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 Thornburg New Mexico Intermediate Municipal Fund 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 Thornburg Intermediate Municipal Fund 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 Thornburg Intermediate Municipal Fund 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 Thornburg Value Fund 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 Thornburg Value Fund 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 Thornburg Florida Intermediate Municipal Fund 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 Thornburg International Value Fund 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 Thornburg International Value Fund 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 Thornburg Core Growth Fund 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 Thornburg Investment Income Builder Fund 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. The Trustees' determinations in this regard were based upon their current understanding of the definition of "audit committee financial expert" and current interpretations of the definitions. The Trustees call attention to the lack of clarity in the definition, and that shareholders and prospective investors may wish to evaluate independently this definition [and the qualifications of the Trust's audit committee]. The definition of "audit committee financial expert," together with comments on the definition, are set forth in the Securities and Exchange Commission's Release No. 34-47262, January 27, 2003, available on the Commission's website (www.sec.gov). 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: December 1, 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: December 1, 2003 By: /s/ Steven J. Bohlin Steven J. Bohlin Treasurer and principal financial officer Date: December 1, 2003