6.25% due 2/1/2006 Aa2/AA 543,400
1,600,000 Lauderdale County & Florence Health Group Series A, 5.75% due 7/1/2013 (Insured: Aaa/AAA 1,803,504
MBIA)
Alaska (0.40%)
515,000 Anchorage Alaska Prerefunded, 5.25% due 10/1/2008 (Insured: FGIC) Aaa/AAA 556,900
485,000 Anchorage Alaska Unrefunded, 5.25% due 10/1/2008 (Insured: FGIC) Aaa/AAA 522,452
500,000 Anchorage School Refunding, 6.00% due 10/1/2012 (Insured: FGIC) Aaa/AAA 597,095
Arizona (1.90%)
4,580,000 Maricopa County Industrial Development Capital Appreciation Series B, 4.80% due NR/BBB 4,683,416
12/1/2031 put 12/1/2004 (Waste Management Inc. Project)
2,715,000 Pima County Industrial Development Authority Series C, 6.70% due 7/1/2021 Baa3/NR 2,735,797
(Arizona Charter Schools Project)
400,000 Tucson General Obligation Series D, 9.75% due 7/1/2012 (ETM)* Aa2/AA 588,260
500,000 Tucson General Obligation Series D, 9.75% due 7/1/2013 (ETM)* Aa2/AA 751,605
Arkansas (0.70%)
500,000 Conway Electric Revenue Refunding, 2.00% due 8/1/2004 A2/NR 502,825
1,135,000 Jefferson County Hospital Revenue Refunding & Improvement, 5.75% due 6/1/2012 NR/A 1,254,118
(Regional Medical Center Project)
1,200,000 Jefferson County Hospital Revenue Refunding & Improvement, 5.75% due 6/1/2013 NR/A 1,318,332
(Regional Medical Center Project)
California (5.10%)
3,000,000 California Department of Water Resources Power Series A, 5.75% due 5/1/2017 A3/BBB+ 3,325,680
675,000 California HFA Revenue Series 1985-B, 9.875% due 2/1/2017 Aa2/AA- 726,131
4,500,000 California Statewide Community Development Authority Certificate of Aaa/AAA 5,149,620
Participation, 5.50% due 10/1/2007 (Unihealth America Project; Insured: AMBAC)
(ETM)*
1,000,000 Camino Hospital District Revenue Series A, 6.25% due 8/15/2017 (ETM)* Aaa/AAA 1,178,830
1,740,000 Escondido Joint Powers Financing Authority Lease Revenue, 0% due 9/1/2007 (Center Aaa/AAA 1,520,673
for the Arts Project; Insured: AMBAC)
2,140,000 Golden West Schools Financing Authority Capital Appreciation, 0% due 8/1/2018 Aaa/AAA 972,523
(Insured: MBIA)
500,000 Irvine Improvement Bond Act 1915, 1.20% due 9/2/2023 put 10/1/2003 (daily demand VMIG1/NR 500,000
notes)
200,000 Irvine Improvement Bond Act 1915 Limited Obligation Assessment District, 1.15% VMIG1/A1+ 200,000
due 9/2/2025 put 10/1/2003 (daily demand notes)
500,000 Irwindale Community Redevelopment Agency, 6.60% due 8/1/2018 pre-refunded Baa3/NR 557,735
8/1/2005
1,590,000 Los Angeles Regional Airport Lease Refunding, 5.25% due 1/1/2009 (Facilities Aaa/AAA 1,747,983
Laxfuel Corp. La International Project)
2,280,000 Orange County Refunding Recovery, 6.50% due 6/1/2005 (Insured: MBIA) Aaa/AAA 2,481,073
1,500,000 Sacramento Municipal Utility District Electric Revenue, 9.43% due 11/15/2006 Aaa/AAA 1,576,650
(Insured: FSA)
500,000 San Diego County Water Authority Revenue & Refunding Series 1993-A, 10.174% due Aaa/AAA 630,740
4/25/2007 (Insured: FGIC)
145,000 San Marcos Certificate of Participation Series C, 0% due 8/15/2005 (ETM)* NR/AAA 141,295
740,000 San Marcos Certificate of Participation Series D, 0% due 9/2/2005 (ETM)* NR/AAA 720,597
700,000 Sulphur Springs School District General Obligation Series B, 5.60% due 3/1/2004 NR/A 713,020
800,000 Sulphur Springs School District General Obligation Series B, 5.70% due 3/1/2005 NR/A 850,472
450,000 Sunline Transit Agency Certificate of Participation Series A, 5.625% due 7/1/2004 A2/NR 464,306
215,000 Sunline Transit Agency Certificate of Participation Series A, 5.75% due 7/1/2005 A2/NR 221,742
Colorado (4.90%)
1,265,000 Adams County Communication Center Series A, 5.75% due 12/1/2016 Baa1/NR 1,339,724
100,000 Arvada Industrial Development Revenue, 5.25% due 12/1/2007 (Wanco Inc. Project; NR/NR 105,419
LOC: U.S. Bank, N.A.)
450,000 Arvada Industrial Development Revenue, 5.60% due 12/1/2012 (Wanco Inc. Project; NR/NR 455,224
LOC: U.S. Bank, N.A.)
1,000,000 Central Platte Valley Metropolitan District, 5.15% due 12/1/2013 pre-refunded NR/AAA 1,157,560
12/1/2009
2,000,000 Central Platte Valley Metropolitan District Refunding Series A, 5.00% due NR/A1+ 2,190,640
12/1/2031 put 12/1/2009 (LOC: US Bank)
500,000 Colorado Educational & Cultural Facilities Refunding, 6.00% due 4/1/2021 (Charter Baa2/NR 507,225
School Cherry Creek Project)
100,000 Colorado Housing Finance Authority Single Family Program Subordinated Series C, A1/A+ 101,726
5.75% due 10/1/2007
1,545,000 Colorado Student Obligation Bond Student Loan Senior Subordinated Series B, 6.20% A2/NR 1,640,156
due 12/1/2008
2,070,000 Denver City & County Certificates of Participation Series B, 5.00% due 12/1/2009 Aa2/AA 2,307,677
2,465,000 Denver City & County Certificates of Participation Series B, 5.00% due 12/1/2011 Aa2/AA 2,697,573
500,000 El Paso County School District 11, 7.10% due 12/1/2013 Aa3/AA- 647,495
2,395,000 Interstate South Metropolitan District Refunding, 6.00% due 12/1/2020 (LOC: BNP NR/AA- 2,472,790
Paribas)
2,830,000 Larimer County General Obligation, 8.45% due 12/15/2005 (Poudre School District Aa3/NR 3,267,433
Project)
1,005,000 Northwest Parkway Public Highway Authority Capital Appreciation Senior Aaa/AAA 758,021
Convertible C, 0% due 6/15/2014 (Insured: FSA)
2,500,000 Plaza Metropolitan District 1 Colorado Revenue Public Improvement Fee/Tax NR/NR 2,518,725
Increment, 7.70% due 12/1/2017
350,000 Superior Metropolitan District 1 Water Refunding & Improvement Series B, 5.45% NR/A 364,560
due 12/1/2020 put 12/1/2004 @ 100 (LOC: Allied Irish)
75,000 Thornton County Single Family Mortgage Revenue Series 1992-A, 8.05% due 8/1/2009 A3/NR 75,733
Delaware (0.30%)
1,500,000 Delaware State Health Facilities Authority Revenue Series A, 5.25% due 5/1/2016 NR/AA 1,602,465
(Nanticoke Memorial Hospital Project; Insured: Radian)
District of (1.10%)
Columbia
600,000 District of Columbia Hospital Revenue, 5.375% due 8/15/2015 (ETM)* Aaa/AAA 679,176
3,000,000 District of Columbia Refunding Series B, 6.00% due 6/1/2015 (Insured: MBIA) Aaa/AAA 3,585,930
250,000 District of Columbia Revenue, 0% due 2/15/2004 (Assoc. of American Medical NR/AA- 248,490
Colleges Project)
1,500,000 District of Columbia Tax Increment Capital Appreciation, 0% due 7/1/2019 Aaa/AAA 666,120
(Mandarin Oriental Project; Insured: FSA)
Florida (3.80%)
1,000,000 Broward County Resource Recovery Revenue, 5.00% due 12/1/2007 A3/AA- 1,100,450
60,000 Duval County HFA Single Family Housing Revenue Series 94, 6.10% due 4/1/2006 Aaa/NR 63,055
(Collateralized: GNMA)
60,000 Duval County HFA Single Family Housing Revenue Series 94, 6.10% due 10/1/2006 Aaa/NR 63,021
(Collateralized: GNMA)
1,700,000 Duval County Multi Family Housing Revenue Refunding, 5.90% due 9/1/2016 (St. NR/A+ 1,770,431
Augustine Apartments Project)
1,675,000 Enterprise Community Development District Assessment Bonds, 6.00% due 5/1/2010 Aaa/AAA 1,739,236
(Insured: MBIA)
3,000,000 Escambia County Health Facility Revenue, 5.95% due 7/1/2020 (Florida Health Care Aaa/NR 3,225,060
Facility Loan Project; Insured: AMBAC)
155,000 Florida Board of Education Capital Outlay, 9.125% due 6/1/2014 (ETM)* Aaa/AAA 216,747
905,000 Florida Board of Education Capital Outlay, 9.125% due 6/1/2014 Aa2/AA+ 1,270,186
1,460,000 Florida Board of Education Capital Outlay Refunding Public Education Series D, Aa2/AA+ 1,669,583
5.75% due 6/1/2018
700,000 Florida State Department of Corrections, 6.25% due 3/1/2015 (Okeechobee Aaa/AAA 760,116
Correctional Project)
500,000 Orlando & Orange County Expressway Revenue, 8.25% due 7/1/2014 (Insured: FGIC) Aaa/AAA 703,000
150,000 Osceola County Health Facilities Revenue Series 1994, 5.75% due 5/1/2004 Aaa/AAA 154,131
(Evangelical Lutheran Good Samaritan Project; Insured: AMBAC)
1,000,000 Palm Beach County Solid Waste Revenue Refunding Series A, 6.00% due 10/1/2010 Aaa/AAA 1,182,670
(Insured: AMBAC)
1,200,000 Pasco County Housing Finance Authority MFHR, 5.50% due 6/1/2027 put 6/1/2008 NR/AA- 1,272,804
(Cypress Trail Apartments Project; Guaranty: Axa Reinsurance)
650,000 Pensacola Apartment Revenue Series A, 6.25% due 10/1/2004 (Insured: MBIA) Aaa/AAA 682,084
600,000 Sarasota County Public Hospital Board, 1.23% due 7/1/2037 put 10/1/2003 (Sarasota VMIG1/A1+ 600,000
Memorial Hospital Project) (daily demand notes)
1,000,000 Turtle Run Community Development District Refunding Water Management Benefit Aaa/AAA 1,105,040
Special Assessment, 5.00% due 5/1/2011 (Insured: MBIA)
Georgia (0.10%)
235,000 Georgia Municipal Electric Authority Power Revenue Unrefunded Series Y, 10.00% A2/NR 321,363
due 1/1/2010
Hawaii (0.70%)
2,000,000 Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Insured: MBIA) Aaa/AAA 2,444,100
970,000 Hawaii Housing Finance Development Corp. Series B, 5.85% due 7/1/2017 Aaa/AAA 998,208
(Collateralized: FNMA)
Idaho (0.20%)
985,000 Boise City Industrial Development Corp., 5.40% due 12/15/2009 (Western Trailer A1/NR 1,007,192
Co. Project; LOC: First Security)
Illinois (13.20%)
1,930,000 Bedford Park Tax Increment Revenue Refunding Series 1993, 8.00% due 12/1/2010 NR/BBB- 2,083,628
pre-refunded 12/1/2004
300,000 Central Lake County Joint Action Water Agency Series 1991, 0% due 5/1/2005 Aaa/AAA 293,727
(Insured: MBIA)
800,000 Champaign County Community Unit Series C, 0% due 1/1/2011 pre-refunded 1/1/2010 @ Aaa/AAA 613,048
94.672 (Insured: FGIC)
3,000,000 Chicago Housing Authority Capital, 5.00% due 7/1/2008 Aa3/AA 3,318,420
600,000 Chicago Park District Harbor, 5.75% due 1/1/2011 A2/A 697,458
2,285,000 Chicago Tax Increment Allocation Lincoln Belmont A, 5.30% due 1/1/2014 (Insured: NR/A 2,397,468
ACA)
650,000 Chicago Wastewater Transmission Revenue Refunding Second Lien, 5.50% due 1/1/2013 Aaa/AAA 742,567
(Insured: MBIA)
500,000 Cook County Capital Improvement, 5.50% due 11/15/2008 (Insured: FGIC) Aaa/AAA 563,710
4,200,000 Cook County School District Class A, 0% due 12/1/2022 NR/NR 1,349,838
655,000 Du Page County School District Capital Appreciation, 0% due 2/1/2010 (Insured: Aaa/NR 526,057
FGIC)
1,500,000 Freeport Illinois, 5.375% due 1/1/2018 Aaa/AAA 1,653,225
1,385,000 Hoffman Estates Tax Increment Revenue, 0% due 5/15/2004 Baa1/NR 1,356,123
2,860,000 Illinois Development Finance Authority Revenue, 6.00% due 11/15/2012 (Insured: Aaa/AAA 3,303,014
MBIA)
500,000 Illinois Development Financing Authority, 7.125% due 3/15/2007 (Children's Home & NR/A-1 507,340
Aid Society Project; LOC: Bank One)
2,400,000 Illinois Development Financing Authority Debt Restructuring Revenue Series 1994, NR/A 2,601,936
7.25% due 11/15/2009 (East St. Louis Project)
2,160,000 Illinois Educational Facilities Authority Revenues Adjusted Medium Term, 4.75% A2/A 2,215,037
due 11/1/2036 put 11/1/2016 @ 100 (Field Museum Project)
475,000 Illinois Educational Facilities Authority Revenues Capital Appreciation, 0% due Aaa/AAA 247,261
7/1/2014 pre-refunded 7/1/2009 @ 57.17 (Insured: MBIA)
230,000 Illinois Educational Facilities Authority Revenues Loyola University A, 6.00% due Aaa/AAA 274,162
7/1/2012 (Insured: MBIA) (ETM)*
1,500,000 Illinois Educational Facilities Authority Revenues Midwestern University B, 5.50% NR/A 1,557,570
due 5/15/2018 (Insured: ACA)
2,000,000 Illinois Educational Facilities Authority Revenues Series B, 4.40% due 7/1/2025 Aa1/AA 2,049,700
put 7/1/2004 (University of Chicago Project)
1,540,000 Illinois Educational Facilities Authority Revenues Unrefunded Balance Loyola A, Aaa/AAA 1,673,903
5.00% due 7/1/2006 (Insured: MBIA)
770,000 Illinois Educational Facilities Authority Revenues Unrefunded Balance Loyola A, Aaa/AAA 908,261
6.00% due 7/1/2011 (ETM)*
970,000 Illinois Educational Facilities Authority Revenues Unrefunded Balance Loyola A, Aaa/AAA 1,131,505
6.00% due 7/1/2012 (ETM)*
261,000 Illinois Health Facilities Authority Revenue, 7.60% due 8/15/2010 (Insured: FSA) Aaa/AAA 269,743
1,900,000 Illinois Health Facilities Authority Revenue, 5.75% due 8/15/2013 (Children's Aaa/AAA 2,144,150
Memorial Hospital Series A Project; Insured: AMBAC)
990,000 Illinois Health Facilities Authority Revenue, 5.70% due 2/20/2021 (Midwest Care Aaa/NR 1,055,271
Center Project; Collateralized: GNMA)
1,250,000 Illinois Health Facilities Authority Revenue Healthcare Systems, 6.25% due A2/A 1,348,950
11/15/2019 (OSF Healthcare Project)
37,000 Illinois Health Facilities Authority Revenue Series A, 7.60% due 8/15/2010 Aaa/AAA 37,183
(Insured: FSA)
870,000 Illinois Health Facilities Authority Revenue Series A, 6.10% due 8/15/2014 Aa2/AA+ 922,374
(Northwestern Memorial Hospital Project)
1,205,000 Illinois University Revenues, 5.25% due 1/15/2018 (UIC South Campus Development Aaa/AAA 1,324,572
Project)
680,000 Jackson & Williamson Countys, Illinois, 7.50% due 12/1/2009 (Insured: AMBAC) Aaa/AAA 861,309
1,000,000 Lake County Community Consolidated School District 73, 9.00% due 1/1/2006 Aaa/NR 1,165,000
(Insured: FSA)
5,550,000 Lake County Community High School Capital Appreciation Series B, 0% due 12/1/2012 Aaa/NR 3,842,931
(Insured: FGIC)
755,000 Marion Refunding, 5.00% due 9/15/2012 (Insured: FGIC) Aaa/AAA 839,454
710,000 McHenry County School District Woodstock General Obligation, 6.80% due 1/1/2006 Aaa/AAA 794,036
(Insured: FSA)
1,015,000 Melrose Park Tax Increment Series B, 6.50% due 12/15/2015 (Insured: FSA) Aaa/AAA 1,221,065
800,000 Sangamon County Property Tax Lease Receipts, 7.45% due 11/15/2006 Aa3/NR 900,552
2,400,000 Sangamon County School District Series A, 5.875% due 8/15/2018 (Hay Edwards NR/A 2,503,440
Project)
1,170,000 Sherman Revenue Refunding Mortgage, 6.10% due 10/1/2014 (Collateralized: GNMA) Aaa/AAA 1,288,041
1,600,000 Sherman Revenue Refunding Mortgage, 6.20% due 10/1/2019 (Collateralized: GNMA) Aaa/AAA 1,735,856
1,425,000 Southern Illinois University Revenues, 0% due 4/1/2014 (Insured: MBIA) Aaa/AAA 912,442
500,000 Southwestern Illinois Development Authority Revenue, 5.375% due 8/15/2015 Baa2/BBB+ 509,120
1,590,000 University of Illinois Revenue Capital Appreciation, 0% due 4/1/2014 (Insured: Aaa/AAA 1,019,142
MBIA)
1,000,000 West Chicago Industrial Development Revenue, 6.90% due 9/1/2024 (Leggett & Platt NR/A+ 1,068,350
Inc. Project)
1,000,000 Will & Kendall Counties Community Series B, 5.125% due 1/1/2014 (Insured: FSA) Aaa/AAA 1,091,860
3,000,000 Will County Community School 365-U Capital Appreciation, 0% due 11/1/2011 Aaa/AAA 2,210,970
(Insured: FSA)
Indiana (6.30%)
895,000 Allen County Economic Development, 5.80% due 12/30/2012 (Indiana Institute of NR/NR 962,242
Technology Project)
1,355,000 Allen County Economic Development, 5.75% due 12/30/2015 (Indiana Institute of NR/NR 1,481,191
Technology Project)
1,000,000 Allen County War Memorial Series A, 5.25% due 11/1/2013 (Insured: AMBAC) Aaa/NR 1,112,130
1,000,000 Boone County Hospital Association, 5.625% due 1/15/2015 (Insured: FGIC) Aaa/AAA 1,116,520
80,000 Carmel Economic Development Revenue Refunding FHA Loan, 5.875% due 9/1/2005 Aa2/NR 81,174
(Insured: FHA)
1,515,000 Dyer Redevelopment Authority, 6.40% due 7/15/2015 NR/BBB+ 1,659,576
1,910,000 Dyer Redevelopment Authority, 6.50% due 7/15/2016 NR/BBB+ 2,092,902
350,000 East Chicago Elementary School Building First Mortgage Series A, 6.25% due NR/A 401,919
7/5/2008
1,000,000 Gary Building Corp. - Lake County First Mortgage Series 1994-B, 8.25% due NR/NR 1,045,000
7/1/2010 (Sears Building Project)
1,020,000 Goshen Chandler School Building Capital Appreciation Refunding, 0% due 1/15/2011 Aaa/AAA 777,383
(Insured: MBIA)
2,600,000 Hamilton Southeastern Indiana, 6.25% due 7/15/2006 (North Delaware School Aaa/AAA 2,931,084
Building Project; Insured: AMBAC)
1,000,000 Huntington Economic Development Revenue, 6.40% due 5/1/2015 (United Methodist NR/NR 1,050,010
Memorial Project)
700,000 Indiana Bond Bank Common School Fund Advanced Purchase Funding, 5.00% due Aaa/AAA 783,811
2/1/2009 (Insured: AMBAC)
1,500,000 Indiana Bond Bank Special Program Hendrick's Redevelopment Series B, 6.20% due NR/A+ 1,500,165
2/1/2023 (LOC: Canadian Imperial Bank)
575,000 Indiana Health Facility Hospital Revenue, 5.75% due 9/1/2015 (ETM)* NR/AA- 594,533
800,000 Indiana Health Facility Hospital Revenue, 5.40% due 2/15/2016 (Clarian Health Aaa/AAA 880,168
Obligation Group Project; Insured: MBIA)
910,000 Indiana Public School Building Corp. First Mortgage, 6.00% due 7/5/2007 (Insured: NR/AA 1,037,300
State Aid Witholding)
1,065,000 Indiana State Educational Facilities Authority Revenue, 5.65% due 10/1/2015 NR/A- 1,129,475
(University of Indianapolis Project)
1,025,000 Indiana State Educational Facilities Authority Revenue, 5.70% due 10/1/2016 NR/A- 1,083,435
(University of Indianapolis Project)
500,000 Indianapolis Economic Development Revenue, 5.50% due 6/1/2014 Aa3/NR 540,615
740,000 Indianapolis Local Public Improvement Bond Bank, 0% due 7/1/2009 (ETM)* Aa2/AA- 623,850
500,000 Portage Township Multi School Bldg., 5.50% due 7/15/2015 (Insured: FGIC) Aaa/AAA 564,190
2,500,000 Rockport Pollution Control Revenue Series A, 4.90% due 6/1/2025 put 6/1/2007 Baa2/BBB 2,600,200
(Indiana Michigan Power Co. Project)
1,200,000 Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2012 NR/AA- 1,349,088
1,685,000 West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2017 (Insured: Aaa/AAA 1,902,651
FGIC and State Aid Withholding)
Iowa (2.10%)
2,590,000 Iowa Department of General Services Certificate of Participation Series 1992, Aaa/AAA 2,627,296
6.50% due 7/1/2006 (Insured: AMBAC) (ETM)*
1,000,000 Iowa Finance Authority Health Care Facilities, 6.00% due 7/1/2013 (Genesis A1/NR 1,100,180
Medical Center Project)
1,000,000 Iowa Finance Authority Hospital Facility Revenue, 6.00% due 7/1/2012 (Trinity Aaa/AAA 1,168,120
Regional Hospital Project; Insured: FSA)
1,000,000 Iowa Finance Authority Hospital Facility Revenue, 6.75% due 2/15/2016 A1/NR 1,125,050
2,000,000 Iowa Finance Authority Revenue, 6.00% due 12/1/2018 (Catholic Health Initiatives Aa2/AA 2,218,840
Project)
1,250,000 Iowa Finance Authority Revenue Refunding Trinity Health Series B, 5.75% due Aa3/AA- 1,372,375
12/1/2015
Kansas (1.00%)
4,200,000 Wichita Hospital Revenue Refunding Improvement Series XI, 6.75% due 11/15/2019 NR/A+ 4,715,928
(Christi Health System Project)
Kentucky (1.30%)
4,000,000 Kentucky Economic Development Finance Authority Series C, 0% due 10/1/2015 Aaa/AAA 4,115,920
(Norton Healthcare Project; Insured: MBIA)
1,120,000 Paintsville First Mortgage Revenue Refunding Series 1991, 8.65% due 9/1/2005 NR/NR 1,134,683
(Paul B. Hall Medical Center Project)
785,000 Wilmore Housing Facilities Revenue, 5.55% due 7/1/2013 (LOC: Allied Irish Bank) NR/NR 835,177
Louisiana (2.00%)
2,992 East Baton Rouge Mortgage Financing Authority Purchase Revenue, 8.25% due Aaa/AAA 3,040
2/25/2011 (Collateralized: GNMA)
1,595,000 Jefferson Sales Tax District Revenue Series B, 5.50% due 12/1/2008 (Insured: Aaa/AAA 1,840,104
AMBAC)
390,000 Louisiana Local Government Environment Series A, 4.10% due 9/1/2007 (Housing Baa1/NR 389,150
Bellemont Apts. Project)
320,000 Louisiana Public Facilities Authority MFHR, 5.95% due 6/15/2019 put 6/15/2005 NR/AA 321,139
(Carlyle Apts. Project; Insured: AXA)
1,709,550 Louisiana Public Facilities Authority Revenue Refinancing, 8.00% due 10/1/2009 NR/NR 355,586
(Schwegman Westside Expressway Project A) (a)
3,250,000 Louisiana State Offshore Term Refunding Series D, 4.00% due 9/1/2023 put 9/1/2008 A3/A-1 3,396,055
(Loop LLC Project)
3,000,000 Morehouse Parish Pollution Revenue Refunding Series A, 5.25% due 11/15/2013 Baa2/BBB 3,136,470
(International Paper Co. Project)
Maryland (0.20%)
935,000 Ann Arundel County Multi Family Housing Revenue, 7.45% due 12/1/2024 put NR/BBB- 938,918
12/1/2003 (Twin Coves Apartment Project; HUD Section 8)
Massachusetts (1.20%)
1,280,000 Massachusetts Development Finance Agency Refunding, 6.25% due 1/1/2015 (Odd NR/NR 1,178,790
Fellows Home Project)
2,510,000 Massachusetts Housing Finance Authority Insured Rental Housing Series 1994-A, Aaa/AAA 2,615,521
6.20% due 1/1/2006 (Insured: AMBAC)
1,905,000 Massachusetts Industrial Financing Agency Revenue Series A, 6.125% due 12/1/2011 Aaa/AAA 1,969,446
(Insured: MBIA)
Michigan (1.80%)
350,000 Auburn Hills Economic Limited Obligation Revenue Refunding & Improvement, 6.15% NR/NR 348,908
due 12/1/2005 (Foamade Industries Project; LOC: Comerica Bank)
650,000 Kalamazoo Hospital Finance Authority Revenue Series 1994-A, 6.25% due 6/1/2014 Aaa/AAA 796,913
(Borgess Medical Center Project) (ETM)*
1,000,000 Kent Hospital Finance Authority Michigan Hospital, 7.25% due 1/15/2013 (Insured: Aaa/AAA 1,240,270
MBIA)
750,000 Livonia Public School District, 5.50% due 5/1/2014 Aaa/AAA 767,528
415,000 Michigan Housing Redevelopment Authority Ltd. Obligation, 6.50% due 9/15/2007 Aaa/AAA 429,301
(Greenwood Villa Project; Insured: FSA)
2,450,000 Michigan State Building Authority Revenue Refunding Facilities Program Series I, Aaa/AAA 2,726,899
5.25% due 10/15/2017
400,000 Michigan State Hospital Finance Authority Revenue Pooled Loan Program, 5.50% due Aaa/AAA 409,388
11/1/2013
1,530,000 Southfield Economic Development Corp. Refunding Revenue N.W. 12 Limited NR/NR 1,528,684
Partnership, 7.25% due 12/1/2010
Minnesota (0.20%)
700,000 Southern Minnesota Municipal Power Agency Supply, Prerefunded to various dates, Aaa/AAA 716,135
Series A, 5.75% due 1/1/2018 (Insured: MBIA)
Mississippi (0.50%)
1,500,000 Mississippi Higher Educational Authority Series C, 7.50% due 9/1/2009 A2/NR 1,534,215
825,000 Mississippi Hospital Equipment Revenue, 6.40% due 1/1/2007 (Rush Foundation Baa3/AAA 856,185
Project; Guaranty: Connie Lee)
Missouri (0.90%)
2,025,000 Missouri Development Finance Board Healthcare Series A, 5.40% due 11/1/2018 A2/NR 2,092,108
(Lutheran Home Aged Project; LOC: Commerce Bank)
2,000,000 Missouri Environment Improvement Energy Refunding, 3.90% due 1/2/2012 put VMIG1/A-2 2,041,040
9/1/2004 (Kansas City Power & Light Project)
Nebraska (0.20%)
845,000 Madison County Hospital Authority 1 Hospital Revenue, 5.50% due 7/1/2014 (Faith NR/AA 923,974
Regional Health Services Project; Insured: Radian)
Nevada (1.90%)
640,000 Clark County Pollution Control Revenue Series B, 6.60% due 6/1/2019 (Nevada Power Aaa/AAA 660,192
Company Project; Insured: FGIC)
1,265,000 Las Vegas Special Improvement District Refunding Senior Local Improvement Series Aaa/AAA 1,393,676
A, 5.375% due 6/1/2013 (Insured: FSA)
2,600,000 Washoe County Capital Appreciation Reno Sparks Series B, 0% due 7/1/2011 Aaa/AAA 1,937,468
(Insured: FSA)
2,250,000 Washoe County Hospital Facility Revenue Series 1993 A, 6.00% due 6/1/2015 (Washoe A2/A+ 2,297,385
Medical Center Project)
2,350,000 Washoe County School District Refunding Series B, 5.00% due 6/1/2010 (Insured: Aaa/AAA 2,636,018
FGIC)
New Hampshire (1.80%)
5,140,000 Manchester Housing & Redevelopment Authority, 0% due 1/1/2017 NR/AA 2,540,034
4,990,000 Manchester Housing & Redevelopment Authority Capital Appreciation Series B, 0% NR/AA 2,591,357
due 1/1/2016 (Insured: Radian)
3,000,000 New Hampshire Pollution Refunding Central Maine Power Co., 5.375% due 5/1/2014 A3/BBB+ 3,208,590
New Jersey (1.30%)
285,000 New Jersey EDA Refunding Revenue, 7.50% due 12/1/2019 (Spectrum for Living A3/A 286,419
Development Project; LOC: PNC Bank)
65,000 New Jersey State Transit Corp. Capital Grant Anticipation Notes Series A, 5.125% Aaa/AAA 65,193
due 2/1/2004 (Insured: AMBAC)
5,000,000 New Jersey State Transport Trust Fund Authority Series C, 5.50% due 6/15/2017 Aa3/AA- 5,593,900
(Transportation Systems Project)
New Mexico (1.80%)
1,500,000 Albuquerque Educational Facilities Revenue Refunding, 1.15% due 10/15/2016 put VMIG1/AA 1,500,000
10/7/2003 (Albuquerque Academy Project; Insured: Bank of America) (weekly demand
notes)
2,000,000 Farmington Pollution Control Revenue, 1.20% due 5/1/2024 put 10/1/2003 (LOC: Bank P1/A1+ 2,000,000
of America) (daily demand notes)
650,000 Farmington Pollution Control Revenue, 1.20% due 9/1/2024 put 10/1/2003 (LOC: P1/A1+ 650,000
Barclays Bank) (daily demand notes)
2,800,000 New Mexico Housing Authority, Multi Family Housing Revenue, 1.10% due 1/15/2033 NR/A1+ 2,800,000
put 10/7/2003 (Arbors/Courtyard Apartments Project) (weekly demand notes)
590,000 Sandia Pueblo General Obligation, 5.40% due 12/1/2003 (LOC: Wells Fargo) NR/AA- 593,941
600,000 Sandia Pueblo General Obligation, 5.60% due 12/1/2005 (LOC: Wells Fargo) NR/AA- 603,846
New York (3.10%)
2,000,000 Long Island Power Authority General Series B, 5.00% due 12/1/2006 Baa1/A- 2,180,100
1,080,000 Metro Transportation Authority New York Service Control Series B, 5.25% due A3/AA- 1,185,721
7/1/2006
1,000,000 Nassau Health Care Corp., 6.00% due 8/1/2011 (Insured: FSA) Aaa/AAA 1,158,850
1,935,000 New York City General Obligation Series E, 6.00% due 8/1/2008 (Insured: FGIC) Aaa/AAA 2,182,970
1,175,000 New York City Industrial Development Agency Series A, 5.00% due 6/1/2010 (Lycee NR/A 1,265,863
Francais De New York Project; Insured: ACA)
875,000 New York City Trust Cultural Resources, 5.75% due 7/1/2015 (Museum of American NR/A 957,329
Folk Art Project; Insured: ACA)
220,000 New York Housing Finance Service Series A, 6.375% due 9/15/2015 pre-refunded A3/AAA 257,946
9/15/2007 @ 100
800,000 New York Series B-2, Subseries B-4, 1.15% due 8/15/2023 put 10/1/2003 (daily VMIG1/A1+ 800,000
demand notes)
1,290,000 New York State Dormitory Authority Revenues, 5.75% due 7/1/2022 NR/AAA 1,330,635
2,200,000 Port Authority New York & New Jersey Special Obligation, 6.25% due 12/1/2011 (JFK Aaa/AAA 2,549,734
International Air Terminal 6 Project)
500,000 Port Authority New York & New Jersey Special Obligation, 1.15% due 5/1/2019 put VMIG1/A1+ 500,000
10/1/2003 (daily demand notes)
North Carolina (0.40%)
650,000 Craven County Industrial Facilities Pollution Control Financing Authority Solid Baa2/NR 658,209
Waste Revenue, 7.875% due 6/1/2005 (Weyerhaeuser Co. Project)
1,200,000 North Carolina Eastern Municipal Power Refunding Series A, 5.70% due 1/1/2013 Aaa/AAA 1,364,880
(Insured: MBIA)
North Dakota (0.10%)
365,000 Grand Forks Health Care System Revenue Bonds Series 1997, 6.25% due 8/15/2006 Aaa/AAA 410,037
(Altra Health Systems Obligated Group Project; Insured: MBIA)
Ohio (2.60%)
1,000,000 Butler County Transportation Improvement, 6.00% due 4/1/2010 (Insured: FSA) Aaa/AAA 1,164,680
1,610,000 Cleveland Cuyahoga County Development Bond Fund A, 6.25% due 5/15/2016 (LOC: NR/NR 1,645,468
FifthThird Bank)
1,100,000 Franklin County Health Care Revenue Series 1995-A, 6.00% due 11/1/2010 Aa2/NR 1,168,992
(Heinzerling Foundation Project; LOC: Banc One)
500,000 Franklin County Hospital, 5.80% due 12/1/2005 (Doctors Project) (ETM)* A3/NR 513,810
500,000 Middleburg Heights Ohio Refunding, 6.75% due 8/15/2005 (Southwest General Health Aaa/AAA 551,050
Center Project; Insured: FSA)
685,000 North Ridgeville Economic Development, 0% due 2/1/2015 NR/A 272,466
2,000,000 Ohio Pollution Control Revenue Refunding, 5.625% due 3/1/2015 (General Motors Baa1/BBB 2,143,680
Corp. Project)
1,600,000 Ohio State Higher Educational Facility Revenue, 5.05% due 7/1/2037 put 7/1/16 A2/A 1,675,536
(Kenyon College Project)
760,000 Reynoldsburg Health Care Facilities Revenue Bonds Series 1997, 5.70% due Aaa/NR 823,855
10/20/2012 (Collateralized: GNMA)
2,000,000 Trumbull County Ohio Health Refunding & Improvement, 1.23% due 10/1/2031 put NR/A-1 2,000,000
10/1/2003 (daily demand notes)
Oklahoma (2.40%)
340,000 Grady County Industrial Authority Correctional Facilities, 5.00% due 11/1/2004 Aaa/AAA 346,627
(Insured: MBIA)
1,020,000 Oklahoma City Municipal Improvement Authority, 0% due 7/1/2008 (Insured: AMBAC) Aaa/AAA 902,996
500,000 Oklahoma City Municipal Water & Sewer Capital Appreciation Series C, 0% due Aaa/AAA 477,235
7/1/2006 (Insured: AMBAC)
1,125,000 Oklahoma City Municipal Water & Sewer Series C, 0% due 7/1/2011 (Insured: AMBAC) Aaa/AAA 846,664
1,485,000 Oklahoma City Municipal Water & Sewer Series C, 0% due 7/1/2013 (Insured: AMBAC) Aaa/AAA 1,004,379
825,000 Oklahoma Development Finance Authority Hospital Association Pooled Hospital A, Aaa/AAA 911,773
5.40% due 6/1/2013 (Insured: AMBAC)
750,000 Oklahoma Industrial Authority Revenue Refunding, 6.00% due 8/15/2010 (Integris Aaa/AAA 869,363
Baptist Project; Insured: AMBAC)
2,800,000 Tulsa County Independent School District Combined Purpose, 4.50% due 8/1/2007 Aa3/A+ 3,067,596
1,485,000 Tulsa Industrial Development Authority Hospital Revenue, 6.10% due 2/15/2009 Aa3/AA 1,647,266
pre-refunded 2/15/2006 @ 100 (St. John's Medical Center Project)
500,000 Tulsa Public Facilities Authority Solid Waste Revenue, 5.65% due 11/1/2006 (Ogden Aaa/AAA 554,760
Martin Project; Insured: AMBAC)
500,000 Woodward Municipal Hospital Authority Revenue Series 1994, 8.25% due 11/1/2009 NR/NR 515,580
Oregon (0.60%)
705,000 Albany Hospital Facility Authority Gross Revenue & Refunding Series 1994, 7.00% NR/NR 725,001
due 10/1/2005 (Mennonite Home Project)
800,000 Forest Grove Campus Improvement & Refunding Pacific University, 6.00% due NR/AA 902,760
5/1/2015 (Insured: Radian)
1,070,000 Oregon Economic Development Department of Revenue Series CLII, 7.70% due Aa2/NR 1,147,757
12/1/2014 (Smokecraft Project; LOC: Seafirst Bank)
Pennsylvania (2.00%)
380,000 Admiral Peary Area Vocational School, 5.25% due 2/1/2005 NR/A 381,284
500,000 Allegheny County Hospital Development, 7.00% due 8/1/2015 (ETM)* NR/AAA 638,930
1,400,000 Allegheny County Hospital Development Health Series B, 6.50% due 5/1/2012 (South Baa1/NR 1,444,436
Hills Health Systems Project)
1,900,000 Carbon County Industrial Development Authority Refunding, 6.65% due 5/1/2010 NR/BBB- 2,031,138
(Panther Creek Partners Project)
795,000 Lancaster County Capital Appreciation Series B, 0% due 5/1/2014 (Insured: FGIC) Aaa/NR 503,060
795,000 Lancaster County Capital Appreciation Series B, 0% due 11/1/2014 (Insured: FGIC) Aaa/NR 490,308
800,000 Lancaster County Capital Appreciation Series B, 0% due 5/1/2015 (Insured: FGIC) Aaa/NR 474,488
785,000 Lehigh County General Purpose Shepard Rehab. Hospital, 6.00% due 11/15/2007 Aaa/AAA 904,508
(Insured: AMBAC)
800,000 McKeesport Area School District Series B, 0% due 10/1/2004 NR/A 788,496
2,032,839 Pennsylvania Higher Education University Series 14, 0% due 7/1/2020 (Insured: Aaa/AAA 592,878
AMBAC)
500,000 Pennsylvania State Higher Educational Facility Allegheny Delaware Valley Aaa/AAA 565,505
Obligation A, 5.60% due 11/15/2009 (Insured: MBIA)
365,000 Philadelphia Water & Sewer Revenue 10th Series, 7.35% due 9/1/2004 (ETM)* Aaa/AAA 384,776
Rhode Island (0.90%)
1,840,000 Providence Series C, 5.50% due 1/15/2011 (Insured: FGIC) Aaa/AAA 2,112,670
1,000,000 Rhode Island Health & Education Building Refunding, 6.00% due 8/1/2014 (Credit NR/AAA 1,112,340
Support: FHA)
1,065,000 Rhode Island Health & Education Building Refunding Higher Education State NR/AA 1,142,042
University, 5.00% due 3/15/2014 (Insured: Radian)
South Dakota (0.20%)
1,000,000 South Dakota Housing Development Authority Homeownership Series B, 4.85% due Aa1/AAA 1,072,810
5/1/2009
Tennessee (0.50%)
2,000,000 Knox County Health, 4.90% due 6/1/2031 put 6/1/2011 (Collateralized: FNMA) NR/AAA 2,096,620
Texas (16.90%)
500,000 Austin Utility Systems Revenue Refunding Comb Series A, 5.75% due 11/15/2013 Aaa/AAA 511,835
(Insured: MBIA)
1,250,000 Bexar County Health Facilities Development Corp., 6.125% due 7/1/2022 (Army NR/BBB- 1,289,200
Retirement Residence Project)
600,000 Bexar County Housing Finance Corp., 5.50% due 1/1/2016 (Insured: MBIA) Aaa/NR 638,412
1,035,000 Bexar County Housing Finance Corp., 5.70% due 1/1/2021 (Insured: MBIA) Aaa/NR 1,091,356
2,000,000 Bexar County Housing Finance Corp., 6.50% due 12/1/2021 A3/NR 1,985,040
1,200,000 Bexar County Housing Finance Corp. Multi Family Housing, 5.40% due 8/1/2012 Aaa/NR 1,257,972
(Dymaxion & Marrach Park Apts. A Project; Insured: MBIA)
1,270,000 Bexar County Housing Finance Corp. Multi Family Housing, 5.95% due 8/1/2020 Aaa/NR 1,365,555
(Dymaxion & Marrach Park Apts. A Project; Insured: MBIA)
975,000 Bexar County Housing Finance Corp. Series A, 5.875% due 4/1/2014 (Honey Creek Aaa/NR 1,027,357
Apartments Project; Insured: MBIA)
800,000 Bexar County Housing Finance Corp. Series A, 6.125% due 4/1/2020 (Honey Creek Aaa/NR 839,688
Apartments Project; Insured: MBIA)
2,800,000 Birdville Independent School District Refunding, 0% due 2/15/2012 (Guaranty: PSF) Aaa/AAA 2,006,284
1,130,000 Carroll Independent School District Capital Appreciation Refunding, 0% due Aaa/AAA 829,025
2/15/2011 (Guaranty: PSF)
5,000,000 Coppell Independent School District Capital Appreciation Refunding, 0% due NR/AAA 3,118,000
8/15/2013 (Guaranty: PSF)
1,100,000 De Soto Independent School District Refunding, 5.125% due 8/15/2017 (Guaranty: NR/AAA 1,103,069
PSF)
3,360,000 Duncanville Independent School District Capital Appreciation Refunding Series B, Aaa/AAA 2,156,549
0% due 2/15/2014 (ETM)*
3,000,000 Duncanville Independent School District Capital Appreciation Refunding Series B, Aaa/AAA 1,622,100
0% due 2/15/2016 (Guaranty: PSF)
3,750,000 El Paso Independent School District Capital Appreciation Refunding, 0% due Aaa/AAA 2,834,250
8/15/2010 (Guaranty: PSF)
2,500,000 El Paso Independent School District Capital Appreciation Refunding, 0% due Aaa/AAA 1,762,050
8/15/2011 (Guaranty: PSF)
2,460,000 Ennis Independent School District Refunding, 0% due 8/15/2012 (Guaranty: PSF) Aaa/NR 1,693,390
2,490,000 Ennis Independent School District Refunding, 0% due 8/15/2013 (Guaranty: PSF) Aaa/NR 1,594,820
2,525,000 Ennis Independent School District Refunding, 0% due 8/15/2014 (Guaranty: PSF) Aaa/NR 1,505,835
1,000,000 Fort Worth Water & Sewer Revenue, 5.25% due 2/15/2009 Aa2/AA 1,133,230
1,375,000 Gulf Coast Center Revenue, 6.75% due 9/1/2020 (Mental Health Retardation Center NR/BBB+ 1,468,376
Project)
6,245,000 Hays Consolidated Independent School District Capital Appreciation, 0% due Aaa/AAA 4,009,727
8/15/2013 (Guaranty: PSF)
880,000 Houston Water Conveyance System Contract Certificate of Participation Series F, Aaa/AAA 942,550
7.20% due 12/15/2004 (Insured: AMBAC)
470,000 Irving Hospital Authority Series B, 5.80% due 7/1/2009 (Irving Healthcare Systems Aaa/AAA 492,696
Project; Insured: FSA)
1,500,000 Irving Waterworks & Sewer Revenue Refunding & Improvement, 5.375% due 8/15/2014 Aa2/AA 1,661,775
2,000,000 Leander Independent School District Unlimited Tax School Building & Refunding Aaa/NR 1,946,740
Series 1992, 0% due 8/15/2005 (Guaranty: PSF)
1,420,000 Mesquite Independent School District Refunding, 0% due 8/15/2012 (Guaranty: PSF) NR/AAA 962,348
1,000,000 Midlothian Independent School District Capital Appreciation Refunding, 0% due Aaa/NR 716,530
2/15/2012 (Guaranty: PSF)
400,000 Midtown Redevelopment Authority Tax, 5.50% due 1/1/2004 (Insured: Radian) Baa2/AA 404,196
735,000 Midtown Redevelopment Authority Tax, 6.00% due 1/1/2012 (Insured: Radian) Baa2/AA 829,168
500,000 Midtown Redevelopment Authority Tax, 6.00% due 1/1/2013 (Insured: Radian) Baa2/AA 560,710
500,000 North Central Texas Health Facility Development, 5.50% due 4/1/2005 (Zale Lipshy Aaa/AAA 531,075
University Hospital Project; Insured: FSA)
2,400,000 North Central Texas Health Facility Development Series B, 5.75% due 2/15/2015 Aaa/AAA 2,733,552
(Insured: MBIA)
1,000,000 Pharr San Juan Alamo Independent Building, 5.75% due 2/1/2013 (Guaranty: PSF) Aaa/AAA 1,145,990
1,000,000 Sabine River Authority Texas Pollution Refunding Series A, 5.80% due 7/1/2022 Baa2/BBB 983,080
(TXU Energy Co. Project)
3,000,000 Sam Rayburn Municipal Power Agency Refunding, 6.00% due 10/1/2016 Baa2/BBB- 3,168,600
1,775,000 Stafford Economic Development, 6.00% due 9/1/2017 (Insured: FGIC) Aaa/AAA 2,092,246
715,000 Tarrant County Health Facilities, 6.00% due 9/1/2004 (Harris Methodist Health Aaa/AAA 747,425
Systems Project; Insured: AMBAC) (ETM)*
3,500,000 Tarrant County Health Facilities, 6.625% due 11/15/2020 (Adventist/Sunbelt) A3/A 3,850,735
500,000 Texarkana Health Facilities Hospital Refunding Series A, 5.75% due 10/1/2009 Aaa/AAA 575,615
(Wadley Regional Medical Center Project; Insured: MBIA)
2,500,000 Texarkana Health Facilities Hospital Refunding Series A, 5.75% due 10/1/2011 Aaa/AAA 2,874,975
(Insured: MBIA)
1,000,000 Texas State Capital Appreciation Refunding Superconducting Series C, 0% due Aaa/AAA 994,900
4/1/2004 (ETM)*
1,000,000 Texas State Turnpike Authority Central Turnpike Systems Bond Anticipation Notes Aa3/AA 1,108,980
Second Tier, 5.00% due 6/1/2007
2,420,000 Texas State Unrefunded Balance, 7.00% due 8/1/2020 (Water Development Board Aa1/AA 2,533,861
Project)
2,000,000 Travis County Health Facilities Development Series A, 5.75% due 11/15/2010 Aaa/AAA 2,283,020
(Ascension Health Project; Insured: MBIA)
3,000,000 Travis County Health Facilities Development Series A, 6.25% due 11/15/2014 Aaa/AAA 3,644,850
(Ascension Health Project; Insured: MBIA)
600,000 Upper Trinity Regional Water District Regional Treated Water Supply Systems Aaa/AAA 729,978
Series A, 7.125% due 8/1/2008 (Insured: FGIC)
870,000 Waco Health Facilities Development Corp. Series A, 6.00% due 11/15/2015 Aa2/AAA 1,046,958
pre-refunded 11/15/2009 (Ascension Health)
1,050,000 Waco Health Facilities Development Corp. Series A, 6.00% due 11/15/2016 Aa2/AAA 1,263,570
pre-refunded 11/15/2009 (Ascension Health)
500,000 West Harris County Municipal Utility Refunding, 6.00% due 3/1/2017 (Insured: NR/AA 558,345
Radian)
Utah (1.30%)
1,085,000 Salt Lake City Municipal Building Series B, 5.30% due 10/15/2012 (Insured: AMBAC) Aaa/AAA 1,215,059
595,000 Utah Board Regents Auxiliary Refunding Series A, 5.25% due 5/1/2013 NR/AA 661,967
1,000,000 Utah County Municipal Building Authority, 5.50% due 11/1/2016 (Insured: AMBAC) Aaa/NR 1,125,510
1,425,000 Utah Housing Finance Agency, 6.05% due 7/1/2016 (Credit Support: FHA) NR/AAA 1,505,456
380,000 Utah Housing Finance Agency Single Family Mortgage D-2 Class I, 5.85% due Aa2/AA 395,059
7/1/2015
940,000 Utah Water Finance Agency Revenue Pooled Loan Financing Program Series A, 5.00% Aaa/NR 1,045,017
due 10/1/2012 (Insured: AMBAC)
Virginia (4.10%)
2,000,000 Alexandria Industrial Development Authority, 5.90% due 10/1/2020 (Insured: AMBAC) Aaa/AAA 2,301,280
1,500,000 Alexandria Industrial Development Authority Institute For Defense Analyses Series Aaa/AAA 1,767,435
A, 6.00% due 10/1/2014 (Insured: AMBAC)
1,590,000 Alexandria Industrial Development Authority Institute For Defense Analyses Series Aaa/AAA 1,873,481
A, 6.00% due 10/1/2015 (Insured: AMBAC)
500,000 Arlington County Industrial Development, 6.30% due 7/1/2016 NR/A 511,645
2,000,000 Capital Region Airport Commission Refunding Series B, 8.125% due 7/1/2014 Aaa/AAA 2,141,780
(Insured: AMBAC)
1,000,000 Fauquier County Industrial Development Authority, 5.50% due 10/1/2016 (Insured: NR/AA 1,112,770
Radian)
2,000,000 Hampton Redevelopment Housing Authority Multi Family Housing Refunding Series Baa1/A1+ 2,049,340
1994, 7.00% due 7/1/2024 put 7/1/2004 (Chase Hampton Apartments Project; LOC:
Credit Suisse)
795,000 Hanover County Industrial Development Authority Medical Facilities Revenue, 6.00% Aaa/AAA 797,782
due 10/1/2021 (Insured: MBIA) (ETM)*
1,635,000 Norton Industrial Development Authority Hospital Refunding, 6.00% due 12/1/2014 NR/A 1,832,606
(Norton Community Hospital Project; Insured: ACA)
2,095,000 Spotsylvania County Industrial Development, 6.00% due 9/1/2019 put 9/1/2008 NR/NR 2,219,632
(Walter Grinders Project; LOC: Deutsche Bank)
2,000,000 Suffolk Redevelopment Housing Authority MFHR, 7.00% due 7/1/2024 put 7/1/2004 Baa2/NR 2,023,800
(Chase Heritage @ Dulles Project)
500,000 Virginia College Building Authority, 5.55% due 11/1/2019 put 11/1/2004 @ 100 Aa1/AA 522,660
(University of Richmond Project)
Washington (5.50%)
1,500,000 Benton County Public Utility District Refunding Series A, 5.625% due 11/1/2012 Aaa/AAA 1,719,000
(Insured: FSA)
1,000,000 Energy Northwest Washington Series A, 5.60% due 7/1/2015 (Wind Project) A3/A- 1,052,570
745,000 Energy Northwest Washington Series B, 5.10% due 7/1/2009 (Wind Project) A3/A- 792,404
415,000 Grant County Public Utility District-2 Wanapum Hydro Electric Revenue Series C, Aaa/AAA 457,276
6.00% due 1/1/2006 (Insured: AMBAC)
1,100,000 Pilchuck Development Public Corp. IDRB Series 1993, 6.25% due 8/1/2010 (Little Aa2/NR 1,102,013
Neck Properties Project; LOC: U.S. Bancorp)
500,000 Snohomish County Public Utility 001 Systems Notes, 5.00% due 12/1/2005 A1/SP1+ 533,695
750,000 Tacoma Electric Systems Revenue Series A, 5.50% due 1/1/2012 (Insured: FSA) Aaa/AAA 851,138
1,350,000 University of Washington Revenue Refunding, 5.25% due 8/15/2009 (University of Aaa/AAA 1,522,922
Washington Medical Center Project; Insured: MBIA)
2,690,000 Washington Health Care Facilities, 5.50% due 12/1/2010 (Insured: MBIA) Aaa/AAA 3,031,710
1,735,000 Washington Health Care Facilities, 6.00% due 12/1/2014 (Insured: MBIA) Aaa/AAA 2,000,490
1,945,000 Washington Health Care Facilities, 6.00% due 12/1/2015 (Insured: MBIA) Aaa/AAA 2,242,624
1,500,000 Washington Health Care Facilities Refunding, 6.375% due 10/1/2010 (Insured: FGIC) Aaa/AAA 1,779,090
1,025,000 Washington Health Care Facilities Sea Mar Community Health Center, 5.60% due Aa3/NR 1,091,748
1/1/2018 (LOC: U.S. Bancorp)
500,000 Washington Nonprofit Housing, 5.60% due 7/1/2011 (Kline Galland Center Project; NR/AA 549,975
Insured: Radian)
1,000,000 Washington Nonprofit Housing, 5.875% due 7/1/2019 (Kline Galland Center Project; NR/AA 1,081,430
Insured: Radian)
1,000,000 Washington Public Power Supply Capital Appreciation Refunding Series B, 0% due Aa1/AA- 733,940
7/1/2011
3,030,000 Washington Public Power Supply Refunding Series A, 5.00% due 7/1/2011 (Insured: Aaa/AAA 3,310,305
FSA)
960,000 Washington Public Power Supply System, 0% due 7/1/2010 (Project 3) Aa1/AA- 747,485
1,000,000 Washington State Multi Family Mortgage Revenue, 6.30% due 1/1/2021 (LOC: U.S. NR/AA- 1,087,040
Bank N.A.)
Wisconsin (0.70%)
115,000 Bass Lake PCRB, 6.50% due 4/1/2005 (Johnson Timber Corp. Project; SBA Guaranty) NR/NR 115,213
1,000,000 Wisconsin Health & Educational Facilities, 5.75% due 8/15/2020 (Eagle River NR/AA 1,079,900
Memorial Hospital Inc. Project; Insured: Radian)
2,000,000 Wisconsin Housing & Economic Development Housing Series A, 5.875% due 11/1/2016 Aaa/AAA 2,129,380
(Insured: AMBAC)
Other (0.50%)
Steventon Parsonage LLC, (83.33% of members interest) (b) NR/NR 2,250,000
TOTAL INVESTMENTS (100%) (Cost $435,056,913) $ 463,680,683
<FN>
+ Credit ratings are unaudited.
* Escrowed to maturity
(a) Bond in default, non income-producing security.
(b) Non income-producing security.
See notes to financial statements.
</FN>
Report of Independent Auditors
Thornburg Intermediate Municipal Fund
Report of Independent Auditors
Thornburg Intermediate Municipal Fund
To the Trustees and Class I Shareholders of
Thornburg Intermediate Municipal Fund
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 Intermediate Municipal
Fund series of Thornburg Investment Trust (the "Fund") at September 30, 2003,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for the Class I shares for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. 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 audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, 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
audits, which included confirmation of securities at September 30, 2003 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
Index Comparisons
Thornburg Intermediate Municipal Fund
September 30, 2003
Index Comparison
Compares performance of Intermediate Municipal Fund, the Merrill Lynch Municipal
Bond (7-12 year) Index and the Consumer Price Index, for periods ending
September 30, 2003. On September 30, 2003, the weighted average securities
ratings of the Index and the Fund were AA and AA, respectively, and the weighted
average portfolio maturities of the Index and the Fund were 9.5 years and 8.5
years, respectively. Class I shares became available on July 5, 1996. Past
performance of the Index and the Fund may not be indicative of future
performance. The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on distributions or the redemption of fund
shares.
Thornburg Intermediate Municipal Fund Class I Total Returns, Since July 30,
1996, versus Merrill Lynch 7-12 Year
Municipal Index and Consumer Price Index (CPI)
ML Muni 7-12 yrs
Fund A Shares
CPI
Class I Shares
Average Annual Total Returns
(periods ending 9/30/03)
One year: 3.49%
Five years: 4.57%
Since inception: (7/5/96): 5.58%
The Merrill Lynch 7-12 Year Municipal Bond Index representing a broad measure of
market performance. It is a model portfolio of municipal obligations throughout
the U.S., with an average maturity which ranges from seven to twelve years.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
TRUSTEES and Officers
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
Thornburg INTERMEDIATE municipal fund national portfolio I shares Outperformed
Tax-Free Money Market Funds
(Unaudited)
Investors sometimes ask us to compare Intermediate Municipal Fund to money
market fund returns. These investments have certain differences, and investors
in Intermediate Municipal Fund took more risk than money market fund investors
to earn their higher returns.
Return from a hypothetical $10,000 investment 9/30/93 through 9/30/03 (after
sales charges and fund expenses)
Lipper Tax-free Money
Market Fund Average $2,933
Thornburg Intermediate
Municipal Fund Nat'l Portfolio $6,658
The chart above is for the Fund's Class I Shares. Class I Shares have different
sales charges and expenses than Class A and Class C shares of the Fund. See the
inside front cover page for the 30-day SEC yield and the total returns at the
maximum offering prices for one year, three years, five years, ten years, and
since inception for Class I shares of the Fund.
*Prior to 7/5/96 the illustration includes actual returns of the Class A shares
adjusted for the lower Institutional expenses.
Note 1: Future increases, if any,
of any of these investments may bear no relationship to prior increases.
Quotations for the money fund averages are based upon 30-day yield quotations
for tax-exempt money funds as sourced from the " Lipper Tax-free Money Market
Average" for the months covered by this analysis. The increase for the Class I
Shares of Intermediate Municipal Fund - National Portfolio is based upon the
dividends paid for the months covered by this analysis, the beginning offering
price at $13.47 per share and the ending NAV at $13.54 per share. These
investments returned the $10,000 initial investment in addition to the amounts
shown above.
Note 2: This analysis does not take into account the effect, if
any, caused by state and local income taxes. The portion of the increase, if
any, of Intermediate Municipal Fund representing appreciation of the share price
is assumed to be taxed at a 15% federal tax rate. The average money market fund
increases shown above may differ from the return of a particular money market
fund. It is not possible to invest in this money fund average.
Note 3:
Generally, money market funds seek to maintain an investment portfolio with an
average maturity of 90 days or less. Intermediate Municipal Fund invests in
short-to-intermediate maturity municipal obligations. The net asset value of the
money funds did not fluctuate. The net asset value of the Class I Shares of
THMIX did vary from time to time, and will continue to vary in the future due to
the effect of changes in interest rates on the value of the investments the Fund
holds. The analysis assumes that the investor received the net asset value of
the shares owned, plus accrued income, at time of sale. Redemptions are made at
the then current net asset value, which may give you a gain or loss when you
sell your shares.
Note 4: This analysis assumes that the dividends from each of these investment
vehicles were reinvested and compounded monthly. Most money funds declare
dividends daily and pay them monthly. Intermediate Municipal Fund also declares
dividends daily and pays them monthly.
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
www.thornburg.com
This report is submitted for the general information of 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.
Thornburg Value Fund
Annual Report
September 30, 2003
Letter to shareholders
Thornburg Value Fund
October 16, 2003
William V. Fries, CFA
Portfolio Manager
Dear fellow shareholder:
It is my pleasure to report on the results of your investment in the Thornburg
Value Fund for the fiscal year ended September 30, 2003. It was a good year.
Investment performance exceeded that of the benchmark and likely exceeded the
expectations of many investors, given the poor investment psychology in place at
this time one year ago. The table below shows total return figures for the
Thornburg Value Fund A, B, and C share classes for the year to date and the year
ended September 30, 2003. The table also includes results for the three-year,
five-year, and since-inception periods. Note that these returns are for
investors who held shares for the entire periods shown, with the assumption that
all dividends were reinvested in additional shares.
Total return performance as of 9/30/03
A Shares
Since
YTD 1 Year 3 Years 5 Years Inception
Net Asset Value 21.96% 27.02% (6.67)% 7.61% 13.20%
Max. Offering Price 16.46% 21.28% (8.08)% 6.62% 12.55%
B SHARES
Since
YTD 1 Year 3 Years Inception
Net Asset Value 21.17% 25.96% (7.47)% (6.38)%
Max. Offering Price 16.17% 20.96% (8.56)% (7.33)%
C SHARES
Since
YTD 1 Year 3 Years 5 Years Inception
Net Asset Value 21.23% 25.98% (7.41)% 6.75% 12.31%
Max. Offering Price 20.23% 24.98% (7.41)% 6.75% 12.31%
Total returns for periods greater than one year are annualized averages.
Past performance cannot guarantee future results. Inception of Class A and C
shares: 10/02/95. Inception of Class B shares: 4/03/00.
The favorable result for
the year was not achieved without our enduring considerable volatility and angst
along the way. Doubts about economic recovery, terrorist attacks, the war in
Iraq, and SARS were among factors that held down stock prices through March. The
success of our military effort in Iraq sparked a relief rally that extended
through much of the rest of the Fund's fiscal year, which ends on September 30.
Underpinning the return of confidence was continued economic improvement and its
impact on the outlook for corporate profits. This continued improvement in
investment fundamentals is reflected in the table below, which compares the
revenue, profit margins, and valuations seen today with the same measures of a
year ago -- for a number of equity indices as well as for your Value Fund.
Comparative Attributes
P/E Revenue, Earnings Latest P/S Revenue, P/E to
Latest P/E Last Quarter vs. Quarter vs. Latest Five-Year Historical 10-Year
Four Quarters 2003 Year Ago Year Ago Four Quarters Growth Rate Average
Thornburg Value Fund 19.0 16.8 +13.9% +19% 1.33 +14% 0.5
S&P 500 Index 19.7 18.5 +12.1% +10% 1.48 +9% 0.7
Russell 1000 Value Index 16.4 15.2 +11.6% +14% 1.09 +9% 0.7
Russell 1000 Growth Index 25.1 23.3 +14.9% +16% 2.25 +11% 0.7
The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index generally
representative of the U.S. stock market. Russell 1000 Value Index measures
performance of the Russell 1000 companies with lower price-to-book ratios and
lower forecasted growth values. Russell 1000 Growth Index measures performance
of the Russell 1000 companies with higher price-to-book ratios and higher
forecasted growth values. Unless otherwise noted, index returns reflect the
reinvestment of income dividends and capital gains. Investors may not make
direct investments into an index.
New Holdings For the Year
Alliance Capital Management Holdings LP American Greetings Corp.
Boston Properties Inc. Chubb Corp.
Circuit City Stores Inc. Citigroup Inc.
Deere & Co. Delta Air Lines Inc.
Dominion Resources Inc. DoubleClick Inc.
Eclipsys Corp. El Paso Corp.
Electronic Arts Federal Home Loan Mortgage Corp.
Federal National Mortgage Assoc. General Electric
GM Hughes Hewlett-Packard Co.
Hyundai Motor Co. InterActiveCorp.
Kimberly-Clark Corp. Level 3 Communications Inc.,
Lincoln National Corp. Nextel Communications Inc.
Progress Energy Inc. Quest Diagnostics
St. Paul COS Inc. Target Corp.
Texas Instruments Inc. Wells Fargo & Co.
As of 9/30/03
The table above lists equity holdings purchased during the year. For a
commentary on each holding in the portfolio, please go to www.thornburg.com and
click on Mutual Funds, followed by a click on Value Fund Holdings Commentary.
This was a year in which patience and conviction paid off. Many of the best
performing stocks for the year were issues that performed poorly last year,
even though business execution was sound and valuation
reasonable. Among the best of such performers were Genzyme Corp. (GENX),
E*Trade Financial Corp. (ET), Caremark RX Inc. (CMX), The
Bank of New York Inc. (BK), Lowe's Companies Inc. (LOW), Best Buy Co Inc.
(BBY), and MBNA Corp. (KRB). The latter two reached target
prices and are no longer in the portfolio. New holdings that performed
particularly well were: InterActive Corp (IACI), Electronic
Arts Inc. (ERTS), and Amdocs Ltd. (DOX). Amdocs was sold after quickly reaching
its target price. Few stocks did not rise during the
year. Performance was not only achieved in stocks; an unusual opportunity in
deeply depressed Level Three (LVLT) and E-Trade bonds
also contributed to performance.
The impact of both security and market-value changes is reflected in the sector
weightings table below.
Top Industries
9/30/03
Diversified Financials 13.2%
Banks 10.7%
Media 8.8%
Energy 8.4%
Retailing 7.4%
9/30/02
Healthcare & Services 16.8%
Banks 16.7%
Diversified Financials 8.9%
Software & Services 8.2%
Media/Entertainment 7.5%
Percentages and holdings can and do vary over time.
We appear to be at a critical juncture in both economic development and equity
market performance. Expectations are for continued growth of the U. S. economy
with the potential for earnings surprises on the upside. Corporate earnings are
improving from cost cutting and spending discipline over the past couple of
years. The general consensus is that GDP will rise over 4% this year with
successful holiday spending triggering expanding reorders in the consumer
channel next year. With this sound economic underpinning, the S&P 500 Index
weighted average earnings for the year ahead will likely approach $60 per share,
making the earnings multiple on the market below 17 times, a healthy but not
unreasonable level given the expected sustained low interest rate levels.
During the second quarter of the calendar year, Congress passed tax legislation
establishing a maximum 15% tax rate on both dividends and long-term capital
gains. The new rate, in our view, enhances the value of stocks with
above-average dividend yields. New additions to the portfolio have taken this
into consideration.
The recent focus on the value of the dollar compared with the value of other
developed-world currencies created additional
uncertainty to be digested by the markets. In mid-September, the economic
ministers of the major industrialized nations-- known as
the Group of Eight-- met in Dubai. Their jointly issued communique has roiled
currency markets since. Essentially, the communique
encouraged flexible exchange rate policies and has been interpreted as pointing
to a weak currency posture for the U. S. Dollar.
Foreign investors viewed this as a negative development. This is a potentially
positive for the U.S. industrial sector, if it proves
stimulative to U.S. exports. Interestingly, this influence could be as
important a stimulant for the economy as is capital spending.
Economies outside the U.S. may ultimately experience some benefit-- related to
increased demand from the U.S.-- from both consumer and business suppliers.
Much of the stock gains realized since the bottom of the market last year
reflect a return of confidence. Gains from this point forward will likely
require earnings improvement or the reinforced perception that companies are
enjoying accelerating profits with the expansion. The current period seems
crucial in this regard. Our recent stock purchase activity has been focused on
this improving potential. The effect of such recent portfolio changes is
reflected in the table to the right, which compares economic sector exposure
with that of one year ago.
Diversified financials and banks remain the largest sector exposures, although
those levels are now down to 23.9% compared with 25.6% at the last fiscal
year-end. The largest drop in exposure was in the food and beverages sector,
which is no longer a component of the portfolio. New holdings such as Target
Corp. (TGT) and Circuit City Stores Inc. (CC) are responsible for the increase
in retailing. El Paso Corp. (EP) and Marathon Oil Corp. (MRO) are responsible
for the increase in the energy sector.
Thank you for investing with us, and for your trust and confidence.
Sincerely,
William V. Fries, CFA
Portfolio Manager
Statement of assets and liabilities
Thornburg Value Fund
September 30, 2003
ASSETS
Investments at value (cost $1,631,265,693) .................. $ 1,781,223,696
Cash ........................................................ 292,366
Cash denominated in foreign currency (cost $84,370) ......... 100,954
Receivable for fund shares sold ............................. 5,804,627
Dividends receivable ........................................ 2,255,504
Interest receivable ......................................... 2,028,338
Prepaid expenses and other assets ........................... 50,641
Total Assets .............................. 1,791,756,126
LIABILITIES
Payable for securities purchased ............................ 1,606,908
Payable for fund shares redeemed ............................ 2,048,642
Payable to investment advisor (Note 3) ...................... 1,374,670
Accounts payable and accrued expenses ....................... 1,295,162
Total Liabilities ......................... 6,325,382
NET ASSETS .................................................. $ 1,785,430,744
NET ASSETS CONSIST OF:
Undistributed net investment income (loss) ......... $ (269,729)
Net unrealized appreciation (depreciation) ......... 149,983,783
Accumulated net realized gain (loss) ............... (416,964,605)
Net capital paid in on shares of beneficial interest 2,052,681,295
$ 1,785,430,744
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($994,042,973 applicable to 37,808,973 shares of beneficial
interest outstanding - Note 4) $ 26.29
Maximum sales charge, 4.50% of offering price 1.24
Maximum Offering Price Per Share $ 27.53
Class B Shares:
Net asset value and offering price per share *
($89,661,165 applicable to 3,520,814 shares of beneficial
interest outstanding - Note 4) $ 25.47
Class C Shares:
Net asset value and offering price per share *
($441,102,607 applicable to 17,160,773 shares of beneficial
interest outstanding - Note 4) $ 25.70
Class I Shares:
Net asset value, offering and redemption price per share
($260,623,923 applicable to 9,781,718 shares of beneficial
interest outstanding - Note 4) $ 26.64
Class R-1 Shares:
Net asset value, offering and redemption price per share
($76 applicable to 3 shares of beneficial interest
outstanding - Note 4) $ 26.27
*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
Thornburg Value Fund
Year Ended September 30, 2003
INVESTMENT INCOME
Dividend income (net of foreign taxes withheld of $465,477) ... $ 25,997,679
Interest income ............................................... 6,390,207
Other income .................................................. 53,104
Total Income ................................ 32,440,990
EXPENSES
Investment advisory fees (Note 3) ............................. 12,765,430
Administration fees (Note 3)
Class A Shares ....................................... 1,068,806
Class B Shares ....................................... 98,459
Class C Shares ....................................... 492,470
Class I Shares ....................................... 114,279
Distribution and service fees (Note 3)
Class A Shares ....................................... 2,137,612
Class B Shares ....................................... 787,672
Class C Shares ....................................... 3,939,763
Transfer agent fees
Class A Shares ....................................... 1,411,943
Class B Shares ....................................... 219,086
Class C Shares ....................................... 891,694
Class I Shares ....................................... 183,620
Class R-1 Shares ..................................... 2,530
Registration & filing fees
Class A Shares ....................................... 23,409
Class B Shares ....................................... 18,147
Class C Shares ....................................... 19,892
Class I Shares ....................................... 21,173
Class R-1 Shares ..................................... 3,918
Custodian fees (Note 3) ....................................... 456,521
Professional fees ............................................. 97,148
Accounting fees ............................................... 116,345
Trustee fees .................................................. 33,650
Other expenses ................................................ 356,324
Total Expenses .............................. 25,259,891
Less:
Expenses reimbursed by investment advisor (Note 3) ... (105,321)
Fees paid indirectly (Note 3) ........................ (27,051)
Net Expenses ................................ 25,127,519
Net Investment Income ....................... $ 7,313,471
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments ............................................ $ (71,174,166)
Foreign currency transactions .......................... (295,300)
(71,469,466)
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ 418,730,865
Foreign currency translation ........................... (9,808)
418,721,057
Net Realized and Unrealized
Gain (Loss) on Investments ........... 347,251,591
Net Increase (Decrease) in Net Assets Resulting
From Operations ...................... $ 354,565,062
See notes to financial statements.
Statements of Changes in net assets
Thornburg Value Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss) ..................................... $ 7,313,471 $ (3,121,090)
Net realized gain (loss) on investments and foreign currency
transactions .................................................. (71,469,466) (153,205,277)
Increase (Decrease) in unrealized appreciation (depreciation )
on investments and foreign currency translation ............... 418,721,057 (262,639,298)
Net Increase (Decrease) in Net Assets
Resulting from Operations ............. 354,565,062 (418,965,665)
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares .......................................... (608,906) 0
Class I Shares .......................................... (313,321) 0
From return of capital
Class A Shares .......................................... (841,616) 0
Class I Shares .......................................... (433,066) 0
FUND SHARE TRANSACTIONS - (Note 4)
Class A Shares .......................................... (9,595,663) (38,845,888)
Class B Shares .......................................... 1,176,900 22,255,483
Class C Shares .......................................... (15,910,000) 37,096,207
Class I Shares .......................................... 1,829,284 (24,282,587)
Class R-1 Shares ........................................ 75 0
Net Increase (Decrease) in Net Assets .......... 329,868,749 (422,742,450)
NET ASSETS:
Beginning of year ....................................... 1,455,561,995 1,878,304,445
End of year ............................................. $ 1,785,430,744 $ 1,455,561,995
<FN>
See notes to financial statements.
</FN>
Notes to financial statements
Thornburg Value Fund
September 30, 2003
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 nine
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
International Value Fund, Thornburg Core Growth Fund, Thornburg New York
Intermediate Municipal Fund, and Thornburg Investment Income Builder Fund. Each
series is considered to be a separate entity for financial reporting and tax
purposes and bears expenses directly attributable to it. The Fund seeks
long-term capital appreciation by investing primarily in domestic equity
securities selected on a value basis.
The Fund currently offers five classes of shares of beneficial interest, Class
A, Class B, Class C, Institutional Class (Class I) and Retirement Class (Class
R-1) 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 B 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 and bear both a service fee and
distribution fee, (iii) 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 a service fee and a
distribution fee, (iv) Class I shares are sold at net asset value without a
sales charge at the time of purchase, (v) Class R-1 shares are sold at net asset
value without a sales charge at the time of purchase but bear both a service fee
and distribution fee, and (vi) 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 service and distribution fees, administration fees
and certain registration and transfer agent expenses. Class B shares of the Fund
outstanding for eight years will convert to Class A shares of the Fund.
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, normally 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 or in accordance with such other method as the Trustees may
authorize. 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: Portfolio 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.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of interest recorded on the Fund's books, and the U.S. dollar equivalent
of the amounts actually received or paid.
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 shareholders are generally 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 at least 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. Certain income from foreign securities is recognized as soon
as information is available to the Fund. Realized gains and losses from the sale
of securities are recorded on an identified cost basis. Net investment income,
other than class specific expenses, and realized and unrealized gains and
losses, are allocated daily to each class of shares based upon the relative net
asset value of outstanding shares of each class of shares at the beginning of
the day (after adjusting for the current share activity of the respective
class). Expenses common to all funds are allocated among the funds comprising
the Trust based upon their relative net asset values or other appropriate
allocation methods.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Fund. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services to
the Fund for which the fees are payable at the end of each month. For the year
ended September 30, 2003, these fees were payable at annual rates ranging from
..875 of 1% to .675 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 Advisor, whereby the Advisor 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 .125 of 1% of the average daily
net assets attributable to each class of shares. For the year ended September
30, 2003, the Advisor voluntarily reimbursed certain class specific expenses and
administrative fees of $5,227 for Class B shares, $93,646 for Class I shares,
and $6,448 for Class R-1 shares.
The Fund has an underwriting agreement with Thornburg Securities Corporation
(the "Distributor"), which acts as the distributor of the Fund's shares. For the
year ended September 30, 2003, the Distributor has advised the Fund that it
earned net commissions aggregating $120,158 from the sale of Class A shares of
the Fund, and collected contingent deferred sales charges aggregating $41,281
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 Advisor an amount not to exceed .25 of 1%
per annum of its average daily net assets attributable to each class of shares
of the Fund for payments made by the Advisor to securities dealers and other
financial institutions to obtain various shareholder related services. The
Advisor may pay out of its own resources 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 B, Class C, and Class R-1 shares under which the Fund
compensates the Distributor for services in promoting the sale of Class B, Class
C, and Class R-1 shares of the Fund at an annual rate of up to .75 of 1% of the
average daily net assets attributable to Class B, Class C, and Class R-1 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, 2003 are set
forth in the statement of operations.
The Fund has an agreement with the custodian bank to indirectly pay a portion of
the custodian's fees through credits earned by the Fund's cash on deposit with
the bank. This deposit agreement is an alternative to overnight investments.
Custodial fees have been adjusted to reflect amounts that would have been paid
without this agreement, with a corresponding adjustment reflected as fees paid
indirectly in the statements of operations. For the year ended September 30,
2003, the fees paid indirectly were $27,051.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4 - SHARES OF BENEFICIAL INTEREST
At September 30, 2003 there were an unlimited number of shares of beneficial
interest authorized. Sales of Class R-1 shares commenced July 1, 2003.
Transactions in shares of beneficial interest were as follows:
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold .................... 10,779,879 $ 260,163,852 13,744,557 $ 368,049,226
Shares issued to shareholders in 51,321 1,323,066 -- --
reinvestment of dividends
Shares repurchased ............. (12,057,032) (271,082,581) (16,133,923) (406,895,114)
Net Increase (Decrease) ........ (1,225,832) $ (9,595,663) (2,389,366) $ (38,845,888)
Class B Shares
Shares sold .................... 513,612 $ 11,953,625 1,246,761 $ 32,891,503
Shares repurchased ............. (487,795) (10,776,725) (435,642) (10,636,020)
Net Increase (Decrease) ........ 25,817 $ 1,176,900 811,119 $ 22,255,483
Class C Shares
Shares sold .................... 2,810,602 $ 66,343,222 5,150,507 $ 135,528,095
Shares repurchased ............. (3,690,038) (82,253,222) (4,045,522) (98,431,888)
Net Increase (Decrease) ........ (879,436) $ (15,910,000) 1,104,985 $ 37,096,207
Class I Shares
Shares sold .................... 3,982,384 $ 94,533,465 4,477,126 $ 121,351,695
Shares issued to shareholders in 23,269 607,316 -- --
reinvestment of dividends
Shares repurchased ............. (4,135,473) (93,311,497) (5,787,362) (145,634,282)
Net Increase (Decrease) ........ (129,820) $ 1,829,284 (1,310,236) $ (24,282,587)
Class R-1 Shares
Shares sold .................... 3 $ 75 -- $ --
Shares repurchased ............. -- -- -- --
Net Increase (Decrease) ........ 3 $ 75 -- $ --
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003 the Fund had purchase and sale
transactions of investment securities excluding short-term securities of
$1,264,330,506 and $1,269,238,840, respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components of capital is
as follows:
Cost of investments for tax purpose $ 1,631,265,693
Gross tax unrealized appreciation $ 234,997,864
Gross tax unrealized depreciation (85,039,861)
Net tax unrealized appreciation
(depreciation) on investments $ 149,958,003
At September 30, 2003, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2009 $ 11,324,648
2010 188,545,264
2011 174,918,826
$ 374,788,738
At September 30, 2003, the Fund had deferred currency and capital losses
occurring subsequent to October 31, 2002 of $269,729 and $42,175,867,
respectively. For tax purposes, such losses will be reflected in the year ended
September 30, 2004.
Unutilized tax basis capital losses may be carried forward to offset realized
gains in future years. To the extent such carry forwards are used, capital gains
distributions may be reduced to the extent provided by regulations.
Net investment income and net realized gain (loss) differ for financial
statement and tax purposes primarily due to differing treatments of foreign
currency transactions and losses realized subsequent to October 31 on the sale
of securities and foreign currencies.
The character of distributions paid during the years ended September 30, 2003
and September 30, 2002, was as follows:
Distribution from: 2003 2002
Ordinary income $ 922,227 $ - 0 -
Return of Capital 1,274,682 - 0 -
Total Distribution $ 2,196,909 $ - 0 -
Financial highlights
Thornburg Value Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class A Shares:
Per Share Performance
(for a share outstanding throughout the year)+
Net asset value, beginning of year ................... $ 20.73 $ 26.04 $ 32.98 $ 26.20 $ 19.48
Income from investment operations:
Net investment income (loss) ..................... 0.15 0.00 (c) 0.02 0.74 0.16
Net realized and unrealized
gain (loss) on investments ..................... 5.45 (5.31) (6.38) 7.29 6.76
Total from investment operations ..................... 5.60 (5.31) (6.36) 8.03 6.92
Less dividends from:
Net investment income ............................ (0.02) -- (0.25) (0.86) (0.20)
Net realized gains ............................... -- -- (0.25) (0.39) --
Return of Capital ................................ (0.02) -- (0.08) -- --
Total dividends ...................................... (0.04) -- (0.58) (1.25) (0.20)
Change in net asset value ............................ 5.56 (5.31) (6.94) 6.78 6.72
Net asset value, end of year ......................... $ 26.29 $ 20.73 $ 26.04 $ 32.98 $ 26.20
Total return (a) ..................................... 27.02% (20.39)% (19.59)% 30.68% 35.50%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income (loss) ..................... 0.66% 0.00%(b) 0.07% 2.31% 0.62%
Expenses, after expense reductions ............... 1.43% 1.40% 1.37% 1.38% 1.44%
Expenses, after expense reductions
and net of custody credits ..................... 1.43% 1.40% -- -- --
Expenses, before expense reductions .............. 1.43% 1.40% 1.38% 1.38% 1.44%
Portfolio turnover rate .............................. 82.89% 76.37% 71.81% 72.35% 62.71%
Net assets at end of year (000) ...................... $ 994,043 $ 809,229 $ 1,078,582 $ 873,433 $ 360,966
<FN>
(a) Sales loads are not reflected in computing total return.
(b) The ratio of net investment loss to average net assets is less than 0.01%.
(c) Net investment loss per share is less than 0.01.
+ Based on weighted average shares outstanding.
</FN>
Year Ended September 30, Period Ended
September 30,
2003 2002 2001 2000 (a)
Class B Shares:
Per Share Performance
(for a share outstanding throughout the period)+
Net asset value, beginning of period ................. $ 20.22 $ 25.61 $ 32.63 $ 33.22
Income from investment operations:
Net investment income (loss) ..................... (0.05) (0.22) (0.24) --
Net realized and unrealized
gain (loss) on investments ..................... 5.30 (5.17) (6.31) 0.09
Total from investment operations ..................... 5.25 (5.39) (6.55) 0.09
Less dividends from:
Net investment income ............................ -- -- (0.19) (0.68)
Net realized gains ............................... -- -- (0.25) --
Return of Capital ................................ -- -- (0.03) --
Total dividends ...................................... -- -- (0.47) (0.68)
Change in net asset value ............................ 5.25 (5.39) (7.02) (0.59)
Net asset value, end of period ....................... $ 25.47 $ 20.22 $ 25.61 $ 32.63
Total return (c) ..................................... 25.96% (21.05)% (20.35)% 0.25%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income (loss) ..................... (0.22)% (0.85)% (0.83)% 0.02% (b)
Expenses, after expense reductions ............... 2.31% 2.25% 2.27% 2.38% (b)
Expenses, after expense reductions
and net of custody credits ..................... 2.31% 2.25% -- --
Expenses, before expense reductions .............. 2.32% 2.25% 2.30% 2.43% (b)
Portfolio turnover rate .............................. 82.89% 76.37% 71.81% 72.35%
Net assets at end of period (000) ................... $ 89,661 $ 70,682 $ 68,740 $ 17,945
<FN>
(a) Effective date of Class B Shares was April 3, 2000.
(b) Annualized.
(c) Total return is not annualized for periods less than one year.
+ Based on weighted average shares outstanding.
</FN>
Year Ended September 30,
2003 2002 2001 2000 1999
Class C Shares:
Per Share Performance
(for a share outstanding throughout the year)+
Net asset value, beginning of year ................... $ 20.40 $ 25.82 $ 32.80 $ 26.08 $ 19.45
Income from investment operations:
Net investment income (loss) ..................... (0.04) (0.20) (0.22) 0.49 (0.01)
Net realized and unrealized
gain (loss) on investments ..................... 5.34 (5.22) (6.34) 7.23 6.71
Total from investment operations ..................... 5.30 (5.42) (6.56) 7.72 6.70
Less dividends from:
Net investment income ............................ -- -- (0.16) (0.61) (0.07)
Net realized gains ............................... -- -- (0.25) (0.39) --
Return of Capital ................................ -- -- (0.01) -- --
Total dividends ...................................... -- -- (0.42) (1.00) (0.07)
Change in net asset value ............................ 5.30 (5.42) (6.98) 6.72 6.63
Net asset value, end of year ......................... $ 25.70 $ 20.40 $ 25.82 $ 32.80 $ 26.08
Total return ......................................... 25.98% (20.99)% (20.24)% 29.90% 34.45%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income (loss) ..................... (0.16)% (0.77)% (0.74)% 1.53% (0.17)%
Expenses, after expense reductions ............... 2.25% 2.17% 2.18% 2.16% 2.23%
Expenses, after expense reductions
and net of custody credits ..................... 2.25% 2.17% -- -- --
Expenses, before expense reductions .............. 2.25% 2.17% 2.19% 2.17% 2.23%
Portfolio turnover rate .............................. 82.89% 76.37% 71.81% 72.35% 62.71%
Net assets at end of year (000) ..................... $ 441,103 $ 368,038 $ 437,199 $ 361,447 $ 133,934
<FN>
+ Based on weighted average shares outstanding.
</FN>
Year Ended September 30, Period Ended
September 30,
2003 2002 2001 2000 1999 (b)
Class I Shares:
Per Share Performance
(for a share outstanding throughout the period)+
Net asset value, beginning of period ................. $ 20.95 $ 26.18 $ 33.09 $ 26.26 $ 21.78
Income from investment operations:
Net investment income ............................ 0.26 0.11 0.14 0.91 0.25
Net realized and unrealized
gain (loss) on investments ..................... 5.51 (5.34) (6.42) 7.25 4.48
Total from investment operations ..................... 5.77 (5.23) (6.28) 8.16 4.73
Less dividends from:
Net investment income ............................ (0.03) -- (0.28) (0.94) (0.25)
Net realized gains ............................... -- -- (0.25) (0.39) --
Return of Capital ................................ (0.05) -- (0.10) -- --
Total dividends ...................................... (0.08) -- (0.63) (1.33) (0.25)
Change in net asset value ............................ 5.69 (5.23) (6.91) 6.83 4.48
Net asset value, end of period ....................... $ 26.64 $ 20.95 $ 26.18 $ 33.09 $ 26.26
Total return (c) ..................................... 27.55% (19.98)% (19.29)% 31.44% 21.70%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ............................ 1.10% 0.42% 0.45% 2.82% 1.14% (a)
Expenses, after expense reductions ............... 0.99% 0.98% 0.99% 0.99% 1.00%
(a)
Expenses, after expense reductions
and net of custody credits ..................... 0.99% 0.98% -- -- --
Expenses, before expense reductions .............. 1.03% 0.99% 1.01% 1.00% 1.13%
(a)
Portfolio turnover rate .............................. 82.89% 76.37% 71.81% 72.35% 62.71%
Net assets at end of period (000) ................... $ 260,624 $ 207,613 $ 293,784 $ 242,974 $ 52,357
<FN>
(a) Annualized.
(b) Effective date of Class I Shares was November 2, 1998.
(c) Total return is not annualized for periods less than one year.
+ Based on weighted average shares outstanding. `
</FN>
Period Ended
September 30,
2003(c)
Class R-1 Shares:
Per Share Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ..................... $ 25.83
Income from investment operations:
Net investment income ................................ 0.03
Net realized and unrealized
gain (loss) on investments ......................... 0.41
Total from investment operations 0.44 Less dividends from:
Net investment income ................................ --
Change in net asset value ................................ 0.44
Net asset value, end of period ........................... $ 26.27
Total return (a) ......................................... 1.70%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ................................ 0.48%(b)
Expenses, after expense reductions ................... 1.45%(b)
Expenses, after expense reductions
and net of custody credits ......................... 1.45%(b)
Expenses, before expense reductions .................. 44,445.63%(b)*
Portfolio turnover rate .................................. 82.89%
Net assets at end of period (000) ........................ $ 0 (d)
(a) Total return is not annualized for periods less than one year.
(b) Annualized.
(c) Effective date of Class R-1 Shares was July 1, 2003.
(d) Net assets at end of year were less than $1,000.
* Due to the size of net assets and fixed expenses, ratios may appear
disproportionate.
Schedule of investments
Thornburg Value Fund
September 30, 2003
CUSIPS: CLASS A - 885-215-731, CLASS B - 885-215-590, CLASS C - 885-215-715,
CLASS I - 885-215-632, CLASS R-1 - 885-215-533
NASDAQ SYMBOLS: CLASS A - TVAFX, CLASS B - TVBFX, CLASS C - TVCFX,
CLASS I - TVIFX, CLASS R-1 - TVRFX
Shares Value
COMMON STOCKS - 94.60%
AUTOMOBILES & COMPONENTS (2.00%)
Hyundai Motor Co. ................................ 1,209,000 $34,793,636
BANKS (10.70%)
Bank of Ireland .................................. 4,257,600 51,097,828
The Bank of New York Co. Inc. .................... 1,419,900 41,333,289
SouthTrust Corp. ................................. 793,885 23,332,280
Washington Mutual Inc. ........................... 815,900 32,121,983
Wells Fargo & Co. ................................ 835,400 43,023,100
CAPITAL GOODS (2.00%)
Deere & Co. ...................................... 680,800 36,293,448
COMMERCIAL SERVICES & SUPPLIES (2.60%)
First Data Corp. ................................. 1,172,200 46,841,112
DIVERSIFIED FINANCIALS (12.60%)
Alliance Capital Management Holdings LP ......... 539,900 18,081,251
Citigroup Inc. ................................... 1,033,000 47,011,830
E-Trade Financial Corp. + ........................ 5,328,477 49,341,697
Freddie Mac ...................................... 508,800 26,635,680
Fannie Mae ....................................... 677,300 47,546,460
MBIA Inc. ........................................ 639,145 35,133,801
ENERGY (8.40%)
BP Amoco ......................................... 720,900 30,349,890
El Paso Corp. .................................... 4,269,735 31,169,065
Marathon Oil Corp. ............................... 1,455,000 41,467,500
Unocal Corp. ..................................... 1,485,000 46,807,200
HEALTHCARE EQUIPMENT & SERVICES (6.90%)
Caremark RX Inc. + ............................... 1,381,200 31,215,120
Health Management Associates ..................... 2,565,640 55,956,608
Quest Diagnostics + .............................. 593,600 35,995,904
HOUSEHOLD & PERSONAL PRODUCTS (1.70%)
American Greetings Corp. + ....................... 787,300 15,297,239
Kimberly-Clark Corp. ............................. 306,100 15,709,052
INSURANCE (5.80%)
Chubb Corp. ...................................... 569,730 36,964,083
Lincoln National Corp. ........................... 411,022 14,541,958
The St. Paul Cos ................................. 1,415,100 52,401,153
MEDIA (8.80%)
AOL Time Warner Inc. + ........................... 2,533,755 38,285,038
Comcast Corp. + .................................. 1,646,000 48,622,840
Fox Entertainment Group Inc. + ................... 1,159,875 32,464,901
Hughes Electronics Corp. + ....................... 2,574,300 36,838,233
PHARMACEUTICALS & BIOTECHNOLOGY (5.20%)
Genzyme Corp. + .................................. 870,300 40,251,375
Pfizer Inc. ...................................... 1,706,200 51,834,356
REAL ESTATE MANAGEMENT & DEVELOPMENT (1.10%)
Boston Properties Inc. ........................... 457,500 19,887,525
RETAILING (7.40%)
Circuit City Stores Inc. ......................... 2,470,200 23,541,006
InterActiveCorp + ................................ 1,205,075 39,827,729
Lowe's Companies Inc. ............................ 821,000 42,609,900
Target Corp. ..................................... 664,000 24,986,320
SOFTWARE & SERVICES (7.10%)
Affiliated Computer Services Inc. + .............. 622,090 30,289,562
DoubleClick Inc. + ............................... 2,244,364 24,171,800
Eclipsys Corp. + ................................. 1,559,140 24,930,649
Electronic Arts Inc.+ ............................ 293,900 27,106,397
Microsoft Corp. .................................. 718,100 19,955,999
TECHNOLOGY - HARDWARE & EQUIPMENT (5.40%)
Hewlett-Packard Co. .............................. 1,795,400 34,758,944
Samsung Electronics Co., Ltd. .................... 121,600 41,444,333
Texas Instruments Inc. ........................... 911,000 20,770,800
TELECOMMUNICATION SERVICES (1.80%)
Nextel Communications Inc. + ..................... 1,651,800 32,523,942
UTILITIES (5.10%)
Dominion Resources Inc. .......................... 952,900 58,984,510
Progress Energy Inc. ............................. 706,800 31,424,328
TOTAL COMMON STOCKS (Cost $1,540,066,922) 1,685,972,654
Principal
Amount Value
CORPORATE BONDS - 2.70%
TELECOMMUNICATION SERVICES (1.10%)
Level 3 Communications Inc., 9.125%, 5/1/2008 $23,400,000 19,890,000
TRANSPORTATION (1.60%)
Delta Air Lines Inc., 10.00%, 8/15/2008 ..... 6,160,000 5,020,400
Delta Air Lines Inc., 7.90%, 12/15/2009 ..... 5,000,000 3,712,500
Delta Air Lines Inc., 10.125%, 5/15/2010 .... 2,900,000 2,240,250
Delta Air Lines Inc., 9.75%, 5/15/2021 ...... 2,000,000 1,330,000
Delta Air Lines Inc., 8.30%, 12/15/2029 ..... 24,500,000 15,802,500
TOTAL CORPORATE BONDS (Cost $47,103,194) 47,995,650
CONVERTIBLE BONDS - 1.80%
DIVERSIFIED FINANCIALS (0.60%)
E-Trade Financial Corp., 6.00%, 2/1/2007 .... $10,000,000 $ 9,750,000
TELECOMMUNICATION SERVICES (1.20%)
Level 3 Communications Inc., 6.00%, 9/15/2009 17,000,000 10,837,500
Level 3 Communications Inc., 6.00%, 3/15/2010 17,800,000 11,169,500
TOTAL CONVERTIBLE BONDS (Cost $28,597,185) .. 31,757,000
COMMERCIAL PAPER - 0.90%
American General Finance, 1.10% due 10/1/2003 5,000,000 5,000,000
American General Finance, 1.10% due 10/3/2003 4,500,000 4,499,725
General Electric, 1.00% due 10/9/2003 ....... 6,000,000 5,998,667
TOTAL COMMERCIAL PAPER (Cost $15,498,392) ... 15,498,392
TOTAL INVESTMENTS (100%) (Cost $1,631,265,693) $ 1,781,223,696
+ Non-income producing.
See notes to financial statements.
Report of Independent auditors
Thornburg Value Fund
September 30, 2003
To the Trustees and Shareholders of
Thornburg Value Fund
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 (the "Fund") at September 30, 2003, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. 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 audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, 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 audits, which included confirmation
of securities at September 30, 2003 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
index comparisons
Thornburg Value Fund
September 30, 2003
Index Comparison
The charts below compare performance of Thornburg Value Fund and the Standard &
Poor's 500 Index for the period October 2, 1995 to September 30, 2003. Past
performance of the Index and the Fund may not be indicative of future
performance. The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on distributions or the redemption of fund
shares.
Thornburg Value Fund Class A Total Returns, Since Inception,
versus S&P 500 Index
Fund A Shares
S&P 500 Index
Average Annual Total Returns
(periods ending 9/30/03) (at max. offering price)
A Shares
1 Year: 21.28%
5 Year: 6.62%
From Inception (10/2/95): 12.55%
Thornburg Value Fund Class C Total Returns, Since Inception,
versus S&P 500 Index
Fund C Shares
S&P 500 Index
Average Annual Total Returns
(periods ending 9/30/03)
C Shares
1 Year: 24.98%
5 Year: 6.75%
From Inception (10/2/95): 12.31%
TRUSTEES and Officers
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
TAX INFORMATION
Federal Income tax information (unaudited):
For the fiscal year ended September 30, 2003 certain dividends paid by the Fund
may be subject to a maximum tax rate of 15% as provided by the Jobs and Growth
Tax Relief Reconciliation Act of 2003. The Fund designates a maximum amount of
$922,227 as qualified dividend income, which is taxed at a maximum rate of 15%.
The information and distributions reported herein may differ from the
information and distributions taxable to the shareholders for the calendar year
ending December 31, 2003. Complete information will be computed and reported in
conjunction with your 2003 Form 1099-DIV.
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
www.thornburg.com
This report is submitted for the general information of 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.
Thornburg Value Fund I Shares
Annual Report
September 30, 2003
Letter to shareholders
Thornburg Value Fund
October 16, 2003
William V. Fries, CFA
Portfolio Manager
Dear fellow shareholder:
It is my pleasure to report on the results of your investment in the Thornburg
Value Fund for the
fiscal year ended September 30, 2003. It was a good year. Investment performance
exceeded that of the benchmark and likely exceeded the expectations of many
investors, given the poor investment psychology in place at this time one year
ago. The table below shows total return figures for the Thornburg Value Fund I
share class for the year to date and the year ended September 30, 2003. The
table also includes results for the three-year, and since-inception periods.
Note that these returns are for investors who held shares for the entire periods
shown, with the assumption that all dividends were reinvested in additional
shares.
Total return performance as of 9/30/03
I SHARES
Since
YTD 1 Year 3 Years Inception
Net Asset Value 22.35% 27.55% (6.26)% 5.78%
Max. Offering Price 22.35% 27.55% (6.26)% 5.78%
Total returns for periods greater than one year are annualized averages.
Past performance cannot guarantee future results. Inception of Class I shares:
11/2/98.
The favorable result for
the year was not achieved without our enduring considerable volatility and angst
along the way. Doubts about economic recovery, terrorist attacks, the war in
Iraq, and SARS were among factors that held down stock prices through March. The
success of our military effort in Iraq sparked a relief rally that extended
through much of the rest of the Fund's fiscal year, which ends on September 30.
Underpinning the return of confidence was continued economic improvement and its
impact on the outlook for corporate profits. This continued improvement in
investment fundamentals is reflected in the table below, which compares the
revenue, profit margins, and valuations seen today with the same measures of a
year ago -- for a number of equity indices as well as for your Value Fund.
Comparative Attributes
P/E Revenue, Earnings Latest P/S Revenue, P/E to
Latest P/E Last Quarter vs. Quarter vs. Latest Five-Year Historical 10-Year
Four Quarters 2003 Year Ago Year Ago Four Quarters Growth Rate Average
Thornburg Value Fund 19.0 16.8 +13.9% +19% 1.33 +14% 0.5
S&P 500 Index 19.7 18.5 +12.1% +10% 1.48 +9% 0.7
Russell 1000 Value Index 16.4 15.2 +11.6% +14% 1.09 +9% 0.7
Russell 1000 Growth Index 25.1 23.3 +14.9% +16% 2.25 +11% 0.7
The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index generally
representative of the U.S. stock market. Russell 1000 Value Index measures
performance of the Russell 1000 companies with lower price-to-book ratios and
lower forecasted growth values. Russell 1000 Growth Index measures performance
of the Russell 1000 companies with higher price-to-book ratios and higher
forecasted growth values. Unless otherwise noted, index returns reflect the
reinvestment of income dividends and capital gains. Investors may not make
direct investments into an index.
New Holdings For the Year
Alliance Capital Management Holdings LP American Greetings Corp.
Boston Properties Inc. Chubb Corp.
Circuit City Stores Inc. Citigroup Inc.
Deere & Co. Delta Air Lines Inc.
Dominion Resources Inc. DoubleClick Inc.
Eclipsys Corp. El Paso Corp.
Electronic Arts Federal Home Loan Mortgage Corp.
Federal National Mortgage Assoc. General Electric
GM Hughes Hewlett-Packard Co.
Hyundai Motor Co. InterActiveCorp.
Kimberly-Clark Corp. Level 3 Communications Inc.,
Lincoln National Corp. Nextel Communications Inc.
Progress Energy Inc. Quest Diagnostics
St. Paul COS Inc. Target Corp.
Texas Instruments Inc. Wells Fargo & Co.
As of 9/30/03
The table above lists equity holdings purchased during the year. For a
commentary on each holding in the portfolio, please go to www.thornburg.com and
click on Mutual Funds, followed by a click on Value Fund Holdings Commentary.
This was a year in which patience and conviction paid off. Many of the best
performing stocks for the year were issues that performed poorly last year,
even though business execution was sound and valuation
reasonable. Among the best of such performers were Genzyme Corp. (GENX),
E*Trade Financial Corp. (ET), Caremark RX Inc. (CMX), The
Bank of New York Inc. (BK), Lowe's Companies Inc. (LOW), Best Buy Co Inc.
(BBY), and MBNA Corp. (KRB). The latter two reached target
prices and are no longer in the portfolio. New holdings that performed
particularly well were: InterActive Corp (IACI), Electronic
Arts Inc. (ERTS), and Amdocs Ltd. (DOX). Amdocs was sold after quickly reaching
its target price. Few stocks did not rise during the
year. Performance was not only achieved in stocks; an unusual opportunity in
deeply depressed Level Three (LVLT) and E-Trade bonds
also contributed to performance.
The impact of both security and market-value changes is reflected in the sector
weightings table below.
Top Industries
9/30/03
Diversified Financials 13.2%
Banks 10.7%
Media 8.8%
Energy 8.4%
Retailing 7.4%
9/30/02
Healthcare & Services 16.8%
Banks 16.7%
Diversified Financials 8.9%
Software & Services 8.2%
Media/Entertainment 7.5%
Percentages and holdings can and do vary over time.
We appear to be at a critical juncture in both economic development and equity
market performance. Expectations are for continued growth of the U. S. economy
with the potential for earnings surprises on the upside. Corporate earnings are
improving from cost cutting and spending discipline over the past couple of
years. The general consensus is that GDP will rise over 4% this year with
successful holiday spending triggering expanding reorders in the consumer
channel next year. With this sound economic underpinning, the S&P 500 Index
weighted average earnings for the year ahead will likely approach $60 per share,
making the earnings multiple on the market below 17 times, a healthy but not
unreasonable level given the expected sustained low interest rate levels.
During the second quarter of the calendar year, Congress passed tax legislation
establishing a maximum 15% tax rate on both dividends and long-term capital
gains. The new rate, in our view, enhances the value of stocks with
above-average dividend yields. New additions to the portfolio have taken this
into consideration.
The recent focus on the value of the dollar compared with the value of other
developed-world currencies created additional
uncertainty to be digested by the markets. In mid-September, the economic
ministers of the major industrialized nations-- known as
the Group of Eight-- met in Dubai. Their jointly issued communique has roiled
currency markets since. Essentially, the communique
encouraged flexible exchange rate policies and has been interpreted as pointing
to a weak currency posture for the U. S. Dollar.
Foreign investors viewed this as a negative development. This is a potentially
positive for the U.S. industrial sector, if it proves
stimulative to U.S. exports. Interestingly, this influence could be as
important a stimulant for the economy as is capital spending.
Economies outside the U.S. may ultimately experience some benefit-- related to
increased demand from the U.S.-- from both consumer and business suppliers.
Much of the stock gains realized since the bottom of the market last year
reflect a return of confidence. Gains from this point forward will likely
require earnings improvement or the reinforced perception that companies are
enjoying accelerating profits with the expansion. The current period seems
crucial in this regard. Our recent stock purchase activity has been focused on
this improving potential. The effect of such recent portfolio changes is
reflected in the table to the right, which compares economic sector exposure
with that of one year ago.
Diversified financials and banks remain the largest sector exposures, although
those levels are now down to 23.9% compared with 25.6% at the last fiscal
year-end. The largest drop in exposure was in the food and beverages sector,
which is no longer a component of the portfolio. New holdings such as Target
Corp. (TGT) and Circuit City Stores Inc. (CC) are responsible for the increase
in retailing. El Paso Corp. (EP) and Marathon Oil Corp. (MRO) are responsible
for the increase in the energy sector.
Thank you for investing with us, and for your trust and confidence.
Sincerely,
William V. Fries, CFA
Portfolio Manager
Statement of assets and liabilities
Thornburg Value Fund
September 30, 2003
ASSETS
Investments at value (cost $1,631,265,693) .................. $ 1,781,223,696
Cash ........................................................ 292,366
Cash denominated in foreign currency (cost $84,370) ......... 100,954
Receivable for fund shares sold ............................. 5,804,627
Dividends receivable ........................................ 2,255,504
Interest receivable ......................................... 2,028,338
Prepaid expenses and other assets ........................... 50,641
Total Assets .............................. 1,791,756,126
LIABILITIES
Payable for securities purchased ............................ 1,606,908
Payable for fund shares redeemed ............................ 2,048,642
Payable to investment advisor (Note 3) ...................... 1,374,670
Accounts payable and accrued expenses ....................... 1,295,162
Total Liabilities ......................... 6,325,382
NET ASSETS .................................................. $ 1,785,430,744
NET ASSETS CONSIST OF:
Undistributed net investment income (loss) ......... $ (269,729)
Net unrealized appreciation (depreciation) ......... 149,983,783
Accumulated net realized gain (loss) ............... (416,964,605)
Net capital paid in on shares of beneficial interest 2,052,681,295
$ 1,785,430,744
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($994,042,973 applicable to 37,808,973 shares of beneficial
interest outstanding - Note 4) $ 26.29
Maximum sales charge, 4.50% of offering price 1.24
Maximum Offering Price Per Share $ 27.53
Class B Shares:
Net asset value and offering price per share *
($89,661,165 applicable to 3,520,814 shares of beneficial
interest outstanding - Note 4) $ 25.47
Class C Shares:
Net asset value and offering price per share *
($441,102,607 applicable to 17,160,773 shares of beneficial
interest outstanding - Note 4) $ 25.70
Class I Shares:
Net asset value, offering and redemption price per share
($260,623,923 applicable to 9,781,718 shares of beneficial
interest outstanding - Note 4) $ 26.64
Class R-1 Shares:
Net asset value, offering and redemption price per share
($76 applicable to 3 shares of beneficial interest
outstanding - Note 4) $ 26.27
*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
Thornburg Value Fund
Year Ended September 30, 2003
INVESTMENT INCOME
Dividend income (net of foreign taxes withheld of $465,477) ... $ 25,997,679
Interest income ............................................... 6,390,207
Other income .................................................. 53,104
Total Income ................................ 32,440,990
EXPENSES
Investment advisory fees (Note 3) ............................. 12,765,430
Administration fees (Note 3)
Class A Shares ....................................... 1,068,806
Class B Shares ....................................... 98,459
Class C Shares ....................................... 492,470
Class I Shares ....................................... 114,279
Distribution and service fees (Note 3)
Class A Shares ....................................... 2,137,612
Class B Shares ....................................... 787,672
Class C Shares ....................................... 3,939,763
Transfer agent fees
Class A Shares ....................................... 1,411,943
Class B Shares ....................................... 219,086
Class C Shares ....................................... 891,694
Class I Shares ....................................... 183,620
Class R-1 Shares ..................................... 2,530
Registration & filing fees
Class A Shares ....................................... 23,409
Class B Shares ....................................... 18,147
Class C Shares ....................................... 19,892
Class I Shares ....................................... 21,173
Class R-1 Shares ..................................... 3,918
Custodian fees (Note 3) ....................................... 456,521
Professional fees ............................................. 97,148
Accounting fees ............................................... 116,345
Trustee fees .................................................. 33,650
Other expenses ................................................ 356,324
Total Expenses .............................. 25,259,891
Less:
Expenses reimbursed by investment advisor (Note 3) ... (105,321)
Fees paid indirectly (Note 3) ........................ (27,051)
Net Expenses ................................ 25,127,519
Net Investment Income ....................... $ 7,313,471
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments ............................................ $ (71,174,166)
Foreign currency transactions .......................... (295,300)
(71,469,466)
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ 418,730,865
Foreign currency translation ........................... (9,808)
418,721,057
Net Realized and Unrealized
Gain (Loss) on Investments ........... 347,251,591
Net Increase (Decrease) in Net Assets Resulting
From Operations ...................... $ 354,565,062
See notes to financial statements.
Statements of Changes in net assets
Thornburg Value Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss) ..................................... $ 7,313,471 $ (3,121,090)
Net realized gain (loss) on investments and foreign currency
transactions .................................................. (71,469,466) (153,205,277)
Increase (Decrease) in unrealized appreciation (depreciation )
on investments and foreign currency translation ............... 418,721,057 (262,639,298)
Net Increase (Decrease) in Net Assets
Resulting from Operations ............. 354,565,062 (418,965,665)
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares .......................................... (608,906) 0
Class I Shares .......................................... (313,321) 0
From return of capital
Class A Shares .......................................... (841,616) 0
Class I Shares .......................................... (433,066) 0
FUND SHARE TRANSACTIONS - (Note 4)
Class A Shares .......................................... (9,595,663) (38,845,888)
Class B Shares .......................................... 1,176,900 22,255,483
Class C Shares .......................................... (15,910,000) 37,096,207
Class I Shares .......................................... 1,829,284 (24,282,587)
Class R-1 Shares ........................................ 75 0
Net Increase (Decrease) in Net Assets .......... 329,868,749 (422,742,450)
NET ASSETS:
Beginning of year ....................................... 1,455,561,995 1,878,304,445
End of year ............................................. $ 1,785,430,744 $ 1,455,561,995
<FN>
See notes to financial statements.
</FN>
Notes to financial statements
Thornburg Value Fund
September 30, 2003
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 nine
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
International Value Fund, Thornburg Core Growth Fund, Thornburg New York
Intermediate Municipal Fund, and Thornburg Investment Income Builder Fund. Each
series is considered to be a separate entity for financial reporting and tax
purposes and bears expenses directly attributable to it. The Fund seeks
long-term capital appreciation by investing primarily in domestic equity
securities selected on a value basis.
The Fund currently offers five classes of shares of beneficial interest, Class
A, Class B, Class C, Institutional Class (Class I) and Retirement Class (Class
R-1) 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 B 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 and bear both a service fee and
distribution fee, (iii) 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 a service fee and a
distribution fee, (iv) Class I shares are sold at net asset value without a
sales charge at the time of purchase, (v) Class R-1 shares are sold at net asset
value without a sales charge at the time of purchase but bear both a service fee
and distribution fee, and (vi) 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 service and distribution fees, administration fees
and certain registration and transfer agent expenses. Class B shares of the Fund
outstanding for eight years will convert to Class A shares of the Fund.
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, normally 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 or in accordance with such other method as the Trustees may
authorize. 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: Portfolio 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.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of interest recorded on the Fund's books, and the U.S. dollar equivalent
of the amounts actually received or paid.
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 shareholders are generally 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 at least 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. Certain income from foreign securities is recognized as soon
as information is available to the Fund. Realized gains and losses from the sale
of securities are recorded on an identified cost basis. Net investment income,
other than class specific expenses, and realized and unrealized gains and
losses, are allocated daily to each class of shares based upon the relative net
asset value of outstanding shares of each class of shares at the beginning of
the day (after adjusting for the current share activity of the respective
class). Expenses common to all funds are allocated among the funds comprising
the Trust based upon their relative net asset values or other appropriate
allocation methods.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Fund. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services to
the Fund for which the fees are payable at the end of each month. For the year
ended September 30, 2003, these fees were payable at annual rates ranging from
..875 of 1% to .675 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 Advisor, whereby the Advisor 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 .125 of 1% of the average daily
net assets attributable to each class of shares. For the year ended September
30, 2003, the Advisor voluntarily reimbursed certain class specific expenses and
administrative fees of $5,227 for Class B shares, $93,646 for Class I shares,
and $6,448 for Class R-1 shares.
The Fund has an underwriting agreement with Thornburg Securities Corporation
(the "Distributor"), which acts as the distributor of the Fund's shares. For the
year ended September 30, 2003, the Distributor has advised the Fund that it
earned net commissions aggregating $120,158 from the sale of Class A shares of
the Fund, and collected contingent deferred sales charges aggregating $41,281
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 Advisor an amount not to exceed .25 of 1%
per annum of its average daily net assets attributable to each class of shares
of the Fund for payments made by the Advisor to securities dealers and other
financial institutions to obtain various shareholder related services. The
Advisor may pay out of its own resources 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 B, Class C, and Class R-1 shares under which the Fund
compensates the Distributor for services in promoting the sale of Class B, Class
C, and Class R-1 shares of the Fund at an annual rate of up to .75 of 1% of the
average daily net assets attributable to Class B, Class C, and Class R-1 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, 2003 are set
forth in the statement of operations.
The Fund has an agreement with the custodian bank to indirectly pay a portion of
the custodian's fees through credits earned by the Fund's cash on deposit with
the bank. This deposit agreement is an alternative to overnight investments.
Custodial fees have been adjusted to reflect amounts that would have been paid
without this agreement, with a corresponding adjustment reflected as fees paid
indirectly in the statements of operations. For the year ended September 30,
2003, the fees paid indirectly were $27,051.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4 - SHARES OF BENEFICIAL INTEREST
At September 30, 2003 there were an unlimited number of shares of beneficial
interest authorized. Sales of Class R-1 shares commenced July 1, 2003.
Transactions in shares of beneficial interest were as follows:
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold .................... 10,779,879 $ 260,163,852 13,744,557 $ 368,049,226
Shares issued to shareholders in 51,321 1,323,066 -- --
reinvestment of dividends
Shares repurchased ............. (12,057,032) (271,082,581) (16,133,923) (406,895,114)
Net Increase (Decrease) ........ (1,225,832) $ (9,595,663) (2,389,366) $ (38,845,888)
Class B Shares
Shares sold .................... 513,612 $ 11,953,625 1,246,761 $ 32,891,503
Shares repurchased ............. (487,795) (10,776,725) (435,642) (10,636,020)
Net Increase (Decrease) ........ 25,817 $ 1,176,900 811,119 $ 22,255,483
Class C Shares
Shares sold .................... 2,810,602 $ 66,343,222 5,150,507 $ 135,528,095
Shares repurchased ............. (3,690,038) (82,253,222) (4,045,522) (98,431,888)
Net Increase (Decrease) ........ (879,436) $ (15,910,000) 1,104,985 $ 37,096,207
Class I Shares
Shares sold .................... 3,982,384 $ 94,533,465 4,477,126 $ 121,351,695
Shares issued to shareholders in 23,269 607,316 -- --
reinvestment of dividends
Shares repurchased ............. (4,135,473) (93,311,497) (5,787,362) (145,634,282)
Net Increase (Decrease) ........ (129,820) $ 1,829,284 (1,310,236) $ (24,282,587)
Class R-1 Shares
Shares sold .................... 3 $ 75 -- $ --
Shares repurchased ............. -- -- -- --
Net Increase (Decrease) ........ 3 $ 75 -- $ --
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003 the Fund had purchase and sale
transactions of investment securities excluding short-term securities of
$1,264,330,506 and $1,269,238,840, respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components of capital is
as follows:
Cost of investments for tax purpose $ 1,631,265,693
Gross tax unrealized appreciation $ 234,997,864
Gross tax unrealized depreciation (85,039,861)
Net tax unrealized appreciation
(depreciation) on investments $ 149,958,003
At September 30, 2003, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2009 $ 11,324,648
2010 188,545,264
2011 174,918,826
$ 374,788,738
At September 30, 2003, the Fund had deferred currency and capital losses
occurring subsequent to October 31, 2002 of $269,729 and $42,175,867,
respectively. For tax purposes, such losses will be reflected in the year ended
September 30, 2004.
Unutilized tax basis capital losses may be carried forward to offset realized
gains in future years. To the extent such carry forwards are used, capital gains
distributions may be reduced to the extent provided by regulations.
Net investment income and net realized gain (loss) differ for financial
statement and tax purposes primarily due to differing treatments of foreign
currency transactions and losses realized subsequent to October 31 on the sale
of securities and foreign currencies.
The character of distributions paid during the years ended September 30, 2003
and September 30, 2002, was as follows:
Distribution from: 2003 2002
Ordinary income $ 922,227 $ - 0 -
Return of Capital 1,274,682 - 0 -
Total Distribution $ 2,196,909 $ - 0 -
Financial highlights
Thornburg Value Fund
Year Ended September 30, Period Ended
September 30,
2003 2002 2001 2000 1999 (b)
Class I Shares:
Per Share Performance
(for a share outstanding throughout the period)+
Net asset value, beginning of period ................. $ 20.95 $ 26.18 $ 33.09 $ 26.26 $ 21.78
Income from investment operations:
Net investment income ............................ 0.26 0.11 0.14 0.91 0.25
Net realized and unrealized
gain (loss) on investments ..................... 5.51 (5.34) (6.42) 7.25 4.48
Total from investment operations ..................... 5.77 (5.23) (6.28) 8.16 4.73
Less dividends from:
Net investment income ............................ (0.03) -- (0.28) (0.94) (0.25)
Net realized gains ............................... -- -- (0.25) (0.39) --
Return of Capital ................................ (0.05) -- (0.10) -- --
Total dividends ...................................... (0.08) -- (0.63) (1.33) (0.25)
Change in net asset value ............................ 5.69 (5.23) (6.91) 6.83 4.48
Net asset value, end of period ....................... $ 26.64 $ 20.95 $ 26.18 $ 33.09 $ 26.26
Total return (c) ..................................... 27.55% (19.98)% (19.29)% 31.44% 21.70%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ............................ 1.10% 0.42% 0.45% 2.82% 1.14% (a)
Expenses, after expense reductions ............... 0.99% 0.98% 0.99% 0.99% 1.00%
(a)
Expenses, after expense reductions
and net of custody credits ..................... 0.99% 0.98% -- -- --
Expenses, before expense reductions .............. 1.03% 0.99% 1.01% 1.00% 1.13%
(a)
Portfolio turnover rate .............................. 82.89% 76.37% 71.81% 72.35% 62.71%
Net assets at end of period (000) ................... $ 260,624 $ 207,613 $ 293,784 $ 242,974 $ 52,357
<FN>
(a) Annualized.
(b) Effective date of Class I Shares was November 2, 1998.
(c) Total return is not annualized for periods less than one year.
+ Based on weighted average shares outstanding. `
</FN>
Schedule of investments
Thornburg Value Fund
September 30, 2003
CUSIPS: CLASS A - 885-215-731, CLASS B - 885-215-590, CLASS C - 885-215-715,
CLASS I - 885-215-632, CLASS R-1 - 885-215-533
NASDAQ SYMBOLS: CLASS A - TVAFX, CLASS B - TVBFX, CLASS C - TVCFX,
CLASS I - TVIFX, CLASS R-1 - TVRFX
Shares Value
COMMON STOCKS - 94.60%
AUTOMOBILES & COMPONENTS (2.00%)
Hyundai Motor Co. ................................ 1,209,000 $34,793,636
BANKS (10.70%)
Bank of Ireland .................................. 4,257,600 51,097,828
The Bank of New York Co. Inc. .................... 1,419,900 41,333,289
SouthTrust Corp. ................................. 793,885 23,332,280
Washington Mutual Inc. ........................... 815,900 32,121,983
Wells Fargo & Co. ................................ 835,400 43,023,100
CAPITAL GOODS (2.00%)
Deere & Co. ...................................... 680,800 36,293,448
COMMERCIAL SERVICES & SUPPLIES (2.60%)
First Data Corp. ................................. 1,172,200 46,841,112
DIVERSIFIED FINANCIALS (12.60%)
Alliance Capital Management Holdings LP ......... 539,900 18,081,251
Citigroup Inc. ................................... 1,033,000 47,011,830
E-Trade Financial Corp. + ........................ 5,328,477 49,341,697
Freddie Mac ...................................... 508,800 26,635,680
Fannie Mae ....................................... 677,300 47,546,460
MBIA Inc. ........................................ 639,145 35,133,801
ENERGY (8.40%)
BP Amoco ......................................... 720,900 30,349,890
El Paso Corp. .................................... 4,269,735 31,169,065
Marathon Oil Corp. ............................... 1,455,000 41,467,500
Unocal Corp. ..................................... 1,485,000 46,807,200
HEALTHCARE EQUIPMENT & SERVICES (6.90%)
Caremark RX Inc. + ............................... 1,381,200 31,215,120
Health Management Associates ..................... 2,565,640 55,956,608
Quest Diagnostics + .............................. 593,600 35,995,904
HOUSEHOLD & PERSONAL PRODUCTS (1.70%)
American Greetings Corp. + ....................... 787,300 15,297,239
Kimberly-Clark Corp. ............................. 306,100 15,709,052
INSURANCE (5.80%)
Chubb Corp. ...................................... 569,730 36,964,083
Lincoln National Corp. ........................... 411,022 14,541,958
The St. Paul Cos ................................. 1,415,100 52,401,153
MEDIA (8.80%)
AOL Time Warner Inc. + ........................... 2,533,755 38,285,038
Comcast Corp. + .................................. 1,646,000 48,622,840
Fox Entertainment Group Inc. + ................... 1,159,875 32,464,901
Hughes Electronics Corp. + ....................... 2,574,300 36,838,233
PHARMACEUTICALS & BIOTECHNOLOGY (5.20%)
Genzyme Corp. + .................................. 870,300 40,251,375
Pfizer Inc. ...................................... 1,706,200 51,834,356
REAL ESTATE MANAGEMENT & DEVELOPMENT (1.10%)
Boston Properties Inc. ........................... 457,500 19,887,525
RETAILING (7.40%)
Circuit City Stores Inc. ......................... 2,470,200 23,541,006
InterActiveCorp + ................................ 1,205,075 39,827,729
Lowe's Companies Inc. ............................ 821,000 42,609,900
Target Corp. ..................................... 664,000 24,986,320
SOFTWARE & SERVICES (7.10%)
Affiliated Computer Services Inc. + .............. 622,090 30,289,562
DoubleClick Inc. + ............................... 2,244,364 24,171,800
Eclipsys Corp. + ................................. 1,559,140 24,930,649
Electronic Arts Inc.+ ............................ 293,900 27,106,397
Microsoft Corp. .................................. 718,100 19,955,999
TECHNOLOGY - HARDWARE & EQUIPMENT (5.40%)
Hewlett-Packard Co. .............................. 1,795,400 34,758,944
Samsung Electronics Co., Ltd. .................... 121,600 41,444,333
Texas Instruments Inc. ........................... 911,000 20,770,800
TELECOMMUNICATION SERVICES (1.80%)
Nextel Communications Inc. + ..................... 1,651,800 32,523,942
UTILITIES (5.10%)
Dominion Resources Inc. .......................... 952,900 58,984,510
Progress Energy Inc. ............................. 706,800 31,424,328
TOTAL COMMON STOCKS (Cost $1,540,066,922) 1,685,972,654
Principal
Amount Value
CORPORATE BONDS - 2.70%
TELECOMMUNICATION SERVICES (1.10%)
Level 3 Communications Inc., 9.125%, 5/1/2008 $23,400,000 19,890,000
TRANSPORTATION (1.60%)
Delta Air Lines Inc., 10.00%, 8/15/2008 ..... 6,160,000 5,020,400
Delta Air Lines Inc., 7.90%, 12/15/2009 ..... 5,000,000 3,712,500
Delta Air Lines Inc., 10.125%, 5/15/2010 .... 2,900,000 2,240,250
Delta Air Lines Inc., 9.75%, 5/15/2021 ...... 2,000,000 1,330,000
Delta Air Lines Inc., 8.30%, 12/15/2029 ..... 24,500,000 15,802,500
TOTAL CORPORATE BONDS (Cost $47,103,194) 47,995,650
CONVERTIBLE BONDS - 1.80%
DIVERSIFIED FINANCIALS (0.60%)
E-Trade Financial Corp., 6.00%, 2/1/2007 .... $10,000,000 $ 9,750,000
TELECOMMUNICATION SERVICES (1.20%)
Level 3 Communications Inc., 6.00%, 9/15/2009 17,000,000 10,837,500
Level 3 Communications Inc., 6.00%, 3/15/2010 17,800,000 11,169,500
TOTAL CONVERTIBLE BONDS (Cost $28,597,185) .. 31,757,000
COMMERCIAL PAPER - 0.90%
American General Finance, 1.10% due 10/1/2003 5,000,000 5,000,000
American General Finance, 1.10% due 10/3/2003 4,500,000 4,499,725
General Electric, 1.00% due 10/9/2003 ....... 6,000,000 5,998,667
TOTAL COMMERCIAL PAPER (Cost $15,498,392) ... 15,498,392
TOTAL INVESTMENTS (100%) (Cost $1,631,265,693) $ 1,781,223,696
+ Non-income producing.
See notes to financial statements.
Report of Independent auditors
Thornburg Value Fund
September 30, 2003
To the Trustees and Class I Shareholders of
Thornburg Value Fund
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 (the "Fund") at September 30, 2003, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for Class
I shares for each of the periods presented, in conformity with accounting
principles generally accepted in the United States of America. 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 audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, 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 audits, which included confirmation
of securities at September 30, 2003 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
September 30, 2003
index comparisons
Thornburg Value Fund
September 30, 2003
Index Comparison
The chart below compares performance of Thornburg Value Fund and the Standard &
Poor's 500 Index for the period November 2, 1998 to September 30, 2003. Past
performance of the Index and the Fund may not be indicative of future
performance. The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on distributions or the redemption of fund
shares.
Thornburg Value Fund Class I Total Returns, Since Inception,
versus S&P 500 Index
Fund I Shares
S&P 500 Index
Average Annual Total Returns
(periods ending 9/30/03)
I Shares
1 Year: 27.55%
3 Year: (6.26)%
From Inception (11/2/98): 5.78%
The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index generally
representative of the U.S. Stock Market, without regard to company size.
TRUSTEES and Officers
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
TAX INFORMATION
Federal Income tax information (unaudited):
For the fiscal year ended September 30, 2003 certain dividends paid by the Fund
may be subject to a maximum tax rate of 15% as provided by the Jobs and Growth
Tax Relief Reconciliation Act of 2003. The Fund designates a maximum amount of
$922,227 as qualified dividend income, which is taxed at a maximum rate of 15%.
The information and distributions reported herein may differ from the
information and distributions taxable to the shareholders for the calendar year
ending December 31, 2003. Complete information will be computed and reported in
conjunction with your 2003 Form 1099-DIV.
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
www.thornburg.com
This report is submitted for the general information of 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.
Thornburg Florida Intermediate Municipal Fund
Annual Report
September 30, 2003
ALL DATA AS OF 9/30/03.
FUND FACTS: Thornburg Florida Intermediate Municipal Fund
A Shares
Annualized Distribution Rate (at NAV) 3.64%
SEC Yield 2.36%
NAV $12.46
Maximum Offering Price $12.71
TOTAL RETURNS: (Annual Average - After Subtracting Maximum Sales Charge)
One Year 0.69%
Three Years 5.61%
Five Years 4.11%
Ten Years N/A
Since Inception 4.82%
Inception Date 2/1/1994
The investment return and principal value of an investment in the Fund will
fluctuate so that, when redeemed, an investor's shares may be worth more or less
than their original cost.
Maximum sales charge of the Fund's Class A Shares is 2.00%.
The data quoted represent past performance and may not be construed as a
guarantee of future results.
The SEC Yield is computed in accordance with SEC standards measuring the net
investment income per share over a specified 30-day period expressed as a
percentage of the maximum offering price of the Fund's shares at the end of the
period.
The distribution rate is calculated by taking the sum of the month's total
distribution factors and dividing this sum by a 30-day period and annualizing to
360-day year. The value is then divided by the ending NAV to arrive at the
annualized distribution yield. The yield is calculated on a periodic basis and
is subject to change depending on the Fund's NAV and current distributions.
Letter to shareholders
Thornburg Florida Intermediate Municipal Fund
October 20, 2003
Dear Shareholder:
I am pleased to present the Annual Report for the Thornburg Florida Intermediate
Fund. The net asset value of the A shares decreased by 11 cents to $12.46 during
the year ending September 30, 2003. If you were with us for the entire period,
you received dividends of 44.9 cents per share. If you reinvested dividends, you
received 45.7 cents per share.
Interest rates on intermediate-term municipal bonds have risen somewhat over the
last year. For example, the interest rate on a ten-year AAA-rated municipal bond
rose from 3.40% on September 30, 2002 to 3.67% on September 30, 2003. Since
rising interest rates cause bond prices to fall, a ten-year bond that was worth
100% of par value on September 30, 2002 would be worth 97.95% of par on
September 30, 2003 (a 2.05% loss).
The price of your Fund has depreciated 0.88% over the one-year period ending
September 30, 2003. This is consistent with our goal of having lower price
volatility than comparable maturity bonds like the one mentioned above.
Meanwhile, your Fund has paid a steady monthly dividend while short-term
interest rates have plummeted. Investors in money market funds and short-term
CDs, susceptible to reinvestment risk, are still feeling the pinch of reduced
income flow. To see how your fund has performed relative to the money market
fund averages, turn to the back of this report.
Your Thornburg Florida Intermediate Fund is a laddered portfolio of over 60
municipal obligations from all over the state. Today, your Fund's weighted
average maturity is 6.6 years. We always keep it below 10 years. We ladder the
maturity dates of the bonds in your portfolio so that some of the bonds are
scheduled to mature during each of the coming years. Laddering intermediate
bonds accomplishes two goals. First, the staggered bond maturities contained in
a ladder defuse interest-rate risk and dampen the Fund's price volatility.
Second, laddering gives the Fund a steady cash flow stream from maturing bonds
to reinvest toward the top of the ladder where yields are typically higher. The
laddering strategy is what truly differentiates your Fund from most bond mutual
funds. It will be particularly useful if interest rates rise, because it will
allow the Fund to gradually increase the yield of the portfolio without having
to sell bonds prior to maturity at reduced prices. The following chart describes
the percentages of your fund's bond portfolio maturing in each of the coming
years:
% of portfolio Cumulative %
maturing within maturing by end of
2 years = 20% Year 2 = 20%
2 to 4 years = 13% Year 4 = 33%
4 to 6 years = 10% Year 6 = 43%
6 to 8 years = 17% Year 8 = 60%
8 to 10 years = 18% Year 10 = 78%
10 to 12 years = 9% Year 12 = 87%
12 to 14 years = 9% Year 14 = 96%
14 to 16 years = 0% Year 16 = 96%
16 to 18 years = 4% Year 18 = 100%
18 to 20 years = 0% Year 20 = 100%
Percentages can and do vary. Data as of 9/30/03
We are gradually seeing more and more reasons to feel optimistic about the U.S.
economic recovery. Many economists expect GDP growth of 5-6% for the current
quarter, but question its sustainability. The current strength seems to be
largely driven by tax cuts, federal government spending, and continued cash
flows from the home refinancing boom. If we are to enter the next phase of
recovery, we will have to see corporate capital spending and hiring pick up.
Meanwhile, despite higher prices for items such as housing, insurance and health
care, there is virtually no evidence of widespread inflation. In fact, official
measurements of inflation such as the Core Consumer Price Index have continued
to decline. So we don't see any reason for Federal Reserve policy to change for
the foreseeable future.
We do, however, continue to believe that phase two of the recovery will
eventually materialize. It will probably happen in conjunction with a weakened
dollar and a heavier calendar or Treasury bond offerings. These factors would
likely cause interest rates to rise on short-term and long-term bonds. We have
kept the Fund's duration shorter than normal to prepare for such an environment.
Doing so has detracted somewhat from price appreciation as interest rates fell,
but should allow the Fund to better take advantage of higher interest rates if
and when they arrive.
Most of the states are currently dealing with very sluggish revenue growth
following a terrible 2002, when revenues dropped over 10%. Florida general fund
revenues held up much better than most other states' in 2002 and are up a little
over 3% in the 2003 fiscal year. The state has done a good job of limiting
expenditure growth so far, but is currently facing enormous challenges to fund
voter-mandated programs for pre-kindergarten education, class size reductions,
and a high-speed railway. In the face of these challenges, your Fund continues
to maintain high credit quality, with 95% of the portfolio rated A or above by
one of the major rating agencies and 67% rated AAA.
Over the years, our practice of laddering a diversified portfolio of short and
intermediate maturity municipal bonds has allowed your fund to perform
consistently well in varying interest rate environments. Thank you for investing
in Thornburg Florida Intermediate Fund.
Sincerely,
George Strickland
Portfolio Manager
Statement of assets and liabilities
Thornburg Florida Intermediate Municipal Fund
September 30, 2003
ASSETS
Investments at value (cost $48,386,600) ........................ $ 50,691,904
Cash ........................................................... 457,552
Receivable for investments sold ................................ 1,755,000
Receivable for fund shares sold ................................ 274,991
Interest receivable ............................................ 910,466
Total Assets ................................. 54,089,913
LIABILITIES
Payable for fund shares redeemed ............................... 30,301
Accounts payable and accrued expenses .......................... 34,131
Payable to investment advisor (Note 3) ......................... 23,909
Dividends payable .............................................. 89,868
Total Liabilities ............................ 178,209
NET ASSETS ..................................................... $ 53,911,704
NET ASSETS CONSIST OF:
Net unrealized appreciation (depreciation) on investments $ 2,305,304
Accumulated net realized gain (loss) ................. (668,118)
Net capital paid in on shares of beneficial interest .. 52,274,518
$ 53,911,704
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($53,911,704 applicable to 4,326,311 shares of beneficial
interest outstanding - Note 4) ........................ $ 12.46
Maximum sales charge, 2.00% of offering price .................. 0.25
Maximum Offering Price Per Share ............................... $ 12.71
See notes to financial statements.
Statement of operations
Thornburg Florida Intermediate Municipal Fund
Year Ended September 30, 2003
INVESTMENT INCOME:
Interest income (net of premium amortized of $327,046) .......... $ 2,212,837
EXPENSES:
Investment advisory fees (Note 3) ............................... 245,335
Administration fees (Note 3) .................................... 61,334
Service fees (Note 3) ........................................... 98,648
Transfer agent fees ............................................. 27,851
Custodian fees (Note 3) ......................................... 40,638
Registration and filing fees .................................... 773
Professional fees ............................................... 9,292
Accounting fees ................................................. 2,496
Trustee fees .................................................... 1,189
Other expenses .................................................. 8,397
Total Expenses ................................ 495,953
Less:
Management fees waived by investment advisor (Note 3) .. (48,563)
Fees paid indirectly (Note 3) .......................... (798)
Net Expenses .................................. 446,592
Net Investment Income ......................... 1,766,245
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments ......................... (16,605)
Increase (Decrease) in unrealized appreciation of investments ... (341,196)
Net Realized and Unrealized
Gain (Loss) on Investments .................. (357,801)
Net Increase (Decrease) in Net Assets Resulting
From Operations $ ........................... 1,408,444
See notes to financial statements.
Statements of changes in net assets
Thornburg Florida Intermediate Municipal Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ....................................... $ 1,766,245 $ 1,426,944
Net realized gain (loss) on investments sold ................ (16,605) 46,010
Increase (Decrease) in unrealized appreciation of investments (341,196)
1,086,427
Net Increase (Decrease) in Net Assets
Resulting from Operations ............... 1,408,444 2,559,381
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares ..................................... (1,766,245) (1,426,944)
FUND SHARE TRANSACTIONS (Note 4):
Class A Shares ..................................... 12,409,008 11,794,259
Net Increase in Net Assets ................ 12,051,207 12,926,696
NET ASSETS:
Beginning of year .................................. 41,860,497 28,933,801
End of year ........................................ $ 53,911,704 $ 41,860,497
<FN>
See notes to financial statements ...........................
</FN>
Notes to financial statements
Thornburg Florida Intermediate Municipal Fund
September 30, 2003
NOTE 1 - ORGANIZATION
Thornburg Florida Intermediate Municipal Fund (the "Fund") is a non-diversified
series of Thornburg Investment Trust (the "Trust"). The Trust is 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 nine
series of shares of beneficial interest in addition to those of the Fund:
Thornburg New Mexico Intermediate Municipal Fund, Thornburg New York
Intermediate Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg
Limited Term U.S. Government Fund, Thornburg Limited Term Income Fund, Thornburg
Value Fund, Thornburg International Value Fund, Thornburg Core Growth Fund, and
Thornburg Investment Income Builder Fund. Each series is considered to be a
separate entity for financial reporting and tax purposes and bears expenses
directly attributable to it. The Fund's investment objective is to obtain as
high a level of current income exempt from Federal income tax as is consistent
with the preservation of capital. The Fund currently offers only one class of
shares of beneficial interest, Class A shares.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the
Fund are as follows:
Valuation of Investments: In determining net asset value, the Fund utilizes an
independent pricing service approved by the Trustees. Debt investment securities
have a primary market over the counter and are valued on the basis of valuations
furnished by the pricing service. The pricing service values portfolio
securities at quoted bid prices, normally at 4:00 pm EST or the yield
equivalents when quotations are not readily available. Securities for which
quotations are not readily available are valued at fair value as determined by
the pricing service using methods which include consideration of yields or
prices of municipal obligations of comparable quality, type of issue, coupon,
maturity, and rating; indications as to value from dealers and general market
conditions. The valuation procedures used by the pricing service and the
portfolio valuations received by the Fund are reviewed by the officers of the
Trust under the general supervision of the 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 (if any) and tax exempt 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 interest rate 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. Securities purchased on a when-issued or
delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on
shares for which the Fund has received payment. Dividends are paid monthly 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 capital gains, to the extent available, will be
distributed at least annually.
General: Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Premiums and discounts on securities
purchased are amortized to call dates or maturity dates of the respective
securities. Realized gains and losses from the sale of securities are recorded
on an identified cost basis. Expenses common to all Funds are allocated among
the Funds comprising the Trust based upon their relative net asset values or
other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Fund. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services for
which the fees are payable at the end of each month. For the year ended
September 30, 2003, these fees were payable at annual rates ranging from .50 of
1% to .275 of 1% of the average daily net assets of the Fund. For the year ended
September 30, 2003, the Advisor voluntarily waived investment advisory fees of
$48,563. The Fund entered into an administrative services agreement with the
Advisor, whereby the Advisor 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 .125 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 year
ended September 30, 2003, the Distributor has advised the Fund that it earned
net commissions aggregating $2,338 from the sale of Class A shares.
Pursuant to a Service Plan, under Rule 12b-1 of the Investment Company Act of
1940, the Fund may reimburse to the Advisor an amount not to exceed .25 of 1%
per annum of the average daily net assets attributable to each class of shares
of the Fund for payments made by the Advisor to securities dealers and other
financial institutions to obtain various shareholder related services. The
Advisor may pay out of its own resources additional expenses for distribution of
the Fund's shares.
The Fund has an agreement with the custodian bank to indirectly pay a portion of
the custodian's fees through credits earned by the Fund's cash on deposit with
the bank. This deposit agreement is an alternative to overnight investments.
Custodial fees have been adjusted to reflect amounts that would have been paid
without this agreement, with a corresponding adjustment reflected as fees paid
indirectly in the statements of operations. For the year ended September 30,
2003, the fees paid indirectly were $798.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4- SHARES OF BENEFICIAL INTEREST
At September 30, 2003 there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold .................... 2,522,567 $ 31,358,503 2,335,830 $ 28,434,136
Shares issued to shareholders in 63,396 787,452 53,863 660,270
reinvestment of dividends
Shares repurchased ............. (1,590,032) (19,736,947) (1,422,454) (17,300,147)
Net Increase (Decrease) ........ 995,931 $ 12,409,008 967,239 $ 11,794,259
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003, the Fund had purchase and sale
transactions (excluding short-term securities) of $25,118,650 and $14,493,337,
respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components of capital is as
follows:
Cost of investments for tax purpose $ 48,386,600
Gross tax unrealized appreciation $ 2,374,547
Gross tax unrealized depreciation (69,243)
Net tax unrealized appreciation
(depreciation) on investments $ 2,305,304
At September 30, 2003, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2004 $ 13,904
2005 34,967
2006 7,356
2007 6,459
2008 306,777
2009 282,018
$ 651,481
Unutilized tax basis capital losses may be carried forward to offset realized
gains in future years. To the extent such carry forwards are used, capital gain
distributions may be reduced to the extent provided by regulations.
During the year ended September 30, 2003, $44,210 of capital loss carry forwards
from prior years expired. This amount was reclassed to Paid-in Capital.
At September 30, 2003 the Fund had deferred capital losses occurring subsequent
to October 31, 2002 of $16,637. For tax purposes, such losses will be reflected
in the year ending September 30, 2004.
Dividends paid by the Fund for the years ended September 30, 2003 and September
30, 2002 represent exempt interest dividends, which are excludable by
shareholders from gross income for Federal income tax purposes.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of losses realized subsequent to October
31, on the sale of securities.
Financial highlights
Thornburg Florida Intermediate Municipal Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class A Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 12.57 $ 12.24 $ 11.73 $ 11.79 $ 12.37
Income from investment operations:
Net investment income ....................... 0.45 0.52 0.55 0.54 0.54
Net realized and unrealized
gain (loss) on investments ................ (0.11) 0.33 0.51 (0.06) (0.58)
Total from investment operations ................ 0.34 0.85 1.06 0.48 (0.04)
Less dividends from:
Net investment income ....................... (0.45) (0.52) (0.55) (0.54) (0.54)
Change in net asset value ....................... (0.11) 0.33 0.51 (0.06) (0.58)
Net asset value, end of year .................... $ 12.46 $ 12.57 $ 12.24 $ 11.73 $ 11.79
Total return (a) ................................ 2.77% 7.10% 9.20% 4.19% (0.36)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ....................... 3.60% 4.18% 4.55% 4.60% 4.44%
Expenses, after expense reductions .......... 0.91% 0.85% 0.89% 0.98% 0.99%
Expenses, after expense reductions
and net of custody credits ................ 0.91% 0.84% -- -- --
Expenses, before expense reductions ......... 1.01% 1.06% 1.10% 1.10% 1.08%
Portfolio turnover rate ......................... 30.98% 30.28% 22.99% 40.70% 35.91%
Net assets at end of year (000) ................$ 53,912 $ 41,860 $ 28,934 $ 25,876 $ 30,221
<FN>
(a) Sales loads are not reflected in computing total return. Schedule of
investments
</FN>
Schedule of Investments
Thornburg Florida Intermediate Municipal Fund
CUSIPS: CLASS A - 885-215-707
NASDAQ SYMBOLS: CLASS A - THFLX
Principal Credit Rating
Amount Issuer-Description Moody's/S&P Value
745,000 Brevard County School Board Certificates of Participation Series A, 5.00% due 7/1/2005 Aaa/AAA $794,885
(Insured: AMBAC)
400,000 Broward County Educational Facilities Authority Series 1994, 5.60% due 4/1/2004 (Nova NR/AAA 408,904
Southeastern University Project; Guaranty: Connie Lee)
870,000 Broward County Multi Family Housing, 5.40% due 10/1/2011 (Pembroke Park Apts Project; NR/NR 900,215
Guaranty: Florida Housing Finance Corp.)
740,000 Broward County Resource Recovery Revenue Refunding, 5.375% due 12/1/2009 A3/AA- 823,117
820,000 Capital Projects Finance Authority Student Housing, 5.50% due 10/1/2012 (Capital Aaa/AAA 913,013
Projects Student Housing; Insured: MBIA)
1,000,000 Capital Trust Agency Multi Family Housing Revenue Series A, 5.15% due 11/1/2030 put Aaa/NR 1,069,740
11/1/2010 (Shadow Run Project; Collateralized: FNMA)
800,000 Collier County Housing Finance Authority Multi Family Revenue A-1, 4.90% due 2/15/2032 Aaa/NR 841,464
put 2/15/2012 (Goodlette Arms Project; Collateralized: FNMA)
2,705,000 Cooper City Utility Systems Capital Appreciation Refunding Series A, 0% due 10/1/2013 Aaa/AAA 1,500,707
(Insured: AMBAC)
350,000 Crossings at Fleming Island Community Development Refunding Series A, 5.60% due Aaa/AAA 396,711
5/1/2012 (Insured: MBIA)
714,000 Crossings at Fleming Island Community Development Refunding Series B, 5.45% due Aaa/AAA 819,843
5/1/2010 (Insured: MBIA)
2,000,000 Dade County Solid Waste Systems Special Obligation Revenue Refunding, 6.00% due Aaa/AAA 2,308,780
10/1/2007 (Insured: AMBAC)
740,000 Duval County HFA Multi Family Housing Revenue Series 1996, 5.35% due 9/1/2006 (St. NR/A+ 793,406
Augustine Apartments Project)
230,000 Enterprise Community Development District Florida Water & Sewer Revenue, 6.125% due Aaa/AAA 238,128
5/1/2024 (Insured: MBIA)
1,000,000 Escambia County Health Facility Revenue, 5.95% due 7/1/2020 (Florida Health Care Aaa/NR 1,075,020
Facility Loan Project; Insured: AMBAC)
300,000 First Florida Govt. Financing Commission Revenue Refunding Series B, 5.50% due 7/1/2016 Aaa/AAA 346,542
1,000,000 Florida Board of Education Capital Outlay Public Education Series C, 5.50% due 6/1/2013 Aaa/AAA 1,136,280
(Insured: FGIC)
630,000 Florida Finance Corp. Revenue Homeowner Mortgage Series 1, 4.80% due 1/1/2016 Aa2/AA 645,983
1,000,000 Florida Housing Finance Agency, 3.90% due 12/1/2007 (Multi Family Guaranteed Mortgage) NR/A+ 1,033,010
95,000 Florida Housing Finance Agency Revenue Bonds, 5.30% due 12/1/2004 (Insured: AMBAC) Aaa/AAA 96,898
880,000 Florida Housing Finance Authority Series 94-B, 5.70% due 10/1/2024 mandatory put NR/AAA 910,756
10/1/2004 (Plantation Colony Project; Collateralized: FNMA)
655,000 Florida Housing Finance Corp. Revenue Homeowner Mortgage Series 1, 4.80% due 7/1/2016 Aa2/AA 671,617
200,000 Florida Housing Finance Corp. Revenue Housing D 1, 5.10% due 10/1/2011 (Augustine Club Aaa/NR 209,742
Apartments Project; Insured: MBIA)
415,000 Florida Housing Finance Corp. Revenue Housing D 1, 5.40% due 4/1/2014 (Augustine Club Aaa/NR 432,999
Apartments Project; Insured: MBIA)
500,000 Florida State Department of Corrections Certificates of Participation, 5.90% due Aaa/AAA 533,690
3/1/2005 (Okeechobee Correctional Project; Insured: AMBAC)
1,000,000 Florida State Department of Environmental Protection Revenue Series A, 5.00% due Aaa/AAA 1,090,220
7/1/2017 (Florida Forever Project; Insured: FGIC)
250,000 Gulf Breeze Revenue, 4.50% due 12/1/2015 put 12/1/2007 (Insured: FGIC) Aaa/AAA 267,218
375,000 Gulf Breeze Revenue, 4.70% due 12/1/2015 put 12/1/2010 (Insured: FGIC) Aaa/AAA 408,142
840,000 Hernando County Industrial Development Revenue, 8.50% due 12/1/2014 (Florida Crushed NR/NR 859,202
Stone Project)
1,000,000 Hillsborough County Capital Improvement Program Revenue Refunding Junior Lien, 5.00% Aaa/AAA 1,126,590
due 8/1/2008 (Criminal Justice Project; Insured: FGIC)
1,000,000 Hillsborough County Industrial Development Authority, 5.50% due 8/15/2006 (University Aaa/AAA 1,057,180
Community Hospital Inc. Project; Insured: MBIA)
1,000,000 Hillsborough County Industrial Development Authority, 5.10% due 10/1/2013 (Tampa Baa1/BBB- 990,820
Electric Co. Project)
800,000 Hillsborough County Port District Revenue, 0% due 12/1/2011 (Insured: MBIA) Aaa/AAA 497,016
1,000,000 Jacksonville Electric St. John's River Park Systems Revenue Refunding Issue-2 17th Aa2/AA 1,117,160
Series, 5.25% due 10/1/2012
1,000,000 Jacksonville Health Facilities Authority Hospital Revenue, 5.75% due 8/15/2014 Aa2/NR 1,164,880
pre-refunded 8/15/2011
727,830 Lummus Housing Development Corp., 8.00% due 12/1/2010 (Elderly Housing, Section 8 NR/NR 715,944
Project)
1,000,000 Miami Dade County Florida School Board Series B, 5.00% due 5/1/2031 put 5/1/11 Aaa/AAA 1,100,550
(Insured: MBIA)
1,000,000 Miami Dade County Special Housing Revenue Refunding, 5.80% due 10/1/2012 A3/NR 1,003,060
825,000 Miami Dade County Special Obligation Capital Asset Acquisition Series A-2, 5.00% due Aaa/AAA 923,819
4/1/2011 (Insured: AMBAC)
1,000,000 Miami Refunding, 5.375% due 9/1/2015 (Insured: MBIA) Aaa/AAA 1,125,430
760,000 Mirimar Wastewater Improvement Assessment Revenue, 6.25% due 10/1/2005 pre-refunded Aaa/AAA 807,158
10/1/2004 (Insured: FGIC)
1,000,000 Orange County Health Facilities Authority Revenue Refunding, 6.25% due 11/15/2008 Aaa/AAA 1,123,990
(Hospital Adventist Health Systems Project; Insured: AMBAC)
1,000,000 Orange County Health Facilities Authority Revenue Refunding, 5.125% due 6/1/2014 NR/AA 1,061,880
(Mayflower Retirement Project; Insured: Radian)
1,000,000 Orange County Health Facilities Authority Revenue Refunding, 6.375% due 11/15/2020 A3/A 1,105,620
(Adventist Health Systems Project)
440,000 Orange County Health Facilities Authority Revenue Unrefunded Balance Series A, 6.25% Aaa/AAA 532,686
due 10/1/2013 (Orlando Regional Hospital Project; Insured: MBIA)
300,000 Orange County Health Facilities Authority Revenue Unrefunded Balance Series A, 6.25% Aaa/AAA 370,173
due 10/1/2016 (Insured: MBIA)
50,000 Orange County Housing Finance Authority, 6.10% due 10/1/2005 (Collateralized: NR/AAA 52,760
FNMA/GNMA)
425,000 Orange County Housing Finance Authority Multi Family, 5.50% due 7/1/2010 (Insured: Aaa/NR 452,587
MBIA)
310,000 Orange County School Board Certificates of Participation Refunding Series A, 5.10% due Aaa/NR 346,720
8/1/2007 (Insured: MBIA)
735,000 Orange County School Board Certificates of Participation Series A, 5.50% due 8/1/2017 Aaa/AAA 825,655
(Insured: MBIA)
505,000 Orange County School District Series B, 1.20% due 8/1/2025 put 10/1/2003 (Insured: Aaa/NR 505,000
AMBAC) (daily demand notes)
500,000 Orange County Solid Waste Facility Revenue Refunding, 5.00% due 10/1/2011 (Insured: Aaa/AAA 554,275
MBIA)
115,000 Osceola County Health Facilities Revenue Series 1994, 5.75% due 5/1/2004 (Evangelical Aaa/AAA 118,167
Lutheran Good Samaritan Project; Insured: AMBAC)
1,000,000 Osceola County Transportation Revenue, 6.10% due 4/1/2017 (Osceola Parkway Project; Aaa/AAA 1,013,940
Insured: MBIA)
515,000 Palm Beach County Industrial Development Revenue Series 1996, 6.10% due 12/1/2007 NR/A 596,926
(Lourdes-Noreen McKeen-Geriatric Care Project; LOC: Allied Irish Bank)
270,000 Palm Beach County Industrial Development Revenue Series 1996, 6.20% due 12/1/2008 NR/A 313,783
(Lourdes-Noreen McKeen-Geriatric Care Project; LOC: Allied Irish Bank)
400,000 Palm Beach County School Board Certificates of Participation Series D, 5.00% due Aaa/AAA 447,664
8/1/2012 (Insured: FSA)
1,000,000 Palm Beach County Solid Waste Authority Revenue Refunding Series A, 6.00% due 10/1/2008 Aaa/AAA 1,171,330
(Insured: AMBAC)
800,000 Pasco County Housing Finance Authority MFHR, 5.50% due 6/1/2027 put 6/1/2008 (Cypress NR/AA- 848,536
Trail Apartments Project; Guaranty: Axa Reinsurance)
1,000,000 Pasco County Water & Sewer Revenue Refunding, 5.00% due 10/1/2004 (Insured: FSA) Aaa/AAA 1,039,610
690,000 Pensacola Airport Revenue, 6.25% due 10/1/2005 (Insured: MBIA) Aaa/AAA 753,135
675,000 Pinellas County Educational Facility Authority Revenue, 8.00% due 2/1/2011 pre-refunded NR/NR 753,442
2/1/2006 @ 102 (Clearwater Christian College Project)
800,000 Sarasota County Public Hospital Board, 1.23% due 7/1/2037 put 10/1/2003 (Sarasota VMIG1/A1+ 800,000
Memorial Hospital Project) (daily demand notes)
300,000 State Board of Education Series C, 6.00% due 5/1/2007 (ETM)* Aaa/AA+ 302,664
220,000 State Board of Education Series D, 6.20% due 5/1/2007 (Insured: MBIA) (ETM)* Aaa/AAA 221,991
1,050,000 Tampa Revenue, 5.50% due 11/15/2013 (Insured: MBIA) Aaa/AAA 1,205,001
1,000,000 University Athletic Association Inc. Florida Athletic Program Revenue Refunding, 2.20% VMIG1/NR 1,018,530
due 10/1/2031 put 10/1/2005 (LOC: Suntrust Bank)
TOTAL INVESTMENTS (Cost $48,386,600) $ 50,691,904
<FN>
+Credit ratings are unaudited.
*Escrowed to maturity.
See notes to financial statements.
</FN>
Report of Independent Auditors
Thornburg Florida Intermediate Municipal Fund
September 30, 2003
To the Trustees and Shareholders of
Thornburg Florida Intermediate Municipal Fund
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 Florida Intermediate
Municipal Fund series of Thornburg Investment Trust (the "Fund") at September
30, 2003, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America. 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 audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, 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
audits, which included confirmation of securities at September 30, 2003 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
Index Comparisons
Thornburg Florida Intermediate Municipal Fund
September 30, 2003
Index Comparison
Compares performance of Florida Intermediate Municipal Fund, the Merrill
Lynch Municipal Bond
(7-12 year) Index and the Consumer Price Index, February 1, 1994 to September
30, 2003. On September 30, 2003, the weighted average securities ratings of the
Index and the Fund were AA and AA+, respectively, and the weighted average
portfolio maturities of the Index and the Fund were 9.5 years and 6.6 years,
respectively. Past performance of the Index and the Fund may not be indicative
of future performance. The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on distributions or the
redemption of fund shares.
Thornburg Florida Intermediate Fund Class A Total Returns, Since Inception,
versus Merrill Lynch 7-12 Year Municipal
Index and Consumer Price Index (CPI)
ML Muni 7-12 yrs
Fund A Shares
CPI
Class A
Average Annual Total Returns (at max. offering price)
(periods ended 9/30/03)
One Year: .69%
Five Years: 4.11%
From Inception (2/1/94): 4.82%
The Merrill Lynch 7-12 Year Municipal Bond Index representing a broad measure of
market performance. It is a model portfolio of municipal obligations throughout
the U.S., with an average maturity which ranges from seven to twelve years.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
TRUSTEES and Officers
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
Thornburg FLORIDA INTERMEDIATE municipal fund
a shares
Outperformed Tax-Free Money Market Funds
(Unaudited)
Investors sometimes ask us to compare the returns of the Florida Intermediate
Municipal Fund to money market fund returns. These investments have certain
differences, and investors in Florida Intermediate Municipal Fund took more risk
than money market fund investors to earn their higher returns.
Return from a hypothetical $10,000 investment 9/30/94 through 9/30/03 (after
sales charge and fund expenses)
Tax-free Money Market Average CDA/Wiesenberger $2,555
Thornburg Florida
Intermediate Municipal Fund $5,762
The chart above is for the Fund's Class A Shares only. See the inside front
cover page for the 30-day SEC yield and the total returns at the maximum
offering prices for one year, three years years, five years and since inception
for each class of shares of the Fund.
Note 1: Future increases, if any, of any of these investments may bear no
relationship to prior increases. Quotations for the money fund averages are
based upon 30-day yield quotations for tax-exempt money funds as sourced from
the "Tax-free Money Market Average CDA/Wiesenberger" for the months covered by
this analysis. The increase for the Class A Shares of Florida Intermediate
Municipal Fund is based upon the dividends paid for the months covered by this
analysis, the beginning offering price at $11.78 per share and the ending NAV at
$12.46 per share. These investments returned the $10,000 initial investment in
addition to the amounts shown above.
Note 2: This analysis does not take into
account the effect, if any, caused by state and local income taxes. The portion
of the increase, if any, of Florida Intermediate Municipal Fund representing
appreciation of the share price is assumed to be taxed at a 15% federal tax
rate. The average money market fund increases shown above may differ from the
return of a particular money market fund. It is not possible to invest in this
money fund average.
Note 3: Generally, money market funds seek to maintain an
investment portfolio with an average maturity of 90 days or less. Florida
Intermediate Municipal Fund invests in short-to-intermediate maturity municipal
obligations. The net asset value of the money funds did not fluctuate. The net
asset value of the Class A Shares of THFLX did vary from time to time, and will
continue to vary in the future due to the effect of changes in interest rates on
the value of the investments the Fund holds. The analysis assumes that the
investor received the net asset value of the shares owned, plus accrued income,
at time of sale. Redemptions are made at the then current net asset value, which
may give you a gain or loss when you sell your shares.
Note 4: This analysis assumes that the dividends from each of these investment
vehicles were reinvested and compounded monthly. Most money funds declare
dividends daily and pay them monthly. Florida Intermediate Municipal Fund also
declares dividends daily and pays them monthly.
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
www.thornburg.com
This report is submitted for the general information of 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.
Thornburg International Value Fund
Annual Report
September 30, 2003
Letter to shareholders
Thornburg International Value Fund
October 28, 2003
William V. Fries, CFA
Portfolio Manager
Dear fellow shareholder:
It is my pleasure to report on the results of your investment in the Thornburg
International Value Fund for the fiscal year ended September 30, 2003. It was a
good year. Your Fund's investment performance exceeded its benchmark and likely
exceeded the expectations of many investors, given the poor investment
psychology in place at this time one year ago. The table below shows total
return figures for the Thornburg International Value Fund A, B, and C share
classes for year ended September 30, 2003, and also includes results for the
three-year, five-year, and since-inception periods. Note that these returns are
for investors who held shares for the entire periods shown, with the assumption
that all dividends were reinvested in additional shares.
Total return performance as of 9/30/03
A Shares B SHARES
Qtr Ended Since Qtr Ended Since
YTD 9/30/03 1yr 3yrs 5yrs Inc YTD 9/30/03 1yr 3 Years Inc
Net Asset Value .... 20.37% 9.85% 25.84% (1.65)% 11.34% 6.59% 19.55% 9.57% 24.72% (2.48)% (3.20)%
Max. Offering Price 14.91% 4.91% 20.18% (3.14)% 10.32% 5.68% 14.55% 4.57% 19.72% (3.64)% (4.18)%
C Shares
Qtr Ended Since
YTD 9/30/03 1yr 3yrs 5yrs Inc
Net Asset Value 19.59% 9.62% 24.74% (2.52)% 10.35% 5.62%
Max. Offering Price 18.59% 8.62% 23.74% (2.52)% 10.35% 5.62%
Total returns for periods greater than one year are annualized average
Past performance cannot guarantee future results.
Inception of Class A and C shares: 5/28/98. Inception of Class B shares:
4/03/00.
The favorable result for the year was not achieved without our enduring
considerable volatility and stress along the way. Doubts about economic
recovery, terrorist attacks, the War in Iraq, and SARS were among factors that
held down stock prices through March. The success of our military effort in Iraq
sparked a relief rally that has extended through the present. Emerging market
holdings, which accounted for 26.2% of the portfolio at fiscal year end, showed
strong performance. The strength in the major currencies versus the Dollar
favorably influenced performance in many markets, even with little favorable
economic news from a few of the largest of these markets: Germany, France, and
Japan.
Stock Market Performance-Major Countries
Country Index Index (12 mos. Ended Sept. 30)
Performance Adjusted to Dollars
United Kingdom (FTSE 100) +8.77% +14.72%
France (CAC 40) +11.65 +32.05
Germany (DAX) +13.55 +34.29
Switzerland (SMI) +6.93 +19.70
Japan (NIKKEI 225) +13.09 +25.12
Standout performers in the portfolio hailed from a number of geographies. The
table on the next page lists the top ten stocks according to the degree to which
they impacted the portfolio, and lists the country of domicile. Stock selection
remains the core strategy at Thornburg Investment Management.
Country Company Industry
Hungary Gedeon Richter Generic Drugs
Taiwan ASE Test Technology
Hong Kong ASM Pacific Technology
Russia Mobile Telesystems Communication Svcs.
South Korea Samsung Electronic Technology
Taiwan Taiwan Semiconductor Technology
Germany Depfa Bank Financial Services
Mexico Wal-Mart de Mexico Retail
Canada Rogers Communications Media
Germany Deutsche Boerse Financial Services
Concern about the value of the Dollar compared with that of other
developed-world currencies has recently become a focus of U.S. investors. In
mid-September, the economic ministers of the major industrialized nations, known
as the Group of Eight, met in Dubai. Their jointly issued communique has roiled
currency markets since. Essentially, the communique encouraged flexible exchange
rate policies and has been interpreted as pointing to a non-interventionist/weak
Dollar policy on the part of the U.S. Treasury. While this might make companies
operating in the U.S. more formidable global competitors, the initial reaction
of investors has been characterized by growing interest in international
markets. The ultimate impact of this development is complex and opaque and may
already be factored into stock valuations. Our most recent investments have
taken this development into consideration, not as an issue to which to react,
but more as a consideration of which to be aware. The table below lists recent
equity purchases. For a commentary on each holding in the portfolio, please go
to our website, www.thornburg.com, and click on Mutual Funds, followed by a
click on International Value Fund Holdings Commentary.
New Holdings During the fiscal year
Bank of Ireland Boskalis Westminster Groep NV
Hugo Boss AG Chunghwa Telecom Co. Ltd. ADR
Depfa Bank Doctor Reddys Laboratories Ltd. ADR
FamilyMart Co. Ltd. ADR HSBC Holdings Plc ADR
MMC Norilsk Nickel ADR Kimberly Clark de Mexico
Kingfisher LLC Magna International Inc.
Mobile Telesystems NEC Electronics Corp. ADR +
Nippon Telegraph and Telephone Corp. Pearson Plc
Promotora De Informaciones Rogers Communications Inc.
Shaw Communications STMicroelectronics NV
Swiss Reinsurance Vodafone Group Plc
Vodafone Group Plc ADR
We appear to be at a critical juncture in both economic development and equity
market performance. Expectations for continued growth in both the U.S. and
abroad are widely accepted. The less-developed Asian and Eastern European
economies continue robust growth. The U.K. and smaller economies in Europe
continue with modest expansion. The major continental economies of Germany and
France, however, are straining under absence of growth, inflexible labor laws,
and heavy transfer payments. Debt levels in both countries are expected to
exceed the 3% guideline set by the European Union as a percent of GDP. Japan is
showing signs of economic life with more candid recognition of bad debt problems
in the banking system. The strongest companies there remain those oriented
towards exports, where a weaker Dollar could dampen profitability.
TOP INDUSTRIES
9/30/2003 9/30/2002
15.2% Technology 12.6% Energy
9.3% Telecommunications 9.9% Retail
8.5% Pharmaceuticals & Biotech 9.8% Autos & Components
7.9% Autos & Components 9.5% Food, Bev., & Tobacco
7.6% Diversified Financials 8.4% Banking
Percentages and holdings can and do vary over time.
Much of the stock market gains realized since last Fall reflect a return of
investor confidence. Gains from this point forward will likely focus more on
profit improvement. Recent stock purchase activity in your Fund has focused on
companies in which this improvement is a reliable prospect. The effect of recent
portfolio changes is shown in the table to the left; it compares economic sector
exposure with that of one year ago.
There was considerable change in sector participation from last year.
Technology, telecommunications and pharmaceuticals replaced energy, retail and
autos as top sector holdings. Recent purchases, such as NEC Electronics Corp.
and STMicroelectronics NV, contributed to the increase in the technology sector,
as did good performance from existing holdings. The increase in
telecommunications was mostly due to portfolio additions: Mobile Telesystems (a
Russian cellular service), NTT DoCoMo Inc., Vodafone Group Plc, and Chunghwa
Telecom Co. LTD (a Taiwanese firm). The addition of Dr. Reddy's Laboratories
Ltd. (an Indian generic drugs maker) boosted the Pharmaceutical sector's
performance, as did good performance at Gedeon Richter (a Hungarian generic drug
developer and manufacturer).
9/30/ 9/30/
2003 2002
U.K. 15.6% 17.6%
Germany 13.2% 12.3%
Japan 12.2% 6.7%
Switzerland 8.2% 12.2%
Taiwan 5.4% 2.2%
Canada 5.3% 0.4%
Korea 4.5% 5.0%
Hungary 4.4% 7.1%
France 4.1% 0.2%
Russia 3.9% -
Mexico 3.6% 5.3%
Netherlands 2.8% 2.3%
Ireland 2.7% 3.0%
Sweden 2.0% 3.5%
India 1.9% -
Spain 1.9% 3.1%
Italy 1.7% 3.1%
Brazil 1.5% 1.4%
Hong Kong 1.3% 0.7%
China 1.0% 5.6%
Cash 2.8% -
* Percentages and holdings can and do vary over time.
The changes in geographic diversification since September 30, 2002 are reflected
in the table on the right. While the U.K., Germany, and Switzerland continue to
account for over 35% of the portfolio, Japan holding increased significantly and
now accounts for over 12% of country holdings. Canada and Taiwan increased
materially and Russia and India represent new holdings in emerging markets.
Total exposure to emerging markets rose to 26.2% compared with 21% at September
30, 2002.
The outlook for foreign equities appears to be more appealing to many U.S.
investors at this time. With or without help from currency movements, we remain
focused on the capital appreciation potential of our international portfolio.
Thank you for investing with us, and for your trust and confidence.
Sincerely,
William V. Fries, CFA
Portfolio Manager
Statement of assets and liabilities
Thornburg International Value Fund
September 30, 2003
ASSETS
Investments at value (cost $162,209,144) .................................................. $ 191,306,767
Cash ...................................................................................... 1,694,784
Cash denominated in foreign currency (cost $2,155,823) .................................... 2,180,155
Receivable for securities sold ............................................................ 112,629
Receivable for fund shares sold ........................................................... 1,115,500
Dividends receivable ...................................................................... 560,205
Unrealized gain on forward exchange contracts (Note 6) .................................... 195,279
Prepaid expenses and other assets ......................................................... 26,302
Total Assets ............................................................ 197,191,621
LIABILITIES
Payable for securities purchased .......................................................... 2,395,263
Payable for fund shares redeemed .......................................................... 159,795
Payable to investment advisor (Note 3) .................................................... 121,110
Unrealized loss on forward exchange contracts (Note 6) .................................... 1,038,606
Accounts payable and accrued expenses ..................................................... 186,749
Total Liabilities ....................................................... 3,901,523
NET ASSETS ................................................................................ $ 193,290,098
NET ASSETS CONSIST OF:
Undistributed net investment income (loss) ....................................... $ (938,279)
Net unrealized appreciation (depreciation) ....................................... 28,268,749
Accumulated net realized gain (loss) ............................................. (24,447,406)
Net capital paid in on shares of beneficial interest ............................. 190,407,034
$ 193,290,098
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($97,990,560 applicable to 6,554,833 shares of beneficial interest outstanding - Note 4) $ 14.95
Maximum sales charge, 4.50% of offering price ............................................. 0.70
Maximum Offering Price Per Share .......................................................... $ 15.65
Class B Shares:
Net asset value and offering price per share *
($6,345,848 applicable to 439,870 shares of beneficial interest outstanding - Note 4) .. $ 14.43
Class C Shares:
Net asset value and offering price per share*
($55,443,028 applicable to 3,832,367 shares of beneficial interest outstanding - Note 4) $ 14.47
Class I Shares:
Net asset value, offering and redemption price per share
($33,510,580 applicable to 2,215,249 shares of beneficial interest outstanding - Note 4) $ 15.13
Class R-1 Shares:
Net asset value, offering and redemption price per share
($82 applicable to 5 shares of beneficial interest outstanding - Note 4) ............... $ 15.01
<FN>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge. See notes to financial statements
</FN>
Statement of Operations
Thornburg International Value Fund
Year Ended September 30, 2003
INVESTMENT INCOME
Dividend income (net of foreign taxes withheld of $348,891) ..... $ 3,042,793
Interest income ................................................. 62,339
Total Income .................................. 3,105,132
EXPENSES
Investment advisory fees (Note 3) ............................... 1,332,485
Administration fees (Note 3)
Class A Shares ......................................... 96,791
Class B Shares ......................................... 6,663
Class C Shares ......................................... 56,177
Class I Shares ......................................... 12,290
Distribution and service fees (Note 3)
Class A Shares ......................................... 193,581
Class B Shares ......................................... 53,301
Class C Shares ......................................... 449,416
Transfer agent fees
Class A Shares ......................................... 154,426
Class B Shares ......................................... 26,414
Class C Shares ......................................... 104,368
Class I Shares ......................................... 21,442
Class R-1 Shares ....................................... 760
Registration & filing fees
Class A Shares ......................................... 11,518
Class B Shares ......................................... 7,613
Class C Shares ......................................... 8,905
Class I Shares ......................................... 9,798
Class R-1 Shares ....................................... 3,918
Custodian fees (Note 3) ......................................... 157,393
Professional fees ............................................... 34,594
Accounting fees ................................................. 10,064
Trustee fees .................................................... 3,434
Other expenses .................................................. 102,915
Total Expenses ................................ 2,858,266
Less:
Expenses reimbursed by investment advisor (Note 3) ..... (69,262)
Management fees waived by investment advisor (Note 3) .. (127,717)
Expenses paid indirectly (Note 3) ...................... (4,493)
Net Expenses .................................. 2,656,794
Net Investment Income ......................... $ 448,338
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments ............................................ $(10,510,164)
Foreign currency transactions .......................... (1,481,324)
(11,991,488)
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ 47,546,373
Foreign currency translation ........................... (1,434,310)
46,112,063
Net Realized and Unrealized
Gain (Loss) on Investments ................. 34,120,575
Net Increase (Decrease) in Net Assets Resulting
from Operations ............................ $ 34,568,913
See notes to financial statements.
Statements of Changes in net assets
Thornburg International Value Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss) ................................ $ 448,338 $ 10,427
Net realized gain (loss) on investments and foreign currency
transactions ............................................. (11,991,488) (13,380,286)
Increase (Decrease) in unrealized appreciation (depreciation)
on investments and foreign currency translation .......... 46,112,063 1,888,896
Net Increase (Decrease) in Net Assets
Resulting from Operations .............. 34,568,913 (11,480,963)
FUND SHARE TRANSACTIONS - (NOTE 4)
Class A Shares ..................................... 11,087,620 18,256,217
Class B Shares ..................................... 485,325 2,719,253
Class C Shares ..................................... 5,432,349 17,418,518
Class I Shares ..................................... 8,371,956 9,679,423
Class R-1 Shares ................................... 75 0
Net Increase (Decrease) in Net Assets ..... 59,946,238 36,592,448
NET ASSETS:
Beginning of year ......................... 133,343,860 96,751,412
End of year ............................... $ 193,290,098 $ 133,343,860
<FN>
See notes to financial statements.
</FN>
Notes to financial statements
Thornburg International Value Fund
September 30, 2003
NOTE 1 - ORGANIZATION
Thornburg International 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 nine 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 Value Fund, Thornburg Core Growth Fund, Thornburg New York
Intermediate Municipal Fund, and Thornburg Investment Income Builder Fund. Each
series is considered to be a separate entity for financial reporting and tax
purposes and bears expenses directly attributable to it. The Fund seeks
long-term capital appreciation by investing in both foreign and domestic equity
securities selected on a value basis.
The Fund currently offers five classes of shares of beneficial interest, Class
A, Class B, Class C, Institutional Class (Class I) and Retirement Class (Class
R-1) 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 B 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 and bear both a service fee and
distribution fee, (iii) 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 a service fee and a
distribution fee, (iv) Class I shares are sold at net asset value without a
sales charge at the time of purchase, (v) Class R-1 shares are sold at net asset
value without a sales charge at the time of purchase, but bear both a service
fee and distribution fee, and (vi) 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 service and distribution fees, administration fees
and certain registration and transfer agent expenses. Class B shares of the Fund
outstanding for eight years will convert to Class A shares of the Fund.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the
Funds are as follows:
Valuation of Securities: In determining net asset value, investments are stated
at value based on latest sales prices, normally 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.
Foreign Currency Translation: Portfolio 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.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of interest recorded on the Fund's books, and the U.S. dollar equivalent
of the amounts actually received or paid.
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 shareholders are generally 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 at least 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. Certain income from foreign securities is recognized as soon
as information is available to the Fund. Realized gains and losses from the sale
of securities are recorded on an identified cost basis. Net investment income,
other than class specific expenses, and realized and unrealized gains and
losses, are allocated daily to each class of shares based upon the relative net
asset value of outstanding shares of each class of shares at the beginning of
the day (after adjusting for the current share activity of the respective
class). Expenses common to all funds are allocated among the funds comprising
the Trust based upon their relative net asset values or other appropriate
allocation methods.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Fund. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services to
the Fund for which the fees are payable at the end of each month. For the year
ended September 30, 2003, these fees were payable at annual rates ranging from
..875 of 1% to .675 of 1% of the average daily net assets of the Fund depending
on the Fund's asset size. For the year ended September 30, 2003, the Advisor
voluntarily waived investment advisory fees of $64,940 for Class A shares,
$4,471 for Class B shares, $37,689 for Class C shares, $20,617 for Class I
shares, and $0 for Class R-1 shares. The Fund also has an administrative
services agreement with the Advisor, whereby the Advisor 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 .125 of 1% of the
average daily net assets attributable to each class of shares. For the year
ended September 30, 2003, the Advisor voluntarily reimbursed certain class
specific expenses and administrative fees of $19,884 for Class B shares, $1,170
for Class C shares, $43,530 for Class I shares, and $4,678 for Class R-1 shares.
The Fund has an underwriting agreement with Thornburg Securities Corporation
(the "Distributor"), which acts as the Distributor of the Fund's shares. For the
year ended September 30, 2003, the Distributor has advised the Fund that it
earned net commissions aggregating $18,254 from the sale of Class A shares of
the Fund, and collected contingent deferred sales charges aggregating $7,776
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 Advisor an amount not to exceed .25 of 1%
per annum of its average daily net assets attributable to each class of shares
of the Fund for payments made by the Advisor to securities dealers and other
financial institutions to obtain various shareholder related services. The
Advisor may pay out of its own resources 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 B, Class C and Class R-1 shares under which the Fund
compensates the Distributor for services in promoting the sale of Class B, Class
C and Class R-1 shares of the Fund at an annual rate of up to .75 of 1% of the
average daily net assets attributable to Class B, Class C and Class R-1 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, 2003 are set
forth in the statement of operations.
The Fund has an agreement with the custodian bank to indirectly pay a portion of
the custodian's fees through credits earned by the Fund's cash on deposit with
the bank. This deposit agreement is an alternative to overnight investments.
Custodial fees have been adjusted to reflect amounts that would have been paid
without this agreement, with a corresponding adjustment reflected as fees paid
indirectly in the statement of operations. For the year ended September 30, 2003
fees paid indirectly were $4,493.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4 - SHARES OF BENEFICIAL INTEREST
At September 30, 2003, there were an unlimited number of shares of beneficial
interest authorized. Sales of Class R-1 shares commenced July 1, 2003.
Transactions in shares of beneficial interest were as follows:
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold ....................... 3,378,754 $ 44,006,739 3,801,273 $ 52,564,406
Shares repurchased** .............. (2,671,582) (32,919,119) (2,520,422) (34,308,189)
Net Increase (Decrease) ........... 707,172 $ 11,087,620 1,280,851 $ 18,256,217
<FN>
** The Fund charges a redemption fee of 1% of the Class A shares exchanged
within 90 days of purchase. For the year ended September 30, 2002 and September
30, 2003, $118,644 and $55,020 were netted in the amount reported for shares
repurchased .......................
</FN>
Class B Shares
Shares sold ....................... 136,594 $ 1,695,976 367,883 $ 5,086,178
Shares repurchased ................ (100,676) (1,210,651) (175,295) (2,366,925)
Net Increase (Decrease) ........... 35,918 $ 485,325 192,588 $ 2,719,253
Class C Shares
Shares sold ....................... 1,397,752 $ 17,554,897 1,995,189 $ 26,837,191
Shares repurchased ................ (1,014,225) (12,122,548) (713,915) (9,418,673)
Net Increase (Decrease) ........... 383,527 $ 5,432,349 1,281,274 $ 17,418,518
Class I Shares
Shares sold ....................... 1,169,448 $ 15,121,898 895,191 $ 12,425,312
Shares repurchased** .............. (558,936) (6,749,942) (197,922) (2,745,889)
Net Increase (Decrease) ........... 610,512 $ 8,371,956 697,269 $ 9,679,423
<FN>
** The Fund charges a redemption fee of 1% of the Class I shares exchanged
within 90 days of purchase. For the year ended September 30, 2002 and September
30, 2003, $160 and $7,078 were netted in the amount reported for shares
repurchased .......................
</FN>
Class R-1 Shares
Shares sold ....................... 5 $ 75 -- $ --
Shares repurchased ................ -- -- -- --
Net Increase (Decrease) ........... 5 $ 75 -- $ --
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003, the Fund had purchase and sale
transactions of investment securities (excluding short term securities) of
$111,368,600 and $85,040,239, respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components
of capital is as follows:
Cost of investments for tax purpose $ 162,414,612
Gross tax unrealized appreciation $ 33,374,157
Gross tax unrealized depreciation (4,482,002)
Net tax unrealized appreciation
(depreciation) on investments $ 28,892,155
At September 30, 2003, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2007 $ 119,008
2008 272,996
2009 917,688
2010 3,523,281
2011 9,267,675
14,100,648
As of September 30, 2003 the Fund had deferred currency and capital losses
occurring subsequent to October 31, 2002 of $1,725,498 and $10,141,290,
respectively. For tax purposes, such losses will be reflected in the year ending
September 30, 2004.
Unutilized tax basis capital losses may be carried forward to offset realized
gains in future years. To the extent such carry forwards are used in future
years, capital gain distributions may be reduced to the extent provided by
regulations.
Net investment income and net realized gain (loss) differ for financial
statement and tax purposes primarily due to differing treatments of wash sale
losses, foreign currency transactions and losses realized subsequent to October
31 on the sale of securities and foreign currencies.
NOTE 7 - FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK
During the year ended September 30, 2003, 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 transactions 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 transactions.
These instruments may involve market risks in excess of the amount recognized on
the Statement 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. 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.
CONTRACTS TO SELL:
21,500,000 Euro Dollar for 24,258,450 USD, January 26, 2004 $ (714,428)
700,000,000 Japanese Yen for 6,048,561 USD, March 19, 2004 (268,069)
3,450,000,000 S. Korean Won for 2,910,164 USD, March 22, 2004 (56,109)
Unrealized loss from forward
exchange contracts. (1,038,606)
31,650,000 Mexican Peso for 2,920,167 USD, December 18, 2003 62,362
32,500,000 Mexican Peso for 3,038,519 USD, January 9, 2004 112,489
12,000,000 Mexican Peso for 1,094,990 USD, February 19, 2004 20,428
Unrealized gain from forward
exchange contracts. 195,279
Net unrealized gain (loss) from forward
exchange contracts $ (843,327)
Financial highlights
Year Ended September 30,
2003 2002 2001 2000 1999
Class A Shares:
Per Share Performance
(for a share outstanding throughout the year)+
Net asset value, beginning of year ....................... $ 11.88 $ 12.37 $ 16.64 $ 12.95 $ 9.79
Income from investment operations:
Net investment income ................................ 0.06 0.03 0.03 0.44 0.12
Net realized and unrealized
gain (loss) on investments ......................... 3.00 (0.54) (3.39) 4.03 3.18
Total from investment operations ......................... 3.06 (0.51) (3.36) 4.47 3.30
Redemption fees added to paid in capital ................. 0.01 0.02 -- -- --
Less dividends from:
Net investment income ................................ -- -- (0.86) (0.78) (0.14)
Return of Capital .................................... -- -- (0.05) -- --
Total dividends .......................................... -- -- (0.91) (0.78) (0.14)
Change in net asset value ................................ 3.07 (0.49) (4.27) 3.69 3.16
Net asset value, end of year ............................. $ 14.95 $ 11.88 $ 12.37 $ 16.64 $ 12.95
Total return (a) ......................................... 25.84% (3.96)% (21.28)% 34.42% 33.79%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ................................ 0.44% 0.19% 0.22% 2.61% 1.07%
Expenses, after expense reductions ................... 1.59% 1.57% 1.54% 1.53% 1.63%
Expenses, after expense reductions
and net of custody credits ......................... 1.59% 1.57% -- -- --
Expenses, before expense reductions .................. 1.67% 1.60% 1.56% 1.55% 1.93%
Portfolio turnover rate .................................. 58.35% 28.39% 61.05% 86.13% 58.09%
Net assets at end of year (000) ......................... $ 97,991 $ 69,490 $ 56,507 $ 76,070 $ 23,202
<FN>
(a) Sales loads are not reflected in computing total return. + Based on weighted
average shares outstanding .............................
</FN>
Thornburg International Value Fund
Year Ended September 30, Period Ended
September 30,
2003 2002 2001 2000 (b)
Class B Shares:
Per Share Performance
(for a share outstanding throughout the period)+
Net asset value, beginning of period .................... $ 11.57 $ 12.16 $ 16.44 $ 17.62
Income from investment operations:
Net investment income (loss) ........................ (0.04) (0.08) (0.06) 0.14
Net realized and unrealized
gain (loss) on investments ........................ 2.90 (0.51) (3.36) (0.79)
Total from investment operations ........................ 2.86 (0.59) (3.42) (0.65)
Less dividends from:
Net investment income ............................... -- -- (0.82) (0.53)
Return of Capital ................................... -- -- (0.04) --
Total dividends ......................................... -- -- (0.86) (0.53)
Change in net asset value ............................... 2.86 (0.59) (4.28) (1.18)
Net asset value, end of period .......................... $ 14.43 $ 11.57 $ 12.16 $ 16.44
Total return (c) ........................................ 24.72% (4.85)% (21.86)% (3.73)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income (loss) ........................ (0.32)% (0.58)% (0.39)% 1.63% (a)
Expenses, after expense reductions .................. 2.38% 2.39% 2.40% 2.38% (a)
Expenses, after expense reductions
and net of custody credits ........................ 2.38% 2.39% -- --
Expenses, before expense reductions ................. 2.84% 2.88% 3.62% 6.08% (a)
Portfolio turnover rate ................................. 58.35% 28.39% 61.05% 86.13%
Net assets at end of period (000) ....................... $ 6,346 $ 4,672 $ 2,570 $ 1,270
<FN>
(a) Annualized ..........................................
(b) Effective date of Class B Shares was April 3, 2000. (c) Total return is not
annualized for periods less than one year. + Based on weighted average shares
outstanding .............................................
</FN>
Thornburg International Value Fund
Year Ended September 30,
2003 2002 2001 2000 1999
Class C Shares:
Per Share Performance
(for a share outstanding throughout the year)+
Net asset value, beginning of year ........................ $ 11.60 $ 12.19 $ 16.49 $ 12.88 $ 9.77
Income from investment operations:
Net investment income (loss) .......................... (0.04) (0.08) (0.08) 0.38 0.04
Net realized and unrealized
gain (loss) on investments .......................... 2.91 (0.51) (3.37) 3.91 3.14
Total from investment operations .......................... 2.87 (0.59) (3.45) 4.29 3.18
Less dividends from:
Net investment income ................................. -- -- (0.81) (0.68) (0.07)
Return of Capital ..................................... -- -- (0.04) -- --
Total dividends ........................................... -- -- (0.85) (0.68) (0.07)
Change in net asset value ................................. 2.87 (0.59) (4.30) 3.61 3.11
Net asset value, end of year .............................. $ 14.47 $ 11.60 $ 12.19 $ 16.49 $ 12.88
Total return .............................................. 24.74% (4.84)% (21.96)% 33.20% 32.59%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income (loss) .......................... (0.31)% (0.62)% (0.51)% 2.25% 0.11%
Expenses, after expense reductions .................... 2.37% 2.36% 2.37% 2.37% 2.38%
Expenses, after expense reductions
and net of custody credits .......................... 2.37% 2.36% -- -- --
Expenses, before expense reductions ................... 2.45% 2.36% 2.39% 2.43% 3.63%
Portfolio turnover rate ................................... 58.35% 28.39% 61.05% 86.13% 58.09%
Net assets at end of year (000) .......................... $ 55,443 $ 39,995 $ 26,426 $ 26,120 $ 3,235
<FN>
+ Based on weighted average shares outstanding ............
</FN>
Thornburg International Value Fund
Year Ended Period Ended
September 30, September 30,
2003 2002 2001(b)
Class I Shares:
Per Share Performance
(for a share outstanding throughout the period)+
Net asset value, beginning of period ...................... $ 11.96 $ 12.40 $ 14.63
Income from investment operations:
Net investment income ................................. 0.14 0.10 0.11
Net realized and unrealized
gain (loss) on investments .......................... 3.03 (0.54) (2.21)
Total from investment operations .......................... 3.17 (0.44) (2.10)
Less dividends from:
Net investment income ................................. -- -- (0.08)
In excess of net investment income .................... -- -- (0.05)
Total dividends ........................................... -- -- (0.13)
Change in net asset value ................................. 3.17 (0.44) (2.23)
Net asset value, end of period ............................ $ 15.13 $ 11.96 $ 12.40
Total return (c) .......................................... 26.51% (3.55)% (14.50)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ................................. 1.07% 0.71% 1.57%(a)
Expenses, after expense reductions .................... 0.99% 0.99% 0.97%(a)
Expenses, after expense reductions
and net of custody credits .......................... 0.99% 0.99% --
Expenses, before expense reductions ................... 1.25% 1.28% 1.38%(a)
Portfolio turnover rate ................................... 58.35% 28.39% 61.05%
Net assets at end of period (000) ......................... $ 33,511 $ 19,187 $ 11,249
<FN>
(a) Annualized ............................................
(b) Effective date of Class I Shares was March 30, 2001.
(c) Total return is not annualized for periods less than one year.
+ Based on weighted average shares outstanding
</FN>
Period Ended
September 30,
2003(c)
Class R-1 Shares:
Per Share Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ...................... $ 13.59
Income from investment operations:
Net investment income ................................. 0.02
Net realized and unrealized
gain (loss) on investments .......................... 1.40
Total from investment operations .......................... 1.42
Less dividends from:
Net investment income ................................. --
Change in net asset value ................................. 1.42
Net asset value, end of period ............................ $ 15.01
Total return (a) .......................................... 10.45%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ................................. 0.65%(b)
Expenses, after expense reductions .................... 1.60%(b)
Expenses, after expense reductions
and net of custody credits .......................... 1.60%(b)
Expenses, before expense reductions ................... 30,451.98%(b)*
Portfolio turnover rate ................................... 58.35%
Net assets at end of period (000) ......................... $ -- (d)
(a) Total return is not annualized for periods less than one year.
(b) Annualized.
(c) Effective date of Class R-1 Shares was July 1, 2003.
(d) Net assets at end of year were less than $1,000.
* Due to the size of net assets and fixed expenses,
ratios may appear disproportionate
Schedule of investments
Thornburg International Value Fund
September 30, 2003
CUSIPS: CLASS A - 885-215-657, CLASS B - 885-215-616, CLASS C - 885-215-640,
CLASS I - 885-215-566, CLASS R-1 - 885-215-525
NASDAQ SYMBOLS: CLASS A - TGVAX, CLASS B - THGBX, CLASS C - THGCX,
CLASS I - TGVIX, CLASS R-1 - TGVRX
Shares Value
COMMON STOCKS-98.40%
AUTOMOBILES & COMPONENTS (7.90%)
Bayerische Motoren Werke AG ..................... 79,705 $ 3,013,704
Hyundai Motor Co. ............................... 268,500 3,893,250
Magna International Inc. ........................ 46,500 3,354,975
Toyota Motor Corp. .............................. 162,900 4,795,692
BANKS (6.80%)
Bank of Ireland ................................. 440,500 5,286,686
Depfa Bank PLC .................................. 37,900 3,679,942
OTP Bank RT + ................................... 172,300 4,085,681
CAPITAL GOODS (5.30%)
Boskalis Westminster Groep NV ................... 81,380 1,916,392
Embraer Brasileira de Aeronaut .................. 295,895 1,517,644
Embraer Brasileira de Aeronaut ADR 61,055 ....... 1,288,260
IHC Caland NV ................................... 66,800 3,440,322
Muhlbauer Holding AG ............................ 85,412 1,871,014
CONSUMER DURABLES & APPAREL (5.60%)
Burberry Group PLC .............................. 680,083 3,679,675
Hugo Boss AG .................................... 206,123 3,734,713
Merloni Elettrodomestici S.P.A .................. 230,200 3,374,320
DIVERSIFIED FINANCIALS (7.60%)
Deutsche Boerse AG .............................. 108,124 5,518,189
Euronext NV ..................................... 217,260 5,293,393
HSBC Holdings PLC ADR ........................... 55,200 3,643,200
ENERGY (3.00%)
BP Amoco ........................................ 91,400 3,847,940
CNOOC Ltd. ...................................... 53,600 1,842,232
FOOD BEVERAGE & TOBACCO (3.90%)
Cadbury Schweppes PLC ........................... 595,200 3,660,675
Swedish Match AB ................................ 498,078 3,792,700
FOOD & DRUG RETAILING (2.40%)
Tesco PLC ....................................... 1,156,590 4,633,327
HOUSEHOLD & PERSONAL PRODUCTS (1.70%)
Kimberly Clark de Mexico ........................ 1,313,300 3,183,215
INSURANCE (2.00%)
Swiss Reinsurance ............................... 60,700 3,858,714
MATERIALS (3.80%)
Givaudan AG ..................................... 9,500 4,023,716
MMC Norilsk Nickel ADR .......................... 67,100 3,304,675
MEDIA (6.80%)
Pearson PLC ..................................... 260,000 2,464,536
Promotora De Informaciones ...................... 336,088 3,575,396
Rogers Communications Inc. + .................... 209,300 3,208,078
Shaw Communications ............................. 305,900 3,726,068
PHARMACEUTICALS & BIOTECHNOLOGY (8.50%)
Bachem Holding AG ............................... 63,188 $ 3,054,549
Doctor Reddy's Laboratories Ltd. ADR ............ 159,200 3,733,240
Gedeon Richter RT ............................... 47,043 4,561,308
Novartis AG ..................................... 127,100 4,936,564
RETAILING (5.80%)
FamilyMart Co. Ltd. ADR ......................... 161,200 3,508,594
Kingfisher LLC .................................. 849,075 3,683,690
Wal-Mart de Mexico .............................. 1,341,400 3,885,729
TECHNOLOGY - HARDWARE & EQUIPMENT (15.20%)
ASE Test Ltd.+ .................................. 518,600 4,506,634
ASM Pacific Technology .......................... 728,600 2,464,919
Canon Inc. ...................................... 85,000 4,165,507
NEC Electronics Corp. ADR + .................... 66,700 4,567,796
Pfeiffer Vacuum Technology AG ................... 82,002 2,482,355
Samsung Electronics Co. Ltd. .................... 14,200 4,839,717
STMicroelectronics NV ........................... 109,200 2,640,226
Taiwan Semiconductor + .......................... 1,763,467 3,476,744
TELECOMMUNICATION SERVICES (9.30%)
Chunghwa Telecom Co. Ltd. ADR .................. 175,700 2,461,557
Mobile Telesystems .............................. 56,900 4,184,995
Nippon Telegraph and Telephone Corp. ............ 747 3,392,559
NTT DoCoMo Inc. ................................. 1,300 3,185,388
Vodafone Group PLC .............................. 862,500 1,720,430
Vodafone Group PLC ADR .......................... 144,700 2,930,175
TRANSPORTATION (2.80%)
Fraport AG + .................................... 200,000 5,415,848
TOTAL COMMON STOCKS (Cost $159,209,225) ......... 188,306,848
SHORT TERM INVESTMENTS-1.60%
International Business Machines, 0.97%
due 10/2/2003 3,000,000 2,999,919
TOTAL SHORT TERM INVESTMENTS (Cost $2,999,919) .. . 2,999,919
TOTAL INVESTMENTS (100%) (Cost $162,209,144) ....... $ 191,306,767
+ Non-income producing.
See notes to financial statements.
Report of Independent auditors
Thornburg International Value Fund
September 30, 2003
To the Trustees and Shareholders of
Thornburg International Value Fund
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 International Value Fund
series of Thornburg Investment Trust (the "Fund") at September 30, 2003, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America. 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 audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
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 audits, which included
confirmation of securities at September 30, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
index comparisons
Thornburg International Value Fund
September 30, 2003
Index Comparison
The charts below compare performance of Thornburg International Value Fund and
the Morgan Stanley Capital International (M.S.C.I.) Europe, Australia and Far
East Index (E.A.F.E.) for the period May 31, 1998 to September 30, 2003. Past
performance of the Index and the Fund may not be indicative of future
performance. The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on distributions or the redemption of fund
shares.
Thornburg International Value Fund Class A Total Returns,
Since 5/31/98, versus MSCI EAFE Index
Fund A Shares
MSCI EAFE
Class A Shares Average Annual Total Returns
(at max. offering price) (periods ending 9/30/03)
1 Year: 20.18%
3 Years: (3.14)%
5 Years: 10.32%
From Inception (05/28/98): 5.68%
Thornburg International Value Fund Class C Total Returns,
Since 5/31/98, versus MSCI EAFE Index
Fund C Shares
MSCI EAFE
Class C Shares
Average Annual Total Returns (periods ending 9/30/03)
1 Year: 23.74%
3 Years: (2.52)%
5 Years: 10.35%
From Inception (05/28/98): 5.62%
The Morgan Stanley Capital International ("MSCI") Europe, Australasia, Far East
Index ("EAFE") is an unmanaged index of over 900 companies, and is a generally
accepted benchmark for major overseas markets. Index weightings represent the
relative capitalizations of the major overseas markets included in the index on
a U.S. dollar adjusted basis. The index is calculated separately; without
dividends, with gross dividends reinvested and estimated tax withheld, and with
gross dividends reinvested, in both U.S. Dollars and local currency.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
TRUSTEES and Officers
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
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
www.thornburg.com
This report is submitted for the general information of 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.
Thornburg International Value Fund I Shares
Annual Report
September 30, 2003
Letter to shareholders
William V. Fries, CFA
Portfolio Manager
Dear fellow shareholder:
It is my pleasure to report on the results of your investment in the Thornburg
International Value Fund for the fiscal year ended September 30, 2003. It was a
good year. Your Fund's investment performance exceeded its benchmark and likely
exceeded the expectations of many investors, given the poor investment
psychology in place at this time one year ago. The table below shows total
return figures for the Thornburg International Value Fund I share class for year
ended September 30, 2003, and also includes results for the most recent quarter,
one-year, and since-inception periods. Note that these returns are for investors
who held shares for the entire periods shown, with the assumption that all
dividends were reinvested in additional shares.
Total return performance as of 9/30/03
I SHARES
Qtr Ended Since
YTD 9/30/03 1 Year Inception
Net Asset Value 20.85% 9.96% 26.51% 1.71%
Max. Offering Price 20.85% 9.96% 26.51% 1.71%
Total returns for periods greater than one year are annualized average.
Past performance cannot guarantee future results.
Inception of Class I shares: 3/30/01
The favorable result for the year was not achieved without our enduring
considerable volatility and stress along the way. Doubts about economic
recovery, terrorist attacks, the War in Iraq, and SARS were among factors that
held down stock prices through March. The success of our military effort in Iraq
sparked a relief rally that has extended through the present. Emerging market
holdings, which accounted for 26.2% of the portfolio at fiscal year end, showed
strong performance. The strength in the major currencies versus the Dollar
favorably influenced performance in many markets, even with little favorable
economic news from a few of the largest of these markets: Germany, France, and
Japan.
Stock Market Performance-Major Countries
Country Index Index (12 mos. Ended Sept. 30)
Performance Adjusted to Dollars
United Kingdom (FTSE 100) +8.77% +14.72%
France (CAC 40) +11.65 +32.05
Germany (DAX) +13.55 +34.29
Switzerland (SMI) +6.93 +19.70
Japan (NIKKEI 225) +13.09 +25.12
Standout performers in the portfolio hailed from a number of geographies. The
table on the next page lists the top ten stocks according to the degree to which
they impacted the portfolio, and lists the country of domicile. Stock selection
remains the core strategy at Thornburg Investment Management.
Country Company Industry
Hungary Gedeon Richter Generic Drugs
Taiwan ASE Test Technology
Hong Kong ASM Pacific Technology
Russia Mobile Telesystems Communication Svcs.
South Korea Samsung Electronic Technology
Taiwan Taiwan Semiconductor Technology
Germany Depfa Bank Financial Services
Mexico Wal-Mart de Mexico Retail
Canada Rogers Communications Media
Germany Deutsche Boerse Financial Services
Concern about the value of the Dollar compared with that of other
developed-world currencies has recently become a focus of U.S. investors. In
mid-September, the economic ministers of the major industrialized nations, known
as the Group of Eight, met in Dubai. Their jointly issued communique has roiled
currency markets since. Essentially, the communique encouraged flexible exchange
rate policies and has been interpreted as pointing to a non-interventionist/weak
Dollar policy on the part of the U.S. Treasury. While this might make companies
operating in the U.S. more formidable global competitors, the initial reaction
of investors has been characterized by growing interest in international
markets. The ultimate impact of this development is complex and opaque and may
already be factored into stock valuations. Our most recent investments have
taken this development into consideration, not as an issue to which to react,
but more as a consideration of which to be aware. The table below lists recent
equity purchases. For a commentary on each holding in the portfolio, please go
to our website, www.thornburg.com, and click on Mutual Funds, followed by a
click on International Value Fund Holdings Commentary.
New Holdings During the fiscal year
Bank of Ireland Boskalis Westminster Groep NV
Hugo Boss AG Chunghwa Telecom Co. Ltd. ADR
Depfa Bank Doctor Reddys Laboratories Ltd. ADR
FamilyMart Co. Ltd. ADR HSBC Holdings Plc ADR
MMC Norilsk Nickel ADR Kimberly Clark de Mexico
Kingfisher LLC Magna International Inc.
Mobile Telesystems NEC Electronics Corp. ADR +
Nippon Telegraph and Telephone Corp. Pearson Plc
Promotora De Informaciones Rogers Communications Inc.
Shaw Communications STMicroelectronics NV
Swiss Reinsurance Vodafone Group Plc
Vodafone Group Plc ADR
We appear to be at a critical juncture in both economic development and equity
market performance. Expectations for continued growth in both the U.S. and
abroad are widely accepted. The less-developed Asian and Eastern European
economies continue robust growth. The U.K. and smaller economies in Europe
continue with modest expansion. The major continental economies of Germany and
France, however, are straining under absence of growth, inflexible labor laws,
and heavy transfer payments. Debt levels in both countries are expected to
exceed the 3% guideline set by the European Union as a percent of GDP. Japan is
showing signs of economic life with more candid recognition of bad debt problems
in the banking system. The strongest companies there remain those oriented
towards exports, where a weaker Dollar could dampen profitability.
TOP INDUSTRIES
9/30/2003 9/30/2002
15.2% Technology 12.6% Energy
9.3% Telecommunications 9.9% Retail
8.5% Pharmaceuticals & Biotech 9.8% Autos & Components
7.9% Autos & Components 9.5% Food, Bev., & Tobacco
7.6% Diversified Financials 8.4% Banking
Percentages and holdings can and do vary over time.
Much of the stock market gains realized since last Fall reflect a return of
investor confidence. Gains from this point forward will likely focus more on
profit improvement. Recent stock purchase activity in your Fund has focused on
companies in which this improvement is a reliable prospect. The effect of recent
portfolio changes is shown in the table to the left; it compares economic sector
exposure with that of one year ago.
There was considerable change in sector participation from last year.
Technology, telecommunications and pharmaceuticals replaced energy, retail and
autos as top sector holdings. Recent purchases, such as NEC Electronics Corp.
and STMicroelectronics NV, contributed to the increase in the technology sector,
as did good performance from existing holdings. The increase in
telecommunications was mostly due to portfolio additions: Mobile Telesystems (a
Russian cellular service), NTT DoCoMo Inc., Vodafone Group Plc, and Chunghwa
Telecom Co. LTD (a Taiwanese firm). The addition of Dr. Reddy's Laboratories
Ltd. (an Indian generic drugs maker) boosted the Pharmaceutical sector's
performance, as did good performance at Gedeon Richter (a Hungarian generic drug
developer and manufacturer).
9/30/ 9/30/
2003 2002
U.K. 15.6% 17.6%
Germany 13.2% 12.3%
Japan 12.2% 6.7%
Switzerland 8.2% 12.2%
Taiwan 5.4% 2.2%
Canada 5.3% 0.4%
Korea 4.5% 5.0%
Hungary 4.4% 7.1%
France 4.1% 0.2%
Russia 3.9% -
Mexico 3.6% 5.3%
Netherlands 2.8% 2.3%
Ireland 2.7% 3.0%
Sweden 2.0% 3.5%
India 1.9% -
Spain 1.9% 3.1%
Italy 1.7% 3.1%
Brazil 1.5% 1.4%
Hong Kong 1.3% 0.7%
China 1.0% 5.6%
Cash 2.8% -
* Percentages and holdings can and do vary over time.
The changes in geographic diversification since September 30, 2002 are reflected
in the table on the right. While the U.K., Germany, and Switzerland continue to
account for over 35% of the portfolio, Japan holding increased significantly and
now accounts for over 12% of country holdings. Canada and Taiwan increased
materially and Russia and India represent new holdings in emerging markets.
Total exposure to emerging markets rose to 26.2% compared with 21% at September
30, 2002.
The outlook for foreign equities appears to be more appealing to many U.S.
investors at this time. With or without help from currency movements, we remain
focused on the capital appreciation potential of our international portfolio.
Thank you for investing with us, and for your trust and confidence.
Sincerely,
William V. Fries, CFA
Portfolio Manager
Statement of assets and liabilities
Thornburg International Value Fund
September 30, 2003
ASSETS
Investments at value (cost $162,209,144) .................................................. $ 191,306,767
Cash ...................................................................................... 1,694,784
Cash denominated in foreign currency (cost $2,155,823) .................................... 2,180,155
Receivable for securities sold ............................................................ 112,629
Receivable for fund shares sold ........................................................... 1,115,500
Dividends receivable ...................................................................... 560,205
Unrealized gain on forward exchange contracts (Note 6) .................................... 195,279
Prepaid expenses and other assets ......................................................... 26,302
Total Assets ............................................................ 197,191,621
LIABILITIES
Payable for securities purchased .......................................................... 2,395,263
Payable for fund shares redeemed .......................................................... 159,795
Payable to investment advisor (Note 3) .................................................... 121,110
Unrealized loss on forward exchange contracts (Note 6) .................................... 1,038,606
Accounts payable and accrued expenses ..................................................... 186,749
Total Liabilities ....................................................... 3,901,523
NET ASSETS ................................................................................ $ 193,290,098
NET ASSETS CONSIST OF:
Undistributed net investment income (loss) ....................................... $ (938,279)
Net unrealized appreciation (depreciation) ....................................... 28,268,749
Accumulated net realized gain (loss) ............................................. (24,447,406)
Net capital paid in on shares of beneficial interest ............................. 190,407,034
$ 193,290,098
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($97,990,560 applicable to 6,554,833 shares of beneficial interest outstanding - Note 4) $ 14.95
Maximum sales charge, 4.50% of offering price ............................................. 0.70
Maximum Offering Price Per Share .......................................................... $ 15.65
Class B Shares:
Net asset value and offering price per share *
($6,345,848 applicable to 439,870 shares of beneficial interest outstanding - Note 4) .. $ 14.43
Class C Shares:
Net asset value and offering price per share*
($55,443,028 applicable to 3,832,367 shares of beneficial interest outstanding - Note 4) $ 14.47
Class I Shares:
Net asset value, offering and redemption price per share
($33,510,580 applicable to 2,215,249 shares of beneficial interest outstanding - Note 4) $ 15.13
Class R-1 Shares:
Net asset value, offering and redemption price per share
($82 applicable to 5 shares of beneficial interest outstanding - Note 4) ............... $ 15.01
<FN>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge. See notes to financial statements
</FN>
Statement of Operations
Thornburg International Value Fund
Year Ended September 30, 2003
INVESTMENT INCOME
Dividend income (net of foreign taxes withheld of $348,891) ..... $ 3,042,793
Interest income ................................................. 62,339
Total Income .................................. 3,105,132
EXPENSES
Investment advisory fees (Note 3) ............................... 1,332,485
Administration fees (Note 3)
Class A Shares ......................................... 96,791
Class B Shares ......................................... 6,663
Class C Shares ......................................... 56,177
Class I Shares ......................................... 12,290
Distribution and service fees (Note 3)
Class A Shares ......................................... 193,581
Class B Shares ......................................... 53,301
Class C Shares ......................................... 449,416
Transfer agent fees
Class A Shares ......................................... 154,426
Class B Shares ......................................... 26,414
Class C Shares ......................................... 104,368
Class I Shares ......................................... 21,442
Class R-1 Shares ....................................... 760
Registration & filing fees
Class A Shares ......................................... 11,518
Class B Shares ......................................... 7,613
Class C Shares ......................................... 8,905
Class I Shares ......................................... 9,798
Class R-1 Shares ....................................... 3,918
Custodian fees (Note 3) ......................................... 157,393
Professional fees ............................................... 34,594
Accounting fees ................................................. 10,064
Trustee fees .................................................... 3,434
Other expenses .................................................. 102,915
Total Expenses ................................ 2,858,266
Less:
Expenses reimbursed by investment advisor (Note 3) ..... (69,262)
Management fees waived by investment advisor (Note 3) .. (127,717)
Expenses paid indirectly (Note 3) ...................... (4,493)
Net Expenses .................................. 2,656,794
Net Investment Income ......................... $ 448,338
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments ............................................ $(10,510,164)
Foreign currency transactions .......................... (1,481,324)
(11,991,488)
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ 47,546,373
Foreign currency translation ........................... (1,434,310)
46,112,063
Net Realized and Unrealized
Gain (Loss) on Investments ................. 34,120,575
Net Increase (Decrease) in Net Assets Resulting
from Operations ............................ $ 34,568,913
See notes to financial statements.
Statements of Changes in net assets
Thornburg International Value Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss) ................................ $ 448,338 $ 10,427
Net realized gain (loss) on investments and foreign currency
transactions ............................................. (11,991,488) (13,380,286)
Increase (Decrease) in unrealized appreciation (depreciation)
on investments and foreign currency translation .......... 46,112,063 1,888,896
Net Increase (Decrease) in Net Assets
Resulting from Operations .............. 34,568,913 (11,480,963)
FUND SHARE TRANSACTIONS - (NOTE 4)
Class A Shares ..................................... 11,087,620 18,256,217
Class B Shares ..................................... 485,325 2,719,253
Class C Shares ..................................... 5,432,349 17,418,518
Class I Shares ..................................... 8,371,956 9,679,423
Class R-1 Shares ................................... 75 0
Net Increase (Decrease) in Net Assets ..... 59,946,238 36,592,448
NET ASSETS:
Beginning of year ......................... 133,343,860 96,751,412
End of year ............................... $ 193,290,098 $ 133,343,860
<FN>
See notes to financial statements.
</FN>
Notes to financial statements
Thornburg International Value Fund
September 30, 2003
NOTE 1 - ORGANIZATION
Thornburg International 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 nine 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 Value Fund, Thornburg Core Growth Fund, Thornburg New York
Intermediate Municipal Fund, and Thornburg Investment Income Builder Fund. Each
series is considered to be a separate entity for financial reporting and tax
purposes and bears expenses directly attributable to it. The Fund seeks
long-term capital appreciation by investing in both foreign and domestic equity
securities selected on a value basis.
The Fund currently offers five classes of shares of beneficial interest, Class
A, Class B, Class C, Institutional Class (Class I) and Retirement Class (Class
R-1) 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 B 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 and bear both a service fee and
distribution fee, (iii) 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 a service fee and a
distribution fee, (iv) Class I shares are sold at net asset value without a
sales charge at the time of purchase, (v) Class R-1 shares are sold at net asset
value without a sales charge at the time of purchase, but bear both a service
fee and distribution fee, and (vi) 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 service and distribution fees, administration fees
and certain registration and transfer agent expenses. Class B shares of the Fund
outstanding for eight years will convert to Class A shares of the Fund.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the
Funds are as follows:
Valuation of Securities: In determining net asset value, investments are stated
at value based on latest sales prices, normally 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.
Foreign Currency Translation: Portfolio 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.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of interest recorded on the Fund's books, and the U.S. dollar equivalent
of the amounts actually received or paid.
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 shareholders are generally 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 at least 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. Certain income from foreign securities is recognized as soon
as information is available to the Fund. Realized gains and losses from the sale
of securities are recorded on an identified cost basis. Net investment income,
other than class specific expenses, and realized and unrealized gains and
losses, are allocated daily to each class of shares based upon the relative net
asset value of outstanding shares of each class of shares at the beginning of
the day (after adjusting for the current share activity of the respective
class). Expenses common to all funds are allocated among the funds comprising
the Trust based upon their relative net asset values or other appropriate
allocation methods.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Fund. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services to
the Fund for which the fees are payable at the end of each month. For the year
ended September 30, 2003, these fees were payable at annual rates ranging from
..875 of 1% to .675 of 1% of the average daily net assets of the Fund depending
on the Fund's asset size. For the year ended September 30, 2003, the Advisor
voluntarily waived investment advisory fees of $64,940 for Class A shares,
$4,471 for Class B shares, $37,689 for Class C shares, $20,617 for Class I
shares, and $0 for Class R-1 shares. The Fund also has an administrative
services agreement with the Advisor, whereby the Advisor 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 .125 of 1% of the
average daily net assets attributable to each class of shares. For the year
ended September 30, 2003, the Advisor voluntarily reimbursed certain class
specific expenses and administrative fees of $19,884 for Class B shares, $1,170
for Class C shares, $43,530 for Class I shares, and $4,678 for Class R-1 shares.
The Fund has an underwriting agreement with Thornburg Securities Corporation
(the "Distributor"), which acts as the Distributor of the Fund's shares. For the
year ended September 30, 2003, the Distributor has advised the Fund that it
earned net commissions aggregating $18,254 from the sale of Class A shares of
the Fund, and collected contingent deferred sales charges aggregating $7,776
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 Advisor an amount not to exceed .25 of 1%
per annum of its average daily net assets attributable to each class of shares
of the Fund for payments made by the Advisor to securities dealers and other
financial institutions to obtain various shareholder related services. The
Advisor may pay out of its own resources 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 B, Class C and Class R-1 shares under which the Fund
compensates the Distributor for services in promoting the sale of Class B, Class
C and Class R-1 shares of the Fund at an annual rate of up to .75 of 1% of the
average daily net assets attributable to Class B, Class C and Class R-1 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, 2003 are set
forth in the statement of operations.
The Fund has an agreement with the custodian bank to indirectly pay a portion of
the custodian's fees through credits earned by the Fund's cash on deposit with
the bank. This deposit agreement is an alternative to overnight investments.
Custodial fees have been adjusted to reflect amounts that would have been paid
without this agreement, with a corresponding adjustment reflected as fees paid
indirectly in the statement of operations. For the year ended September 30, 2003
fees paid indirectly were $4,493.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4 - SHARES OF BENEFICIAL INTEREST
At September 30, 2003, there were an unlimited number of shares of beneficial
interest authorized. Sales of Class R-1 shares commenced July 1, 2003.
Transactions in shares of beneficial interest were as follows:
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold ....................... 3,378,754 $ 44,006,739 3,801,273 $ 52,564,406
Shares repurchased** .............. (2,671,582) (32,919,119) (2,520,422) (34,308,189)
Net Increase (Decrease) ........... 707,172 $ 11,087,620 1,280,851 $ 18,256,217
<FN>
** The Fund charges a redemption fee of 1% of the Class A shares exchanged
within 90 days of purchase. For the year ended September 30, 2002 and September
30, 2003, $118,644 and $55,020 were netted in the amount reported for shares
repurchased .......................
</FN>
Class B Shares
Shares sold ....................... 136,594 $ 1,695,976 367,883 $ 5,086,178
Shares repurchased ................ (100,676) (1,210,651) (175,295) (2,366,925)
Net Increase (Decrease) ........... 35,918 $ 485,325 192,588 $ 2,719,253
Class C Shares
Shares sold ....................... 1,397,752 $ 17,554,897 1,995,189 $ 26,837,191
Shares repurchased ................ (1,014,225) (12,122,548) (713,915) (9,418,673)
Net Increase (Decrease) ........... 383,527 $ 5,432,349 1,281,274 $ 17,418,518
Class I Shares
Shares sold ....................... 1,169,448 $ 15,121,898 895,191 $ 12,425,312
Shares repurchased** .............. (558,936) (6,749,942) (197,922) (2,745,889)
Net Increase (Decrease) ........... 610,512 $ 8,371,956 697,269 $ 9,679,423
<FN>
** The Fund charges a redemption fee of 1% of the Class I shares exchanged
within 90 days of purchase. For the year ended September 30, 2002 and September
30, 2003, $160 and $7,078 were netted in the amount reported for shares
repurchased .......................
</FN>
Class R-1 Shares
Shares sold ....................... 5 $ 75 -- $ --
Shares repurchased ................ -- -- -- --
Net Increase (Decrease) ........... 5 $ 75 -- $ --
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003, the Fund had purchase and sale
transactions of investment securities (excluding short term securities) of
$111,368,600 and $85,040,239, respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components
of capital is as follows:
Cost of investments for tax purpose $ 162,414,612
Gross tax unrealized appreciation $ 33,374,157
Gross tax unrealized depreciation (4,482,002)
Net tax unrealized appreciation
(depreciation) on investments $ 28,892,155
At September 30, 2003, the Fund had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2007 $ 119,008
2008 272,996
2009 917,688
2010 3,523,281
2011 9,267,675
14,100,648
As of September 30, 2003 the Fund had deferred currency and capital losses
occurring subsequent to October 31, 2002 of $1,725,498 and $10,141,290,
respectively. For tax purposes, such losses will be reflected in the year ending
September 30, 2004.
Unutilized tax basis capital losses may be carried forward to offset realized
gains in future years. To the extent such carry forwards are used in future
years, capital gain distributions may be reduced to the extent provided by
regulations.
Net investment income and net realized gain (loss) differ for financial
statement and tax purposes primarily due to differing treatments of wash sale
losses, foreign currency transactions and losses realized subsequent to October
31 on the sale of securities and foreign currencies.
NOTE 7 - FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK
During the year ended September 30, 2003, 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 transactions 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 transactions.
These instruments may involve market risks in excess of the amount recognized on
the Statement 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. 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.
CONTRACTS TO SELL:
21,500,000 Euro Dollar for 24,258,450 USD, January 26, 2004 $ (714,428)
700,000,000 Japanese Yen for 6,048,561 USD, March 19, 2004 (268,069)
3,450,000,000 S. Korean Won for 2,910,164 USD, March 22, 2004 (56,109)
Unrealized loss from forward
exchange contracts. (1,038,606)
31,650,000 Mexican Peso for 2,920,167 USD, December 18, 2003 62,362
32,500,000 Mexican Peso for 3,038,519 USD, January 9, 2004 112,489
12,000,000 Mexican Peso for 1,094,990 USD, February 19, 2004 20,428
Unrealized gain from forward
exchange contracts. 195,279
Net unrealized gain (loss) from forward
exchange contracts $ (843,327)
Financial highlights
Thornburg International Value Fund
Year Ended Period Ended
September 30, September 30,
2003 2002 2001(b)
Class I Shares:
Per Share Performance
(for a share outstanding throughout the period)+
Net asset value, beginning of period ...................... $ 11.96 $ 12.40 $ 14.63
Income from investment operations:
Net investment income ................................. 0.14 0.10 0.11
Net realized and unrealized
gain (loss) on investments .......................... 3.03 (0.54) (2.21)
Total from investment operations .......................... 3.17 (0.44) (2.10)
Less dividends from:
Net investment income ................................. -- -- (0.08)
In excess of net investment income .................... -- -- (0.05)
Total dividends ........................................... -- -- (0.13)
Change in net asset value ................................. 3.17 (0.44) (2.23)
Net asset value, end of period ............................ $ 15.13 $ 11.96 $ 12.40
Total return (c) .......................................... 26.51% (3.55)% (14.50)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ................................. 1.07% 0.71% 1.57%(a)
Expenses, after expense reductions .................... 0.99% 0.99% 0.97%(a)
Expenses, after expense reductions
and net of custody credits .......................... 0.99% 0.99% --
Expenses, before expense reductions ................... 1.25% 1.28% 1.38%(a)
Portfolio turnover rate ................................... 58.35% 28.39% 61.05%
Net assets at end of period (000) ......................... $ 33,511 $ 19,187 $ 11,249
<FN>
(a) Annualized ............................................
(b) Effective date of Class I Shares was March 30, 2001.
(c) Total return is not annualized for periods less than one year.
+ Based on weighted average shares outstanding
</FN>
Schedule of investments
Thornburg International Value Fund
September 30, 2003
CUSIPS: CLASS A - 885-215-657, CLASS B - 885-215-616, CLASS C - 885-215-640,
CLASS I - 885-215-566, CLASS R-1 - 885-215-525
NASDAQ SYMBOLS: CLASS A - TGVAX, CLASS B - THGBX, CLASS C - THGCX,
CLASS I - TGVIX, CLASS R-1 - TGVRX
Shares Value
COMMON STOCKS-98.40%
AUTOMOBILES & COMPONENTS (7.90%)
Bayerische Motoren Werke AG ..................... 79,705 $ 3,013,704
Hyundai Motor Co. ............................... 268,500 3,893,250
Magna International Inc. ........................ 46,500 3,354,975
Toyota Motor Corp. .............................. 162,900 4,795,692
BANKS (6.80%)
Bank of Ireland ................................. 440,500 5,286,686
Depfa Bank PLC .................................. 37,900 3,679,942
OTP Bank RT + ................................... 172,300 4,085,681
CAPITAL GOODS (5.30%)
Boskalis Westminster Groep NV ................... 81,380 1,916,392
Embraer Brasileira de Aeronaut .................. 295,895 1,517,644
Embraer Brasileira de Aeronaut ADR 61,055 ....... 1,288,260
IHC Caland NV ................................... 66,800 3,440,322
Muhlbauer Holding AG ............................ 85,412 1,871,014
CONSUMER DURABLES & APPAREL (5.60%)
Burberry Group PLC .............................. 680,083 3,679,675
Hugo Boss AG .................................... 206,123 3,734,713
Merloni Elettrodomestici S.P.A .................. 230,200 3,374,320
DIVERSIFIED FINANCIALS (7.60%)
Deutsche Boerse AG .............................. 108,124 5,518,189
Euronext NV ..................................... 217,260 5,293,393
HSBC Holdings PLC ADR ........................... 55,200 3,643,200
ENERGY (3.00%)
BP Amoco ........................................ 91,400 3,847,940
CNOOC Ltd. ...................................... 53,600 1,842,232
FOOD BEVERAGE & TOBACCO (3.90%)
Cadbury Schweppes PLC ........................... 595,200 3,660,675
Swedish Match AB ................................ 498,078 3,792,700
FOOD & DRUG RETAILING (2.40%)
Tesco PLC ....................................... 1,156,590 4,633,327
HOUSEHOLD & PERSONAL PRODUCTS (1.70%)
Kimberly Clark de Mexico ........................ 1,313,300 3,183,215
INSURANCE (2.00%)
Swiss Reinsurance ............................... 60,700 3,858,714
MATERIALS (3.80%)
Givaudan AG ..................................... 9,500 4,023,716
MMC Norilsk Nickel ADR .......................... 67,100 3,304,675
MEDIA (6.80%)
Pearson PLC ..................................... 260,000 2,464,536
Promotora De Informaciones ...................... 336,088 3,575,396
Rogers Communications Inc. + .................... 209,300 3,208,078
Shaw Communications ............................. 305,900 3,726,068
PHARMACEUTICALS & BIOTECHNOLOGY (8.50%)
Bachem Holding AG ............................... 63,188 $ 3,054,549
Doctor Reddy's Laboratories Ltd. ADR ............ 159,200 3,733,240
Gedeon Richter RT ............................... 47,043 4,561,308
Novartis AG ..................................... 127,100 4,936,564
RETAILING (5.80%)
FamilyMart Co. Ltd. ADR ......................... 161,200 3,508,594
Kingfisher LLC .................................. 849,075 3,683,690
Wal-Mart de Mexico .............................. 1,341,400 3,885,729
TECHNOLOGY - HARDWARE & EQUIPMENT (15.20%)
ASE Test Ltd.+ .................................. 518,600 4,506,634
ASM Pacific Technology .......................... 728,600 2,464,919
Canon Inc. ...................................... 85,000 4,165,507
NEC Electronics Corp. ADR + .................... 66,700 4,567,796
Pfeiffer Vacuum Technology AG ................... 82,002 2,482,355
Samsung Electronics Co. Ltd. .................... 14,200 4,839,717
STMicroelectronics NV ........................... 109,200 2,640,226
Taiwan Semiconductor + .......................... 1,763,467 3,476,744
TELECOMMUNICATION SERVICES (9.30%)
Chunghwa Telecom Co. Ltd. ADR .................. 175,700 2,461,557
Mobile Telesystems .............................. 56,900 4,184,995
Nippon Telegraph and Telephone Corp. ............ 747 3,392,559
NTT DoCoMo Inc. ................................. 1,300 3,185,388
Vodafone Group PLC .............................. 862,500 1,720,430
Vodafone Group PLC ADR .......................... 144,700 2,930,175
TRANSPORTATION (2.80%)
Fraport AG + .................................... 200,000 5,415,848
TOTAL COMMON STOCKS (Cost $159,209,225) ......... 188,306,848
SHORT TERM INVESTMENTS-1.60%
International Business Machines, 0.97%
due 10/2/2003 3,000,000 2,999,919
TOTAL SHORT TERM INVESTMENTS (Cost $2,999,919) .. . 2,999,919
TOTAL INVESTMENTS (100%) (Cost $162,209,144) ....... $ 191,306,767
+ Non-income producing.
See notes to financial statements.
Report of Independent auditors
Thornburg International Value Fund
September 30, 2003
To the Trustees and Shareholders of
Thornburg International Value Fund
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 International Value Fund
series of Thornburg Investment Trust (the "Fund") at September 30, 2003, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for Class I shares for the periods presented, in conformity with
accounting principles generally accepted in the United States of America. 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 audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
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 audits, which included
confirmation of securities at September 30, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
index comparisons
Thornburg International Value Fund
September 30, 2003
Index Comparison
The charts below compare performance of Thornburg International Value Fund and
the Morgan Stanley Capital International (M.S.C.I.) Europe, Australia and Far
East Index (E.A.F.E.) for the period March 30, 2001 to September 30, 2003. Past
performance of the Index and the Fund may not be indicative of future
performance. The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on distributions or the redemption of fund
shares.
Thornburg International Value Fund Class I Total Returns,
Since 3/30/01, versus MSCI EAFE Index
Fund A Shares
MSCI EAFE
Class I Shares Average Annual Total Returns
(at max. offering price) (periods ending 9/30/03)
YTD: 20.85%
1 Year: 26.51%
From Inception (03/30/01): 1.71%
The Morgan Stanley Capital International ("MSCI") Europe, Australasia, Far East
Index ("EAFE") is an unmanaged index of over 900 companies, and is a generally
accepted benchmark for major overseas markets. Index weightings represent the
relative capitalizations of the major overseas markets included in the index on
a U.S. dollar adjusted basis. The index is calculated separately; without
dividends, with gross dividends reinvested and estimated tax withheld, and with
gross dividends reinvested, in both U.S. Dollars and local currency.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
TRUSTEES and Officers
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
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
www.thornburg.com
This report is submitted for the general information of 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.
Thornburg Core Growth Fund
Annual Report
September 30, 2003
Letter to shareholders
Thornburg Core Growth Fund
October 22, 2003
Dear Fellow Shareholder:
Your Thornburg Core Growth Fund performed well during the fiscal year ended
September 2003. The market was strong over the last year. Your Fund outperformed
both of its two benchmarks, the Russell 1000 Growth Index, and the NASDAQ
Composite Index, as well as an average of the other funds in its peer group, the
Lipper Multi-Cap Growth Fund universe, for the fiscal year. Since your Fund
started in late 2000, it has seen consistent success relative to the benchmarks
and its peer group.
Total return performance as of 9/30/03
A Shares C Shares
Qtr Ended Since Qtr Ended Since
9/30/03 YTD 1 Year Inception 9/30/03 YTD 1 Year Inception
Net Asset Value 6.09% 44.84% 56.74% (5.85)% 5.91% 43.80% 54.39% (6.74)%
Maximum Offering Price 1.30% 38.30% 49.78% (7.40)% 4.91% 42.80% 53.39% (6.74)%
<FN>
Total returns for periods greater than one year are annualized averages.
Past performance cannot guarantee future results.
Inception of Class A and C shares: 12/27/00
</FN>
As might be expected over the past 12 months, many of our biggest winners were
technology oriented. However, there was some diversification among the five
biggest contributors to the year's performance. Three of our five biggest
winners were healthcare companies: Boston Scientific (BSX), Eclipsys (ECLP), and
eResearch Technologies (ERES). Boston Scientific is a large capitalization
company that is a market leader in developing medical devices such as stents and
guide wires. Eclipsys sells enterprise-level software to hospitals - software
that allows their clients to manage their patient relationships. eResearch is
involved in the collection of electrocardiograms (ECGs) during FDA clinical drug
trials for major pharmaceutical companies. JetBlue (JBLU ) is the
fastest-growing and most profitable airline in the United States. Rounding out
the top five is Silicon Labs (SLAB), a company that makes semiconductors used
primarily in cellular phones.
Top Industries
9/30/03
Healthcare & Services 17.9%
Retailing 17.7%
Technology Hardware & Equip. 12.2%
Software & Services 10.2%
Telecommunications 6.5%
9/30/02
Healthcare & Services 13.7%
Media/Entertainment 13.1%
Technology Hardware & Equip. 9.5%
Retailing 7.0%
Business Services 5.9%
Small capitalization stocks generally performed better than mid- or large-cap
stocks, but the performance of the Fund was very broad based, with many
different stocks contributing to our returns. Although we have been successful
at investing in retail companies in the past, these companies were the largest
drag to performance over the past twelve months.
As shown in the table above, your Thornburg Core Growth Fund rose 6.09% in the
third calendar quarter, 44.8% for the year to date, and 56.7% over the past
twelve months. The NASDAQ Composite Index gained 10.22% in the third quarter,
34.3% for the year, and 53.2% over the past twelve months. The Russell 1000
Growth Index gained 3.66% in the third quarter, 16.6% for the year, and 24.5%
over the past twelve months. The average (median) Lipper Multi-Cap Growth fund
gained 4.84% in the second quarter, 21.9% year to date, and 28.7% over the past
twelve months.
Stocks received at their initial public offerings contributed positively to the
results for the quarter and the trailing fiscal year. As a result of the Fund's
participation in the new offering market, performance was improved by 0.10% for
the quarter, and 1.0% for the year ending September 30, 2003. The effects of
offerings in prior periods are disclosed in prior quarterly reports.
New Holdings during the Year
Affiliated Managers Group Inc. Apache Corp.
Evergreen Resources Anthem Inc.
Caremark Rx Inc. Platinum Underwriters Holdings
Comcast Corp. Amgen Inc.
GameStop Corp. InterActiveCorp
Ross Stores Inc. Microsoft Corp.
Amdocs Ltd. Cyberguard Corp.
Integrated Circuit Systems Inc. Novellus Systems Inc.
Mobile Telesystems Nextel Communications Inc.
Our motto is core strategies for serious investors. We believe your Thornburg
Core Growth Fund continues to meet its mandate as a growth oriented investment
vehicle that can comprise part of the nucleus of an asset allocation strategy.
Our focus is on maximizing long-term after-tax returns, while controlling risk.
We encourage you to learn more about your portfolio. Descriptions of each
holding and links to company websites can be found by pointing your Internet
browser to www.thornburg.com, clicking on Mutual Funds, and then on Core Growth
Fund Holdings Commentary.
Thank you for investing in the Thornburg Core Growth Fund.
Regards,
Alexander M.V. Motola, CFA
Portfolio Manager
Statement of assets and liabilities
Thornburg Core Growth Fund
September 30, 2003
ASSETS
Investments at value (cost $39,036,578) ................................... $ 42,426,370
Cash ...................................................................... 1,268,967
Receivable for securities sold ............................................ 111,062
Receivable for fund shares sold ........................................... 910,734
Dividends receivable ...................................................... 16,131
Prepaid expenses and other assets ......................................... 24,175
Total Assets ............................................ 44,757,439
LIABILITIES
Payable for securities purchased .......................................... 1,193,330
Payable for fund shares redeemed .......................................... 125,379
Payable to investment advisor (Note 3) .................................... 28,416
Accounts payable and accrued expenses ..................................... 37,269
Total Liabilities ....................................... 1,384,394
NET ASSETS ................................................................ $ 43,373,045
NET ASSETS CONSIST OF:
Undistributed net investment income (loss) ....................... $ (2,036)
Net unrealized appreciation (depreciation) on investments ........ 3,389,792
Accumulated net realized gain (loss) ............................. (2,226,298)
Net capital paid in on shares of beneficial interest ............. 42,211,587
$ 43,373,045
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($36,227,444 applicable to 3,584,503 shares of beneficial
interest outstanding - Note 4) ......................................... $ 10.11
Maximum sales charge, 4.50% of offering price ............................. 0.48
Maximum Offering Price Per Share .......................................... $ 10.59
Class C Shares:
Net asset value and offering price per share *
($7,145,521 applicable to 725,386 shares of beneficial
interest outstanding - Note 4) ......................................... $ 9.85
Class R-1 Shares:
Net asset value, offering and redemption price per share
($80 applicable to 8 shares of beneficial
interest outstanding - Note 4) ......................................... $ 10.11
<FN>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge. See notes to financial statements.
</FN>
Statement of Operations
Year Ended September 30, 2003
INVESTMENT INCOME
Dividend income (net of foreign taxes withheld of $1,693) ....... $ 27,098
Interest income ................................................. 6,222
Total Income .................................. 33,320
EXPENSES
Investment advisory fees (Note 3) ............................... 142,673
Administration fees (Note 3)
Class A Shares ......................................... 16,366
Class C Shares ......................................... 4,016
Distribution and service fees (Note 3)
Class A Shares ......................................... 32,732
Class C Shares ......................................... 32,126
Transfer agent fees
Class A Shares ......................................... 36,325
Class C Shares ......................................... 20,099
Class R-1 Shares ....................................... 760
Registration & filing fees
Class A Shares ......................................... 11,517
Class C Shares ......................................... 8,905
Class R-1 Shares ....................................... 3,918
Custodian fees (Note 3) ......................................... 34,714
Professional fees ............................................... 14,231
Trustee fees .................................................... 228
Other expenses .................................................. 18,293
Total Expenses ................................ 376,903
Less:
Expenses reimbursed by investment advisor (Note 3) ..... (84,411)
Expenses paid indirectly (Note 3) ...................... (2,599)
Net Expenses .................................. 289,893
Net Investment Income (Loss) .................. (256,573)
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments ............................................ 2,055,035
Foreign currency transactions .......................... (2,036)
2,052,999
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ 4,261,917
Net Realized and Unrealized
Gain (Loss) on Investments ................. 6,314,916
Net Increase (Decrease) in Net Assets Resulting
From Operations ............................ $ 6,058,343
See notes to financial statements
Statements of Changes in net assets
Thornburg Core Growth Fund
Year Ended Year Ended
September 30, 2003 September 30, 2002
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss) ................................ $ (256,573) $ (172,658)
Net realized gain (loss) on investments and
foreign currency transactions ............................ 2,052,999 (2,105,462)
Increase (Decrease) in unrealized appreciation on investments
and foreign currency translations ........................ 4,261,917 133,128
Net Increase (Decrease) in Net Assets
Resulting from Operations .............. 6,058,343 (2,144,992)
FUND SHARE TRANSACTIONS - (Note 4)
Class A Shares ..................................... 25,630,774 928,265
Class C Shares ..................................... 4,106,879 240,525
Class R-1 Shares ................................... 75 0
Net Increase (Decrease) in Net Assets ..... 35,796,071 (976,202)
NET ASSETS:
Beginning of year .................................. 7,576,974 8,553,176
End of year ........................................ $ 43,373,045 $ 7,576,974
<FN>
See notes to financial statements.
</FN>
Notes to financial statements
Thornburg Core Growth Fund
September 30, 2003
NOTE 1 - ORGANIZATION
Thornburg Core Growth Fund, hereinafter referred to as the "Fund," is a
diversified series of Thornburg Investment Trust (the "Trust"). The Fund
commenced operations on December 27, 2000. 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 nine
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 Core Growth Fund, Thornburg Value Fund, Thornburg
International Value Fund, Thornburg New York Intermediate Municipal Fund, and
Thornburg Investment Income Builder Fund. Each series is considered to be a
separate entity for financial reporting and tax purposes and bears expenses
directly attributable to it. The Fund seeks long-term capital appreciation by
investing primarily in domestic equity securities selected for their growth
potential.
The Fund currently offers three classes of shares of beneficial interest, Class
A, Class C and Class R-1 shares. Each class of shares of the 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, (iii) Class R-1 shares are sold at net
asset value without a sales charge at the time of purchase but bear both a
service fee and a distribution fee, 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 administration and legal expenses. Currently, class specific expenses
of the Fund are limited to service and distribution fees, administration fees
and certain registration 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, normally 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 Transactions: The Fund may buy or write put and call options through
listed exchanges and the over-the-counter market. The buyer has the right to
purchase (in the case of a call option) or sell (in the case of a put option) a
specified quantity of a specific security or other underlying asset at a
specified price prior to or on a specified expiration date. The writer of an
option is exposed to the risk of loss if the market price of the underlying
asset declines (in the case of a put option) or increases (in the case of a call
option). The writer of an option can never profit by more than the premium paid
by the buyer but can lose an unlimited amount. The writer also has the
additional risk of not being able to enter into a closing transaction if a
liquid secondary market does not exist.
Premiums received/paid from writing/purchasing options are recorded as
liabilities/assets on the Statement of Assets and Liabilities, and are
subsequently adjusted to current values. The difference between the current
value of an option and the premium received/paid is treated as an unrealized
gain or loss.
When a purchased option expires on its stipulated expiration date or when a
closing transaction is entered into, the premium paid on the purchase of the
option is treated by the Fund as a realized loss. When a written option expires
on its stipulated expiration date or when a closing transaction is entered into,
the related liability is extinguished and the Fund realizes a gain (loss if the
cost of the closing transaction exceeds the premium received when the option was
written).
Foreign Currency Translation: Portfolio 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.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of interest recorded on the Fund's books, and the U.S. dollar equivalent
of the amounts actually received or paid.
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.
Dividends: Dividends to shareholders are generally 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 at least 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. Certain income from foreign securities is recognized as soon
as information is available to the Fund. Realized gains and losses from the sale
of securities are recorded on an identified cost basis. Net investment income,
other than class specific expenses, and realized and unrealized gains and
losses, are allocated daily to each class of shares based upon the relative net
asset value of outstanding shares of each class of shares at the beginning of
the day (after adjusting for the current share activity of the respective
class). Expenses common to all funds are allocated among the funds comprising
the Trust based upon their relative net asset values or other appropriate
allocation methods.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Fund. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services to
the Fund for which the fees are payable at the end of each month. For the year
ended September 30, 2003, these fees were payable at annual rates ranging from
..875 of 1% to .675 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 Advisor, whereby the Advisor 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 .125 of 1% of the average daily
net assets attributable to each class of shares. For the year ended September
30, 2003, the Advisor voluntarily reimbursed certain class specific expenses and
administrative fees of $49,316 for Class A shares, $30,417 for Class C shares
and $4,678 for Class R-1 shares.
The Fund has an underwriting agreement with Thornburg Securities Corporation
(the "Distributor"), which acts as the Distributor of the Fund's shares. For the
year ended September 30, 2003, the Distributor has advised the Fund that it
earned commissions aggregating $16,055 from the sale of Class A shares of the
Fund and collected contingent deferred sales charges aggregating $549 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 Advisor an amount not to exceed .25 of 1%
per annum of its average daily net assets attributable to each class of shares
of the Fund for payments made by the Advisor to securities dealers and other
financial institutions to obtain various shareholder related services. The
Advisor may pay out of its own resources 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 and Class R-1 shares, under which the Fund
compensates the Distributor for services in promoting the sale of Class C and
Class R-1 shares of the Fund at an annual rate of up to .75 of 1% of the average
daily net assets attributable to Class C and Class R-1 shares. Total fees
incurred by each class of shares of the Fund under its respective Service and
Distribution Plans are set forth in the statement of operations.
The Fund has an agreement with the custodian bank to indirectly pay a portion of
the custodian's fees through credits earned by the Fund's cash on deposit with
the bank. This deposit agreement is an alternative to overnight investments.
Custodial fees have been adjusted to reflect amounts that would have been paid
without this agreement, with a corresponding adjustment reflected as fees paid
indirectly in the statement of operations.
For the year ended September 30, 2003, the fees paid indirectly were $2,599.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
At September 30, 2003, 13.4% of the Fund's shares were owned by the Advisor and
other affiliates of the Fund.
NOTE 4 - SHARES OF BENEFICIAL INTEREST
At September 30, 2003 there were an unlimited number of shares of beneficial
interest authorized. Sales of Class R-1 shares commenced July 1, 2003.
Transactions in shares of beneficial interest were as follows:
Year Ended Year Ended
September 30, 2003 September 30, 2002
Shares Amount Shares Amount
Class A Shares
Shares sold ........... 3,221,438 $ 29,901,018 680,451 $ 5,285,988
Shares repurchased** .. (517,802) (4,270,244) (612,028) (4,357,723)
Net Increase (Decrease) 2,703,636 $ 25,630,774 68,423 $ 928,265
<FN>
**The Fund charges a redemption fee of 1% of the Class A shares exchanged within
90 days of purchase. For the year ended September 30, 2002 and September 30,
2003, $1,670 and $29,916 were netted in the amount reported for shares
repurchased.
</FN>
Class C Shares
Shares sold ........... 596,335 $ 5,369,114 321,404 $ 2,833,345
Shares repurchased .... (167,711) (1,262,235) (310,198) (2,592,820)
Net Increase (Decrease) 428,624 $ 4,106,879 11,206 $ 240,525
Class R-1 Shares
Shares sold ........... 8 $75 - $ --
Shares repurchased .... -- -- -- --
Net Increase (Decrease) 8 $75 -- $ --
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2003 the Fund had purchase and sale
transactions of investment securities (excluding short-term investments) of
$45,406,313 and $16,871,727, respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax components of capital
is as follows:
Cost of investments for tax purpose $ 38,982,494
Gross tax unrealized appreciation $ 4,168,379
Gross tax unrealized depreciation (724,503)
Net tax unrealized appreciation
(depreciation) on investments $ 3,443,876
At September 30, 2003, the Fund has deferred currency losses occurring
subsequent to October 31, 2002 of $2,036. For tax purposes, such losses will be
reflected in the year ending September 30, 2004. At September 30, 2003, the Fund
had tax basis capital losses of $2,280,382, which may be carried over to offset
future capital gains. Such losses expire September 30, 2010.
The Fund utilized $156,091 of loss carryforwards during the year ended September
30, 2003
Unutilized tax basis capital losses may be carried forward to offset realized
gains in future years. To the extent such carry forwards are used, capital gains
distributions may be reduced to the extent provided by regulations.
Net investment income and net realized gain (loss) differ for financial
statement and tax purposes primarily due to differing treatments of wash sale
losses, foreign currency transactions, index options, and losses realized
subsequent to October 31 on the sale of foreign currencies.
SUBSEQUENT EVENTS
Effective November 1, 2003, the Fund started offering Class I shares.
Financial highlights
Thornburg Core Growth Fund
Year Ended Period Ended
September 30, September 30,
2003 2002 2001(c)
Class A Shares:
Per Share Performance
(for a share outstanding throughout the period)+
Net asset value, beginning of period ................. $ 6.45 $ 7.80 $ 11.94
Income from investment operations:
Net investment income (loss) ..................... (0.13) (0.12) (0.08)
Net realized and unrealized
gain (loss) on investments ..................... 3.77 (1.23) (4.06)
Total from investment operations ..................... 3.64 (1.35) (4.14)
Redemption fees added to paid in capital ............. 0.02 -- --
Change in net asset value ............................ 3.66 (1.35) (4.14)
Net asset value, end of period ....................... $ 10.11 $ 6.45 $ 7.80
Total return (a) ..................................... 56.74% (17.31)% (34.67)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income (loss) ..................... (1.43%) (1.44)% (1.02)%(b)
Expenses, after expense reductions ............... 1.65% 1.64% 1.71% (b)
Expenses, after expense reductions
and net of custody credits ..................... 1.63% 1.63% --
Expenses, before expense reductions .............. 2.03% 2.39% 2.80% (b)
Portfolio turnover rate .............................. 102.91% 212.17% 126.15%
Net assets at end of period (000) .................... $ 36,247 $ 5,685 $ 6,337
<FN>
(a) Sales loads are not reflected in computing total return, which is not
annualized for periods less than one year.
(b) Annualized.
(c) Fund commenced operations on December 27, 2000.
+ Based on weighted average shares outstanding.
</FN>
Thornburg Core Growth Fund
Year Ended Period Ended
September 30, September 30,
2003 2002 2001(b)
Class C Shares:
Per Share Performance
(for a share outstanding throughout the period)+
Net asset value, beginning of period ................. $ 6.38 $ 7.76 $ 11.94
Income from investment operations:
Net investment income (loss) ..................... (0.18) (0.18) (0.13)
Net realized and unrealized
gain (loss) on investments ..................... 3.65 (1.20) (4.05)
Total from investment operations ..................... 3.47 (1.38) (4.18)
Change in net asset value ............................ 3.47 (1.38) (4.18)
Net asset value, end of period ....................... $ 9.85 $ 6.38 $ 7.76
Total return (c) ..................................... 54.39% (17.78)% (35.01)%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income (loss) ..................... (2.19)% (2.19)% (1.78)%(a)
Expenses, after expense reductions ............... 2.40% 2.39% 2.49% (a)
Expenses, after expense reductions
and net of custody credits ..................... 2.38% 2.38% --
Expenses, before expense reductions .............. 3.35% 3.45% 4.43% (a)
Portfolio turnover rate .............................. 102.91% 212.17% 126.15%
Net assets at end of period (000) .................... $ 7,146 $ 1,892 $ 2,216
<FN>
(a) Annualized.
(b) Fund commenced operations on December 27, 2000.
(c) Total return is not annualized for periods less than one year.
+ Based on weighted average shares outstanding.
</FN>
Thornburg Core Growth Fund
Period Ended
September 30,
2003(c)
Class R-1 Shares:
Per Share Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ................. $ 9.59
Income from investment operations:
Net investment income (loss) ..................... (0.03)
Net realized and unrealized
gain (loss) on investments ..................... 0.55
Total from investment operations ..................... 0.52
Change in net asset value ............................ 0.52
Net asset value, end of period ....................... $ 10.11
Total return (a) ..................................... 5.42%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income (loss) ..................... (1.06)%(b)
Expenses, after expense reductions ............... 1.65% (b)
Expenses, after expense reductions
and net of custody credits ..................... 1.65% (b)
Expenses, before expense reductions .............. 22,219.77% (b)*
Portfolio turnover rate .............................. 102.91%
Net assets at end of period (000) .................... $ -- (d)
(a) Total Return is not annualized for periods less than one year.
(b) Annualized.
(c) Effective date of Class R-1 Shares was July 1, 2003.
(d) Net assets at end of year were less than $1,000.
o Due to the size of net assets and fixed expenses, ratios may appear
disproportionate.
Schedule of investments
Thornburg Core Growth Fund
September 30, 2003
CUSIPS: CLASS A - 885-215-582, CLASS C - 885-215-574, CLASS R-1 - 885-215-517
NASDAQ SYMBOLS: CLASS A - THCGX , CLASS C - TCGCX, CLASS R-1 THCRX
COMMON STOCKS - 99.90%
COMMERCIAL SERVICES & SUPPLIES (3.50%)
First Data Corp. .......................... 19,600 $ 783,216
Ipass Inc. + .............................. 29,400 690,900
DIVERSIFIED FINANCIALS (5.60%)
Affiliated Managers Group + ............... 21,070 1,323,196
E-Trade Financial Corp. + ................. 112,200 1,038,972
ENERGY (4.80%)
Apache Corp. .............................. 17,110 1,186,407
Evergreen Resources + ..................... 31,200 842,400
HEALTHCARE EQUIPMENT & SERVICES (17.90%)
Anthem Inc. + ............................. 15,300 1,091,349
Boston Scientific Corp. + ................. 25,600 1,633,280
Caremark Rx Inc. + ........................ 61,200 1,383,120
Johnson & Johnson ......................... 26,150 1,294,948
Lincare Holdings Inc. + ................... 35,800 1,312,070
UnitedHealth Group Inc. ................... 17,600 885,632
INSURANCE (2.60%)
Platinum Underwriters Holdings ............ 39,930 1,122,033
MEDIA (12.60%)
Clear Channel Communications Inc. ......... 29,200 1,118,360
Comcast Corp. + ........................... 52,100 1,539,034
EchoStar Communications Corp. + ........... 31,700 1,213,159
Hughes Electronics Corp. + ................ 103,400 1,479,654
PHARMACEUTICALS & BIOTECHNOLOGY (5.10%)
Amgen Inc. + .............................. 16,600 1,071,862
Gilead Sciences Inc. + .................... 19,350 1,082,246
RETAILING (17.70%)
Circuit City Stores Inc. .................. 118,000 1,124,540
GameStop Corp. + .......................... 63,850 1,015,215
InterActiveCorp + ......................... 30,000 991,500
Kohl's Corp. + ............................ 24,300 1,300,050
Leapfrog Enterprises Inc. + ............... 21,500 817,000
Quiksilver Inc. + ......................... 74,600 1,189,870
Ross Stores Inc. .......................... 22,850 1,059,326
SOFTWARE & SERVICES (10.20%)
Eclipsys Corp. + .......................... 63,975 1,022,960
Electronic Arts Inc.+ ..................... 13,300 1,226,659
Microsoft Corp. ........................... 58,000 1,611,820
TradeStation Group Inc. + ................. 63,163 471,954
TECHNOLOGY - HARDWARE & EQUIPMENT (12.20%)
Amdocs Ltd + .............................. 84,200 1,582,960
AMIS Holdings Inc. + ...................... 53,740 992,040
Cyberguard Corp. + ........................ 36,700 349,017
Integrated Circuit Systems Inc. + ......... 31,300 940,252
Novellus Systems Inc. + ................... 39,250 1,324,688
TELECOMMUNICATION SERVICES (6.50%)
Mobile Telesystems ........................ 17,200 1,265,060
Nextel Communications Inc. + .............. 76,600 1,508,254
TRANSPORTATION (1.20%)
JetBlue Airways Corp. + .......... 8,420 513,367
TOTAL COMMON STOCKS (Cost $38,954,178) .... 42,398,370
INDEX OPTION - 0.10%
Nasdaq 100 Index Put Oct 31 + .... 80,000 28,000
TOTAL PUT OPTION PURCHASED (Cost $82,400) . 28,000
TOTAL INVESTMENTS (100%) (Cost $39,036,578) $42,426,370
+ Non-income producing.
See notes to financial statements.
Report of Independent Auditors
Thornburg Core Growth Fund
September 30, 2003
To the Trustees and Shareholders of
Thornburg Core Growth Fund
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 Core Growth Fund series
of Thornburg Investment Trust (the "Fund") at September 30, 2003, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the periods presented, in conformity with accounting principles generally
accepted in the United States of America. 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 audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, 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 audits, which included confirmation of securities at
September 30, 2003 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
index comparisons
Thornburg Core Growth Fund
September 30, 2003
Index Comparison
Compares performance of Thornburg Core Growth Fund and the NASDAQ Composite
Index for the period December 31, 2000 to September 30, 2003. Past performance
of the Index and the Fund may not be indicative of future performance. The
performance data and graph do not reflect the deduction of taxes that a
shareholder would pay on distributions or the redemption of fund shares.
Thornburg Core Growth Fund Class A Total Returns, Since December 31, 2000,
versus the NASDAQ Composite Index
Fund A Shares
NASDAQ Composite Index
Average Annual Total Returns
(periods ending 9/30/03) (at max. offering price)
A Shares
1 Year: 49.78%
From Inception (12/27/00): (7.40)%
Thornburg Core Growth Fund Class C Total Returns, Since December 31, 2000,
versus the NASDAQ Composite Index
Fund C Shares
NASDAQ Composite Index
Average Annual Total Returns
(periods ending 9/30/03)
C Shares
1 Year: 53.39%
From Inception (12/27/00): (6.74)%
The NASDAQ Composite Index is a market value-weighted, technology-oriented index
comprised of approximately 5,000 domestic and non-US-based securities.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
TRUSTEES and Officers
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
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
www.thornburg.com
This report is submitted for the general information of 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.
Thornburg Investment Income Builder Fund
Annual Report
September 30, 2003
Letter to shareholders
Thornburg Investment Income Builder Fund
October 20, 2003
Dear Fellow Shareholder:
Recall that the objective of Thornburg Investment Income Builder is to pay
attractive, growing dividends to shareholders. As a byproduct of achieving this,
we also aim to generate capital appreciation of the share price over time.
Following are the quarterly dividends paid by your fund in the nine-month fiscal
year that ended on September 30:
March Qtr. June Qtr. Sept. Qtr. Year-to-Date Total
A Shares 9.2(cent) 11.2(cent) 12.4(cent) 32.8(cent)
C Shares 8.3(cent) 9.2(cent) 10.36(cent) 27.86(cent)
We expect that at least 80% of the regular quarterly dividend paid by your fund
this year will qualify for the new 15% tax rate for individual taxpayers on
"qualifying dividends." The net asset values of the A and C shares ended the
fiscal period at $13.77 and $13.79, respectively, having increased by $1.83 and
$1.85 since the December 24, 2002 inception of the Fund. On September 30, 2003,
your Fund had 46 equity holdings and 24 different bonds with a weighted average
duration of 4.9 years.
Firms in a broad range of industries contributed to the solid return of your
Fund. Tesco PLC (TSCDF), (a general merchandise retailer), SuperValu Inc. (SVU),
(a grocery distribution firm), Samsung Electronics Co. Ltd. (SSU), (a maker of
digital appliances and integrated circuits), Marathon Oil Corp. (MRO), (an
oil/gas production and refining concern), and BAE Systems PLC (BAESF), (a
defense contractor) were the top five performers for the fiscal year.
Worthington Industries (WOR), (a steel fabrication firm), Lloyds TSB Group PLC
(LLDTF), (a banking/insurance firm), Kelda Group PLC (KELGF), (a water utility),
Bank of Ireland (IRLBF), (a bank), and CNOOC ltd. (CEO), (an oil
exploration/production concern) were our weakest portfolio performers. The
underlying businesses of each of these, except Worthington, developed
satisfactorily this year. Your Fund's most significant industry exposures as of
September 30 are listed nearby.
% Exposure at
Industry Grouping September 30,
2003
Banks 16%
Utilities 12%
Energy 10%
Financials 8%
Real Estate 7%
Materials 6%
Other Key Summary Statistics
% Bonds and Cash 20%
% Domestic Equity 42%
% Foreign Equity 38%
Percentages and holdings can and do vary over time.
We remain optimistic about the backdrop for success of our investment program,
due to ongoing improvements in corporate ability to pay interest and dividends,
and corporate willingness to do so. The new 15% tax rate on dividend income is
important icing on the cake. This should motivate other investors to add more
dividend paying investments to their portfolios, as you have done through your
investment in this Fund. Ability to pay is determined by revenues, earnings, and
cash flows after expenses of operating the business. Looking at the broad U.S.
market, year-over-year revenue growth of public companies (as represented by the
S&P 1500 Index) increased at +14%, and operating earnings per share grew +12%,
according to the corporate data service Baseline. Net profit margins have
firmed. In general, firms outside the U.S. show similar trends, and tend to pay
higher dividends to begin with. Balance sheets are slowly improving, as
indicated by Moody's report of declines in the default rate of
below-investment-grade bond issues. Hopefully, these positive trends will
continue to play out for several years into the future.
Willingness to pay, determined by the behavior of corporate executives and
boards, also seems to be improving. The dividend per unit of the S&P 500 Index
increased from $3.14 in 1970 to $16.07 in 2002. Progress of the S&P 500 Index
dividend stalled between 1999 and 2002, but it appears poised to increase to the
$17.00 area this year. S&P 500 Index dividend increasers outnumber dividend
cutters by 173 to 11 through early October, a trend that is generally reflective
of the broader market. We believe the period of stupid acquisitions, dishonest
accounting, and blind pursuit of profitless top-line growth has yielded (for a
while) to a more constructive mindset, focusing on profitability and dividends.
Your Fund's investments are reported to you in the latter pages of this report.
You can read more about the equity investments in your Fund by going to our
internet web site, www.thornburg.com, then proceeding to Mutual Funds and Income
Builder Holdings Commentary. (If you do not have internet access, please call us
at 800-847-0200. We will print and mail you a copy of this). You can follow
price movements of your shares at www.thornburg.com, under Daily NAVs. Your Fund
is approaching the size at which daily price quotes will appear in newspapers
around the country. Thank you for your support, and best wishes.
Sincerely,
Brian McMahon
President & Chief Investment Officer
Brad Kinkelaar
Associate Portfolio Manager
Steven J. Bohlin
Managing Director
regarding the dividend landscape
Thornburg Investment Income Builder Fund
The S&P 500 Index Payout Ratio
from 1940 to the Present
The S& P 500 Index' Payout Ratio-- A historical Perspective
The dividend payout ratio is a
fraction that expresses dividend
payments as a percentage of
per-share earnings. By long-term
historical standards, the dividend payout ratio of the S&P 500 Index is
relatively low at this time.
Percentage of Companies Paying Dividends
Russell 1000 Index, 1979-2002
Corporate Willingness to Pay Dividends is Improving
The Russell 1000 Index includes 1000 public companies that are supposed to be
generally representative of
corporate America. Between 1980 and 1993, at least 80% of these firms paid some
dividend. Between 1994 and 2001, the percentage of Russell 1000 companies paying
dividends sunk to just over 50%, indicating investor and management preference
for reinvesting retained earnings in growth initiatives. Now the pendulum
appears to be swinging back, and the percentage of dividend payers is
increasing. Long-term academic studies have shown that subsequent earnings-
per-share growth of dividend-paying firms actually exceeds that of non-payers.
regarding the dividend landscape
Thornburg Investment Income Builder Fund
The S&P 500 Index Average Yield (Blue Line) v. Annual Dividends (Blue Bars)
from a One -Time $10,000 Investment in the Index
(Dividends not Reinvested)
Source: Bloomberg.
Rising Dividend Payments Despite Changing Dividend Yields
Over time, the dollar dividend
per unit of the S&P 500 Index has increased. Because the price of the index
itself has increased even more, the yield on the S&P 500 Index, as a percentage
of the current index price, has generally decreased in recent decades. You
should note, however, that the yield on the original investment made at a fixed
point in time (say, 1970 or 1989) has increased, even without reinvestment of
dividends.
The Top 100 The Top 100
Dividend Yields Dividend Yields
in Russell 1000 in Russell 2000
Index Index
REITs 46% 79%
Banks 5% 2%
Other Financials 3% 4%
Utilities 33% 7%
Consumer Staples 7% 3%
Materials 4% 2%
Industrials 1% 1%
Telecom 1% 0%
Consumer Discretionary 0% 3%
Health Care 0% 0%
Energy 0% 0%
Technology 0% 0%
Source: Bloomberg. (Numbers may not add to 100% due to rounding.)
A Truly Diversified Dividend-Paying Portfolio Must Look Beyond the Obvious High
Yield Stocks!
In the (large cap) Russell 1000 Index, 79% of the top 100 dividend payers are
either real estate investment trusts (REITs) or utilities. In the (small cap)
Russell 2000 Index, 86% of the top 100 dividend-yielding stocks are either REITs
or utilities. In order to construct a diversified portfolio of attractive
yielding stocks, one must look beyond these two sectors. We do!
regarding the dividend landscape
Thornburg Investment Income Builder Fund
Average Dividend Yields and Payout Ratios of Markets around the Globe
Source: Bloomberg; FactSet; Merrill Lynch, UBS Warburg
Global Diversification Can
Improve the Portfolio Yield
Since firms outside the U.S. tend to pay higher dividends than U.S. firms,
particularly outside the REIT and utility sectors, we diversify the Thornburg
Investment Income Builder portfolio into some foreign dividend-paying stocks to
take advantage of these opportunities.
Potential Increases in S&P 500 Index' Sector Dividends if all Share Repurchases
were converted to Dividend Payments
Source: FactSet, CSFB estimates. Assumes that all last twelve months' share
repurchases are converted to dividends.
Corporate Willingness to Pay Dividends May Come from Unlikely Sources
Since the passage of the 2003 tax bill, which lowered maximum tax rates on
dividends to 15%, Citigroup and several other leading U.S firms have redirected
funds previously allocated to share buybacks to increased dividend payments.
This graph shows the potential for dividend increases, by S&P sector, if all
funds used to repurchase shares were to be redirected to dividend payments. We
do not expect this outcome, but we are seeing movement in this direction.
Statement of assets and liabilities
Thornburg Investment Income Builder Fund
September 30, 2003
ASSETS
Investments at value (cost $107,031,727) .................................. $ 110,530,199
Cash ...................................................................... 842,193
Cash denominated in foreign currency (cost $3,859,716) .................... 3,877,716
Receivable for fund shares sold ........................................... 2,674,565
Dividends receivable ...................................................... 602,363
Interest receivable ....................................................... 347,111
Prepaid expenses and other assets ......................................... 39,767
Total Assets ............................................ 118,913,914
LIABILITIES
Payable for securities purchased .......................................... 5,802,088
Payable for fund shares redeemed .......................................... 80,374
Payable to investment advisor (Note 3) .................................... 71,643
Accounts payable and accrued expenses ..................................... 111,588
Dividends Payable ......................................................... 152,456
Total Liabilities ....................................... 6,218,149
NET ASSETS ................................................................ $ 112,695,765
NET ASSETS CONSIST OF:
Undistributed net investment income ..................... $ 580,773
Net unrealized appreciation (depreciation) on investments 3,503,494
Accumulated net realized gain (loss) .................... (128,451)
Net capital paid in on shares of beneficial interest .... 108,739,949
$ 112,695,765
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($73,083,248 applicable to 5,306,830 shares of beneficial
interest outstanding - Note 4) ......................................... $ 13.77
Maximum sales charge, 4.50% of offering price ............................. 0.65
Maximum Offering Price Per Share .......................................... $ 14.42
Class C Shares:
Net asset value and offering price per share *
($39,612,517 applicable to 2,872,173 shares of beneficial
interest outstanding - Note 4) ......................................... $ 13.79
<FN>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge. See notes to financial statements.
</FN>
Statement of Operations
Thornburg Investment Income Builder Fund
For the period from December 24, 2002
(commencement of operations) to September 30, 2003
INVESTMENT INCOME
Dividend income (net of foreign taxes withheld of $107,713) ...... $ 1,648,562
Interest income (net of premium amortized of $39,372) ............ 359,013
Total Income ................................... 2,007,575
EXPENSES
Investment advisory fees (Note 3) ................................ 245,115
Administration fees (Note 3)
Class A Shares ................................. 23,613
Class C Shares ................................. 11,403
Distribution and service fees (Note 3)
Class A Shares ................................. 47,227
Class C Shares ................................. 91,224
Transfer agent fees
Class A Shares ................................. 26,283
Class C Shares ................................. 19,676
Registration & filing fees
Class A Shares ................................. 8,928
Class C Shares ................................. 6,905
Custodian fees (Note 3) .......................................... 43,389
Professional fees ................................................ 10,714
Accounting fees .................................................. 857
Trustee fees ..................................................... 401
Other expenses ................................................... 25,801
Total Expenses ................................. 561,536
Less:
Expenses reimbursed by investment advisor (Note 3) (63,309)
Distribution and service fees waived ........... (20,266)
Fees paid indirectly (Note 3) ........................... (2,379)
Net Expenses ................................... 475,582
Net Investment Income .......................... 1,531,993
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments .................................... (128,452)
Foreign currency transactions ........................... (22,291)
(150,743)
Net change in unrealized appreciation (depreciation) on:
Investments .................................... 3,498,472
Foreign currency translations ........................... 5,022
3,503,494
Net Realized and Unrealized
Gain (Loss) on Investments .................. 3,352,751
Net Increase (Decrease) in Net Assets Resulting
from Operations ............................. $ 4,884,744
See notes to financial statements ...............................
Statement of Changes in net assets
Thornburg Investment Income Builder Fund
For the period from
December 24, 2002
(commencement of operations)
to September 30, 2003
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ...................................... $ 1,531,993
Net realized gain (loss) on investments and foreign currency
transactions ...................................... (150,743)
Increase (Decrease) in unrealized appreciation
on investments and foreign currency translations ........ 3,503,494
Net Increase (Decrease) in Net Assets
Resulting from Operations ............................... 4,884,744
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares .................................... (662,771)
Class C Shares .................................... (266,157)
FUND SHARE TRANSACTIONS - (Note 4)
Class A Shares .................................... 70,256,269
Class C Shares .................................... 38,483,680
Net Increase in Net Assets ............... 112,695,765
NET ASSETS:
Beginning of period ............................... 0
End of period ..................................... $ 112,695,765
See notes to financial statements.
Notes to financial statements
Thornburg Investment Income Builder Fund
September 30, 2003
NOTE 1 - ORGANIZATION
Thornburg Investment Income Builder Fund, hereinafter referred to as the "Fund,"
is a diversified series of Thornburg Investment Trust (the "Trust"). The Fund
commenced operations on December 24, 2002. 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 nine
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 Value
Fund, Thornburg International Value Fund, Thornburg New York Intermediate
Municipal Fund and Thornburg Core Growth Fund. Each series is considered to be a
separate entity for financial reporting and tax purposes and bears expenses
directly attributable to it. The Fund pursues its investment objectives by
investing in a broad range of income producing securities, primarily including
stocks and bonds.
The Fund currently offers two classes of shares of beneficial interest, Class A
and Class C shares. Each class of shares of the 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, 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 administration and legal expenses. Currently, class specific expenses
of the Fund are limited to service and distribution fees, administration fees
and certain registration 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, normally 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.
Foreign Currency Translation: Portfolio 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.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of interest recorded on the Fund's books and the U.S. dollar equivalent
of the amounts actually received or paid.
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: Net investment income of the Fund is declared daily as a dividend on
shares for which the Fund has received payment. 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 capital gains, to the extent available, will be
distributed at least 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. Certain income from foreign securities is recognized as soon
as information is available to the Fund. Realized gains and losses from the sale
of securities are recorded on an identified cost basis. Net investment income,
other than class specific expenses, and realized and unrealized gains and
losses, are allocated daily to each class of shares based upon the relative net
asset value of outstanding shares of each class of shares at the beginning of
the day (after adjusting for the current share activity of the respective
class). Expenses common to all funds are allocated among the funds comprising
the Trust based upon their relative net asset values or other appropriate
allocation methods.
Guarantees and Indemnifications: Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liability arising out of
the performance of their duties to the Fund. Additionally, in the normal course
of business the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown. However, based on experience, the Trust expects the
risk of loss to be remote.
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 Investment Management,
Inc. (the "Advisor") serves as the investment advisor and performs services to
the Fund for which the fees are payable at the end of each month. For the period
ended September 30, 2003, these fees were payable at annual rates ranging from
..875 of 1% to .675 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 Advisor, whereby the Advisor 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 .125 of 1% of the average daily
net assets attributable to each class of shares. For the period ended September
30, 2003, the Advisor voluntarily reimbursed certain class specific expenses and
administrative fees of $25,325 for Class A shares and $37,984 for Class C
shares.
The Fund has an underwriting agreement with Thornburg Securities Corporation
(the "Distributor"), which acts as the Distributor of the Fund's shares. For the
period ended September 30, 2003, the Distributor has advised the Fund that it
earned commissions aggregating $93,355 from the sale of Class A shares of the
Fund and collected contingent deferred sales charges aggregating $841 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 Advisor an amount not to exceed .25 of 1%
per annum of its average daily net assets attributable to each class of shares
of the Fund for payments made by the Advisor to securities dealers and other
financial institutions to obtain various shareholder related services. The
Advisor may pay out of its own resources 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 compensates the
Distributor for services in promoting the sale of Class C shares of the Fund at
an annual rate of up to .75 of 1% 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 are set forth in the statement of
operations. Distribution fees in the amount of $20,266 were waived for Class C
shares.
The Fund has an agreement with the custodian bank to indirectly pay a portion of
the custodian's fees through credits earned by the Fund's cash on deposit with
the bank. This deposit agreement is an alternative to overnight investments.
Custodial fees have been adjusted to reflect amounts that would have been paid
without this agreement, with a corresponding adjustment reflected as fees paid
indirectly in the statement of operations. For the period ended September 30,
2003, the fees paid indirectly were $2,379.
Certain officers and trustees of the Trust are also officers and/or directors of
the Advisor and Distributor. The compensation of unaffiliated trustees is borne
by the Trust.
NOTE 4 - SHARES OF BENEFICIAL INTEREST
At September 30, 2003 there were an unlimited number of shares of beneficial
interest authorized. Sales of Class A and Class C shares of the Investment
Income Builder Fund commenced December 24, 2002. Transactions in shares of
beneficial interest were as follows:
For the Period from December 24, 2002
(commencement of operations) to September 30, 2003
Shares Amount
Class A Shares
Shares sold .................... 5,334,254 $ 70,587,793
Shares issued to shareholders in 41,869 568,052
reinvestment of dividends
Shares repurchased** ........... (69,293) (899,576)
Net Increase (Decrease) ........ 5,306,830 $ 70,256,269
**The Fund charges a redemption fee of 1% of the Class A shares exchanged within
90 days of purchase. For the period ended September 30, 2003, $2,155 was netted
in the amount reported for shares repurchased.
Class C Shares
Shares sold .................... 2,880,165 $ 38,582,969
Shares issued to shareholders in 12,283 167,691
reinvestment of dividends
Shares repurchased ............. (20,275) (266,980)
Net Increase (Decrease) ........ 2,872,173 $ 38,483,680
NOTE 5 - SECURITIES TRANSACTIONS
For the period ended September 30, 2003 the Fund had purchase and sale
transactions of investment securities (excluding short-term investments) of
$122,503,720 and $15,302,029, respectively.
NOTE 6 - INCOME TAXES
At September 30, 2003, information on the tax
components of capital is as follows:
Cost of investments for tax purpose $ 107,095,806
Gross tax unrealized appreciation $ 4,601,210
Gross tax unrealized depreciation (1,166,817)
Net tax unrealized appreciation
(depreciation) on investments $ 3,434,393
Distributable earnings-ordinary income $ 603,064
At September 30, 2003, the Fund had deferred tax basis currency and capital
losses occurring subsequent to October 31, 2002 of $22,291 and $64,372,
respectively. For tax purposes, such losses will be reflected in the year ending
September 30, 2004.
Net investment income and net realized gain (loss) differ for financial
statement and tax purposes primarily due to differing treatments of wash sale
losses, foreign currency transactions and losses realized subsequent to October
31 on the sale of securities and foreign currencies.
Tax character of distributions for the period ended September 30, 2003
was as follows:
Ordinary income $ 928,928
SUBSEQUENT EVENTS
Effective November 1, 2003, the Fund started offering Class I shares.
Financial highlights
Thornburg Investment Income Builder Fund
Period Ended
September 30,
2003(c)
Class A Shares:
Per Share Performance
(for a share outstanding throughout the period)+
Net asset value, beginning of period ..................... $ 11.94
Income from investment operations:
Net investment income ................................ 0.56
Net realized and unrealized
gain (loss) on investments ......................... 1.60
Total from investment operations 2.16 Less dividends from:
Net investment income ................................ (0.33)
Change in net asset value ................................ 1.83
Net asset value, end of period ........................... $ 13.77
Total return (a) ......................................... 18.25%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ................................ 5.65% (b)
Expenses, after expense reductions ................... 1.61% (b)
Expenses, after expense reductions
and net of custody credits ......................... 1.60% (b)
Expenses, before expense reductions .................. 1.74% (b)
Portfolio turnover rate .................................. 52.10%
Net assets at end of period (000) ........................ $ 73,083
(a) Sales loads are not reflected in computing total return, which is not
annualized for periods less than one year.
(b) Annualized.
(c) Fund commenced operations on December 24, 2002.
+ Based on weighted average shares outstanding.
Period Ended
September 30,
2003(c)
Class C Shares:
Per Share Performance
(for a share outstanding throughout the period)+
Net asset value, beginning of period ..................... $ 11.94
Income from investment operations:
Net investment income ................................ 0.51
Net realized and unrealized
gain (loss) on investments ......................... 1.62
Total from investment operations 2.13 Less dividends from:
Net investment income ................................ (0.28)
Change in net asset value ................................ 1.85
Net asset value, end of period ........................... $ 13.79
Total return (a) ......................................... 18.01%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income ................................ 5.10% (b)
Expenses, after expense reductions ................... 1.91% (b)
Expenses, after expense reductions
and net of custody credits ......................... 1.90% (b)
Expenses, before expense reductions .................. 2.55% (b)
Portfolio turnover rate .................................. 52.10%
Net assets at end of period (000) ........................ $ 39,613
(a) Total return is not annualized for periods less than one year.
(b) Annualized.
(c) Fund commenced operations on December 24, 2002.
+ Based on weighted average shares outstanding.
Schedule of investments
Thornburg Investment Income Builder Fund
September 30, 2003
CUSIPS: CLASS A - 885-215-558, CLASS C - 885-215-541
NASDAQ SYMBOLS: CLASS A - TIBAX, CLASS C - TIBCX
Shares Value
COMMON STOCKS - 80.60%
BANKS (14.10%)
Bank of Ireland ............................................. 240,000 $ 2,880,374
Bank of New York Inc. ....................................... 100,000 2,911,000
Barclays PLC ................................................ 240,000 1,842,106
Citigroup Inc. .............................................. 75,000 3,413,250
Lloyds TSB Group PLC ........................................ 255,000 1,753,778
Oko Osuuspankkien ........................................... 18,000 325,510
Washington Mutual Inc. ...................................... 64,000 2,519,680
CAPITAL GOODS (2.80%)
BAE Systems PLC ............................................. 900,000 2,513,323
Boskalis Westminster Groep NV ............................... 25,000 588,717
CONSUMER DURABLES & APPAREL (1.00%)
Hugo Boss AG ................................................ 53,000 960,299
Waterford Wedgewood ......................................... 500,000 163,128
DIVERSIFIED FINANCIALS (7.70%)
Alliance Capital Management Holdings LP .................... 75,000 2,511,750
Morgan Stanley .............................................. 60,000 3,027,600
WP Stewart & Co. Ltd. ....................................... 140,000 2,926,000
ENERGY (8.40%)
BP Amoco .................................................... 55,000 2,315,500
CNOOC Ltd. .................................................. 55,000 1,890,350
Marathon Oil Corp. .......................................... 115,000 3,277,500
Occidental Petroleum Corp. .................................. 12,000 422,760
PetroChina Co. Ltd. ADR .................................... 40,000 1,342,000
FOOD BEVERAGE & TOBACCO (3.50%)
ConAgra Foods Inc. .......................................... 25,500 541,620
H.J. Heinz Co. .............................................. 23,000 788,440
Korean Tobacco & Ginseng Corp. .............................. 140,000 2,507,499
FOOD & DRUG RETAILING (4.20%)
SuperValu Inc. .............................................. 60,000 1,431,600
Tesco PLC ................................................... 800,000 3,204,819
HOUSEHOLD & PERSONAL PRODUCTS (2.60%)
Kimberly Clark de Mexico .................................... 1,200,000 2,908,595
HOTELS RESTAURANTS & LEISURE (1.20%)
IHOP Corp. .................................................. 39,100 1,284,435
INSURANCE (3.20%)
Lincoln National Corp. ...................................... 100,000 3,538,000
MATERIALS (5.70%)
Chesapeake Corp. ............................................ 71,300 1,607,102
PPG Industries Inc. ......................................... 21,000 1,096,620
Readymix PLC ................................................ 115,000 232,486
UPM Kymmene Oyj ............................................. 35,000 586,853
Worthington Industries Inc. ................................. 225,000 2,826,000
MEDIA (3.90%)
Independent News & Media Finance ............................ 1,310,000 $ 2,549,108
Pearson PLC ................................................. 180,000 1,706,217
Pearson PLC ADR ............................................. 10,000 95,700
REAL ESTATE MANAGEMENT & DEVELOPMENT (5.10%)
Boston Properties Inc. ...................................... 75,000 3,260,250
Vornado Realty Trust ........................................ 50,000 2,402,000
RETAILING (2.30%)
Kingfisher PLC .............................................. 575,000 2,494,623
TECHNOLOGY - HARDWARE & EQUIPMENT (2.80%)
Samsung Electronics Co. Ltd. ................................ 9,000 3,067,426
TELECOMMUNICATION SERVICES (1.50%)
Vodafone Group PLC ADR ...................................... 81,000 1,640,250
UTILITIES (10.60%)
Dominion Resources Inc. ..................................... 53,000 3,280,700
Hong Kong Electric Holdings Ltd. ............................ 60,000 231,264
Kelda Group PLC ............................................. 304,000 2,138,785
Nisource Inc. ............................................... 92,000 1,838,160
Progress Energy Inc. ........................................ 42,000 1,867,320
Scottish Power PLC .......................................... 100,000 2,370,000
TOTAL COMMON STOCKS (Cost $86,112,388) ...................... 89,080,497
Principal
Amount
CORPORATE BONDS - 16.70%
BANKS (2.00%)
Capital One Bank, 6.70%, 5/15/2008 $ ........................ 655,000 724,015
Capital One Bank, 6.50%, 6/13/2013 1,500,000 1,535,235
COMMERCIAL SERVICES & SUPPLIES (0.20%)
Waste Management Inc., 7.375%, 8/1/2010 ..................... 175,000 204,569
ENERGY (1.10%)
Sonat Inc., 7.625%, 7/15/2011 ............................... 1,400,000 1,155,000
INSURANCE (3.50%)
AAG Holding Co. Inc., 6.875%, 6/1/2008 ...................... 335,000 323,246
Hartford Life Inc., 7.10%, 6/15/2007 ........................ 400,000 454,718
Old Republic International Corp., 7.00%, 6/15/2007 .......... 1,000,000 1,127,665
Provident Cos Inc., 6.375%, 7/15/2005 ....................... 353,000 370,650
Unumprovident Corp., 7.625%, 3/1/2011 ....................... 1,420,000 1,562,000
MEDIA (1.00%)
AOL Time Warner Inc., 6.875%, 5/1/2012 ...................... 425,000 476,862
Independent News & Media Finance, 5.75%, 5/17/2009 .......... 600,000 650,181
PHARMACEUTICALS & BIOTECHNOLOGY (0.50%)
Watson Pharmaceuticals Inc., 7.125%, 5/15/2008 .............. 500,000 547,159
REAL ESTATE MANAGEMENT & DEVELOPMENT (1.50%)
MDC Holdings Inc., 7.00%, 12/1/2012 ......................... 1,500,000 1,648,746
Principal
Amount Value
SOFTWARE & SERVICES (1.10%)
Computer Associates Inc., 6.50%, 4/15/2008 .................. $ 1,154,000 $ 1,249,205
TECHNOLOGY - HARDWARE & EQUIPMENT (1.90%)
Jabil Circuit Inc., 5.875%, 7/15/2010 ....................... 500,000 519,302
Sun Microsystems Inc., 7.65%, 8/15/2009 ..................... 1,335,000 1,556,619
TELECOMMUNICATION SERVICES (2.70%)
Level 3 Communications Inc., 9.125%, 5/1/2008 ............... 300,000 255,000
TCI Communications Inc., 7.875%, 8/1/2013 ................... 2,285,000 2,747,183
UTILITIES (1.20%)
Teco Energy Inc., 6.125%, 5/1/2007 635,000 .................. 628,650
Teco Energy Inc., 7.20%, 5/1/2011 ........................... 705,000 694,425
TOTAL CORPORATE BONDS (Cost $17,853,874) .................... 18,430,430
CONVERTIBLE BONDS - 0.90%
DIVERSIFIED FINANCIALS (0.20%)
E-Trade Financial Corp., 6.00%, 2/1/2007 .................... 265,000 258,375
TELECOMMUNICATION SERVICES (0.70%)
Level 3 Communications Inc., 6.00%, 9/15/2009 ............... 100,000 63,750
Level 3 Communications Inc., 6.00%, 3/15/2010 ............... 1,097,000 688,367
TOTAL CONVERTIBLE BONDS (Cost $1,065,705) ................... 1,010,492
TAXABLE MUNICIPAL BONDS - 1.80%
Short Pump Town Center Community Development, 6.26%, 2/1/2009 2,000,000 2,008,780
TOTAL TAXABLE MUNICIPAL BONDS (Cost $1,999,760) ............. 2,008,780
TOTAL INVESTMENTS (100%) (Cost $107,031,727) ................ $ 110,530,199
<FN>
See notes to financial statements.
</FN>
Report of Independent auditors
Thornburg Investment Income Builder Fund
September 30, 2003
To the Trustees and Shareholders of
Thornburg Investment Income Builder Fund
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 Investment Income Builder
Fund series of Thornburg Investment Trust (the "Fund") at September 30, 2003,
and the results of its operations, the changes in its net assets and the
financial highlights for the period from December 24, 2002 (commencement of
operations) to September 30, 2003, in conformity with accounting principles
generally accepted in the United States of America. 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 auditing standards generally
accepted in the United States of America, 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, 2003 by correspondence with the custodian and brokers, provides a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 7, 2003
index comparisons
Thornburg Investment Income Builder Fund
September 30, 2003
Index Comparison
Compares performance of Thornburg Investment Income Builder Fund and the Blended
Benchmark Index for the period December 24, 2002 to September 30, 2003. Past
performance of the Index and the Fund may not be indicative of future
performance. The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on distributions or the redemption of fund
shares.
Thornburg Investment Income Builder Fund Class A Total Returns, Since
December 24, 2002, versus the Blended Benchmark Index
Average Annual Total Returns
(period ending 9/30/03) (at max. offering price)
A Shares
From Inception (12/24/02): 12.95%
Thornburg Investment Income Builder Fund Class C Total Returns, Since
December 24, 2002, versus the Blended Benchmark Index
Average Annual Total Returns
(period ending 9/30/03)
C Shares
From Inception (12/24/02): 17.01%
The blended index is comprised of 25% Lehman Brothers Aggregate Bond Index and
75% MSCI World Equity Index. The Lehman Brothers Aggregate Bond Index is
composed of approximately 6,000 publicly traded bonds including US government,
mortgage-backed, corporate and Yankee bonds with an average maturity of
approximately 10 years. The index is weighted by the market value of the bond
included in the index. This index represents asset types which are subject to
risk, including loss of principal. The Morgan Stanley Capital International
World Equity Index is a total return index, reported in US dollars, based on
share prices and reinvested gross dividends of approximately 1600 companies from
22 countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, Netherlands, New Zealand,
Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the
United States. The securities represented in this index may experience loss of
invested principal and are subject to investment risk. In exchange for greater
growth potential, investments in foreign securities can have added risks. These
include changes in currency rates, economic and monetary policy, differences in
auditing standards and risks related to political and economic developments.
Unless otherwise noted, index returns reflect the reinvestment of income
dividends and capital gains, if any, but do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct
investments into any index.
TRUSTEES and Officers
Name, Address Position(s) Term of Principal Number of Other
and Age (1) Held with Office Occupation(s) Portfolios Directorships
Fund (2) and During Past in Fund Held by
Length of 5 Years Complex Trustee or
Time Overseen Nominee for
Served by Trustee (2) Trustee
Interested Trustees
Garrett Chairman Trustee CEO, Chairman and controlling Twelve Director of
Thornburg, of Trustees (3) Since shareholder of Thornburg Thornburg Mortgage,
57 1987 (4) Investment Management, Inc. Inc. (real estate
(investment adviser) and investment trust)
Thornburg Securities
Corporation (securities dealer);
Chairman of Thornburg Limited
Term Municipal Fund, Inc.
(registered investment company);
CEO and Chairman of Thornburg
Mortgage, Inc. (real estate
investment trust); Chairman
of Thornburg Mortgage
Advisory Corporation (investment
manager to Thornburg Mortgage, Inc.).
Brian J. McMahon, Trustee, Trustee President and Managing Director Ten None
47 President (5) Since of Thornburg Investment
2001; Management, Inc.; President
President of Thornburg Limited Term
Since 1997 Municipal Fund, Inc.
(4)(6)
Independent Trustees
David A. Ater, Trustee Trustee Principal in Ater & Ater Ten Director of
58 since Associates, Santa Fe, New Thornburg
1994 (4) Mexico (developer, planner Mortgage, Inc.
and broker of residential and (real estate
commercial real estate); owner, investment trust)
developer and broker for
various real estate projects.
David D. Chase, Trustee Trustee Chairman, President, CEO, Twelve Director of
62 since and General Partner of Vestor Thornburg
2001 (4) Partners, LP, Santa Fe, NM Limited Term
(private equity fund); Chairman Municipal Fund,
and CEO of Vestor Holdings, Inc.
Inc., Santa Fe, NM (merchant
bank).
Forrest S. Smith, Trustee Trustee Trust and estate attorney in private Ten None
73 since practice and shareholder, Catron, Catron
1987 (4) & Pottow, Santa Fe, NM (law firm).
James W. Weyhrauch, Trustee Trustee CEO and Vice Chairman, Ten None
44 since Nambe Mills, Inc., Santa Fe,
1996 (4) NM (manufacturer).
Officers of the Fund (who are not Trustees) (7)
Dawn B. Fischer, Secretary Secretary Vice President, Secretary and Not applicable Not applicable
56 Since 1987 Managing Director, Thornburg
(6) Investment Management, Inc.;
Secretary, Thornburg Limited Term
Municipal Fund, Inc.; Secretary,
Thornburg Securities Corporation;
Vice President, Daily Tax Free
Income Fund, Inc. (registered
investment company).
Steven J. Bohlin, Vice President, Vice Vice President and Managing Not applicable Not applicable
44 Treasurer President Director of Thornburg Investment
Since 1987; Management, Inc.; Vice President
Treasurer of Thornburg Limited Term
Since 1989 Municipal Fund, Inc.
(6)
George Strickland, Vice President Vice Vice President and Managing Not applicable Not applicable
40 President Director of Thornburg Investment
Since 1996 Management, Inc.; Vice President (and
6) Treasurer since 2003) of Thornburg Ltd
Term Municipal Fund, Inc.
William V. Fries, Vice President Vice Managing Director of Not applicable Not applicable
64 President Thornburg Investment
Since 1995 Management, Inc.
(6)
Leigh Moiola, Vice President Vice Vice President and Managing Not applicable Not applicable
36 President Director of Thornburg Investment
Since 2001 Management, Inc.; Vice President
(6) of Thornburg Limited Term
Municipal Fund, Inc. since 1999.
Kenneth Ziesenheim, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
49 President Investment Management, Inc.;
Since 1995 President of Thornburg Securities
(6) Corporation; Vice President
of Thornburg Limited Term
Municipal Fund, Inc.
Alexander Motola, Vice President Vice Managing Director of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.
Since 2001 since 2000; Portfolio Manager,
(6) Insight Capital Research &
Management, Inc., Walnut Creek,
California 1995-2000.
Wendy Trevisani, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
32 President Management, Inc. since 1999 and
Since 1999 Vice President since 1999; Sales
(6) Representative, Salomon Smith
Barney 1996-1999.
Joshua Gonze, Vice President Vice Associate (and Vice President Not applicable Not applicable
40 President since 1999) of Thornburg
Since 1999 Investment Management, Inc.;
(6) Vice President of Thornburg
Limited Term Municipal Fund, Inc.
since 2001.
Brad Kinkelaar, Vice President Vice Associate Portfolio Manager of Not applicable Not applicable
35 President Thornburg Investment Management,
Since 1999 Inc. since 1999; Equity Investment
(6) Analyst, State Farm Insurance
Companies 1996-1999.
Kerry D. Lee, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
36 President Management, Inc.; Vice President
Since 1999 of Thornburg Limited Term
(6) Municipal Fund, Inc. since 1999.
Chris Ihlefeld, Vice President Vice Vice President of Thornburg Not applicable Not applicable
33 President Investment Management, Inc.;
Since 2003 Vice President of Limited Term
(4) Municipal Fund, Inc. since 2003.
Leon Sandersfeld, Vice President Vice Associate of Thornburg Investment Not applicable Not applicable
37 President Management, Inc. since 2002;
Since 2003 Senior Staff Accountant,
(6) Farm Bureau Life Insurance Co.
1998-2002.
<FN>
(1) Each person's address is 119 East Marcy Street, Santa Fe, New Mexico 87501.
(2) The Fund is one of ten separate investment "funds" or "portfolios" of
Thornburg Investment Trust (the "Trust"), organized as a Massachusetts business
trust. The Trust currently has ten active funds, which are considered for
certain regulatory purposes as parts of a "fund complex" with the two funds of
Thornburg Limited Term Municipal Fund, Inc. Thornburg Investment Management,
Inc. is the investment advisor to, and manages, the twelve funds of the Trust
and Thornburg Limited Term Municipal Fund, Inc.
(3) Mr. Thornburg is considered an "interested" Trustee under the Investment
Company Act of 1940 because he is a director and controlling shareholder of
Thornburg Investment Management, Inc., the investment to the ten active funds
of the Trust, and is the sole director and controlling shareholder of Thornburg
Securities Corporation, the distribut or of shares for the Trust.
(4) Each Trustee serves in office until the election and qualification of a
successor.
(5) Mr. McMahon is considered an "interested" Trustee because he is the
president of Thornburg Investment Management, Inc.
(6) The Trust's president, secretary and treasurer each serves a one-year
term or until the election and qualification of a successor; each other
officer serves at the pleasure of the Trustees.
(7) Assistant vice presidents, assistant secretaries and assistant treasurers
are not shown.
The Statement of Additional Information for each Fund of the Trust
includes additional information about the Trustees and is available, without
charge and upon request by calling
1-800-847-0200.
</FN>
PORTFOLIO PROXY VOTING
Policies and Procedures (Unaudited):
The Trust has delegated to Thornburg Investment Management, Inc. ("the Advisor")
voting decisions respecting proxies for the Fund's voting securities. The
Advisor makes voting decisions in accordance with its Proxy Voting Policy and
Procedures. A description of the policy and Procedures is available (i) without
charge, upon request, by calling the Advisor toll-free at 1.800.847.0200, (ii)
on the Thornburg website at www.thornburg.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Commencing November 30, 2004, information regarding how proxies were voted will
be available on or before November 30 of each year for the twelve months ending
the preceding June 30. This information will be available (i) without charge,
upon request, on the Thornburg website at www.thornburg.com and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
TAX INFORMATION
Federal Income tax information (unaudited):
For the fiscal year ended September 30, 2003 certain dividends paid by the Fund
may be subject to a maximum tax rate of 15% as provided by the Jobs and Growth
Tax Relief Reconciliation Act of 2003. The Fund designates a maximum amount of
$850,000 as qualified dividend income, which is taxed at a maximum rate of 15%.
The information and distributions reported herein may differ from the
information and distributions taxable to the shareholders for the calendar year
ending December 31, 2003. Complete information will be computed and reported in
conjunction with your 2003 Form 1099-DIV.
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
www.thornburg.com
This report is submitted for the general information of 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.
Item 2. Code of Ethics
As of the end of the period September 30, 2003, Thornburg Investment Trust has
adopted a code of ethics described in Item 2 of Form N-CSR. A copy of the code
of ethics is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert
The Trustees of Thornburg Investment Trust have determined that two members of
the Trust's audit committee, David A. Ater and David D. Chase, are each audit
committee financial experts as defined in Item 3 of Form N-CSR. Mr. Ater and
Mr. Chase are each independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Reserved
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. Reserved
Item 9. Controls and Procedures
(a) The principal executive officer and the principal financial officer have
concluded that Thornburg Investment Trust disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940) provide
reasonable assurance that material information relating to Thornburg Investment
Trust is made known to them by the appropriate persons, based on their
evaluation of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
(b) There were no changes in the Thornburg Investment Trust's internal controls
over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) that occurred during the registrant's second fiscal
half-year that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 10. Exhibits
(a) (1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and
attached hereto as EX-99.CODEETH
(a) (2) Certifications pursuant to Rule 30a-2 under the Investment Company
Act of 1940 (17 CFR 70.30a-2) attached hereto as Exhibit 99.CERT.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Thornburg Investment Trust, in respect of Thornburg Intermediate Municipal Fund,
Thornburg New Mexico Intermediate Municipal Fund, Thornburg Florida Intermediate
Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg Limited
Term Income Fund, Thornburg Value Fund, Thornburg International Value Fund,
Thornburg Core Growth Fund, and Thornburg Investment Income Builder Fund.
By: /s/ Brian J. McMahon
Brian J. McMahon
President and principal executive officer
Date: November 17, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Brian J. McMahon
Brian J. McMahon
President and principal executive officer
Date: November 17, 2003
By: /s/ Steven J. Bohlin
Steven J. Bohlin
Treasurer and principal financial officer
Date: November 17, 2003