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, 2006
Date of reporting period: September 30, 2006
Item 1. Reports to Stockholders
The following annual reports are attached hereto, in order:
Thornburg Limited Term Municipal Fund
Thornburg Limited Term Municipal Fund Class I
Thornburg California Limited Term Municipal Fund
Thornburg California Limited Term Municipal Fund Class I
Thornburg Intermediate Municipal Fund
Thornburg Intermediate Municipal Fund Class I
Thornburg New Mexico Intermediate Municipal Fund
Thornburg New York Intermediate Municipal Fund
Thornburg Limited Term Income Funds
Thornburg Limited Term Income Funds Class I
Thornburg Value Fund
Thornburg Value Fund Class I
Thornburg International Value Fund
Thornburg International Value Fund Class I
Thornburg Core Growth Fund
Thornburg Core Growth Fund Class I
Thornburg Investment Income Builder Fund
Thornburg Investment Income Builder Fund Class I
Thornburg Global Opportunities Fund
Thornburg Global Opportunities Fund Class I
Thornburg Limited Term Municipal Fund
Laddering – an All Weather Strategy
The Fund’s primary investment objective is to obtain as high a level of current income exempt from Federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital (may be subject to Alternative Minimum Tax). The secondary goal of the Fund is to reduce expected changes in its share price compared to longer intermediate and long-term bond portfolios.
This Fund is a laddered portfolio of municipal bonds with an average maturity of five years or less. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year; cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. The strategy is a good compromise for managing different types of risk.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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2 | This page is not part of the Annual Report. |
Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We aspire to accomplish this through a family of laddered bond funds that focus on quality, stability, and minimization of risk over time, and through a range of equity funds that redefine traditional measures of value and growth.
Our bond funds have always been managed using the highly disciplined approach of laddering short and intermediate bond maturities, seeking to provide both an attractive return and stability of principal. Laddering is an all-weather strategy, designed to perform in uncertain markets like the ones we have seen in the last two years. Moreover, all of the bond funds focus on buying investment-grade securities. We have found this strategy to be the best at managing both interest-rate risk and credit risk, and we believe this approach has served our shareholders well over time.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Our bond fund portfolio managers have many years of experience. We are proud of this consistency and experience and look forward to many more successful years with them at the helm.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely |
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Garrett Thornburg Chairman & CEO |
This page is not part of the Annual Report. | 3 |
2006
Certified Annual Report
Thornburg Limited Term Municipal Fund
September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 | Certified Annual Report |
Important Information
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
The maximum sales charge for the Fund’s Class A shares is 1.50%. Class C shares include a 0.50% contingent deferred sales charge (CDSC) for the first year only.
Performance data given at net asset value (NAV) does not take into account these sales charges. If the sales charges had been included, the performance would have been lower.
Shares in the Fund carry risks, including possible loss of principal. As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Glossary
The Lehman Brothers Five-Year Municipal Bond Index – A rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must have a minimum credit rating of Baa. The approximate maturity of the municipal bonds in the index is five 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.
Duration – The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.
Weighted Average Maturity – A weighted average of all the effective maturities of the bonds in a portfolio. Effective maturity takes into consideration mortgage prepayments, puts, sinking funds, adjustable coupons, and other features of individual bonds and is thus a more accurate measure of interest-rate sensitivity. Longer-maturity funds are generally considered more interest-rate sensitive than their shorter counterparts.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Treasury Notes – a debt obligation of the US government backed by the “full faith and credit” of the government. Notes are intermediate to long term investments typically issued in maturities of two, five and ten years. Interest is paid semi-annually.
Certified Annual Report | 5 |
George Strickland
Portfolio Manager
October 17, 2006
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg Limited Term Municipal Fund. The net asset value of the Class A shares decreased by 6 cents to $13.53 during the twelve months ended September 30, 2006. If you were with us for the entire period, you received dividends of 44.2 cents per share. If you reinvested dividends, you received 44.9 cents per share. Investors who owned Class C shares received dividends of 40.6 and 41.2 cents per share, respectively.
Over the last twelve months, interest rates on bonds that mature in ten years or less have risen, while interest rates on long-term bonds have fallen. Higher interest rates on short-term bonds have lowered the price of most of the bonds owned by the Fund somewhat, but have allowed us to buy new bonds at higher yields and increase the yield of the portfolio. The Class A shares of your Fund produced a total return of 2.87% over the twelve month period ended September 30, 2006, compared to a 3.01% return for the Lehman Five Year Municipal Bond Index. The Fund was slightly over weighted in bonds that mature in less than five years. Since the returns of those short-term bonds lagged the return of the index, the Fund’s return lagged the index by 0.14%.
After rising for most of the year, bond yields fell in the third quarter of 2006 because the bond market started to anticipate a slower economy, reduced inflation, and a lower Fed Funds rate. While such an outcome is certainly possible, we believe the preponderance of evidence points to continued economic growth and a Federal Reserve that must stay on high alert to avoid inflationary acceleration.
The current case for a weak economy revolves around the detrimental effects of a declining housing market. However, slackness in residential housing is being countered with strength in commercial real estate, capital spending, state and federal government spending, and exports. Some consumers are feeling pinched by higher rates on adjustable rate mortgages, but many more are enjoying higher incomes in an economy that has produced 1.8 million new jobs over the last twelve months. So consumer spending should continue growing, and may accelerate if oil and gas prices hold in their current ranges. This should drive the economy to solid, but not spectacular, growth.
No matter how you measure it, inflation has doubled over the last three years. The current levels are not terribly alarming, but they are significantly above the Federal Reserve’s comfort zone. Fed Chairman Bernanke has stated that he thinks inflation should moderate next year, but there are reasons to think that it might not. U.S. hourly earnings are rising at a 4% rate, up from 1.6% in early 2004, and import prices have been rising steadily. These and other pressures could keep inflation stubbornly in the Fed’s discomfort zone.
So, when we look at current yield curves – inverted for Treasury notes and bonds, and very flat for municipal bonds – it appears to us that the optimistic inflation scenario is already priced into the market. In order to justify today’s 4.8% 10-year Treasury note, one must assume the Federal Reserve will begin easing monetary policy fairly soon. That implies that inflation will drop back down below 2%. If all that unfolds as expected, then current levels are justified. If it does not, then interest rates should rise on intermediate and long-term bonds. Clearly, it seems that risks are somewhat skewed toward higher interest rates.
6 | Certified Annual Report |
Your Thornburg Limited Term Municipal Fund is a laddered portfolio of over 550 municipal obligations from 45 states. Today, your Fund’s weighted average maturity is 4.44 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 short and 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 chart below describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
% of portfolio maturing | Cumulative % maturing | |||||||||||
1 year | = | 9.6 | % | Year 1 | = | 9.6 | % | |||||
1 to 2 years | = | 11.6 | % | Year 2 | = | 21.2 | % | |||||
2 to 3 years | = | 9.6 | % | Year 3 | = | 30.8 | % | |||||
3 to 4 years | = | 12.9 | % | Year 4 | = | 43.7 | % | |||||
4 to 5 years | = | 13.6 | % | Year 5 | = | 57.3 | % | |||||
5 to 6 years | = | 9.5 | % | Year 6 | = | 66.8 | % | |||||
6 to 7 years | = | 10.9 | % | Year 7 | = | 77.7 | % | |||||
7 to 8 years | = | 8.6 | % | Year 8 | = | 86.3 | % | |||||
8 to 9 years | = | 7.1 | % | Year 9 | = | 93.4 | % | |||||
Over 9 years | = | 6.6 | % | Over 9 years | = | 100.0 | % |
Percentages can and do vary. Data as of 9/30/06.
We took advantage of rising rates to extend the duration of the Fund over the last year. We are now firmly in neutral territory and the ladder is fairly evenly distributed (just a little light in the last three years). We are planning to gradually shorten portfolio duration over time unless new opportunities open up to us over the next few months. If interest rates on long-term bonds rise, Thornburg laddered bond portfolios should outperform more aggressive bond strategies. If interest rates hold steady or decline, then Thornburg bond portfolios should produce compelling risk-adjusted returns.
Overall, municipal credit quality continues to improve. Supported by a strong economy, state tax revenues were up 9.9% over year-ago levels in the second quarter. Tax revenues grew fastest in the Rocky Mountain and Southwest regions. Tax revenues grew slower in the Great Lakes and Southeast re gions, but were still growing in the mid single digits. Other types of bonds, such as school district, utility, and health care bonds, are also generally showing solid credit characteristics.
All the good news has, in our opinion, led market participants to take a very relaxed stance toward taking on credit risk. Yield spreads for lower investment grade and speculative grade bonds are well below long-term averages. While we are not anticipating impending doom for low quality bonds, we do believe it is prudent to keep credit quality high in the current environment. Your Fund is broadly diversified and 92% invested in bonds rated A or above by at least one of the major rating agencies.
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 Limited Term Municipal Fund.
Sincerely, |
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George Strickland Portfolio Manager |
Certified Annual Report | 7 |
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
ASSETS | ||||
Investments at value (cost $1,189,267,811) | $ | 1,209,445,074 | ||
Cash | 307,694 | |||
Receivable for investments sold | 2,630,000 | |||
Receivable for fund shares sold | 2,748,488 | |||
Interest receivable | 16,315,205 | |||
Prepaid expenses and other assets | 41,438 | |||
Total Assets | 1,231,487,899 | |||
LIABILITIES | ||||
Payable for securities purchased | 3,107,192 | |||
Payable for fund shares redeemed | 1,896,625 | |||
Payable to investment advisor and other affiliates (Note 3) | 749,535 | |||
Accounts payable and accrued expenses | 188,356 | |||
Dividends payable | 1,043,804 | |||
Total Liabilities | 6,985,512 | |||
NET ASSETS | $ | 1,224,502,387 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (2,004 | ) | |
Net unrealized appreciation on investments | 20,176,447 | |||
Accumulated net realized gain (loss) | (9,506,274 | ) | ||
Net capital paid in on shares of beneficial interest | 1,213,834,218 | |||
$ | 1,224,502,387 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($833,188,689 applicable to 61,579,265 shares of beneficial interest outstanding - Note 4) | $ | 13.53 | ||
Maximum sales charge, 1.50% of offering price | 0.21 | |||
Maximum offering price per share | $ | 13.74 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($105,435,527 applicable to 7,778,369 shares of beneficial interest outstanding - Note 4) | $ | 13.55 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($285,878,171 applicable to 21,126,039 shares of beneficial interest outstanding - Note 4) | $ | 13.53 | ||
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
8 | Certified Annual Report |
STATEMENT OF OPERATIONS | ||
Thornburg Limited Term Municipal Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $11,653,710) | $ | 53,839,766 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 5,362,867 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,105,306 | |||
Class C Shares | 150,081 | |||
Class I Shares | 141,656 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 2,210,611 | |||
Class C Shares | 1,195,045 | |||
Transfer agent fees | ||||
Class A Shares | 509,639 | |||
Class C Shares | 82,056 | |||
Class I Shares | 104,435 | |||
Registration and filing fees | ||||
Class A Shares | 24,791 | |||
Class C Shares | 19,462 | |||
Class I Shares | 31,948 | |||
Custodian fees (Note 3) | 375,294 | |||
Professional fees | 64,427 | |||
Accounting fees | 99,995 | |||
Trustee fees | 32,958 | |||
Other expenses | 141,099 | |||
Total Expenses | 11,651,670 | |||
Less: | ||||
Distribution and service fees waived (Note 3) | (597,523 | ) | ||
Fees paid indirectly (Note 3) | (34,314 | ) | ||
Net Expenses | 11,019,833 | |||
Net Investment Income | 42,819,933 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on Investments sold | (3,027,220 | ) | ||
Net change in unrealized appreciation (depreciation) of Investments | (3,959,006 | ) | ||
Net Realized and Unrealized Loss on Investments | (6,986,226 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 35,833,707 | ||
See notes to financial statements.
Certified Annual Report | 9 |
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Limited Term Municipal Fund |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 42,819,933 | $ | 41,560,133 | ||||
Net realized loss on investments | (3,027,220 | ) | (1,895,726 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (3,959,006 | ) | (23,004,183 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 35,833,707 | 16,660,224 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (28,968,791 | ) | (29,220,801 | ) | ||||
Class C Shares | (3,602,082 | ) | (4,017,994 | ) | ||||
Class I Shares | (10,249,060 | ) | (8,321,340 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (129,601,272 | ) | (53,647,281 | ) | ||||
Class C Shares | (34,410,880 | ) | (13,573,272 | ) | ||||
Class I Shares | (3,124,294 | ) | 56,236,683 | |||||
Net Decrease in Net Assets | (174,122,672 | ) | (35,883,781 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 1,398,625,059 | 1,434,508,840 | ||||||
End of year | $ | 1,224,502,387 | $ | 1,398,625,059 | ||||
See notes to financial statements.
10 | Certified Annual Report |
Thornburg Limited Term Municipal Fund | September 30, 2006 |
NOTE 1 – ORGANIZATION
Thornburg Limited Term Municipal Fund (the “Fund”)(for-merly Thornburg Limited Term Municipal Fund – National Portfolio) 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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg California Limited Term Municipal Fund, Thornburg New York Intermediate Municipal Fund, Thornburg New Mexico 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, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 primary investment objective is to obtain as high a level of current income exempt from Federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary goal is to reduce expected changes in its share price compared to longer intermediate and long-term bond portfolios.
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, 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 I shares are sold at net asset value without a sales charge at the time of purchase, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent applicable 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, administrative fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: The Trust determines the value of investments utilizing an independent pricing service approved by the Board of 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 p.m. EST. When quotations are not readily available, securities are valued at evaluated prices 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; and indications as to value from dealers and general market conditions. In any case where a price is not available from a pricing service for an investment, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the Trustees. 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 Board of Trustees. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable (if any) and tax exempt income of the Fund to the shareholders. Therefore, no provision for Federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
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 capital shares 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, 2006, these fees were payable at annual rates ranging from .50 of 1% to .225 of 1% per annum of the average daily net assets of the Fund. The Trust also has 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% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned commissions aggregating $5,105 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $15,655 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 amounts 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 persons for distribution of the Fund’s shares and to obtain various shareholder and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted a Distribution Plan pursuant to Rule 12b-1, applicable only to the Fund’s Class C shares under which the 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% per annum 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 and Class C distribution fees waived by the Distributor for the year ended September 30, 2006, are set forth in the Statement of Operations. Distribution fees in the amount of $597,523 were waived for Class C shares.
The Trust 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, 2006, fees paid indirectly were $34,314. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
12 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 7,002,507 | $ | 94,383,822 | 10,112,925 | $ | 138,664,895 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,451,447 | 19,553,941 | 1,429,462 | 19,572,574 | ||||||||||
Shares repurchased | (18,068,444 | ) | (243,539,035 | ) | (15,463,654 | ) | (211,884,750 | ) | ||||||
Net Increase (Decrease) | (9,614,490 | ) | $ | (129,601,272 | ) | (3,921,267 | ) | $ | (53,647,281 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 720,729 | $ | 9,723,762 | 1,853,494 | $ | 25,470,518 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 179,128 | 2,417,463 | 198,591 | 2,724,023 | ||||||||||
Shares repurchased | (3,447,634 | ) | (46,552,105 | ) | (3,045,634 | ) | (41,767,813 | ) | ||||||
Net Increase (Decrease) | (2,547,777 | ) | $ | (34,410,880 | ) | (993,549 | ) | $ | (13,573,272 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 6,913,539 | $ | 93,207,821 | 8,961,752 | $ | 122,650,992 | ||||||||
Shares issued to shareholders inreinvestment of dividends | 583,980 | 7,867,045 | 501,520 | 6,865,525 | ||||||||||
Shares repurchased | (7,732,221 | ) | (104,199,160 | ) | (5,348,315 | ) | (73,279,834 | ) | ||||||
Net Increase (Decrease) | (234,702 | ) | $ | (3,124,294 | ) | 4,114,957 | $ | 56,236,683 | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $290,604,894 and $426,081,275, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 1,189,273,227 | ||
Gross unrealized appreciation on a tax basis | $ | 21,940,088 | ||
Gross unrealized depreciation on a tax basis | (1,768,241 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 20,171,847 | ||
At September 30, 2006, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2006, the Fund had tax basis capital losses, which may be carried over to offset future capital gains. To the extent such carry forwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryovers expire as follows:
2007 | $ | 1,013,153 | |
2008 | 3,565,103 | ||
2013 | 30,614 | ||
2014 | 2,276,927 | ||
$ | 6,885,797 | ||
As of September 30, 2006, the Fund had deferred capital losses occurring subsequent to October 31, 2005 of $2,615,061. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
In order to account for permanent book/tax differences, the Fund decreased over-distributed investment income by $549 and increased accumulated net realized investment loss by $549. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from market discount.
Certified Annual Report | 13 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
All dividends paid by the Fund for the year ended September 30, 2006 and September 30, 2005, represent exempt interest dividends, which are excludable by shareholders from gross income for Federal income tax purposes.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
14 | Certified Annual Report |
Thornburg Limited Term Municipal Fund
Year Ended Sept. 30, | 3 Months Ended Sept. 30, | Year Ended June 30, | ||||||||||||||||||||||
2006 | 2005 | 2004(c) | 2004 | 2003 | 2002 | |||||||||||||||||||
Class A Shares: | ||||||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | $ | 13.65 | $ | 13.44 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.44 | 0.40 | 0.09 | 0.40 | 0.45 | 0.52 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | 0.21 | |||||||||||||||
Total from investment operations | 0.38 | 0.16 | 0.24 | 0.07 | 0.81 | 0.73 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.44 | ) | (0.40 | ) | (0.09 | ) | (0.40 | ) | (0.45 | ) | (0.52 | ) | ||||||||||||
Change in net asset value | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | 0.21 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | $ | 13.65 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 2.87 | % | 1.16 | % | 1.78 | % | 0.47 | % | 5.99 | % | 5.54 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.28 | % | 2.91 | % | 2.69 | %(b) | 2.85 | % | 3.20 | % | 3.83 | % | ||||||||||||
Expenses, after expense reductions | 0.91 | % | 0.90 | % | 0.89 | %(b) | 0.91 | % | 0.93 | % | 0.95 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.90 | % | 0.90 | % | 0.89 | %(b) | 0.91 | % | 0.93 | % | 0.95 | % | ||||||||||||
Expenses, before expense reductions | 0.91 | % | 0.90 | % | 0.89 | %(b) | 0.91 | % | 0.93 | % | 0.96 | % | ||||||||||||
Portfolio turnover rate | 23.02 | % | 27.80 | % | 4.57 | % | 21.37 | % | 15.81 | % | 19.59 | % | ||||||||||||
Net assets at end of period (000) | $ | 833,189 | $ | 967,650 | $ | 1,039,050 | $ | 1,047,482 | $ | 998,878 | $ | 785,145 |
(a) | Sales loads are not reflected in computing total return, which is not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
Certified Annual Report | 15 |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term Municipal Fund
Year Ended Sept. 30, | 3 Months Ended Sept. 30, | Year Ended June 30, | ||||||||||||||||||||||
2006 | 2005 | 2004(c) | 2004 | 2003 | 2002 | |||||||||||||||||||
Class C Shares: | ||||||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.62 | $ | 13.86 | $ | 13.70 | $ | 14.04 | $ | 13.67 | $ | 13.46 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.41 | 0.36 | 0.08 | 0.36 | 0.41 | 0.47 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.07 | ) | (0.24 | ) | 0.16 | (0.34 | ) | 0.37 | 0.21 | |||||||||||||||
Total from investment operations | 0.34 | 0.12 | 0.24 | 0.02 | 0.78 | 0.68 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.41 | ) | (0.36 | ) | (0.08 | ) | (0.36 | ) | (0.41 | ) | (0.47 | ) | ||||||||||||
Change in net asset value | (0.07 | ) | (0.24 | ) | 0.16 | (0.34 | ) | 0.37 | 0.21 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 13.55 | $ | 13.62 | $ | 13.86 | $ | 13.70 | $ | 14.04 | $ | 13.67 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 2.52 | % | 0.89 | % | 1.79 | % | 0.12 | % | 5.78 | % | 5.13 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.00 | % | 2.63 | % | 2.43 | %(b) | 2.56 | % | 2.89 | % | 3.42 | % | ||||||||||||
Expenses, after expense reductions | 1.18 | % | 1.18 | % | 1.15 | %(b) | 1.19 | % | 1.18 | % | 1.33 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 1.18 | % | 1.18 | % | 1.15 | %(b) | 1.19 | % | 1.18 | % | 1.33 | % | ||||||||||||
Expenses, before expense reductions | 1.68 | % | 1.68 | % | 1.65 | %(b) | 1.69 | % | 1.68 | % | 1.80 | % | ||||||||||||
Portfolio turnover rate | 23.02 | % | 27.80 | % | 4.57 | % | 21.37 | % | 15.81 | % | 19.59 | % | ||||||||||||
Net assets at end of period (000) | $ | 105,436 | $ | 140,606 | $ | 156,870 | $ | 155,458 | $ | 137,559 | $ | 57,258 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
16 | Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term Municipal Fund
Year Ended Sept. 30, | 3 Months Ended Sept. 30, | Year Ended June 30, | ||||||||||||||||||||||
2006 | 2005 | 2004(c) | 2004 | 2003 | 2002 | |||||||||||||||||||
Class I Shares: | ||||||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | $ | 13.65 | $ | 13.44 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.49 | 0.44 | 0.11 | 0.44 | 0.49 | 0.57 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | 0.21 | |||||||||||||||
Total from investment operations | 0.43 | 0.20 | 0.26 | 0.11 | 0.85 | 0.78 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.49 | ) | (0.44 | ) | (0.11 | ) | (0.44 | ) | (0.49 | ) | (0.57 | ) | ||||||||||||
Change in net asset value | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | 0.21 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | $ | 13.65 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.22 | % | 1.50 | % | 1.87 | % | 0.80 | % | 6.36 | % | 5.91 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.62 | % | 3.25 | % | 3.02 | %(b) | 3.18 | % | 3.54 | % | 4.18 | % | ||||||||||||
Expenses, after expense reductions | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | 0.60 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | 0.60 | % | ||||||||||||
Expenses, before expense reductions | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | 0.62 | % | ||||||||||||
Portfolio turnover rate | 23.02 | % | 27.80 | % | 4.57 | % | 21.37 | % | 15.81 | % | 19.59 | % | ||||||||||||
Net assets at end of period (000) | $ | 285,878 | $ | 290,369 | $ | 238,589 | $ | 222,760 | $ | 197,367 | $ | 123,652 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
Certified Annual Report | 17 |
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-459, CLASS C - 885-215-442, CLASS I - 885-215-434
NASDAQ SYMBOLS: CLASS A - LTMFX, CLASS C - LTMCX, CLASS I - LTMIX
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
ALABAMA — 1.26% | ||||||||
Birmingham Carraway Health Care Facilities Financing Authority Revenue, 6.25% due 8/15/2009 (Carraway Methodist Hospitals Project; Insured: Connie Lee) | NR/AAA | $ | 10,000,000 | $ | 10,332,800 | |||
Mobile GO Warrants, 4.50% due 8/15/2016 (1) | NR/NR | 3,100,000 | 3,133,883 | |||||
Scottsboro Industrial Development Board Refunding, 5.25% due 5/1/2009 (AAF McQuay Project; LOC: PNC Bank) | NR/NR | 1,920,000 | 1,921,421 | |||||
ALASKA — 0.83% | ||||||||
Alaska Energy Authority Power Revenue Refunding, 6.00% due 7/1/2011 (Bradley Lake Hydroelectric Project; Insured: FSA) | Aaa/AAA | 955,000 | 1,052,104 | |||||
Alaska Municipal Bond Bank Refunding Series One, 5.00% due 6/1/2014 (Insured: MBIA) | Aaa/AAA | 1,175,000 | 1,273,136 | |||||
Alaska Student Loan Corp. Revenue Series A, 5.25% due 1/1/2012 (Insured: FSA) | NR/AAA | 3,000,000 | 3,231,960 | |||||
Anchorage Ice Rink Revenue, 6.375% due 1/1/2020 pre-refunded 7/1/2010 | NR/NR | 1,000,000 | 1,092,000 | |||||
North Slope Boro Revenue Refunding Series A, 5.00% due 6/30/2015 (Insured: MBIA) | Aaa/AAA | 3,250,000 | 3,540,420 | |||||
ARIZONA — 0.62% | ||||||||
Mohave County Industrial Development Authority Series A, 5.00% due 4/1/2014 (Mohave Prison LLC Project; Insured: XLCA) | NR/AAA | 3,135,000 | 3,372,288 | |||||
Pima County Industrial Development Authority Education Revenue Series C, 6.40% due 7/1/2013 (Arizona Charter Schools Project) | Baa3/NR | 1,000,000 | 1,069,410 | |||||
Pima County Industrial Development Authority Revenue Refunding Lease Obligation A, 7.25% due 7/15/2010 (Insured: FSA) | Aaa/AAA | 480,000 | 481,694 | |||||
Pima County Industrial Development Authority Revenue Refunding Series A, 5.45% due 4/1/2010 (Insured: MBIA) | Aaa/AAA | 2,060,000 | 2,117,289 | |||||
Tucson Water Revenue Series D, 9.75% due 7/1/2008 | Aa3/A+ | 500,000 | 551,445 | |||||
ARKANSAS — 0.57% | ||||||||
Conway Electric Revenue Refunding, 5.00% due 8/1/2007 | A2/NR | 2,000,000 | 2,022,840 | |||||
Jefferson County Hospital Revenue Refunding & Improvement, 5.50% due 6/1/2010 (Regional Medical Center Project) | NR/A | 1,000,000 | 1,055,310 | |||||
Jefferson County Hospital Revenue Refunding & Improvement, 5.50% due 6/1/2011 (Regional Medical Center Project) | NR/A | 1,075,000 | 1,147,089 | |||||
Little Rock Hotel & Restaurant Gross Receipts Tax Refunding, 7.125% due 8/1/2009 | A3/NR | 2,645,000 | 2,791,877 | |||||
CALIFORNIA — 1.77% | ||||||||
California Health Facilities Financing Authority Revenue Refunding Series B, 5.25% due 10/1/2013 (Kaiser Permanente Project) (ETM) | A3/AAA | 2,620,000 | 2,728,337 | |||||
California Health Facilities Financing Authority Revenue Series 83 C, 9.25% due 12/1/2006 (Mercy Health Care Project) (ETM) | Aaa/AAA | 1,600,000 | 1,615,552 | |||||
California State Department of Transportation COP Refunding Series A, 5.25% due 3/1/2016 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,026,070 | |||||
California State Department of Water Resources Power Supply Series A, 5.50% due 5/1/2012 | A2/A- | 2,600,000 | 2,833,298 | |||||
California State Department of Water Resources Power Supply Series A, 6.00% due 5/1/2013 | A2/A- | 2,550,000 | 2,871,224 | |||||
Escondido Unified High School District, 5.60% due 11/1/2009 (Insured: MBIA) (ETM) | Aaa/AAA | 1,250,000 | 1,277,050 | |||||
Northern California Power Agency Public Power Revenue Series A, 5.00% due 7/1/2009 (Geothermal Project Number 3) | A2/BBB+ | 6,100,000 | 6,105,307 | |||||
Ontario Montclair School District COP Refunding, 3.80% due 9/1/2028 put 8/31/2007 (School Facility Bridge Funding Project; Insured: FSA) | Aaa/AAA | 1,655,000 | 1,655,364 | |||||
South Orange County Public Financing Authority Special Tax Revenue Series C, 8.00% due 8/15/2008 (Foothill Area Project; Insured: FGIC) | Aaa/AAA | 1,500,000 | 1,620,420 |
18 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
COLORADO — 4.55% | ||||||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 2/1/2012 (Insured: FHA, MBIA) | NR/AAA | $ | 1,310,000 | $ | 1,392,936 | |||
Adams County Revenue Platte Valley Medical Center, 5.00% due 8/1/2012 (Insured: FHA, MBIA) | NR/AAA | 1,345,000 | 1,436,581 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 2/1/2013 (Insured: FHA, MBIA) | NR/AAA | 1,380,000 | 1,477,897 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 2/1/2015 (Insured: FHA, MBIA) | NR/AAA | 1,530,000 | 1,658,719 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 8/1/2015 (Insured: FHA, MBIA) | NR/AAA | 1,565,000 | 1,702,110 | |||||
Adams County School District 012 Series A, 4.375% due 12/15/2007 | Aa3/AA- | 1,000,000 | 1,010,240 | |||||
Central Platte Valley Metropolitan District Refunding Series A, 5.00% due 12/1/2031 put 12/1/2009 (LOC: US Bank) | NR/AA | 12,365,000 | 12,711,467 | |||||
Colorado Department of Transportation Revenue Anticipation Notes, 6.00% due 6/15/2008 (Insured:AMBAC) | Aaa/AAA | 1,500,000 | 1,561,410 | |||||
Colorado Educational & Cultural Facilities, 4.90% due 4/1/2008 (Nashville Public Radio Project) (ETM) | NR/BBB+ | 685,000 | 692,247 | |||||
Colorado HFA, 5.00% due 9/1/2007 (Catholic Health Initiatives Project) | Aa2/AA | 5,705,000 | 5,774,601 | |||||
Colorado HFA, 5.25% due 10/1/2026 pre-refunded 10/1/2008 (Childrens Hospital Project; Insured: MBIA) | Aaa/AAA | 565,000 | 571,396 | |||||
Denver Convention Center Hotel, 5.25% due 12/1/2014 (LOC: XLCA) | Aaa/AAA | 3,000,000 | 3,301,200 | |||||
Denver Convention Center Hotel, 5.25% due 12/1/2015 (LOC: XLCA) | Aaa/AAA | 5,000,000 | 5,533,100 | |||||
Denver Convention Center Senior Series A, 5.00% due 12/1/2011 (Insured: XLCA) (ETM) (2) | Aaa/AAA | 3,335,000 | 3,550,141 | |||||
Highlands Ranch Metropolitan District 2 GO, 6.50% due 6/15/2012 (Insured: FSA) (ETM) | Aaa/AAA | 525,000 | 602,695 | |||||
Highlands Ranch Metropolitan District 2 GO, 6.50% due 6/15/2012 (Insured: FSA) | Aaa/AAA | 475,000 | 544,212 | |||||
Highlands Ranch Metropolitan District 3 Refunding Series B, 5.25% due 12/1/2008 (Insured:ACA) | NR/A | 1,760,000 | 1,804,493 | |||||
Highlands Ranch Metropolitan District 3 Series A GO, 5.25% due 12/1/2008 (Insured:ACA) | NR/A | 1,520,000 | 1,558,425 | |||||
Pinery West Metropolitan District 3, 4.70% due 12/1/2021 put 12/1/2007 (LOC: Compass Bank) | NR/A | 1,040,000 | 1,047,634 | |||||
Plaza Metropolitan District 1 Revenue, 7.60% due 12/1/2016 (Public Improvement Fee/Tax Increment Project) | NR/NR | 6,000,000 | 6,628,560 | |||||
Southland Metropolitan District Number 1 Unlimited GO, 6.75% due 12/1/2016 | NR/NR | 1,000,000 | 1,102,740 | |||||
DELAWARE — 0.60% | ||||||||
Delaware State Economic Development Authority Revenue, 5.50% due 7/1/2025 put 7/1/2010 (Delmarva Power & Light Project) | Baa2/BBB- | 2,045,000 | 2,141,401 | |||||
Delaware State HFA Revenue, 6.25% due 10/1/2006 (ETM) | Aaa/AAA | 845,000 | 845,110 | |||||
Delaware State HFA Revenue Series A, 5.25% due 6/1/2011 (Beebe Medical Center Project) | Baa1/BBB+ | 1,275,000 | 1,344,232 | |||||
Delaware State HFA Revenue Series A, 5.25% due 5/1/2012 (Nanticoke Memorial Hospital Project; Insured: Radian) | NR/AA | 1,370,000 | 1,464,366 | |||||
Delaware State HFA Revenue Series A, 5.25% due 5/1/2013 (Nanticoke Memorial Hospital Project; Insured: Radian) | NR/AA | 1,445,000 | 1,540,789 | |||||
DISTRICT OF COLUMBIA — 2.13% | ||||||||
District of Columbia COP, 5.25% due 1/1/2013 (Insured:AMBAC) | Aaa/AAA | 5,950,000 | 6,439,744 | |||||
District of Columbia COP, 5.25% due 1/1/2015 (Insured: FGIC) | Aaa/AAA | 2,875,000 | 3,152,926 | |||||
District of Columbia COP, 5.25% due 1/1/2016 (Insured: FGIC) | Aaa/AAA | 4,125,000 | 4,547,194 | |||||
District of Columbia Hospital Revenue Refunding, 5.10% due 8/15/2008 | ||||||||
(Medlantic Healthcare Group A Project) (ETM) | Aaa/AAA | 1,500,000 | 1,540,710 | |||||
District of Columbia Hospital Revenue Refunding Series A, 5.70% due 8/15/2008 (Medlantic Healthcare Project) (ETM) | Aaa/AAA | 4,430,000 | 4,525,777 | |||||
District of Columbia Revenue, 6.00% due 1/1/2007 (American Assoc. for Advancement of Science Project; Insured:AMBAC) | Aaa/AAA | 500,000 | 503,025 | |||||
District of Columbia Tax Increment, 0% due 7/1/2009 (Mandarin Oriental Project; Insured: FSA) | Aaa/AAA | 2,000,000 | 1,800,500 | |||||
District of Columbia Tax Increment, 0% due 7/1/2011 (Mandarin Oriental Project; Insured: FSA) | Aaa/AAA | 1,990,000 | 1,654,526 | |||||
District of Columbia Tax Increment, 0% due 7/1/2012 (Mandarin Oriental Project; Insured: FSA) | Aaa/AAA | 1,480,000 | 1,179,649 | |||||
Washington DC Convention Center Authority Dedicated Tax Revenue, 5.00% due 10/1/2006 (Insured:AMBAC) | Aaa/AAA | 750,000 | 750,060 |
Certified Annual Report | 19 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
FLORIDA — 5.51% | ||||||||
Broward County Resource Recovery Revenue Refunding, 5.375% due 12/1/2009 (Wheelabrator South Project) | A3/AA | $ | 5,000,000 | $ | 5,206,700 | |||
Capital Projects Finance Authority Series F 1, 5.50% due 10/1/2012 (Student Housing Project; Insured: MBIA) | Aaa/AAA | 1,820,000 | 1,965,473 | |||||
Capital Projects Finance Authority Series F 1, 5.50% due 10/1/2015 (Insured: MBIA) | Aaa/AAA | 3,260,000 | 3,500,686 | |||||
Capital Trust Agency Multi Family Housing Revenue Series A, 5.15% due 11/1/2030 put 11/1/2010 (Shadow Run Project; Collateralized: FNMA) | Aaa/NR | 2,190,000 | 2,266,672 | |||||
Crossings at Fleming Island Community Development Refunding Series B, 5.45% due 5/1/2010 (Insured: MBIA) | Aaa/AAA | 3,045,000 | 3,149,657 | |||||
Dade County School District GO, 4.75% due 7/15/2010 (Insured: MBIA) | Aaa/AAA | 7,000,000 | 7,075,950 | |||||
Dade County Solid Waste Systems Special Obligation Revenue Refunding, 6.00% due 10/1/2007 (Insured:AMBAC) | Aaa/AAA | 7,000,000 | 7,167,230 | |||||
Escambia County HFA Revenue, 5.00% due 11/1/2028 pre-refunded 11/1/2010 (Charity Obligation Group Project) | Aaa/NR | 2,500,000 | 2,595,525 | |||||
Escambia County HFA Revenue Series C, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB+ | 2,755,000 | 2,827,787 | |||||
Flagler County School Board COP Series A, 5.00% due 8/1/2014 (Insured: FSA) | Aaa/AAA | 1,605,000 | 1,733,079 | |||||
Florida State Department of Children & Families COP South Florida Evaluation Treatment, 5.00% due 10/1/2015 | NR/AA+ | 925,000 | 1,001,645 | |||||
Hillsborough County Assessment Revenue, 5.00% due 3/1/2015 (Insured: FGIC) | Aaa/AAA | 5,000,000 | 5,398,900 | |||||
Hillsborough County Industrial Development Authority, 5.10% due 10/1/2013 (Tampa Electric Co. Project) | Baa2/BBB- | 6,410,000 | 6,633,581 | |||||
Jacksonville Electric St. John’s River Park Systems Revenue Issue-2, 17th Series, 5.25% due 10/1/2012 | Aa2/AA- | 5,000,000 | 5,360,600 | |||||
Miami Dade County School Board COP Series B, 5.50% due 5/1/2030 put 5/1/2011 (Insured: MBIA) | Aaa/AAA | 1,010,000 | 1,083,407 | |||||
Miami Dade County Special Housing Revenue Refunding, 5.80% due 10/1/2012 (HUD Section 8) | Baa3/NR | 3,060,000 | 3,070,740 | |||||
Orange County HFA, 5.80% due 11/15/2009 (Adventist Health System Project) (ETM) | A2/NR | 1,395,000 | 1,484,447 | |||||
Orange County HFA Series A, 6.25% due 10/1/2007 (Orlando Regional Hospital Project; Insured: MBIA) | Aaa/AAA | 925,000 | 948,162 | |||||
Palm Beach County IDRB Series 1996, 6.00% due 12/1/2006 (Lourdes-Noreen McKeen Residence Project) (ETM) | NR/NR | 485,000 | 486,872 | |||||
Pelican Marsh Community Development District Refunding Series A, 5.00% due 5/1/2011 (Insured: Radian) | NR/NR | 2,580,000 | 2,586,476 | |||||
St. John’s County Industrial Development Authority Series A, 5.50% due 8/1/2014 (Presbyterian Retirement Project) | NR/NR | 1,755,000 | 1,872,129 | |||||
GEORGIA — 0.35% | ||||||||
Georgia Municipal Association Inc. COP, 5.00% due 12/1/2006 (Atlanta City Court Project; Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,002,400 | |||||
Monroe County Development Authority PCR, 6.75% due 1/1/2010 (Oglethorpe Power Project; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,190,480 | |||||
Monroe County Development Authority PCR, 6.80% due 1/1/2012 (Oglethorpe Power Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,147,480 | |||||
HAWAII — 0.17% | ||||||||
Hawaii State Department of Budget & Finance Special Purpose Hawaiian Electric Co., 4.95% due 4/1/2012 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,111,760 | |||||
IDAHO — 0.25% | ||||||||
Twin Falls Urban Renewal Agency Refunding Series A, 4.95% due 8/1/2014 | NR/NR | 1,640,000 | 1,628,339 | |||||
Twin Falls Urban Renewal Agency Refunding Series A, 5.15% due 8/1/2017 | NR/NR | 1,455,000 | 1,445,601 | |||||
ILLINOIS — 10.83% | ||||||||
Bolingbrook Series B, 0% due 1/1/2016 (Insured: MBIA) | Aaa/NR | 1,500,000 | 1,022,085 |
20 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Bolingbrook Series B, 0% due 1/1/2017 (Insured: MBIA) | Aaa/NR | $ | 2,000,000 | $ | 1,290,380 | |||
Champaign County Community School District No. 116 Series C, 0% due 1/1/2009 (ETM) | Aaa/AAA | 1,205,000 | 1,109,853 | |||||
Champaign County Community School District No. 116 Unrefunded Balance Series C, 0% due 1/1/2009 (Insured: FGIC) | Aaa/AAA | 2,140,000 | 1,967,109 | |||||
Chicago Board of Education GO, 6.00% due 12/1/2009 (Insured: FGIC) | Aaa/AAA | 2,000,000 | 2,143,800 | |||||
Chicago Board of Education School Reform, 6.25% due 12/1/2012 (Insured: MBIA) | Aaa/AAA | 750,000 | 854,715 | |||||
Chicago Capital Appreciation, 0% due 1/1/2016 (City Colleges project; Insured: FGIC) | Aaa/AAA | 2,670,000 | 1,830,552 | |||||
Chicago Housing Authority Capital Program Revenue, 5.00% due 7/1/2015 (Insured: FSA) | Aaa/AAA | 8,460,000 | 9,150,675 | |||||
Chicago Housing Authority Capital Program Revenue, 5.00% due 7/1/2016 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,170,220 | |||||
Chicago Housing Authority Capital Program Revenue, 5.00% due 7/1/2007 | Aa3/NR | 1,000,000 | 1,011,040 | |||||
Chicago Housing Authority Capital Program Revenue, 5.25% due 7/1/2010 | Aa3/NR | 2,300,000 | 2,432,066 | |||||
Chicago Midway Airport Revenue Series A, 5.40% due 1/1/2009 (Insured: MBIA) | Aaa/AAA | 1,340,000 | 1,358,385 | |||||
Chicago Midway Airport Revenue Series C, 5.50% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | 1,180,000 | 1,292,749 | |||||
Chicago O’Hare International Airport Revenue, 5.375% due 1/1/2007 (Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,004,660 | |||||
Chicago O’Hare International Airport Revenue, 5.00% due 1/1/2012 (Insured: MBIA) | Aaa/AAA | 1,105,000 | 1,174,604 | |||||
Chicago O’Hare International Airport Revenue 2nd Lien Series C-1, 5.00% due 1/1/2010 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,041,650 | |||||
Chicago O’Hare International Airport Revenue Passenger Facility Series A, 5.625% due 1/1/2014 (Insured:AMBAC) | Aaa/AAA | 3,065,000 | 3,130,591 | |||||
Chicago Park District Parking Facility Revenue, 5.75% due 1/1/2010 (ETM) | Baa1/A | 1,000,000 | 1,065,750 | |||||
Chicago Refunding Series A, 5.375% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,213,780 | |||||
Chicago Refunding Series A-2, 6.125% due 1/1/2012 (Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,116,310 | |||||
Chicago Water Revenue, 6.50% due 11/1/2011 (Insured: FGIC) | Aaa/AAA | 1,810,000 | 2,046,368 | |||||
Cook County Capital Improvement, 5.50% due 11/15/2008 pre-refunded 11/15/2006 | Aaa/AAA | 995,000 | 1,007,318 | |||||
Cook County Community Consolidated School District 146 GO, 9.00% due 12/1/2016 (Tinley Park Project; Insured: FGIC) | Aaa/NR | 2,500,000 | 3,516,100 | |||||
Cook County Community Consolidated School District 15 GO, 0% due 12/1/2010 (Insured: FSA) | Aaa/NR | 2,000,000 | 1,714,220 | |||||
Cook County Community School District 97 Series B GO, 9.00% due 12/1/2013 (Insured: FGIC) | Aaa/NR | 2,250,000 | 2,970,495 | |||||
Cook County Community School District 99 GO, 9.00% due 12/1/2012 (Insured: FGIC) | Aaa/NR | 1,000,000 | 1,279,300 | |||||
Cook County Refunding Series A, 6.25% due 11/15/2013 (Insured: MBIA) | Aaa/AAA | 3,995,000 | 4,615,783 | |||||
Du Page County Forest Preservation District, 0% due 11/1/2009 (Partial ETM) | Aaa/AAA | 5,000,000 | 4,460,600 | |||||
Glenview Multi Family Revenue Refunding, 5.20% due 12/1/2027 put 12/1/2007 (Collateralized: FNMA) | NR/AAA | 1,550,000 | 1,567,143 | |||||
Hoffman Estates Tax Increment Revenue Junior Lien, 0% due 5/15/2007 | Ba1/NR | 1,500,000 | 1,457,460 | |||||
Illinois DFA Multi Family Housing Revenue Refunding Series A, 5.55% due 7/20/2008 (Collateralized: GNMA) | NR/AAA | 730,000 | 741,381 | |||||
Illinois DFA PCR Refunding, 5.70% due 1/15/2009 (Commonwealth Edison Co. Project; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,133,800 | |||||
Illinois DFA Revenue, 6.00% due 11/15/2009 (Adventist Health Project; Insured: MBIA) | Aaa/AAA | 3,635,000 | 3,861,933 | |||||
Illinois DFA Revenue, 6.00% due 11/15/2010 (Adventist Health Project; Insured: MBIA) | Aaa/AAA | 3,860,000 | 4,168,067 | |||||
Illinois DFA Revenue Provena Health Series A, 5.50% due 5/15/2011 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,035,790 | |||||
Illinois DFA Revenue Refunding Community Rehab Providers Series A, 6.00% due 7/1/2015 | NR/BBB | 4,500,000 | 4,592,205 | |||||
Illinois DFA Revenue Series A, 5.75% due 5/15/2014 (Provena Health Project; Insured: MBIA) | Aaa/AAA | 6,035,000 | 6,265,778 | |||||
Illinois HFA Revenue, 6.00% due 7/1/2009 (Insured: MBIA) | Aaa/AAA | 1,275,000 | 1,351,411 | |||||
Illinois HFA Revenue, 5.50% due 11/15/2007 (OSF Healthcare System Project) | A2/A | 915,000 | 930,857 | |||||
Illinois HFA Revenue, 6.50% due 2/15/2008 (Iowa Health System Project) | A1/NR | 1,290,000 | 1,332,480 | |||||
Illinois HFA Revenue, 6.50% due 2/15/2009 (Iowa Health System Project) | A1/NR | 1,375,000 | 1,448,480 | |||||
Illinois HFA Revenue, 6.50% due 2/15/2010 (Iowa Health System Project) (ETM) | A1/NR | 1,465,000 | 1,574,670 | |||||
Illinois HFA Revenue, 6.00% due 2/15/2011 (Iowa Health System Project; Insured:AMBAC) (ETM) | Aaa/AAA | 1,560,000 | 1,694,425 | |||||
Illinois HFA Revenue Refunding, 5.00% due 8/15/2008 (University of Chicago Hospital & Health Project; Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,539,255 | |||||
Illinois HFA Revenue Refunding, 5.50% due 11/15/2011 (Methodist Medical Center Project; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,130,230 | |||||
Illinois Hospital District, 5.50% due 1/1/2010 (Insured: FGIC) | Aaa/AAA | 1,040,000 | 1,097,834 | |||||
Illinois State COP Central Management Department, 5.00% due 7/1/2007 (Insured:AMBAC) | Aaa/AAA | 500,000 | 505,370 |
Certified Annual Report | 21 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Lake County Community High School District 117 Series B, 0% due 12/1/2006 (Insured: FGIC) | Aaa/NR | $ | 2,000,000 | $ | 1,988,020 | |||
Lake County Community High School District 117 Series B, 0% due 12/1/2011 (Insured: FGIC) | Aaa/NR | 3,235,000 | 2,658,620 | |||||
McHenry & Kane Counties Community Consolidated School District 158, 0% due 1/1/2010 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 885,230 | |||||
McHenry & Kane Counties Community Consolidated School District 158, 0% due 1/1/2012 (Insured: FGIC) | Aaa/AAA | 2,200,000 | 1,801,382 | |||||
Mclean & Woodford Counties School District GO, 7.375% due 12/1/2010 (Insured: FSA) | Aaa/NR | 1,500,000 | 1,712,880 | |||||
Metropolitan Pier & Exposition Authority Dedicated State Tax Refunding, 0% due 6/15/2013 (McCormick Project; Insured: MBIA) | Aaa/AAA | 1,045,000 | 807,022 | |||||
Metropolitan Pier & Exposition Authority Dedicated State Tax Revenue Series A-2002, 6.00% due 6/15/2007 (McCormick Project; Insured:AMBAC) | Aaa/AAA | 3,750,000 | 3,813,975 | |||||
Naperville City, Du Page & Will Counties Economic Development Revenue, 6.10% due 5/1/2008 (Hospital & Health System Association Project; LOC: Bank One N.A.) | NR/AA- | 1,305,000 | 1,320,086 | |||||
Peoria Public Building Commission School District Facilities Revenue, 0% due 12/1/2007 (Insured: FGIC) | Aaa/NR | 1,100,000 | 1,054,416 | |||||
State of Illinois Waubonsee Community College District No. 516 GO, 0% due 12/15/2013 (Insured: FGIC) | Aaa/AAA | 3,000,000 | 2,223,120 | |||||
University of Illinois COP Series A, 5.00% due 8/15/2019 pre-refunded 8/15/2011 (Utility Infrastructure Project) | Aaa/AAA | 5,235,000 | 5,568,417 | |||||
University of Illinois Revenues, 0% due 10/1/2006 (Insured: MBIA) | Aaa/AAA | 6,300,000 | 6,298,803 | |||||
INDIANA — 7.18% | ||||||||
Allen County Economic Development Revenue, 5.30% due 12/30/2006 (Indiana Institute of Technology Project) | NR/NR | 690,000 | 692,222 | |||||
Allen County Economic Development Revenue, 5.60% due 12/30/2009 (Indiana Institute of Technology Project) | NR/NR | 1,110,000 | 1,153,678 | |||||
Allen County Economic Development Revenue, 5.00% due 12/30/2012 (Indiana Institute of Technology Project) | NR/NR | 1,370,000 | 1,416,690 | |||||
Allen County Jail Building Corp. First Mortgage, 5.75% due 10/1/2010 (ETM) | Aa3/NR | 1,115,000 | 1,205,839 | |||||
Allen County Jail Building Corp. First Mortgage GO, 5.00% due 10/1/2011 (Insured: XLCA) | Aaa/AAA | 2,390,000 | 2,528,548 | |||||
Allen County Jail Building Corp. First Mortgage GO, 5.00% due 10/1/2012 (Insured: XLCA) | Aaa/AAA | 1,275,000 | 1,358,232 | |||||
Allen County Jail Building Corp. First Mortgage GO, 5.00% due 10/1/2014 (Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,076,800 | |||||
Allen County Jail Building Corp. First Mortgage GO, 5.00% due 10/1/2015 (Insured: XLCA) | Aaa/AAA | 1,480,000 | 1,599,717 | |||||
Allen County Jail Building Corp. First Mortgage GO, 5.00% due 10/1/2016 (Insured: XLCA) | Aaa/AAA | 1,520,000 | 1,642,330 | |||||
Allen County Redevelopment District Tax Series A, 5.00% due 11/15/2016 | A3/NR | 1,000,000 | 1,042,740 | |||||
Ball State University Revenues Student Fee Series K, 5.75% due 7/1/2012 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,099,040 | |||||
Boone County Hospital Association Lease Revenue, 5.00% due 1/15/2007 (ETM) | Aaa/AAA | 1,085,000 | 1,089,600 | |||||
Boonville Junior High School Building Corp. Revenue, 0% due 7/1/2010 (State Aid Withholding) | NR/A | 850,000 | 722,891 | |||||
Boonville Junior High School Building Corp. Revenue, 0% due 1/1/2011 (State Aid Withholding) | NR/A | 850,000 | 704,820 | |||||
Boonville Junior High School Building Corp. Revenue, 0% due 7/1/2011 (State Aid Withholding) | NR/A | 950,000 | 770,593 | |||||
Brownsburg 1999 School Building, 5.00% due 8/1/2011 (Insured: FSA) | NR/AAA | 1,835,000 | 1,948,660 | |||||
Brownsburg 1999 School Building, 5.25% due 2/1/2012 (Insured: FSA) | NR/AAA | 1,880,000 | 2,025,380 | |||||
Brownsburg 1999 School Building, 5.25% due 8/1/2012 (Insured: FSA) | NR/AAA | 1,755,000 | 1,901,191 | |||||
Carmel Redevelopment Authority Lease Performing Arts, 0% due 2/1/2015 | Aa2/AA | 1,575,000 | 1,119,856 | |||||
Center Grove 2000 Building First Mortgage, 5.00% due 7/15/2009 (Insured:AMBAC) (ETM) | Aaa/AAA | 1,175,000 | 1,220,202 | |||||
Center Grove 2000 Building First Mortgage, 5.00% due 7/15/2010 (Insured:AMBAC) (ETM) | Aaa/AAA | 1,135,000 | 1,193,214 | |||||
Dekalb County Redevelopment Authority Lease Rental Revenue Refunding, 5.00% due 1/15/2011 (Mini Mill Local Public Improvement Project; Insured: XLCA) | Aaa/AAA | 1,015,000 | 1,064,796 | |||||
Dekalb County Redevelopment Authority Lease Rental Revenue Refunding, 5.00% due 1/15/2012 (Mini Mill Local Public Improvement Project; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,056,460 | |||||
Dekalb County Redevelopment Authority Lease Rental Revenue Refunding, 5.25% due 1/15/2013 (Mini Mill Local Public Improvement Project; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,074,540 | |||||
Dekalb County Redevelopment Authority Lease Rental Revenue Refunding, 5.25% due 1/15/2014 (Mini Mill Local Public Improvement Project; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,072,010 |
22 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Eagle Union Middle School Building Corp., 5.50% due 7/15/2009 (ETM) | Aaa/AAA | $ | 910,000 | $ | 957,011 | |||
Elberfeld J. H. Castle School Building Corp. Indiana First Mortgage Refunding, 0% due 7/5/2008 (Insured: MBIA) | NR/AAA | 1,860,000 | 1,744,531 | |||||
Evansville Vanderburgh Refunding, 5.00% due 7/15/2014 (Insured: AMBAC) | NR/AAA | 1,000,000 | 1,080,170 | |||||
Evansville Vanderburgh Refunding, 5.00% due 7/15/2015 (Insured: AMBAC) | NR/AAA | 1,000,000 | 1,084,970 | |||||
Goshen Multi-School Building Corp. First Mortgage, 5.20% due 7/15/2007 (Insured: MBIA) (ETM) | Aaa/AAA | 965,000 | 973,116 | |||||
Hammond Multi-School Building Corp. First Mortgage Refunding Bond Series 1997, 6.00% due 7/15/2008 (Lake County Project; State Aid Withholding) | Aaa/A | 1,850,000 | 1,897,452 | |||||
Huntington Economic Development Revenue, 6.00% due 11/1/2006 (United Methodist Membership Project) | NR/NR | 105,000 | 105,139 | |||||
Huntington Economic Development Revenue, 6.15% due 11/1/2008 (United Methodist Membership Project) | NR/NR | 700,000 | 721,511 | |||||
Huntington Economic Development Revenue, 6.20% due 11/1/2010 (United Methodist Membership Project) | NR/NR | 790,000 | 817,144 | |||||
Indiana Health Facility Financing Authority Hospital Revenue Series D, 5.00% due 11/1/2026 pre-refunded 11/1/2007 | Aaa/NR | 1,600,000 | 1,623,328 | |||||
Indiana State Educational Facilities Authority Revenue, 5.75% due 10/1/2009 (University of Indianapolis Project) | NR/A- | 670,000 | 703,085 | |||||
Indiana University Revenues Refunding, 0% due 8/1/2007 (Insured: AMBAC) | Aaa/AAA | 2,500,000 | 2,426,425 | |||||
Indianapolis Airport Authority Revenue Refunding Series A, 5.35% due 7/1/2007 (Insured: FGIC) | Aaa/AAA | 1,100,000 | 1,114,399 | |||||
Indianapolis Local Public Improvement Bond Series D, 5.00% due 7/1/2016 (Insured: FGIC) | Aaa/AAA | 1,030,000 | 1,116,479 | |||||
Indianapolis Local Public Improvement Bond Series F, 5.00% due 1/1/2015 (Waterworks Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,084,290 | |||||
Indianapolis Local Public Improvement Bond Series F, 5.00% due 7/1/2015 (Waterworks Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,087,830 | |||||
Indianapolis Resource Recovery Revenue Refunding, 6.75% due 12/1/2006 (Ogden Martin Systems, Inc. Project; Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,009,840 | |||||
Knox Middle School Building Corp. First Mortgage, 6.00% due 7/15/2008 (Insured: FGIC) | Aaa/AAA | 855,000 | 890,568 | |||||
Knox Middle School Building Corp. First Mortgage, 6.00% due 7/15/2009 (Insured: FGIC) | Aaa/AAA | 455,000 | 483,756 | |||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2014 (Insured: FGIC) | Aaa/AAA | 1,200,000 | 1,297,044 | |||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2015 (Insured: FGIC) | Aaa/AAA | 1,250,000 | 1,357,187 | |||||
Monroe County Community School Building Corp. Revenue Refunding, 5.00% due 1/15/2007 (Insured: AMBAC) | Aaa/AAA | 315,000 | 316,298 | |||||
Mount Vernon of Hancock County Refunding First Mortgage, 5.00% due 7/15/2013 (Insured: MBIA) | Aaa/AAA | 1,055,000 | 1,135,887 | |||||
Mount Vernon of Hancock County Refunding First Mortgage, 5.00% due 7/15/2014 (Insured: MBIA) | Aaa/AAA | 1,135,000 | 1,227,593 | |||||
Mount Vernon of Hancock County Refunding First Mortgage, 5.00% due 7/15/2015 (Insured: MBIA) | Aaa/AAA | 1,140,000 | 1,238,644 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2016 (146th Street Extension A Project) | NR/A+ | 1,660,000 | 1,760,546 | |||||
Northwestern School Building Corp., 5.00% due 7/15/2011 (State Aid Withholding) | NR/AAp | 1,240,000 | 1,312,280 | |||||
Perry Township Multi School Building Refunding, 5.00% due 1/10/2013 (Insured: FSA) | Aaa/NR | 1,225,000 | 1,309,905 | |||||
Perry Township Multi School Building Refunding, 5.00% due 7/10/2013 (Insured: FSA) | Aaa/NR | 2,025,000 | 2,173,817 | |||||
Perry Township Multi School Building Refunding, 5.00% due 7/10/2014 (Insured: FSA) | Aaa/NR | 2,130,000 | 2,297,674 | |||||
Peru Community School Corp. Refunding First Mortgage, 0% due 7/1/2010 (State Aid Withholding) | NR/A | 835,000 | 710,134 | |||||
Plainfield Community High School Building Corp. First Mortgage, 5.00% due 1/15/2015 (Insured: FGIC) | Aaa/AAA | 1,445,000 | 1,565,051 | |||||
Rockport PCR Series C, 2.625% due 4/1/2025 put 10/1/2006 (Indiana Michigan Power Co. Project) | Baa2/BBB | 4,030,000 | 4,030,000 | |||||
Warren Township Vision 2005, 5.00% due 7/10/2015 (Insured: FGIC) | Aaa/AAA | 2,095,000 | 2,267,418 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2010 (State Aid Withholding) (ETM) | NR/AA | 995,000 | 1,063,546 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2011 (State Aid Withholding) (ETM) | NR/AA | 1,095,000 | 1,187,714 | |||||
West Clark 2000 School Building Corp., 5.25% due 1/15/2013 (Insured: MBIA) | Aaa/AAA | 1,235,000 | 1,341,469 | |||||
West Clark 2000 School Building Corp., 5.25% due 7/15/2013 (Insured: MBIA) | Aaa/AAA | 1,305,000 | 1,424,486 | |||||
West Clark 2000 School Building Corp., 5.25% due 1/15/2014 (Insured: MBIA) | Aaa/AAA | 1,335,000 | 1,460,623 | |||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2011 (State Aid Withholding) | Aaa/AAA | 2,080,000 | 2,273,086 | |||||
Westfield Elementary School Building Corp. First Mortgage Series 1997, 6.80% due 7/15/2007 (ETM) | Aaa/AAA | 765,000 | 778,388 | |||||
Whitko Middle School Building Corp. Refunding, 5.35% due 7/15/2007 (Insured: FSA) | Aaa/AAA | 665,000 | 671,451 |
Certified Annual Report | 23 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
IOWA — 2.62% | ||||||||
Ankeny Community School District Sales & Services Tax Revenue, 5.00% due 7/1/2010 | NR/AA- | $ | 2,900,000 | $ | 3,016,435 | |||
Des Moines Limited Obligation Revenue, 4.00% due 12/1/2015 put 12/1/2006 (Des Moines Parking Associates Project; LOC:Wells Fargo Bank) | NR/NR | 3,180,000 | 3,177,711 | |||||
Dubuque Community School District Series B, 5.00% due 1/1/2013 | NR/NR | 1,600,000 | 1,622,832 | |||||
Dubuque Community School District Series B, 5.00% due 7/1/2013 | NR/NR | 1,640,000 | 1,663,124 | |||||
Iowa Finance Authority Commercial Development Revenue Refunding, 5.75% due 4/1/2014 put 4/1/2010 (Governor Square Project; Insured:AXA) | NR/AA- | 6,650,000 | 6,835,801 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.50% due 2/15/2007 (Iowa Health Services Project) | Aa3/NR | 435,000 | 439,076 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.50% due 2/15/2009 (Iowa Health Services Project) | Aa3/NR | 1,825,000 | 1,922,528 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.50% due 2/15/2010 (Iowa Health Services Project) | Aa3/NR | 1,955,000 | 2,101,351 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.00% due 2/15/2011 pre-refunded 2/15/2010 (Iowa Health Services Project; Insured:AMBAC) | Aaa/AAA | 3,145,000 | 3,410,784 | |||||
Iowa Finance Authority Revenue Trinity Health Series B, 5.75% due 12/1/2007 | Aa3/AA- | 1,430,000 | 1,462,132 | |||||
Iowa Finance Authority Revenue Trinity Health Series B, 5.75% due 12/1/2010 | Aa3/AA- | 3,295,000 | 3,498,565 | |||||
Tobacco Settlement Authority, 5.30% due 6/1/2025 pre-refunded 6/1/2011 | NR/AAA | 2,695,000 | 2,884,243 | |||||
KENTUCKY — 1.33% | ||||||||
Kentucky Economic Development Finance Authority Series C, 5.35% due 10/1/2009 (Norton Healthcare Project; Insured: MBIA) | Aaa/AAA | 7,400,000 | 7,752,906 | |||||
Kentucky Economic Development Finance Authority Series C, 5.40% due 10/1/2010 (Norton Healthcare Project; Insured: MBIA) | Aaa/AAA | 7,830,000 | 8,325,796 | |||||
Louisville Water Revenue Refunding, 6.00% due 11/15/2006 (ETM) | Aaa/AAA | 150,000 | 150,429 | |||||
LOUISIANA — 3.25% | ||||||||
England District, 5.00% due 8/15/2010 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,047,550 | |||||
Jefferson Sales Tax District Special Sales Tax Revenue, 5.25% due 12/1/2006 (Insured:AMBAC) | Aaa/AAA | 1,440,000 | 1,443,845 | |||||
Jefferson Sales Tax District Special Sales Tax Revenue, 5.25% due 12/1/2007 (Insured:AMBAC) | Aaa/AAA | 1,515,000 | 1,542,664 | |||||
Louisiana Environmental Facilities & Community Development Authority Multi Family Revenue Series A, 5.00% due 9/1/2012 (Bellemont Apartments Project) | Baa1/NR | 1,000,000 | 998,950 | |||||
Louisiana Public Facilities Authority Hospital Revenue Series A, 5.50% due 7/1/2010 (Franciscan Missionaries Project; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,059,990 | |||||
Louisiana Public Facilities Authority Revenue, 5.50% due 10/1/2006 (Loyola University Project) | A1/A+ | 1,280,000 | 1,280,064 | |||||
Louisiana Public Facilities Authority Revenue, 5.75% due 10/1/2008 (Loyola University Project) | A1/A+ | 1,000,000 | 1,022,560 | |||||
Louisiana Public Facilities Authority Revenue, 5.375% due 12/1/2008 (Wynhoven Health Care Center Project; Guaranty:Archdiocese of New Orleans) | NR/NR | 1,425,000 | 1,432,567 | |||||
Louisiana State Citizens Property Insurance Corp., 5.00% due 6/1/2015 (Insured:AMBAC) | Aaa/AAA | 5,000,000 | 5,413,400 | |||||
Louisiana State Correctional Facilities Corp. Lease Refunding, 5.00% due 12/15/2008 (Insured: Radian) | NR/AA | 7,135,000 | 7,309,950 | |||||
Louisiana State Correctional Facilities Corp. Lease Revenue Refunding, 5.00% due 12/15/2007 (Insured: Radian) | NR/AA | 3,760,000 | 3,811,813 | |||||
Louisiana State Office Facilities Corp., 5.50% due 5/1/2013 (Capitol Complex Project; Insured:AMBAC) | Aaa/AAA | 1,150,000 | 1,238,228 | |||||
Louisiana State Offshore Terminal Authority Deepwater Port Revenue, 4.375% due 10/1/2020 put 6/1/2007 (Loop LLC Project) | A3/A | 2,350,000 | 2,356,768 | |||||
Louisiana State Series A, 5.50% due 11/15/2008 (Insured: FGIC) | Aaa/AAA | 1,980,000 | 2,057,953 | |||||
Monroe Sales Tax Increment Garrett Road Economic Development Area, 5.00% due 3/1/2017 (Insured: Radian) | Aa3/AA | 1,505,000 | 1,594,773 | |||||
New Orleans Exhibit Hall Authority Series A, 5.00% due 7/15/2009 (Ernest N. Morial Convention Center Project; Insured:AMBAC) | Aaa/AAA | 2,000,000 | 2,065,100 | |||||
New Orleans Parish School Board, 0% due 2/1/2008 (ETM) | Aaa/AAA | 3,480,000 | 3,115,783 | |||||
St. Tammany Parish Sales Tax, 5.00% due 6/1/2010 (Insured: CIFG) | NR/AAA | 1,000,000 | 1,047,360 |
24 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
MARYLAND — 0.33% | ||||||||
Howard County Retirement Community Revenue Series A, 7.25% due 5/15/2015 pre-refunded 5/15/2010 | NR/AAA | $ | 1,000,000 | $ | 1,149,950 | |||
Howard County Retirement Community Revenue Series A, 7.875% due 5/15/2021 pre-refunded 5/15/2010 | NR/AAA | 2,500,000 | 2,925,700 | |||||
MASSACHUSETTS — 3.47% | ||||||||
Massachusetts Development Finance Agency Resource Recovery Revenue Series A, 5.50% due 1/1/2011 (Seamass Partnership; Insured: MBIA) | Aaa/AAA | 3,470,000 | 3,712,241 | |||||
Massachusetts Development Finance Agency Resource Recovery Revenue Series B, 5.625% due 1/1/2012 (Seamass Partnership; Insured: MBIA) | Aaa/AAA | 1,240,000 | 1,348,661 | |||||
Massachusetts State Construction Loan Series C, 5.50% due 11/1/2013 (Insured: FGIC) | Aaa/AAA | 685,000 | 761,556 | |||||
Massachusetts State Construction Loan Series C, 5.00% due 9/1/2015 | Aa2/AA | 10,000,000 | 10,890,300 | |||||
Massachusetts State Construction Loan Series D, 6.00% due 11/1/2013 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,141,360 | |||||
Massachusetts State Health & Educational Berkshire Health Systems Series F, 5.00% due 10/1/2011 (Insured:Assured Guaranty) | NR/AAA | 2,345,000 | 2,484,223 | |||||
Massachusetts State Health & Educational Berkshire Health Systems Series F, 5.00% due 10/1/2012 (Insured:Assured Guaranty) | NR/AAA | 2,330,000 | 2,485,970 | |||||
Massachusetts State Health & Educational Berkshire Health Systems Series F, 5.00% due 10/1/2013 (Insured:Assured Guaranty) | NR/AAA | 3,215,000 | 3,450,338 | |||||
Massachusetts State Health & Educational Facilities Authority Revenue Series H, 5.375% due 5/15/2012 (New England Medical Center Hospital Project; Insured: FGIC) | Aaa/AAA | 3,415,000 | 3,707,221 | |||||
Massachusetts State Industrial Finance Agency, 5.90% due 7/1/2027 pre-refunded 7/1/2007 (Dana Hall School Project) | NR/NR | 1,220,000 | 1,264,725 | |||||
Massachusetts State Industrial Finance Agency Biomedical A, 0% due 8/1/2010 | Aa2/AA- | 10,000,000 | 8,651,200 | |||||
Massachusetts State Refunding GO Series A, 6.00% due 11/1/2008 | Aa2/AA | 1,000,000 | 1,049,080 | |||||
Massachusetts State Refunding GO Series A, 5.50% due 1/1/2010 | Aa2/AA | 1,500,000 | 1,588,620 | |||||
MICHIGAN — 2.67% | ||||||||
Dearborn Economic Development Corp. Oakwood Obligation Group Series A, 5.75% due 11/15/2015 (Insured: FGIC) | Aaa/AAA | 2,450,000 | 2,496,427 | |||||
Detroit Convention Facility, 5.25% due 9/30/2007 | NR/A | 1,000,000 | 1,014,230 | |||||
Detroit Series A, 6.00% due 4/1/2007 (ETM) | Aaa/AAA | 1,405,000 | 1,422,520 | |||||
Dickinson County Healthcare Systems Hospital Revenue Refunding, 5.50% due 11/1/2013 (Insured:ACA) | NR/A | 2,500,000 | 2,624,975 | |||||
Gull Lake Community School District GO, 0% due 5/1/2013 (Insured: FGIC) | Aaa/AAA | 3,000,000 | 2,158,200 | |||||
Michigan HFA Revenue, 5.375% due 7/1/2012 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,022,400 | |||||
Michigan HFA Revenue Series A, 5.375% due 11/15/2033 put 11/15/2007 (Ascension Health Project) | Aa2/AA | 10,000,000 | 10,185,400 | |||||
Michigan State COP Series A, 5.00% due 9/1/2031 put 9/1/2011 (Insured: MBIA) | Aaa/AAA | 6,000,000 | 6,326,640 | |||||
Michigan State Strategic Fund Refunding Detroit Educational, 4.85% due 9/1/2030 put 9/1/2011 (Insured:AMBAC) | Aaa/NR | 2,075,000 | 2,166,508 | |||||
Oakland County Economic Development Corp. Limited, 5.50% due 6/1/2014 pre-refunded 6/1/2007 (Lutheran Social Services; LOC: First America Bank) | Aa3/NR | 1,000,000 | 1,032,800 | |||||
Summit Academy North Michigan School District, 8.75% due 7/1/2030 pre-refunded 7/1/2010 | NR/NR | 1,100,000 | 1,289,475 | |||||
MINNESOTA — 0.22% | ||||||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2012 (Healthpartners Obligation Group Project) | Baa1/BBB+ | 1,000,000 | 1,063,330 | |||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2013 (Healthpartners Obligation Group Project) | Baa1/BBB+ | 1,500,000 | 1,602,510 |
Certified Annual Report | 25 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
MISSISSIPPI — 0.67% | ||||||||
De Soto County School District Trust Certificates, 5.00% due 12/1/2015 (Insured: MBIA) | Aaa/NR | $ | 1,000,000 | $ | 1,035,790 | |||
Gautier Utility District Systems Revenue Refunding, 5.50% due 3/1/2012 (Insured: FGIC) | Aaa/NR | 1,020,000 | 1,108,220 | |||||
Mississippi Hospital Equipment & Facilities Authority Revenue Refunding, 6.00% due 1/1/2015 (Forrest County General Hospital Project; Insured: FSA) | Aaa/NR | 1,365,000 | 1,484,519 | |||||
Mississippi Hospital Equipment & Facilities Baptist Memorial Health B2, 3.50% due 9/1/2022 put 10/1/2006 | NR/NR | 3,500,000 | 3,499,895 | |||||
Mississippi State GO, 6.20% due 2/1/2008 (ETM) | Aaa/AAA | 985,000 | 1,015,525 | |||||
MISSOURI — 0.40% | ||||||||
Missouri Development Finance Board Healthcare Facilities Revenue Series A, 4.80% due 11/1/2012 (Lutheran Home Aged Project; LOC: Commerce Bank) | Aa3/NR | 1,275,000 | 1,300,130 | |||||
Missouri State Health & Educational Facilities Authority Revenue Series A, 5.00% due 6/1/2011 | NR/AA- | 1,000,000 | 1,052,280 | |||||
St. Louis County Refunding, 5.00% due 8/15/2007 (Convention & Sports Facility Project B 1; Insured: AMBAC) | Aaa/AAA | 2,495,000 | 2,526,437 | |||||
MONTANA — 1.29% | ||||||||
Forsyth PCR Refunding, 5.00% due 10/1/2032 put 12/30/2008 (Insured: AMBAC) | Aaa/AAA | 11,440,000 | 11,735,495 | |||||
Forsyth PCR Refunding, 5.20% due 5/1/2033 put 5/1/2009 (Portland General Project) | Baa1/BBB+ | 4,000,000 | 4,109,560 | |||||
NEBRASKA — 0.71% | ||||||||
Madison County Hospital Authority Revenue 1, 5.25% due 7/1/2010 (Faith Regional Health Services Project; Insured: Radian) | NR/AA | 1,455,000 | 1,529,671 | |||||
Madison County Hospital Authority Revenue 1, 5.50% due 7/1/2012 (Faith Regional Health Services Project; Insured: Radian) | NR/AA | 1,625,000 | 1,749,767 | |||||
Omaha Public Power District Electric Revenue Refunding Systems B, 5.00% due 2/1/2013 | Aa2/AA | 5,000,000 | 5,353,550 | |||||
NEVADA — 1.49% | ||||||||
Clark County District 121 A Refunding, 5.00% due 12/1/2015 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,158,880 | |||||
Clark County School District Series D GO, 5.00% due 6/15/2015 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,075,080 | |||||
Humboldt County PCR Refunding, 6.55% due 10/1/2013 (Sierra Pacific Project; Insured: AMBAC) | Aaa/AAA | 5,000,000 | 5,091,050 | |||||
Las Vegas Special Refunding Local Improvement District 707 Series A, 5.125% due 6/1/2011 (Insured: FSA) | Aaa/AAA | 1,670,000 | 1,740,691 | |||||
Nevada Housing Division Multi Family Certificate A, 4.80% due 4/1/2008 (Collateralized: FNMA) | NR/AAA | 220,000 | 219,914 | |||||
Nevada State Colorado River Commission Power Delivery Series A GO, 7.00% due 9/15/2008 pre-refunded 9/15/2007 | Aa1/AA+ | 840,000 | 867,493 | |||||
Sparks Redevelopment Agency Tax Allocation Revenue Refunding Series A, 5.75% due 1/15/2009 (Insured: Radian) | NR/AA | 1,000,000 | 1,042,780 | |||||
Sparks Redevelopment Agency Tax Allocation Revenue Refunding Series A, 5.75% due 1/15/2010 (Insured: Radian) | NR/AA | 1,000,000 | 1,057,710 | |||||
Sparks Redevelopment Agency Tax Allocation Revenue Refunding Series A, 5.75% due 1/15/2011 (Insured: Radian) | NR/AA | 1,285,000 | 1,368,243 | |||||
Washoe County School District, 5.50% due 6/1/2008 (Insured: FSA) | Aaa/AAA | 3,500,000 | 3,610,810 | |||||
NEW HAMPSHIRE — 0.42% | ||||||||
Manchester Housing & Redevelopment Authority Series A, 6.05% due 1/1/2012 (Insured: ACA) | NR/A | 1,500,000 | 1,600,380 | |||||
New Hampshire Industrial Development Authority Revenue, 3.75% due 12/1/2009 (Central Vermont Public Services Project; LOC: Citizens Bank) | NR/AA- | 2,880,000 | 2,889,302 | |||||
New Hampshire System Revenue Series A, 7.00% due 11/1/2006 (Insured: FGIC) | Aaa/AAA | 665,000 | 666,949 | |||||
NEW JERSEY — 2.68% | ||||||||
Hudson County COP, 7.00% due 12/1/2012 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,170,440 | |||||
Hudson County COP, 6.25% due 12/1/2014 (Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,737,960 |
26 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
New Jersey Economic Development Authority Revenue Cigarette Tax, 5.00% due 6/15/2010 (Insured: FSA) | Aaa/AAA | $ | 1,000,000 | $ | 1,048,530 | |||
New Jersey Economic Development Authority Revenue Cigarette Tax, 5.00% due 6/15/2012 (Insured: FGIC) | Aaa/AAA | 7,375,000 | 7,860,570 | |||||
New Jersey State Transportation Corp. Fed Transportation Administration Grants Series A, 5.50% due 9/15/2013 (Insured: AMBAC) | Aaa/AAA | 7,650,000 | 8,449,578 | |||||
New Jersey State Transportation Corp. Series A, 5.25% due 9/15/2013 (Insured: AMBAC) | Aaa/AAA | 5,000,000 | 5,446,750 | |||||
New Jersey State Transportation Trust Fund Authority Series C, 5.25% due 6/15/2013 (Transportation Systems Project; Insured: MBIA) (ETM) | Aaa/AAA | 5,000,000 | 5,470,250 | |||||
Newark Housing Authority Port Authority Rental Backed, 5.00% due 1/1/2010 (Newark Marine Terminal Redevelopment Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,043,530 | |||||
Pequannock River Basin Regional Sewage Authority Refunding Series M, 5.00% due 12/1/2006 (Sewer Revenue Project; Insured: MBIA) | Aaa/NR | 630,000 | 631,556 | |||||
NEW MEXICO — 1.49% | ||||||||
Albuquerque Joint Water & Sewage Systems Revenue Refunding & Improvement Series A, 5.25% due 7/1/2011 | Aa2/AA | 1,135,000 | 1,218,173 | |||||
Farmington PCR, 3.85% due 9/1/2024 put 10/2/2006 (LOC: Barclays Bank) (daily demand notes) | P1/A-1+ | 1,000,000 | 1,000,000 | |||||
Farmington Utility Systems Revenue Refunding Series A, 5.00% due 5/15/2011 (Insured: FSA) | Aaa/AAA | 3,000,000 | 3,183,090 | |||||
Gallup PCR Refunding Tri State Generation, 5.00% due 8/15/2012 (Insured: AMBAC) | Aaa/AAA | 3,345,000 | 3,561,421 | |||||
New Mexico Highway Commission Revenue Subordinated Lien Tax Series B, 5.00% due 6/15/2011 (Insured: AMBAC) (ETM) | Aaa/AAA | 4,865,000 | 5,148,824 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 1/1/2011 (Insured: FSA & FHA) | Aaa/AAA | 1,790,000 | 1,887,967 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 7/1/2011 (Insured: FSA & FHA) | Aaa/AAA | 2,065,000 | 2,189,292 | |||||
NEW YORK — 6.99% | ||||||||
Brookhaven Industrial Development Agency Revenue, 4.375% due 11/1/2031 put 11/1/2006 (Methodist Retirement Community Project; LOC: Northfork Bank) | A1/A- | 2,100,000 | 2,100,714 | |||||
Hempstead Town Industrial Development Agency Resource Recovery Revenue, 5.00% due 12/1/2008 (American Ref-Fuel Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,022,190 | |||||
Long Island Power Authority Electric Systems Revenue General Series A, 6.00% due 12/1/2007 (Insured: AMBAC) | Aaa/AAA | 2,285,000 | 2,349,117 | |||||
Long Island Power Authority Electric Systems Revenue General Series B, 5.00% due 12/1/2006 | A3/A- | 7,000,000 | 7,015,680 | |||||
Metropolitan Transportation Authority Revenue Series B, 5.00% due 11/15/2007 | A2/A | 5,000,000 | 5,077,050 | |||||
Metropolitan Transportation Authority Service Series B, 5.25% due 7/1/2007 | A1/AA- | 4,535,000 | 4,591,370 | |||||
Monroe County Industrial Development Agency, 5.375% due 6/1/2007 (St. John Fisher College Project; Insured: Radian) | NR/AA | 1,050,000 | 1,061,309 | |||||
New York City Housing Development Corp. Multi Family Housing Revenue Refunding Series A, 5.50% due 11/1/2009 (Insured: FHA) | Aa2/AA | 185,000 | 186,108 | |||||
New York City Industrial Development Agency Civic Facility Series A, 5.25% due 6/1/2011 (Lycee Francais De New York Project; Insured: ACA) | NR/A | 2,215,000 | 2,331,996 | |||||
New York City Industrial Development Agency Civic Facility Series A, 5.25% due 6/1/2012 (Lycee Francais De New York Project; Insured: ACA) | NR/A | 2,330,000 | 2,468,472 | |||||
New York City Refunding Series B GO, 5.50% due 8/1/2011 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,084,930 | |||||
New York City Series G GO, 5.25% due 8/1/2016 | A1/AA- | 4,000,000 | 4,108,600 | |||||
New York City Transitional Finance Authority Facilities Refunding Series A 1, 5.00% due 11/1/2014 | Aa1/AAA | 2,000,000 | 2,179,240 | |||||
New York City Transitional Finance Authority Facilities Refunding Series A 1, 5.00% due 11/1/2015 | Aa1/AAA | 1,500,000 | 1,642,395 | |||||
New York City Transitional Refunding Future Tax Series A1, 5.00% due 11/1/2012 | Aa1/AAA | 5,000,000 | 5,386,050 | |||||
New York Dormitory Authority Revenues Mental Health Services Facilities Improvement B, 5.00% due 8/15/2010 (Insured: MBIA) | Aaa/AAA | 1,600,000 | 1,682,576 | |||||
New York State Dormitory Authority Revenue Hospital Refunding, 5.00% due 2/15/2010 (Wyckoff Heights Project; Insured: AMBAC) | Aaa/AAA | 4,870,000 | 5,026,181 |
Certified Annual Report | 27 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
New York State Dormitory Authority Revenue Hospital Series A, 5.25% due 8/15/2013 (Presbyterian Hospital; Insured: FHA & FSA) | Aaa/AAA | $ | 3,800,000 | $ | 4,136,566 | |||
New York State Dormitory Authority Revenues, 5.00% due 7/1/2007 (City University Systems Project) | A1/AA- | 3,500,000 | 3,535,490 | |||||
New York State Dormitory Authority Revenues, 6.00% due 7/1/2007 (Champlain Valley Physicians Project; Insured: Connie Lee) | NR/AAA | 1,040,000 | 1,058,377 | |||||
New York State Dormitory Authority Revenues, 5.50% due 7/1/2012 (South Nassau Community Hospital B Project) | Baa1/NR | 1,820,000 | 1,952,223 | |||||
New York State Dormitory Authority Revenues, 5.50% due 7/1/2013 (South Nassau Community Hospital B Project) | Baa1/NR | 1,500,000 | 1,618,125 | |||||
New York State Dormitory Authority Revenues Aids Long Term Health Facilities, 5.00% due 11/1/2012 (Insured: SONYMA) | Aa1/NR | 2,000,000 | 2,092,340 | |||||
New York State Dormitory Authority Revenues Aids Long Term Health Facilities, 5.00% due 11/1/2013 (Insured: SONYMA) | Aa1/NR | 4,600,000 | 4,805,298 | |||||
New York State Dormitory Authority Revenues Aids Long Term Health Facilities, 5.00% due 11/1/2014 (Insured: SONYMA) | Aa1/NR | 1,500,000 | 1,566,945 | |||||
New York State Dormitory Authority Revenues Secured Hospital Interfaith Medical Center Series D, 5.75% due 2/15/2008 (Insured: FSA) | Aaa/AAA | 2,515,000 | 2,583,509 | |||||
New York State Dormitory Authority Revenues Series B, 5.25% due 11/15/2026 put 5/15/2012 (Insured: AMBAC) | Aaa/AAA | 4,000,000 | 4,303,800 | |||||
New York State Housing Finance Service Contract Series A, 6.25% due 9/15/2010 pre-refunded 9/15/2007 | A1/AAA | 1,920,000 | 1,964,851 | |||||
Oneida County Industrial Development Agency Series C, 6.00% due 1/1/2009 (Civic Facility Faxton Hospital Project; Insured: Radian) | NR/AA | 710,000 | 743,569 | |||||
Tobacco Settlement Financing Corp. Revenue Asset Backed Series A-1C, 5.25% due 6/1/2012 (Secured: State Contingency Contract) | A1/AA- | 1,190,000 | 1,191,642 | |||||
Tobacco Settlement Financing Corp. Revenue Asset Backed Series B-1C, 5.25% due 6/1/2013 | A1/AA- | 2,600,000 | 2,667,652 | |||||
Tobacco Settlement Financing Corp. Revenue Asset Backed Series B-1C, 5.25% due 6/1/2013 (Insured: XLCA) | Aaa/AAA | 2,000,000 | 2,055,980 | |||||
NORTH CAROLINA — 2.15% | ||||||||
North Carolina Eastern Municipal Power Agency Power Systems Revenue Refunding Series A, 5.50% due 1/1/2012 | Baa2/BBB | 1,000,000 | 1,074,810 | |||||
North Carolina Eastern Municipal Power Agency Power Systems Revenue Refunding Series C, 5.25% due 1/1/2012 | Baa2/BBB | 650,000 | 690,976 | |||||
North Carolina Eastern Municipal Power Agency Power Systems Revenue Refunding Series C, 5.25% due 1/1/2013 | Baa2/BBB | 1,055,000 | 1,127,278 | |||||
North Carolina Eastern Municipal Power Agency Power Systems Revenue Refunding Series D, 5.375% due 1/1/2011 | Baa2/BBB | 3,000,000 | 3,176,610 | |||||
North Carolina Municipal Power Agency 1 Catawba Electric Revenue Refunding, 6.00% due 1/1/2010 (Insured: MBIA) | Aaa/AAA | 2,400,000 | 2,577,600 | |||||
North Carolina Municipal Power Agency 1 Catawba Electric Revenue Series A, 5.50% due 1/1/2013 | A3/BBB+ | 2,505,000 | 2,708,106 | |||||
North Carolina Municipal Power Agency 1 Catawba Electric Revenue Series B, 6.375% due 1/1/2013 | A3/BBB+ | 1,000,000 | 1,078,950 | |||||
North Carolina Municipal Power Agency Catawba Electric Series A, 6.00% due 1/1/2007 (Insured: MBIA) | Aaa/AAA | 3,400,000 | 3,421,012 | |||||
North Carolina Municipal Power Agency Catawba Electric Series A, 6.00% due 1/1/2008 (Insured: MBIA) | Aaa/AAA | 3,900,000 | 4,016,571 | |||||
North Carolina State Infrastructure, 5.00% due 2/1/2016 (Correctional Facilities Project A) | Aa2/AA+ | 5,000,000 | 5,343,900 | |||||
University of North Carolina Systems Pool Revenue Refunding Series B, 5.00% due 4/1/2012 (Insured: AMBAC) | Aaa/AAA | 1,030,000 | 1,101,698 |
28 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
OHIO — 2.38% | ||||||||
Akron COP Refunding, 5.00% due 12/1/2013 (Insured:Assured Guaranty) | NR/AAA | $ | 3,000,000 | $ | 3,199,350 | |||
Akron COP Refunding, 5.00% due 12/1/2014 (Insured:Assured Guaranty) | NR/AAA | 2,000,000 | 2,141,300 | |||||
Cleveland Cuyahoga County Port Authority Revenue, 6.00% due 11/15/2010 | NR/NR | 2,815,000 | 2,922,871 | |||||
Greater Cleveland Regional Transportation Authority GO, 5.00% due 12/1/2015 (Insured: MBIA) | Aaa/NR | 1,000,000 | 1,095,560 | |||||
Hudson City Library Improvement, 6.35% due 12/1/2011 | Aa1/NR | 1,400,000 | 1,562,456 | |||||
Lake County Sewer & Water District Improvement, 5.30% due 12/1/2011 | Aa2/NR | 390,000 | 403,794 | |||||
Lorain County Hospital Revenue Refunding Catholic Healthcare Partners B, 6.00% due 9/1/2008 (Insured: MBIA) | Aaa/AAA | 1,200,000 | 1,246,956 | |||||
Mahoning Valley District Water Refunding, 5.85% due 11/15/2008 (Insured: FSA) | Aaa/AAA | 1,300,000 | 1,361,568 | |||||
Mahoning Valley District Water Refunding, 5.90% due 11/15/2009 (Insured: FSA) | Aaa/AAA | 770,000 | 823,746 | |||||
Montgomery County Revenue, 6.00% due 12/1/2008 (Catholic Health Initiatives Project) | Aa2/AA | 2,250,000 | 2,349,743 | |||||
Montgomery County Revenue, 6.00% due 12/1/2009 (Catholic Health Initiatives Project) | Aa2/AA | 2,385,000 | 2,532,202 | |||||
Montgomery County Revenue, 6.00% due 12/1/2010 (Catholic Health Initiatives Project) | Aa2/AA | 1,530,000 | 1,650,044 | |||||
Ohio State Unlimited Tax Series A GO, 5.75% due 6/15/2010 pre-refunded 6/15/2009 | Aa1/AA+ | 5,000,000 | 5,284,300 | |||||
Plain Local School District, 0% due 12/1/2006 (Insured: FGIC) | Aaa/NR | 680,000 | 675,947 | |||||
Plain Local School District, 0% due 12/1/2007 (Insured: FGIC) | Aaa/NR | 845,000 | 810,456 | |||||
Reading Revenue Development, 6.00% due 2/1/2009 (St. Mary’s Educational Institute Project; Insured: Radian) | NR/AA | 975,000 | 1,024,140 | |||||
OKLAHOMA — 1.46% | ||||||||
Claremore Public Works Authority Revenue Refunding, 6.00% due 6/1/2007 (Insured: FSA) (ETM) | Aaa/NR | 1,340,000 | 1,362,083 | |||||
Comanche County Hospital Authority Revenue Refunding, 4.00% due 7/1/2007 (Insured: Radian) | Aa3/AA | 1,265,000 | 1,268,023 | |||||
Comanche County Hospital Authority Revenue Refunding, 5.00% due 7/1/2011 (Insured: Radian) | Aa3/AA | 1,000,000 | 1,051,260 | |||||
Comanche County Hospital Authority Revenue Refunding, 5.25% due 7/1/2015 (Insured: Radian) | Aa3/AA | 1,340,000 | 1,462,623 | |||||
Grand River Dam Authority Revenue, 5.50% due 6/1/2010 | A2/BBB+ | 1,200,000 | 1,273,128 | |||||
Jenks Aquarium Authority Revenue First Mortgage, 5.50% due 7/1/2010 (ETM) | Aaa/NR | 415,000 | 430,700 | |||||
Oklahoma DFA Health Facilities Revenue, 5.75% due 6/1/2011 (Insured:AMBAC) | Aaa/AAA | 740,000 | 804,521 | |||||
Oklahoma DFA Hospital Revenue Refunding, 5.00% due 10/1/2012 (Unity Health Center Project) | NR/BBB+ | 1,070,000 | 1,119,937 | |||||
Oklahoma DFA Hospital Revenue Series A, 5.25% due 12/1/2011 (Duncan Regional Hospital Project) | NR/A- | 1,215,000 | 1,280,088 | |||||
Oklahoma DFA Hospital Revenue Series A, 5.25% due 12/1/2012 (Duncan Regional Hospital Project) | NR/A- | 1,330,000 | 1,409,760 | |||||
Oklahoma DFA Hospital Revenue Series A, 5.25% due 12/1/2013 (Duncan Regional Hospital Project) | NR/A- | 1,350,000 | 1,435,374 | |||||
Oklahoma State Industrial Authority Revenue Health System Obligation A, 6.00% due 8/15/2010 pre-refunded 8/15/2009 | Aaa/AAA | 190,000 | 203,904 | |||||
Oklahoma State Industrial Authority Revenue Health System Series A, 6.00% due 8/15/2010 (Insured: MBIA) | Aaa/AAA | 2,150,000 | 2,306,606 | |||||
Oklahoma State Industrial Authority Revenue Refunding Health Systems Obligation Group Series A, 5.75% due 8/15/2007 (Insured: MBIA) | Aaa/AAA | 2,380,000 | 2,424,125 | |||||
OREGON — 0.60% | ||||||||
Clackamas County Hospital Facility Authority Revenue Refunding, 5.00% due 5/1/2008 (Legacy Health Systems Project) | A1/AA- | 4,000,000 | 4,086,040 | |||||
Oregon State Department Administrative Services COP Series B, 5.00% due 11/1/2013 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,078,240 | |||||
Oregon State Department Administrative Services COP Series B, 5.00% due 11/1/2014 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,083,800 | |||||
Oregon State Department Administrative Services COP Series B, 5.00% due 11/1/2015 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,088,500 | |||||
PENNSYLVANIA — 1.90% | ||||||||
Allegheny County Hospital Development Health Series B, 6.30% due 5/1/2009 (South Hills Health System Project) | Baa1/NR | 1,160,000 | 1,212,362 | |||||
Chester County School Authority, 5.00% due 4/1/2016 (Intermediate School Project; Insured:AMBAC) | NR/AAA | 1,915,000 | 2,077,469 | |||||
Delaware County Authority Revenue, 5.50% due 11/15/2007 (Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,020,880 | |||||
Geisinger Authority Health Systems Revenue, 5.50% due 8/15/2009 | Aa3/AA- | 1,000,000 | 1,039,430 | |||||
Montgomery County Higher Education & Health Authority, 6.375% due 7/1/2007 | Baa3/NR | 550,000 | 555,527 |
Certified Annual Report | 29 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Pennsylvania Higher Educational Facilities Series A, 5.00% due 8/15/2008 (University of Pennsylvania Health Systems Project) | A2/A+ | $ | 1,250,000 | $ | 1,277,450 | |||
Philadelphia Gas Works Revenue Fifth Series A-1, 5.00% due 9/1/2014 (Insured: FSA) | Aaa/AAA | 3,000,000 | 3,239,310 | |||||
Pittsburgh Series A, 5.00% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 3,415,000 | 3,659,753 | |||||
Pittsburgh Series A, 5.00% due 9/1/2013 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,157,820 | |||||
Pittsburgh Series A, 5.50% due 9/1/2014 (Insured:AMBAC) | Aaa/AAA | 2,000,000 | 2,156,260 | |||||
Sayre Health Care Facilities Authority Series A, 5.00% due 7/1/2008 (Latrobe Area Hospital Project; Insured:AMBAC) | Aaa/AAA | 1,255,000 | 1,285,635 | |||||
Sayre Health Care Facilities Authority Series A, 5.25% due 7/1/2011 (Latrobe Area Hospital Project; Insured:AMBAC) | Aaa/AAA | 1,400,000 | 1,495,634 | |||||
Sayre Health Care Facilities Authority Series A, 5.25% due 7/1/2012 (Latrobe Area Hospital Project; Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,078,020 | |||||
Scranton Lackawanna Health & Welfare Authority, 7.125% due 1/15/2013 pre-refunded 1/15/2007 (Marian Community Hospital Project) | NR/NR | 1,000,000 | 1,029,120 | |||||
PUERTO RICO — 0.08% | ||||||||
Puerto Rico Commonwealth Highway & Transportation Authority Revenue Refunding Series AA, 5.00% due 7/1/2008 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,025,620 | |||||
RHODE ISLAND — 0.81% | ||||||||
Providence Public Building Authority Refunding Series B, 5.75% due 12/15/2007 (Insured: FSA) | Aaa/AAA | 1,075,000 | 1,102,724 | |||||
Providence Series C GO, 5.50% due 1/15/2012 (Insured: FGIC) | Aaa/AAA | 1,880,000 | 2,050,591 | |||||
Rhode Island State, 5.00% due 10/1/2014 (Providence Plantations Project; Insured MBIA) | Aaa/AAA | 1,000,000 | 1,073,950 | |||||
Rhode Island State Economic Development Corp. Revenue, 5.75% due 7/1/2010 (Providence Place Mall Project; Insured: Radian) | NR/AA | 2,000,000 | 2,077,300 | |||||
Rhode Island State Health & Education Building Corp., 4.50% due 9/1/2009 (Butler Hospital Project; LOC: Fleet National Bank) | NR/AA | 1,960,000 | 2,000,984 | |||||
Rhode Island State Health & Education Building Corp. Revenue Hospital Financing, 5.25% due 7/1/2014 (Memorial Hospital Project; LOC: Fleet Bank) | NR/AA | 1,565,000 | 1,658,791 | |||||
SOUTH CAROLINA — 1.58% | ||||||||
Charleston County COP, 6.00% due 12/1/2007 (Insured: MBIA) | Aaa/AAA | 2,050,000 | 2,095,367 | |||||
Georgetown County Environment Refunding International Paper Co. Project Series A, 5.70% due 4/1/2014 | Baa3/BBB | 7,975,000 | 8,682,622 | |||||
Greenville County School District Building Equity Sooner Tomorrow, 5.25% due 12/1/2015 | Aa3/AA- | 1,000,000 | 1,085,130 | |||||
Greenwood County Hospital Revenue Refunding Facilities Self Regional Healthcare A, 5.00% due 10/1/2013 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,154,040 | |||||
South Carolina Jobs Economic Development Authority Hospital Facilities Revenue Improvement Series A, 7.375% due 12/15/2021 pre-refunded 12/15/2010 (Palmetto Health Alliance Project) | NR/NR | 2,600,000 | 3,014,908 | |||||
South Carolina State Public Service Authority Revenue Refunding Series D, 5.00% due 1/1/2007 | Aa2/AA- | 2,315,000 | 2,323,542 | |||||
SOUTH DAKOTA — 0.18% | ||||||||
South Dakota State Health & Educational Facilities Authority Revenue, 5.50% due 9/1/2011 (Rapid City Regional Hospital Project; Insured: MBIA) | Aaa/AAA | 1,100,000 | 1,186,933 | |||||
South Dakota State Health & Educational Facilities Authority Revenue Refunding, 6.25% due 7/1/2009 (McKennan Hospital Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,065,610 | |||||
TENNESSEE — 0.44% | ||||||||
Franklin County Health & Educational Facilities University of the South, 4.75% due 9/1/2009 | NR/A+ | 1,005,000 | 1,033,190 | |||||
Franklin Industrial Development Multi Family Refunding Housing Series A, 5.75% due 4/1/2010 (Insured: FSA) | Aaa/AAA | 540,000 | 550,859 |
30 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Metro Government Nashville Multi Family Refunding, 7.50% due 11/15/2010 pre-refunded 5/15/2010 | Aaa/AAA | $ | 2,000,000 | $ | 2,265,120 | |||
Metro Government Nashville Water & Sewer, 6.50% due 12/1/2014 (ETM) | Aaa/AAA | 1,240,000 | 1,480,635 | |||||
TEXAS — 14.53% | ||||||||
Amarillo Health Facilities Corp. Hospital Revenue, 5.50% due 1/1/2011 (Baptist St. Anthony’s Hospital Corp. Project; Insured: FSA) | Aaa/NR | 1,350,000 | 1,441,503 | |||||
Austin Refunding, 5.00% due 3/1/2011 | Aa1/AA+ | 1,000,000 | 1,057,870 | |||||
Austin Water & Wastewater Refunding Series A, 5.00% due 5/15/2013 (Insured:AMBAC) | Aaa/AAA | 1,920,000 | 2,062,291 | |||||
Austin Water & Wastewater Refunding Series A, 5.00% due 5/15/2014 (Insured:AMBAC) | Aaa/AAA | 2,890,000 | 3,118,657 | |||||
Austin Water & Wastewater Refunding Series A, 5.00% due 5/15/2015 (Insured:AMBAC) | Aaa/AAA | 1,520,000 | 1,647,574 | |||||
Bastrop Independent School District, 0% due 2/15/2009 (Guaranty: PSF) | Aaa/AAA | 1,390,000 | 1,271,878 | |||||
Bell County Health Facilities Development Corp. Revenue Series A, 6.25% due 8/15/2010 (Scott & White Memorial Hospital Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,087,330 | |||||
Bexar County Housing Finance Corp. Multi Family Housing Revenue, 5.00% due 1/1/2011 (Insured: MBIA) | Aaa/NR | 1,800,000 | 1,859,724 | |||||
Cedar Hill Independent School District Unrefunded balance, 0% due 8/15/2010 (Insured: PSF-GTD) | NR/AAA | 440,000 | 372,838 | |||||
Central Texas Regional Mobility Authority Revenue Anticipation Notes, 5.00% due 1/1/2008 | Aa3/AA | 7,000,000 | 7,118,020 | |||||
Clint Independent School District Refunding, 5.50% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 1,700,000 | 1,830,237 | |||||
Clint Independent School District Refunding, 5.50% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,425,000 | 1,532,502 | |||||
Collin County Limited Tax Improvement, 5.00% due 2/15/2016 | Aaa/AAA | 1,465,000 | 1,597,465 | |||||
Coppell Independent School District Refunding, 0% due 8/15/2007 (Guaranty: PSF) | NR/AAA | 3,300,000 | 3,197,700 | |||||
Corpus Christi Business & Job Development Corp. Sales Tax Revenue, 5.00% due 9/1/2012 (Refunding & Improvement Arena Project; Insured:AMBAC) | Aaa/AAA | 1,025,000 | 1,096,771 | |||||
Corpus Christi Utility Systems Revenue Refunding, 5.50% due 7/15/2008 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,067,040 | |||||
Corpus Christi Utility Systems Revenue Refunding, 5.50% due 7/15/2009 (Insured: FSA) | Aaa/AAA | 4,780,000 | 5,023,015 | |||||
Duncanville Independent School District Refunding Series B, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 4,945,000 | 4,188,316 | |||||
Duncanville Independent School District Refunding Series B, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,245,000 | 1,014,687 | |||||
Fort Worth Water & Sewer Revenue, 5.25% due 2/15/2011 (Tarrant & Denton County Project) | Aa2/AA | 1,390,000 | 1,481,949 | |||||
Fort Worth Water & Sewer Revenue Refunding & Improvement, 5.25% due 2/15/2011 pre-refunded 2/15/2008 | Aa2/NR | 3,800,000 | 3,886,982 | |||||
Grapevine Colleyville Independent School District, 0% due 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 7,350,000 | 6,108,291 | |||||
Grapevine GO, 5.25% due 2/15/2012 (Insured: FGIC) | Aaa/AAA | 2,005,000 | 2,007,506 | |||||
Gulf Coast Waste Disposal Authority Environmental Facilities Revenue Refunding, 4.20% due 11/1/2006 (Occidental Project) | A3/A- | 4,000,000 | 4,000,360 | |||||
Gulf Coast Waste Disposal Authority Revenue Refunding, 5.00% due 10/1/2010 (Bayport Area Systems Project; Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,051,220 | |||||
Gulf Coast Waste Disposal Authority Revenue Refunding, 5.00% due 10/1/2011 (Bayport Area Systems Project; Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,061,250 | |||||
Harlingen Consolidated Independent School District, 7.50% due 8/15/2009 (Guaranty: PSF) | Aaa/AAA | 750,000 | 828,375 | |||||
Harris County GO, 0% due 8/1/2008 | Aa1/AA+ | 7,000,000 | 6,548,710 | |||||
Harris County Health Facilities Development Corp. Hospital Revenue Refunding Series A, 6.00% due 6/1/2012 (Memorial Hospital Systems Project; Insured: MBIA) | Aaa/AAA | 500,000 | 558,650 | |||||
Harris County Health Facilities Development Corp. Thermal Utility Revenue, 5.45% due 2/15/2011 (Teco Project; Insured:AMBAC) | Aaa/AAA | 3,745,000 | 3,935,396 | |||||
Harris County Health Facilities Development Corp. Thermal Utility Revenue, 5.00% due 11/15/2015 (Teco Project; Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,598,190 | |||||
Harris County Health Facilities Hospital Series A, 6.00% due 6/1/2010 (Memorial Hospital Systems Project; Insured: MBIA) | Aaa/AAA | 3,100,000 | 3,337,243 | |||||
Harris County Hospital District Mortgage Revenue, 7.40% due 2/15/2010 (Insured:AMBAC) | Aaa/AAA | 1,605,000 | 1,711,684 | |||||
Harris County Hospital District Mortgage Revenue Refunding, 7.40% due 2/15/2010 (ETM) | Aaa/AAA | 260,000 | 273,590 | |||||
Harris County Hospital District Revenue Refunding, 5.75% due 2/15/2011 (Insured: MBIA) | Aaa/AAA | 10,000,000 | 10,718,100 | |||||
Harris County Hospital District Revenue Refunding, 5.75% due 2/15/2012 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,138,540 | |||||
Harris County Sports Authority Revenue Senior Lien Series G, 0% due 11/15/2010 (Insured: MBIA) | Aaa/AAA | 3,260,000 | 2,790,853 | |||||
Houston Community College Systems Refunding Student Fee, 5.25% due 4/15/2011 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,068,330 |
Certified Annual Report | 31 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Houston Community College Systems Refunding Student Fee, 5.25% due 4/15/2012 (Insured: FSA) | Aaa/AAA | $ | 1,460,000 | $ | 1,575,048 | |||
Houston Community College Systems Refunding Student Fee, 5.25% due 4/15/2013 (Insured: FSA) | Aaa/AAA | 1,250,000 | 1,359,713 | |||||
Houston Independent School District Pubic West Side Series B, 0% due 9/15/2014 (Insured:AMBAC) | Aaa/AAA | 6,190,000 | 4,525,199 | |||||
Irving Independent School District GO, 0% due 2/15/2017 (Guaranty: PSF) | Aaa/AAA | 1,000,000 | 645,850 | |||||
Keller Independent School District Refunding, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,250,000 | 999,575 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2012 (Insured:AMBAC) | Aaa/AAA | 1,660,000 | 1,763,767 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2013 (Insured:AMBAC) | Aaa/AAA | 1,745,000 | 1,866,627 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2014 (Insured:AMBAC) | Aaa/AAA | 1,835,000 | 1,973,414 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2015 (Insured:AMBAC) | Aaa/AAA | 1,930,000 | 2,084,033 | |||||
Longview Water & Sewer Revenue Refunding, 5.00% due 3/1/2012 (Insured: MBIA) | Aaa/AAA | 1,150,000 | 1,224,957 | |||||
Lower Colorado River Authority Revenue Refunding & Improvement, 8.00% due 5/15/2010 (Transportation Systems Project; Insured: FSA) | Aaa/AAA | 750,000 | 858,495 | |||||
Mesquite Independent School District Refunding, 0% due 8/15/2011 (Guaranty: PSF) | NR/AAA | 3,065,000 | 2,513,576 | |||||
Midlothian Independent School District Refunding, 0% due 2/15/2008 (ETM) | Aaa/NR | 1,055,000 | 1,003,980 | |||||
Midlothian Independent School District Refunding, 0% due 2/15/2008 (Guaranty: PSF) | Aaa/NR | 360,000 | 342,500 | |||||
Midlothian Independent School District Refunding, 0% due 2/15/2009 (ETM) | Aaa/NR | 570,000 | 522,662 | |||||
Midlothian Independent School District Refunding, 0% due 2/15/2009 (Guaranty: PSF) | Aaa/NR | 630,000 | 577,004 | |||||
Midtown Redevelopment Authority Texas Tax, 6.00% due 1/1/2010 (Insured: Radian) | Aa3/AA | 700,000 | 745,591 | |||||
Midtown Redevelopment Authority Texas Tax, 6.00% due 1/1/2011 (Insured: Radian) | Aa3/AA | 740,000 | 800,946 | |||||
Red River Education Finance Corp., 2.10% due 12/1/2034 put 12/1/2007 (Parish Episcopal School Project; LOC:Allied Irish Banks plc) | Aa3/NR | 2,500,000 | 2,433,775 | |||||
Richardson Refunding & Improvement GO, 5.00% due 2/15/2014 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,232,590 | |||||
Sam Rayburn Municipal Power Agency Refunding, 5.50% due 10/1/2012 | Baa2/BBB- | 6,000,000 | 6,309,480 | |||||
Socorro Independent School District Series A, 5.75% due 2/15/2011 pre-refunded 2/15/2008 (Guaranty: PSF) | NR/AAA | 1,970,000 | 2,028,214 | |||||
Southlake Tax Increment GO Series B, 0% due 2/15/2007 (Insured:AMBAC) | Aaa/AAA | 965,000 | 946,337 | |||||
Spring Branch Independent School District, 7.50% due 2/1/2011 (Guaranty: PSF) | Aaa/AAA | 500,000 | 575,655 | |||||
Springhill Courtland Heights Public Facility Corp. Multi Family Revenue Senior Lien Housing Series A, 5.125% due 12/1/2008 | NR/BB | 885,000 | 884,823 | |||||
Tarrant County Health Facilities Development Corp. Health Systems Revenue Series A, 5.75% due 2/15/2008 (Texas Health Resources Systems Project; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,084,570 | |||||
Tarrant County Health Facilities Development Corp. Health Systems Revenue Series A, 5.75% due 2/15/2009 (Texas Health Resources Systems Project; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,120,570 | |||||
Tarrant County Health Facilities Development Corp. Health Systems Revenue Series A, 5.75% due 2/15/2011 (Texas Health Resources Project; Insured: MBIA) | Aaa/AAA | 1,400,000 | 1,462,636 | |||||
Tarrant County Health Facilities Development Corp. Hospital Revenue, 5.875% due 11/15/2007 (Adventist/Sunbelt Health System Project) (ETM) | A2/NR | 580,000 | 594,494 | |||||
Tarrant County Health Facilities Development Corp. Hospital Revenue, 6.00% due 11/15/2009 (Adventist/Sunbelt Health System Project) (ETM) | A2/NR | 650,000 | 694,532 | |||||
Tarrant County Health Facilities Development Corp. Hospital Revenue, 6.10% due 11/15/2011 pre-refunded 11/15/2010 (Adventist/Sunbelt Health System Project) | A2/NR | 730,000 | 803,621 | |||||
Texarkana Health Facilities Development Corp. Hospital Revenue, 5.75% due 10/1/2008 (Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,560,090 | |||||
Texas Municipal Power Agency Revenue B, 0% due 9/1/2013 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 766,950 | |||||
Texas State Affordable Housing Corp. Series A, 4.85% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 1,945,000 | 1,948,909 | |||||
Texas State Public Finance Authority Building Revenue Series B, 6.00% due 8/1/2011 pre-refunded 8/1/2009 (State Preservation Project; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,064,910 | |||||
Texas State Public Finance Authority Stephen F. Austin University Financing, 5.00% due 10/15/2014 (Insured: MBIA) | Aaa/NR | 1,305,000 | 1,414,907 | |||||
Texas State Public Finance Authority Stephen F. Austin University Financing, 5.00% due 10/15/2015 (Insured: MBIA) | Aaa/NR | 1,450,000 | 1,579,094 | |||||
Tomball Hospital Authority Revenue Refunding, 5.00% due 7/1/2013 | Baa3/NR | 1,460,000 | 1,507,173 | |||||
Travis County Health Facilities Development Corp. Revenue, 5.75% due 11/15/2010 (Ascension Health Project; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,136,140 |
32 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Travis County Health Facilities Development Corp. Revenue Ascension Health Credit Series A, 5.75% due 11/15/2007 (Insured: MBIA) | Aaa/AAA | $ | 1,000,000 | $ | 1,023,170 | |||
Travis County Health Facilities Development Corp. Revenue Ascension Health Credit Series A, 5.75% due 11/15/2008 (Insured: MBIA) | Aaa/AAA | 2,300,000 | 2,397,911 | |||||
Travis County Health Facilities Development Corp. Revenue Ascension Health Credit Series A, 5.75% due 11/15/2009 (Insured: MBIA) | Aaa/AAA | 3,750,000 | 3,973,763 | |||||
Washington County Health Facilities Development Corp. Revenue, 5.35% due 6/1/2009 (Insured:ACA) | NR/A | 1,280,000 | 1,307,622 | |||||
West Harris County Regional Water, 5.25% due 12/15/2010 (Insured: FSA) | Aaa/AAA | 1,700,000 | 1,809,361 | |||||
West Harris County Regional Water, 5.25% due 12/15/2011 (Insured: FSA) | Aaa/AAA | 2,315,000 | 2,491,704 | |||||
West Harris County Regional Water, 5.25% due 12/15/2012 (Insured: FSA) | Aaa/AAA | 2,435,000 | 2,645,554 | |||||
Wylie Independent School District, 5.00% due 8/15/2011 (Guaranty PSF) | NR/AAA | 1,000,000 | 1,061,850 | |||||
UTAH — 0.67% | ||||||||
Intermountain Power Agency Power Supply Revenue Series A, 5.00% due 7/1/2012 (ETM) | Aaa/AAA | 4,355,000 | 4,359,834 | |||||
Salt Lake County Municipal Building Authority, 5.50% due 10/1/2009 | Aa1/AA+ | 1,500,000 | 1,583,565 | |||||
Snyderville Basin Sewer Improvement, 5.00% due 11/1/2006 (Insured:AMBAC) | Aaa/AAA | 675,000 | 675,850 | |||||
Utah State Board of Regents Auxiliary Systems & Student Fee Revenue Refunding Series A, 5.00% due 5/1/2010 | NR/AA | 510,000 | 533,297 | |||||
Utah State University Hospital Board of Regents Revenue, 5.25% due 8/1/2008 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,029,000 | |||||
VIRGINIA — 1.59% | ||||||||
Alexandria Industrial Development Authority Revenue, 5.75% due 10/1/2007 (Insured:AMBAC) (ETM) | Aaa/AAA | 1,010,000 | 1,032,260 | |||||
Alexandria Industrial Development Authority Revenue, 5.75% due 10/1/2008 (Insured:AMBAC) (ETM) | Aaa/AAA | 1,070,000 | 1,115,818 | |||||
Alexandria Industrial Development Authority Revenue, 5.75% due 10/1/2009 (Insured:AMBAC) (ETM) | Aaa/AAA | 1,130,000 | 1,201,608 | |||||
Alexandria Industrial Development Authority Revenue, 5.75% due 10/1/2010 (Insured:AMBAC) (ETM) | Aaa/AAA | 1,195,000 | 1,293,743 | |||||
Chesterfield County Industrial Development, 5.50% due 10/1/2009 (Vepco Project) | Baa1/BBB | 1,500,000 | 1,517,190 | |||||
Hampton Refunding Bond GO, 5.85% due 3/1/2007 | Aa2/AA | 595,000 | 596,101 | |||||
Norton Industrial Development Authority Hospital Revenue Refunding Improvement, 5.75% due 12/1/2012 (Norton Community Hospital Project; Insured:ACA) | NR/A | 1,460,000 | 1,588,188 | |||||
Suffolk Redevelopment Housing Authority Refunding, 4.85% due 7/1/2031 put 7/1/2011 (Windsor at Potomac Project; Collateralized: FNMA) | Aaa/NR | 3,000,000 | 3,125,100 | |||||
Virginia Toll Road Series B, 0% due 8/15/2025 pre-refunded 8/15/2008 (Pocahontas Parkway Association Project) | NR/AAA | 22,600,000 | 8,049,894 | |||||
WASHINGTON — 2.86% | ||||||||
Conservation & Renewable Energy Systems Revenue Refunding, 5.00% due 10/1/2007 (Washington Conservation Project) | Aaa/AA- | 1,000,000 | 1,014,200 | |||||
Energy Northwest Washington Electric Revenue Refunding Series A, 5.375% due 7/1/2013 (Project Number 1; Insured: FSA) | Aaa/AAA | 2,000,000 | 2,164,260 | |||||
Energy Northwest Washington Electric Revenue Series A, 4.75% due 7/1/2007 (Wind Project) | A3/A- | 1,675,000 | 1,681,432 | |||||
Energy Northwest Washington Electric Revenue Series A, 4.95% due 7/1/2008 (Wind Project) | A3/A- | 1,760,000 | 1,799,072 | |||||
Energy Northwest Washington Electric Revenue Series B, 4.95% due 7/1/2008 (Wind Project) | A3/A- | 705,000 | 712,741 | |||||
Energy Northwest Washington Electric Revenue Series B, 5.20% due 7/1/2010 pre-refunded 1/1/2007 (Wind Project) | A3/A- | 785,000 | 811,525 | |||||
Goat Hill Properties Lease Revenue, 5.00% due 12/1/2012 (Government Office Building Project; Insured: MBIA) | Aaa/AAA | 2,055,000 | 2,200,165 | |||||
Snohomish County Public Utilities District No 001 Electric Revenue, 5.00% due 12/1/2015 (Insured: FSA) | Aaa/AAA | 5,015,000 | 5,398,848 | |||||
Spokane Refunding, 5.00% due 12/15/2010 | A2/AA- | 2,430,000 | 2,466,985 | |||||
Spokane Regional Solid Waste Refunding, 5.00% due 12/1/2006 (Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,002,070 | |||||
Spokane Regional Solid Waste Refunding, 5.25% due 12/1/2007 (Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,017,220 | |||||
University of Washington Alumni Association Lease Revenue Refunding, 5.00% due 8/15/2007 (Medical Center Project; Insured: MBIA) | Aaa/AAA | 1,100,000 | 1,113,431 |
Certified Annual Report | 33 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Washington State Health Care Facilities Authority Revenue, 5.50% due 12/1/2009 (Providence Services Project; Insured: MBIA) | Aaa/AAA | $ | 1,500,000 | $ | 1,585,095 | |||
Washington State Health Care Facilities Overlake Hospital Medical Center A, 5.00% due 7/1/2013 (Credit Support:Assured Guarantee) | Aa1/AAA | 1,000,000 | 1,062,890 | |||||
Washington State Public Power Supply Systems Revenue, 5.40% due 7/1/2012 (Nuclear Project Number 2; Insured: FSA) | Aaa/AAA | 900,000 | 980,559 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series A, 6.00% due 7/1/2008 (Nuclear Project Number 1; Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,040,930 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series A, 5.10% due 7/1/2010 (Nuclear Project Number 2; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,031,410 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series A, 5.00% due 7/1/2011 (Insured: FSA) | Aaa/AAA | 2,500,000 | 2,603,225 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series B, 0% due 7/1/2008 (Nuclear Project Number 3) | Aaa/AA- | 830,000 | 777,727 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series B, 0% due 7/1/2008 (Nuclear Project Number 3) | Aaa/AA- | 1,140,000 | 1,068,203 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series C, 0% due 7/1/2013 (Insured: MBIA-IBC) | Aaa/AAA | 1,760,000 | 1,354,882 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series C, 0% due 7/1/2015 (Insured: MBIA-IBC) | Aaa/AAA | 3,000,000 | 2,113,650 | |||||
WEST VIRGINIA — 0.27% | ||||||||
Harrison County Nursing Facility Revenue Refunding, 5.625% due 9/1/2010 (Salem Health Care Corp. Project; LOC: Fleet Bank) | NR/NR | 320,000 | 326,646 | |||||
Kanawha, Mercer, Nicholas, Counties Single Family Mortgage, 0% due 2/1/2015 pre-refunded 2/1/14 | Aaa/NR | 2,260,000 | 1,511,488 | |||||
Pleasants County PCR, 4.70% due 11/1/2007 (Monongahela Power Co. Project; Insured:AMBAC) | Aaa/AAA | 1,500,000 | 1,518,870 | |||||
WISCONSIN — 0.30% | ||||||||
Bradley PCR, 6.75% due 7/1/2009 (Owens Illinois Waste Project) (ETM) | NR/B | 1,500,000 | 1,621,155 | |||||
Wisconsin State Health & Educational Facilities Authority Revenue, 6.00% due 8/15/2008 (Aurora Health Care Inc. Project; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,079,700 | |||||
WYOMING — 0.32% | ||||||||
West Park Hospital District Revenue, 5.90% due 7/1/2010 (Insured:ACA) | NR/A | 1,615,000 | 1,637,852 | |||||
Wyoming Farm Loan Board Revenue, 0% due 4/1/2009 | NR/AA | 2,500,000 | 2,274,975 | |||||
TOTAL INVESTMENTS — 98.77% (Cost $1,189,267,811) | $ | 1,209,445,074 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.23% | 15,057,313 | |||||||
NET ASSETS — 100.00% | $ | 1,224,502,387 | ||||||
34 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. See notes to financial statements. |
(1) | When-issued security. |
(2) | Segregated as collateral for a when-issued security. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
CIFG | CIFG Assurance North America Inc. | |
COP | Certificates of Participation | |
DFA | Development Finance Authority | |
ETM | Escrowed to Maturity | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FHA | Insured by Federal Housing Administration | |
FNMA | Collateralized by Federal National Mortgage Association | |
FSA | Insured by Financial Security Assurance Co. | |
GNMA | Insured by Government National Mortgage Co. | |
GO | General Obligation | |
HFA | Health Facilities Authority | |
IDRB | Industrial Development Revenue Bond | |
MBIA | Insured by Municipal Bond Investors Assurance | |
MBIA-IBC | Insured by Municipal Bond Investors Assurance - Insured Bond Certificates | |
PCR | Pollution Control Revenue Bond | |
PSF | Guaranteed by Permanent School Fund | |
RADIAN | Insured by Radian Asset Assurance | |
SONYMA | State of New York Mortgage Authority | |
XLCA | Insured by XL Capital Assurance |
SUMMARY OF SECURITY CREDIT RATINGS†
Ratings are a blend of Moody’s and Standard & Poor’s, using the higher rating. Some bonds are rated by only one service.
Certified Annual Report | 35 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Limited Term Municipal Fund
To the Trustees and Shareholders of Thornburg Limited Term 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 Limited Term Municipal Fund (one of the Portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
36 | Certified Annual Report |
EXPENSE EXAMPLE | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including
(a) sales charges (loads) on purchase payments, for Class A shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(c) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06-9/30/06 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000 | $ | 1,024.40 | $ | 4.61 | |||
Hypothetical* | $ | 1,000 | $ | 1,020.51 | $ | 4.60 | |||
Class C Shares | |||||||||
Actual | $ | 1,000 | $ | 1,022.20 | $ | 5.98 | |||
Hypothetical* | $ | 1,000 | $ | 1,019.16 | $ | 5.97 | |||
Class I Shares | |||||||||
Actual | $ | 1,000 | $ | 1,026.10 | $ | 2.90 | |||
Hypothetical* | $ | 1,000 | $ | 1,022.20 | $ | 2.90 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.91%; C: 1.18%; and I: 0.57%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report | 37 |
INDEX COMPARISON | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Limited Term Municipal Fund Class A Total Returns versus
Lehman Brothers Five Year Municipal Bond Index and Consumer Price Index
(September 30, 1984 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 9/28/84) | 1.31 | % | 2.78 | % | 3.82 | % | 5.70 | % | ||||
C Shares (Incep: 9/01/94) | 2.02 | % | 2.80 | % | 3.60 | % | 3.79 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 9/28/84) | 3.36 | % | 3.00 | % | $ | 13.53 | $ | 13.74 | ||||
C Shares (Incep: 9/01/94) | 3.13 | % | 2.80 | % | $ | 13.55 | $ | 13.55 |
Performance data reflect past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 1.50%. Class C shares assume deduction of a 0.50% contingent deferred sales charge (CDSC) for the first year only.
The Consumer Price Index (“CPI”) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
The Lehman Brothers Five-Year Municipal Bond Index is a rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must have a minimum credit rating of Baa. The approximate maturity of the municipal bonds in the index is five 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.
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 Net Asset Value (NAV) to arrive at the annualized distribution yield. The yield is calculated on a periodic basis and is subject to change depending on the Funds’ NAV and current distributions.
38 | Certified Annual Report |
TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report | 39 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
40 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report | 41 |
OTHER INFORMATION | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, 100% of dividends paid by the Fund are tax exempt dividends for Federal Income Tax purposes. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Limited Term Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor on a range of matters, including information (among other things) respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time relative to categories of mutual funds sharing certain comparable characteristics and selected by independent mutual fund analyst firms, and relative to a broad based securities index; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of
42 | Certified Annual Report |
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to single state municipal bond mutual fund categories, and in particular to broad based securities indices, is limited because the Fund’s investment objectives and strategies, as defined in its prospectuses, are unique and may vary from the parameters for selecting investments for other funds and indices, and the largely theoretical character of fixed income security indices.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully and competently pursue and achieve the Fund’s stated objectives, as reflected particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluation the Fund’s above average or better investment returns over most periods relative to two categories of mutual funds sharing certain characteristics comparable to the Fund and selected by independent mutual fund analyst firms, and the Fund’s relative performance against comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of short-intermediate term mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the management fee and expenses charged to the Fund were generally comparable to average and median fees and expenses charged to the grouping of mutual funds assembled by the mutual fund analyst firm. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by the Fund and other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
Certified Annual Report | 43 |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
44 | This page is not part of the Annual Report. |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are avail able. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’ re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street | 119 East Marcy Street | |
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |
800.847.0200 | 800.847.0200 |
Thornburg Limited Term Municipal Fund
Laddering – an All Weather Strategy
The Fund’s primary investment objective is to obtain as high a level of current income exempt from Federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital (may be subject to Alternative Minimum Tax). The secondary goal of the Fund is to reduce expected changes in its share price compared to longer intermediate and long-term bond portfolios.
This Fund is a laddered portfolio of municipal bonds with an average maturity of five years or less. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year; cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. The strategy is a good compromise for managing different types of risk.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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Receive your shareholder reports and prospectus online instead of through traditional mail. | ||
Sign up at www.thornburg.com/edelivery |
2 | This page is not part of the Annual Report. |
Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We aspire to accomplish this through a family of laddered bond funds that focus on quality, stability, and minimization of risk over time, and through a range of equity funds that redefine traditional measures of value and growth.
Our bond funds have always been managed using the highly disciplined approach of laddering short and intermediate bond maturities, seeking to provide both an attractive return and stability of principal. Laddering is an all-weather strategy, designed to perform in uncertain markets like the ones we have seen in the last two years. Moreover, all of the bond funds focus on buying investment-grade securities. We have found this strategy to be the best at managing both interest-rate risk and credit risk, and we believe this approach has served our shareholders well over time.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Our bond fund portfolio managers have many years of experience. We are proud of this consistency and experience and look forward to many more successful years with them at the helm.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely,
Garrett Thornburg
Chairman & CEO
This page is not part of the Annual Report. | 3 |
2006
Certified Annual Report
Thornburg Limited Term Municipal Fund
I Shares – September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 | Certified Annual Report |
Important Information
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
Minimum investments for Class I shares are higher than those for other classes. Returns reflect the reinvestment of dividends and capital gains. There is no up front sales charge for this class of shares.
Shares in the Fund carry risks, including possible loss of principal. As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Glossary
The Lehman Brothers Five-Year Municipal Bond Index – A rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must have a minimum credit rating of Baa. The approximate maturity of the municipal bonds in the index is five 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.
Duration – The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.
Weighted Average Maturity – A weighted average of all the effective maturities of the bonds in a portfolio. Effective maturity takes into consideration mortgage prepayments, puts, sinking funds, adjustable coupons, and other features of individual bonds and is thus a more accurate measure of interest-rate sensitivity. Longer-maturity funds are generally considered more interest-rate sensitive than their shorter counterparts.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Treasury Notes – a debt obligation of the US government backed by the “full faith and credit” of the government. Notes are intermediate to long term investments typically issued in maturities of two, five and ten years. Interest is paid semi-annually.
Certified Annual Report | 5 |
George Strickland
Portfolio Manager
October 17, 2006
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg Limited Term Municipal Fund. The net asset value of the Class I shares decreased by 6 cents to $13.53 during the twelve months ended September 30, 2006. If you were with us for the entire period, you received dividends of 48.7 cents per share. If you reinvested dividends, you received 49.6 cents per share.
Over the last twelve months, interest rates on bonds that mature in ten years or less have risen, while interest rates on long-term bonds have fallen. Higher interest rates on short-term bonds have lowered the price of most of the bonds owned by the Fund somewhat, but have allowed us to buy new bonds at higher yields and increase the yield of the portfolio. The Class I shares of your Fund produced a total return of 3.22% over the twelve month period ended September 30, 2006, compared to a 3.01% return for the Lehman Five Year Municipal Bond Index. Certain positions in the health care, electric utility, and education sectors strongly contributed to the Funds performance. These positions helped the I shares of your Fund outperform the index despite being over weighted in short-term bonds.
After rising for most of the year, bond yields fell in the third quarter of 2006 because the bond market started to anticipate a slower economy, reduced inflation, and a lower Fed Funds rate. While such an outcome is certainly possible, we believe the preponderance of evidence points to continued economic growth and a Federal Reserve that must stay on high alert to avoid inflationary acceleration.
The current case for a weak economy revolves around the detrimental effects of a declining housing market. However, slackness in residential housing is being countered with strength in commercial real estate, capital spending, state and federal government spending, and exports. Some consumers are feeling pinched by higher rates on adjustable rate mortgages, but many more are enjoying higher incomes in an economy that has produced 1.8 million new jobs over the last twelve months. So consumer spending should continue growing, and may accelerate if oil and gas prices hold in their current ranges. This should drive the economy to solid, but not spectacular, growth.
No matter how you measure it, inflation has doubled over the last three years. The current levels are not terribly alarming, but they are significantly above the Federal Reserve’s comfort zone. Fed Chairman Bernanke has stated that he thinks inflation should moderate next year, but there are reasons to think that it might not. U.S. hourly earnings are rising at a 4% rate, up from 1.6% in early 2004, and import prices have been rising steadily. These and other pressures could keep inflation stubbornly in the Fed’s discomfort zone.
So, when we look at current yield curves – inverted for Treasury notes and bonds, and very flat for municipal bonds – it appears to us that the optimistic inflation scenario is already priced into the market. In order to justify today’s 4.8% 10-year Treasury note, one must assume the Federal Reserve will begin easing monetary policy fairly soon. That implies that inflation will drop back down below 2%. If all that unfolds as expected, then current levels are justified. If it does not, then interest rates should rise on intermediate and long-term bonds. Clearly, it seems that risks are somewhat skewed toward higher interest rates.
6 | Certified Annual Report |
Your Thornburg Limited Term Municipal Fund is a laddered portfolio of over 550 municipal obligations from 45 states. Today, your Fund’s weighted average maturity is 4.44 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 short and 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 chart below describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
% of portfolio maturing | Cumulative % maturing | |||||||||||||
1 year | = | 9.6 | % | Year 1 | = | 9.6 | % | |||||||
1 to 2 years | = | 11.6 | % | Year 2 | = | 21.2 | % | |||||||
2 to 3 years | = | 9.6 | % | Year 3 | = | 30.8 | % | |||||||
3 to 4 years | = | 12.9 | % | Year 4 | = | 43.7 | % | |||||||
4 to 5 years | = | 13.6 | % | Year 5 | = | 57.3 | % | |||||||
5 to 6 years | = | 9.5 | % | Year 6 | = | 66.8 | % | |||||||
6 to 7 years | = | 10.9 | % | Year 7 | = | 77.7 | % | |||||||
7 to 8 years | = | 8.6 | % | Year 8 | = | 86.3 | % | |||||||
8 to 9 years | = | 7.1 | % | Year 9 | = | 93.4 | % | |||||||
Over 9 years | = | 6.6 | % | Over 9 years | = | 100.0 | % |
Percentages can and do vary. Data as of 9/30/06.
We took advantage of rising rates to extend the duration of the Fund over the last year. We are now firmly in neutral territory and the ladder is fairly evenly distributed (just a little light in the last three years). We are planning to gradually shorten portfolio duration over time unless new opportunities open up to us over the next few months. If interest rates on long-term bonds rise, Thornburg laddered bond portfolios should outperform more aggressive bond strategies. If interest rates hold steady or decline, then Thornburg bond portfolios should produce compelling risk-adjusted returns.
Overall, municipal credit quality continues to improve. Supported by a strong economy, state tax revenues were up 9.9% over year-ago levels in the second quarter. Tax revenues grew fastest in the Rocky Mountain and Southwest regions. Tax revenues grew slower in the Great Lakes and Southeast regions, but were still growing in the mid single digits. Other types of bonds, such as school district, utility, and health care bonds, are also generally showing solid credit characteristics. All the good news has, in our opinion, led market participants to take a very relaxed stance toward taking on credit risk. Yield spreads for lower investment grade and speculative grade bonds are well below long-term averages. While we are not anticipating impending doom for low quality bonds, we do believe it is prudent to keep credit quality high in the current environment. Your Fund is broadly diversified and 92% invested in bonds rated A or above by at least one of the major rating agencies.
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 Limited Term Municipal Fund.
Sincerely,
George Strickland
Portfolio Manager
Certified Annual Report | 7 |
STATEMENT OF ASSETS AND LIABILITIES
Thornburg Limited Term Municipal Fund | September 30, 2006 |
ASSETS | ||||
Investments at value (cost $1,189,267,811) | $ | 1,209,445,074 | ||
Cash | 307,694 | |||
Receivable for investments sold | 2,630,000 | |||
Receivable for fund shares sold | 2,748,488 | |||
Interest receivable | 16,315,205 | |||
Prepaid expenses and other assets | 41,438 | |||
Total Assets | 1,231,487,899 | |||
LIABILITIES | ||||
Payable for securities purchased | 3,107,192 | |||
Payable for fund shares redeemed | 1,896,625 | |||
Payable to investment advisor and other affiliates (Note 3) | 749,535 | |||
Accounts payable and accrued expenses | 188,356 | |||
Dividends payable | 1,043,804 | |||
Total Liabilities | 6,985,512 | |||
NET ASSETS | $ | 1,224,502,387 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (2,004 | ) | |
Net unrealized appreciation on investments | 20,176,447 | |||
Accumulated net realized gain (loss) | (9,506,274 | ) | ||
Net capital paid in on shares of beneficial interest | 1,213,834,218 | |||
$ | 1,224,502,387 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($833,188,689 applicable to 61,579,265 shares of beneficial interest outstanding - Note 4) | $ | 13.53 | ||
Maximum sales charge, 1.50% of offering price | 0.21 | |||
Maximum offering price per share | $ | 13.74 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($105,435,527 applicable to 7,778,369 shares of beneficial interest outstanding - Note 4) | $ | 13.55 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($285,878,171 applicable to 21,126,039 shares of beneficial interest outstanding - Note 4) | $ | 13.53 | ||
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
8 | Certified Annual Report |
Thornburg Limited Term Municipal Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $11,653,710) | $ | 53,839,766 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 5,362,867 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,105,306 | |||
Class C Shares | 150,081 | |||
Class I Shares | 141,656 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 2,210,611 | |||
Class C Shares | 1,195,045 | |||
Transfer agent fees | ||||
Class A Shares | 509,639 | |||
Class C Shares | 82,056 | |||
Class I Shares | 104,435 | |||
Registration and filing fees | ||||
Class A Shares | 24,791 | |||
Class C Shares | 19,462 | |||
Class I Shares | 31,948 | |||
Custodian fees (Note 3) | 375,294 | |||
Professional fees | 64,427 | |||
Accounting fees | 99,995 | |||
Trustee fees | 32,958 | |||
Other expenses | 141,099 | |||
Total Expenses | 11,651,670 | |||
Less: | ||||
Distribution and service fees waived (Note 3) | (597,523 | ) | ||
Fees paid indirectly (Note 3) | (34,314 | ) | ||
Net Expenses | 11,019,833 | |||
Net Investment Income | 42,819,933 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on Investments sold | (3,027,220 | ) | ||
Net change in unrealized appreciation (depreciation) of Investments | (3,959,006 | ) | ||
Net Realized and Unrealized Loss on Investments | (6,986,226 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 35,833,707 | ||
See notes to financial statements.
Certified Annual Report | 9 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Limited Term Municipal Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 42,819,933 | $ | 41,560,133 | ||||
Net realized loss on investments | (3,027,220 | ) | (1,895,726 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (3,959,006 | ) | (23,004,183 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 35,833,707 | 16,660,224 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (28,968,791 | ) | (29,220,801 | ) | ||||
Class C Shares | (3,602,082 | ) | (4,017,994 | ) | ||||
Class I Shares | (10,249,060 | ) | (8,321,340 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (129,601,272 | ) | (53,647,281 | ) | ||||
Class C Shares | (34,410,880 | ) | (13,573,272 | ) | ||||
Class I Shares | (3,124,294 | ) | 56,236,683 | |||||
Net Decrease in Net Assets | (174,122,672 | ) | (35,883,781 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 1,398,625,059 | 1,434,508,840 | ||||||
End of year | $ | 1,224,502,387 | $ | 1,398,625,059 | ||||
See notes to financial statements.
10 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
NOTE 1 – ORGANIZATION
Thornburg Limited Term Municipal Fund (the “Fund”)(formerly Thornburg Limited Term Municipal Fund – National Portfolio) 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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg California Limited Term Municipal Fund, Thornburg New York Intermediate Municipal Fund, Thornburg New Mexico 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, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 primary investment objective is to obtain as high a level of current income exempt from Federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary goal is to reduce expected changes in its share price compared to longer intermediate and long-term bond portfolios.
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, 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 I shares are sold at net asset value without a sales charge at the time of purchase, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent applicable 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, administrative fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: The Trust determines the value of investments utilizing an independent pricing service approved by the Board of 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 p.m. EST. When quotations are not readily available, securities are valued at evaluated prices 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; and indications as to value from dealers and general market conditions. In any case where a price is not available from a pricing service for an investment, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the Trustees. 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 Board of Trustees. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable (if any) and tax exempt income of the Fund to the shareholders. Therefore, no provision for Federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
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 capital shares 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, 2006, these fees were payable at annual rates ranging from .50 of 1% to .225 of 1% per annum of the average daily net assets of the Fund. The Trust also has 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% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned commissions aggregating $5,105 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $15,655 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 amounts 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 persons for distribution of the Fund’s shares and to obtain various shareholder and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted a Distribution Plan pursuant to Rule 12b-1, applicable only to the Fund’s Class C shares under which the 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% per annum 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 and Class C distribution fees waived by the Distributor for the year ended September 30, 2006, are set forth in the Statement of Operations. Distribution fees in the amount of $597,523 were waived for Class C shares.
The Trust 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, 2006, fees paid indirectly were $34,314. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
12 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 7,002,507 | $ | 94,383,822 | 10,112,925 | $ | 138,664,895 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,451,447 | 19,553,941 | 1,429,462 | 19,572,574 | ||||||||||
Shares repurchased | (18,068,444 | ) | (243,539,035 | ) | (15,463,654 | ) | (211,884,750 | ) | ||||||
Net Increase (Decrease) | (9,614,490 | ) | $ | (129,601,272 | ) | (3,921,267 | ) | $ | (53,647,281 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 720,729 | $ | 9,723,762 | 1,853,494 | $ | 25,470,518 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 179,128 | 2,417,463 | 198,591 | 2,724,023 | ||||||||||
Shares repurchased | (3,447,634 | ) | (46,552,105 | ) | (3,045,634 | ) | (41,767,813 | ) | ||||||
Net Increase (Decrease) | (2,547,777 | ) | $ | (34,410,880 | ) | (993,549 | ) | $ | (13,573,272 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 6,913,539 | $ | 93,207,821 | 8,961,752 | $ | 122,650,992 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 583,980 | 7,867,045 | 501,520 | 6,865,525 | ||||||||||
Shares repurchased | (7,732,221 | ) | (104,199,160 | ) | (5,348,315 | ) | (73,279,834 | ) | ||||||
Net Increase (Decrease) | (234,702 | ) | $ | (3,124,294 | ) | 4,114,957 | $ | 56,236,683 | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $290,604,894 and $426,081,275, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 1,189,273,227 | ||
Gross unrealized appreciation on a tax basis | $ | 21,940,088 | ||
Gross unrealized depreciation on a tax basis | (1,768,241 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 20,171,847 | ||
At September 30, 2006, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2006, the Fund had tax basis capital losses, which may be carried over to offset future capital gains. To the extent such carry forwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryovers expire as follows:
2007 | $ | 1,013,153 | |
2008 | 3,565,103 | ||
2013 | 30,614 | ||
2014 | 2,276,927 | ||
$ | 6,885,797 | ||
As of September 30, 2006, the Fund had deferred capital losses occurring subsequent to October 31, 2005 of $2,615,061. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
In order to account for permanent book/tax differences, the Fund decreased over-distributed investment income by $549 and increased accumulated net realized investment loss by $549. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from market discount.
Certified Annual Report | 13 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
All dividends paid by the Fund for the year ended September 30, 2006 and September 30, 2005, represent exempt interest dividends, which are excludable by shareholders from gross income for Federal income tax purposes.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
14 | Certified Annual Report |
Thornburg Limited Term Municipal Fund
Year Ended Sept. 30, | 3 Months 2004(c) | Year Ended June 30, | ||||||||||||||||||||||
Class I Shares: | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | $ | 13.65 | $ | 13.44 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.49 | 0.44 | 0.11 | 0.44 | 0.49 | 0.57 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | 0.21 | |||||||||||||||
Total from investment operations | 0.43 | 0.20 | 0.26 | 0.11 | 0.85 | 0.78 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.49 | ) | (0.44 | ) | (0.11 | ) | (0.44 | ) | (0.49 | ) | (0.57 | ) | ||||||||||||
Change in net asset value | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | 0.21 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | $ | 13.65 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.22 | % | 1.50 | % | 1.87 | % | 0.80 | % | 6.36 | % | 5.91 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.62 | % | 3.25 | % | 3.02 | %(b) | 3.18 | % | 3.54 | % | 4.18 | % | ||||||||||||
Expenses, after expense reductions | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | 0.60 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | 0.60 | % | ||||||||||||
Expenses, before expense reductions | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | 0.62 | % | ||||||||||||
Portfolio turnover rate | 23.02 | % | 27.80 | % | 4.57 | % | 21.37 | % | 15.81 | % | 19.59 | % | ||||||||||||
Net assets at end of period (000) | $ | 285,878 | $ | 290,369 | $ | 238,589 | $ | 222,760 | $ | 197,367 | $ | 123,652 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
Certified Annual Report | 15 |
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-459, CLASS C - 885-215-442, CLASS I - 885-215-434
NASDAQ SYMBOLS: CLASS A - LTMFX, CLASS C - LTMCX, CLASS I - LTMIX
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
ALABAMA — 1.26% | ||||||||
Birmingham Carraway Health Care Facilities Financing Authority Revenue, 6.25% due 8/15/2009 (Carraway Methodist Hospitals Project; Insured: Connie Lee) | NR/AAA | $ | 10,000,000 | $ | 10,332,800 | |||
Mobile GO Warrants, 4.50% due 8/15/2016 (1) | NR/NR | 3,100,000 | 3,133,883 | |||||
Scottsboro Industrial Development Board Refunding, 5.25% due 5/1/2009 (AAF McQuay Project; LOC: PNC Bank) | NR/NR | 1,920,000 | 1,921,421 | |||||
ALASKA — 0.83% | ||||||||
Alaska Energy Authority Power Revenue Refunding, 6.00% due 7/1/2011 (Bradley Lake Hydroelectric Project; Insured: FSA) | Aaa/AAA | 955,000 | 1,052,104 | |||||
Alaska Municipal Bond Bank Refunding Series One, 5.00% due 6/1/2014 (Insured: MBIA) | Aaa/AAA | 1,175,000 | 1,273,136 | |||||
Alaska Student Loan Corp. Revenue Series A, 5.25% due 1/1/2012 (Insured: FSA) | NR/AAA | 3,000,000 | 3,231,960 | |||||
Anchorage Ice Rink Revenue, 6.375% due 1/1/2020 pre-refunded 7/1/2010 | NR/NR | 1,000,000 | 1,092,000 | |||||
North Slope Boro Revenue Refunding Series A, 5.00% due 6/30/2015 (Insured: MBIA) | Aaa/AAA | 3,250,000 | 3,540,420 | |||||
ARIZONA — 0.62% | ||||||||
Mohave County Industrial Development Authority Series A, 5.00% due 4/1/2014 (Mohave Prison LLC Project; Insured: XLCA) | NR/AAA | 3,135,000 | 3,372,288 | |||||
Pima County Industrial Development Authority Education Revenue Series C, 6.40% due 7/1/2013 (Arizona Charter Schools Project) | Baa3/NR | 1,000,000 | 1,069,410 | |||||
Pima County Industrial Development Authority Revenue Refunding Lease Obligation A, 7.25% due 7/15/2010 (Insured: FSA) | Aaa/AAA | 480,000 | 481,694 | |||||
Pima County Industrial Development Authority Revenue Refunding Series A, 5.45% due 4/1/2010 (Insured: MBIA) | Aaa/AAA | 2,060,000 | 2,117,289 | |||||
Tucson Water Revenue Series D, 9.75% due 7/1/2008 | Aa3/A+ | 500,000 | 551,445 | |||||
ARKANSAS — 0.57% | ||||||||
Conway Electric Revenue Refunding, 5.00% due 8/1/2007 | A2/NR | 2,000,000 | 2,022,840 | |||||
Jefferson County Hospital Revenue Refunding & Improvement, 5.50% due 6/1/2010 (Regional Medical Center Project) | NR/A | 1,000,000 | 1,055,310 | |||||
Jefferson County Hospital Revenue Refunding & Improvement, 5.50% due 6/1/2011 (Regional Medical Center Project) | NR/A | 1,075,000 | 1,147,089 | |||||
Little Rock Hotel & Restaurant Gross Receipts Tax Refunding, 7.125% due 8/1/2009 | A3/NR | 2,645,000 | 2,791,877 | |||||
CALIFORNIA — 1.77% | ||||||||
California Health Facilities Financing Authority Revenue Refunding Series B, 5.25% due 10/1/2013 (Kaiser Permanente Project) (ETM) | A3/AAA | 2,620,000 | 2,728,337 | |||||
California Health Facilities Financing Authority Revenue Series 83 C, 9.25% due 12/1/2006 (Mercy Health Care Project) (ETM) | Aaa/AAA | 1,600,000 | 1,615,552 | |||||
California State Department of Transportation COP Refunding Series A, 5.25% due 3/1/2016 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,026,070 | |||||
California State Department of Water Resources Power Supply Series A, 5.50% due 5/1/2012 | A2/A- | 2,600,000 | 2,833,298 | |||||
California State Department of Water Resources Power Supply Series A, 6.00% due 5/1/2013 | A2/A- | 2,550,000 | 2,871,224 | |||||
Escondido Unified High School District, 5.60% due 11/1/2009 (Insured: MBIA) (ETM) | Aaa/AAA | 1,250,000 | 1,277,050 | |||||
Northern California Power Agency Public Power Revenue Series A, 5.00% due 7/1/2009 (Geothermal Project Number 3) | A2/BBB+ | 6,100,000 | 6,105,307 | |||||
Ontario Montclair School District COP Refunding, 3.80% due 9/1/2028 put 8/31/2007 (School Facility Bridge Funding Project; Insured: FSA) | Aaa/AAA | 1,655,000 | 1,655,364 | |||||
South Orange County Public Financing Authority Special Tax Revenue Series C, 8.00% due 8/15/2008 (Foothill Area Project; Insured: FGIC) | Aaa/AAA | 1,500,000 | 1,620,420 |
16 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
COLORADO — 4.55% | ||||||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 2/1/2012 (Insured: FHA, MBIA) | NR/AAA | $ | 1,310,000 | $ | 1,392,936 | |||
Adams County Revenue Platte Valley Medical Center, 5.00% due 8/1/2012 (Insured: FHA, MBIA) | NR/AAA | 1,345,000 | 1,436,581 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 2/1/2013 (Insured: FHA, MBIA) | NR/AAA | 1,380,000 | 1,477,897 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 2/1/2015 (Insured: FHA, MBIA) | NR/AAA | 1,530,000 | 1,658,719 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 8/1/2015 (Insured: FHA, MBIA) | NR/AAA | 1,565,000 | 1,702,110 | |||||
Adams County School District 012 Series A, 4.375% due 12/15/2007 | Aa3/AA- | 1,000,000 | 1,010,240 | |||||
Central Platte Valley Metropolitan District Refunding Series A, 5.00% due 12/1/2031 put 12/1/2009 (LOC: US Bank) | NR/AA | 12,365,000 | 12,711,467 | |||||
Colorado Department of Transportation Revenue Anticipation Notes, 6.00% due 6/15/2008 (Insured: AMBAC) | Aaa/AAA | 1,500,000 | 1,561,410 | |||||
Colorado Educational & Cultural Facilities, 4.90% due 4/1/2008 (Nashville Public Radio Project) (ETM) | NR/BBB+ | 685,000 | 692,247 | |||||
Colorado HFA, 5.00% due 9/1/2007 (Catholic Health Initiatives Project) | Aa2/AA | 5,705,000 | 5,774,601 | |||||
Colorado HFA, 5.25% due 10/1/2026 pre-refunded 10/1/2008 (Childrens Hospital Project; Insured: MBIA) | Aaa/AAA | 565,000 | 571,396 | |||||
Denver Convention Center Hotel, 5.25% due 12/1/2014 (LOC: XLCA) | Aaa/AAA | 3,000,000 | 3,301,200 | |||||
Denver Convention Center Hotel, 5.25% due 12/1/2015 (LOC: XLCA) | Aaa/AAA | 5,000,000 | 5,533,100 | |||||
Denver Convention Center Senior Series A, 5.00% due 12/1/2011 (Insured: XLCA) (ETM) (2) | Aaa/AAA | 3,335,000 | 3,550,141 | |||||
Highlands Ranch Metropolitan District 2 GO, 6.50% due 6/15/2012 (Insured: FSA) (ETM) | Aaa/AAA | 525,000 | 602,695 | |||||
Highlands Ranch Metropolitan District 2 GO, 6.50% due 6/15/2012 (Insured: FSA) | Aaa/AAA | 475,000 | 544,212 | |||||
Highlands Ranch Metropolitan District 3 Refunding Series B, 5.25% due 12/1/2008 (Insured: ACA) | NR/A | 1,760,000 | 1,804,493 | |||||
Highlands Ranch Metropolitan District 3 Series A GO, 5.25% due 12/1/2008 (Insured: ACA) | NR/A | 1,520,000 | 1,558,425 | |||||
Pinery West Metropolitan District 3, 4.70% due 12/1/2021 put 12/1/2007 (LOC: Compass Bank) | NR/A | 1,040,000 | 1,047,634 | |||||
Plaza Metropolitan District 1 Revenue, 7.60% due 12/1/2016 (Public Improvement Fee/Tax Increment Project) | NR/NR | 6,000,000 | 6,628,560 | |||||
Southland Metropolitan District Number 1 Unlimited GO, 6.75% due 12/1/2016 | NR/NR | 1,000,000 | 1,102,740 | |||||
DELAWARE — 0.60% | ||||||||
Delaware State Economic Development Authority Revenue, 5.50% due 7/1/2025 put 7/1/2010 (Delmarva Power & Light Project) | Baa2/BBB- | 2,045,000 | 2,141,401 | |||||
Delaware State HFA Revenue, 6.25% due 10/1/2006 (ETM) | Aaa/AAA | 845,000 | 845,110 | |||||
Delaware State HFA Revenue Series A, 5.25% due 6/1/2011 (Beebe Medical Center Project) | Baa1/BBB+ | 1,275,000 | 1,344,232 | |||||
Delaware State HFA Revenue Series A, 5.25% due 5/1/2012 (Nanticoke Memorial Hospital Project; Insured: Radian) | NR/AA | 1,370,000 | 1,464,366 | |||||
Delaware State HFA Revenue Series A, 5.25% due 5/1/2013 (Nanticoke Memorial Hospital Project; Insured: Radian) | NR/AA | 1,445,000 | 1,540,789 | |||||
DISTRICT OF COLUMBIA — 2.13% | ||||||||
District of Columbia COP, 5.25% due 1/1/2013 (Insured: AMBAC) | Aaa/AAA | 5,950,000 | 6,439,744 | |||||
District of Columbia COP, 5.25% due 1/1/2015 (Insured: FGIC) | Aaa/AAA | 2,875,000 | 3,152,926 | |||||
District of Columbia COP, 5.25% due 1/1/2016 (Insured: FGIC) | Aaa/AAA | 4,125,000 | 4,547,194 | |||||
District of Columbia Hospital Revenue Refunding, 5.10% due 8/15/2008 (Medlantic Healthcare Group A Project) (ETM) | Aaa/AAA | 1,500,000 | 1,540,710 | |||||
District of Columbia Hospital Revenue Refunding Series A, 5.70% due 8/15/2008 (Medlantic Healthcare Project) (ETM) | Aaa/AAA | 4,430,000 | 4,525,777 | |||||
District of Columbia Revenue, 6.00% due 1/1/2007 | ||||||||
(American Assoc. for Advancement of Science Project; Insured: AMBAC) | Aaa/AAA | 500,000 | 503,025 | |||||
District of Columbia Tax Increment, 0% due 7/1/2009 (Mandarin Oriental Project; Insured: FSA) | Aaa/AAA | 2,000,000 | 1,800,500 | |||||
District of Columbia Tax Increment, 0% due 7/1/2011 (Mandarin Oriental Project; Insured: FSA) | Aaa/AAA | 1,990,000 | 1,654,526 | |||||
District of Columbia Tax Increment, 0% due 7/1/2012 (Mandarin Oriental Project; Insured: FSA) | Aaa/AAA | 1,480,000 | 1,179,649 | |||||
Washington DC Convention Center Authority Dedicated Tax Revenue, 5.00% due 10/1/2006 (Insured: AMBAC) | Aaa/AAA | 750,000 | 750,060 |
Certified Annual Report | 17 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
FLORIDA — 5.51% | ||||||||
Broward County Resource Recovery Revenue Refunding, 5.375% due 12/1/2009 (Wheelabrator South Project) | A3/AA | $ | 5,000,000 | $ | 5,206,700 | |||
Capital Projects Finance Authority Series F 1, 5.50% due 10/1/2012 (Student Housing Project; Insured: MBIA) | Aaa/AAA | 1,820,000 | 1,965,473 | |||||
Capital Projects Finance Authority Series F 1, 5.50% due 10/1/2015 (Insured: MBIA) | Aaa/AAA | 3,260,000 | 3,500,686 | |||||
Capital Trust Agency Multi Family Housing Revenue Series A, 5.15% due 11/1/2030 put 11/1/2010 (Shadow Run Project; Collateralized: FNMA) | Aaa/NR | 2,190,000 | 2,266,672 | |||||
Crossings at Fleming Island Community Development Refunding Series B, 5.45% due 5/1/2010 (Insured: MBIA) | Aaa/AAA | 3,045,000 | 3,149,657 | |||||
Dade County School District GO, 4.75% due 7/15/2010 (Insured: MBIA) | Aaa/AAA | 7,000,000 | 7,075,950 | |||||
Dade County Solid Waste Systems Special Obligation Revenue Refunding, 6.00% due 10/1/2007 (Insured: AMBAC) | Aaa/AAA | 7,000,000 | 7,167,230 | |||||
Escambia County HFA Revenue, 5.00% due 11/1/2028 pre-refunded 11/1/2010 (Charity Obligation Group Project) | Aaa/NR | 2,500,000 | 2,595,525 | |||||
Escambia County HFA Revenue Series C, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB+ | 2,755,000 | 2,827,787 | |||||
Flagler County School Board COP Series A, 5.00% due 8/1/2014 (Insured: FSA) | Aaa/AAA | 1,605,000 | 1,733,079 | |||||
Florida State Department of Children & Families COP South Florida Evaluation Treatment, 5.00% due 10/1/2015 | NR/AA+ | 925,000 | 1,001,645 | |||||
Hillsborough County Assessment Revenue, 5.00% due 3/1/2015 (Insured: FGIC) | Aaa/AAA | 5,000,000 | 5,398,900 | |||||
Hillsborough County Industrial Development Authority, 5.10% due 10/1/2013 (Tampa Electric Co. Project) | Baa2/BBB- | 6,410,000 | 6,633,581 | |||||
Jacksonville Electric St. John’s River Park Systems Revenue Issue-2, 17th Series, 5.25% due 10/1/2012 | Aa2/AA- | 5,000,000 | 5,360,600 | |||||
Miami Dade County School Board COP Series B, 5.50% due 5/1/2030 put 5/1/2011 (Insured: MBIA) | Aaa/AAA | 1,010,000 | 1,083,407 | |||||
Miami Dade County Special Housing Revenue Refunding, 5.80% due 10/1/2012 (HUD Section 8) | Baa3/NR | 3,060,000 | 3,070,740 | |||||
Orange County HFA, 5.80% due 11/15/2009 (Adventist Health System Project) (ETM) | A2/NR | 1,395,000 | 1,484,447 | |||||
Orange County HFA Series A, 6.25% due 10/1/2007 (Orlando Regional Hospital Project; Insured: MBIA) | Aaa/AAA | 925,000 | 948,162 | |||||
Palm Beach County IDRB Series 1996, 6.00% due 12/1/2006 (Lourdes-Noreen McKeen Residence Project) (ETM) | NR/NR | 485,000 | 486,872 | |||||
Pelican Marsh Community Development District Refunding Series A, 5.00% due 5/1/2011 (Insured: Radian) | NR/NR | 2,580,000 | 2,586,476 | |||||
St. John’s County Industrial Development Authority Series A, 5.50% due 8/1/2014 (Presbyterian Retirement Project) | NR/NR | 1,755,000 | 1,872,129 | |||||
GEORGIA — 0.35% | ||||||||
Georgia Municipal Association Inc. COP, 5.00% due 12/1/2006 (Atlanta City Court Project; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,002,400 | |||||
Monroe County Development Authority PCR, 6.75% due 1/1/2010 (Oglethorpe Power Project; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,190,480 | |||||
Monroe County Development Authority PCR, 6.80% due 1/1/2012 (Oglethorpe Power Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,147,480 | |||||
HAWAII — 0.17% | ||||||||
Hawaii State Department of Budget & Finance Special Purpose Hawaiian Electric Co., 4.95% due 4/1/2012 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,111,760 | |||||
IDAHO — 0.25% | ||||||||
Twin Falls Urban Renewal Agency Refunding Series A, 4.95% due 8/1/2014 | NR/NR | 1,640,000 | 1,628,339 | |||||
Twin Falls Urban Renewal Agency Refunding Series A, 5.15% due 8/1/2017 | NR/NR | 1,455,000 | 1,445,601 | |||||
ILLINOIS — 10.83% | ||||||||
Bolingbrook Series B, 0% due 1/1/2016 (Insured: MBIA) | Aaa/NR | 1,500,000 | 1,022,085 |
18 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Bolingbrook Series B, 0% due 1/1/2017 (Insured: MBIA) | Aaa/NR | $ | 2,000,000 | $ | 1,290,380 | |||
Champaign County Community School District No. 116 Series C, 0% due 1/1/2009 (ETM) | Aaa/AAA | 1,205,000 | 1,109,853 | |||||
Champaign County Community School District No. 116 Unrefunded Balance Series C, 0% due 1/1/2009 (Insured: FGIC) | Aaa/AAA | 2,140,000 | 1,967,109 | |||||
Chicago Board of Education GO, 6.00% due 12/1/2009 (Insured: FGIC) | Aaa/AAA | 2,000,000 | 2,143,800 | |||||
Chicago Board of Education School Reform, 6.25% due 12/1/2012 (Insured: MBIA) | Aaa/AAA | 750,000 | 854,715 | |||||
Chicago Capital Appreciation, 0% due 1/1/2016 (City Colleges project; Insured: FGIC) | Aaa/AAA | 2,670,000 | 1,830,552 | |||||
Chicago Housing Authority Capital Program Revenue, 5.00% due 7/1/2015 (Insured: FSA) | Aaa/AAA | 8,460,000 | 9,150,675 | |||||
Chicago Housing Authority Capital Program Revenue, 5.00% due 7/1/2016 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,170,220 | |||||
Chicago Housing Authority Capital Program Revenue, 5.00% due 7/1/2007 | Aa3/NR | 1,000,000 | 1,011,040 | |||||
Chicago Housing Authority Capital Program Revenue, 5.25% due 7/1/2010 | Aa3/NR | 2,300,000 | 2,432,066 | |||||
Chicago Midway Airport Revenue Series A, 5.40% due 1/1/2009 (Insured: MBIA) | Aaa/AAA | 1,340,000 | 1,358,385 | |||||
Chicago Midway Airport Revenue Series C, 5.50% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | 1,180,000 | 1,292,749 | |||||
Chicago O’Hare International Airport Revenue, 5.375% due 1/1/2007 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,004,660 | |||||
Chicago O’Hare International Airport Revenue, 5.00% due 1/1/2012 (Insured: MBIA) | Aaa/AAA | 1,105,000 | 1,174,604 | |||||
Chicago O’Hare International Airport Revenue 2nd Lien Series C-1, 5.00% due 1/1/2010 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,041,650 | |||||
Chicago O’Hare International Airport Revenue Passenger Facility Series A, 5.625% due 1/1/2014 (Insured: AMBAC) | Aaa/AAA | 3,065,000 | 3,130,591 | |||||
Chicago Park District Parking Facility Revenue, 5.75% due 1/1/2010 (ETM) | Baa1/A | 1,000,000 | 1,065,750 | |||||
Chicago Refunding Series A, 5.375% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,213,780 | |||||
Chicago Refunding Series A-2, 6.125% due 1/1/2012 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,116,310 | |||||
Chicago Water Revenue, 6.50% due 11/1/2011 (Insured: FGIC) | Aaa/AAA | 1,810,000 | 2,046,368 | |||||
Cook County Capital Improvement, 5.50% due 11/15/2008 pre-refunded 11/15/2006 | Aaa/AAA | 995,000 | 1,007,318 | |||||
Cook County Community Consolidated School District 146 GO, 9.00% due 12/1/2016 (Tinley Park Project; Insured: FGIC) | Aaa/NR | 2,500,000 | 3,516,100 | |||||
Cook County Community Consolidated School District 15 GO, 0% due 12/1/2010 (Insured: FSA) | Aaa/NR | 2,000,000 | 1,714,220 | |||||
Cook County Community School District 97 Series B GO, 9.00% due 12/1/2013 (Insured: FGIC) | Aaa/NR | 2,250,000 | 2,970,495 | |||||
Cook County Community School District 99 GO, 9.00% due 12/1/2012 (Insured: FGIC) | Aaa/NR | 1,000,000 | 1,279,300 | |||||
Cook County Refunding Series A, 6.25% due 11/15/2013 (Insured: MBIA) | Aaa/AAA | 3,995,000 | 4,615,783 | |||||
Du Page County Forest Preservation District, 0% due 11/1/2009 (Partial ETM) | Aaa/AAA | 5,000,000 | 4,460,600 | |||||
Glenview Multi Family Revenue Refunding, 5.20% due 12/1/2027 put 12/1/2007 (Collateralized: FNMA) | NR/AAA | 1,550,000 | 1,567,143 | |||||
Hoffman Estates Tax Increment Revenue Junior Lien, 0% due 5/15/2007 | Ba1/NR | 1,500,000 | 1,457,460 | |||||
Illinois DFA Multi Family Housing Revenue Refunding Series A, 5.55% due 7/20/2008 (Collateralized: GNMA) | NR/AAA | 730,000 | 741,381 | |||||
Illinois DFA PCR Refunding, 5.70% due 1/15/2009 (Commonwealth Edison Co. Project; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,133,800 | |||||
Illinois DFA Revenue, 6.00% due 11/15/2009 (Adventist Health Project; Insured: MBIA) | Aaa/AAA | 3,635,000 | 3,861,933 | |||||
Illinois DFA Revenue, 6.00% due 11/15/2010 (Adventist Health Project; Insured: MBIA) | Aaa/AAA | 3,860,000 | 4,168,067 | |||||
Illinois DFA Revenue Provena Health Series A, 5.50% due 5/15/2011 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,035,790 | |||||
Illinois DFA Revenue Refunding Community Rehab Providers Series A, 6.00% due 7/1/2015 | NR/BBB | 4,500,000 | 4,592,205 | |||||
Illinois DFA Revenue Series A, 5.75% due 5/15/2014 (Provena Health Project; Insured: MBIA) | Aaa/AAA | 6,035,000 | 6,265,778 | |||||
Illinois HFA Revenue, 6.00% due 7/1/2009 (Insured: MBIA) | Aaa/AAA | 1,275,000 | 1,351,411 | |||||
Illinois HFA Revenue, 5.50% due 11/15/2007 (OSF Healthcare System Project) | A2/A | 915,000 | 930,857 | |||||
Illinois HFA Revenue, 6.50% due 2/15/2008 (Iowa Health System Project) | A1/NR | 1,290,000 | 1,332,480 | |||||
Illinois HFA Revenue, 6.50% due 2/15/2009 (Iowa Health System Project) | A1/NR | 1,375,000 | 1,448,480 | |||||
Illinois HFA Revenue, 6.50% due 2/15/2010 (Iowa Health System Project) (ETM) | A1/NR | 1,465,000 | 1,574,670 | |||||
Illinois HFA Revenue, 6.00% due 2/15/2011 (Iowa Health System Project; Insured: AMBAC) (ETM) | Aaa/AAA | 1,560,000 | 1,694,425 | |||||
Illinois HFA Revenue Refunding, 5.00% due 8/15/2008 (University of Chicago Hospital & Health Project; Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,539,255 | |||||
Illinois HFA Revenue Refunding, 5.50% due 11/15/2011 (Methodist Medical Center Project; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,130,230 | |||||
Illinois Hospital District, 5.50% due 1/1/2010 (Insured: FGIC) | Aaa/AAA | 1,040,000 | 1,097,834 | |||||
Illinois State COP Central Management Department, 5.00% due 7/1/2007 (Insured: AMBAC) | Aaa/AAA | 500,000 | 505,370 |
Certified Annual Report | 19 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Lake County Community High School District 117 Series B, 0% due 12/1/2006 (Insured: FGIC) | Aaa/NR | $ | 2,000,000 | $ | 1,988,020 | |||
Lake County Community High School District 117 Series B, 0% due 12/1/2011 (Insured: FGIC) | Aaa/NR | 3,235,000 | 2,658,620 | |||||
McHenry & Kane Counties Community Consolidated School District 158, 0% due 1/1/2010 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 885,230 | |||||
McHenry & Kane Counties Community Consolidated School District 158, 0% due 1/1/2012 (Insured: FGIC) | Aaa/AAA | 2,200,000 | 1,801,382 | |||||
Mclean & Woodford Counties School District GO, 7.375% due 12/1/2010 (Insured: FSA) | Aaa/NR | 1,500,000 | 1,712,880 | |||||
Metropolitan Pier & Exposition Authority Dedicated State Tax Refunding, 0% due 6/15/2013 (McCormick Project; Insured: MBIA) | Aaa/AAA | 1,045,000 | 807,022 | |||||
Metropolitan Pier & Exposition Authority Dedicated State Tax Revenue Series A-2002, 6.00% due 6/15/2007 (McCormick Project; Insured: AMBAC) | Aaa/AAA | 3,750,000 | 3,813,975 | |||||
Naperville City, Du Page & Will Counties Economic Development Revenue, 6.10% due 5/1/2008 (Hospital & Health System Association Project; LOC: Bank One N.A.) | NR/AA- | 1,305,000 | 1,320,086 | |||||
Peoria Public Building Commission School District Facilities Revenue, 0% due 12/1/2007 (Insured: FGIC) | Aaa/NR | 1,100,000 | 1,054,416 | |||||
State of Illinois Waubonsee Community College District No. 516 GO, 0% due 12/15/2013 (Insured: FGIC) | Aaa/AAA | 3,000,000 | 2,223,120 | |||||
University of Illinois COP Series A, 5.00% due 8/15/2019 pre-refunded 8/15/2011 (Utility Infrastructure Project) | Aaa/AAA | 5,235,000 | 5,568,417 | |||||
University of Illinois Revenues, 0% due 10/1/2006 (Insured: MBIA) | Aaa/AAA | 6,300,000 | 6,298,803 | |||||
INDIANA — 7.18% | ||||||||
Allen County Economic Development Revenue, 5.30% due 12/30/2006 (Indiana Institute of Technology Project) | NR/NR | 690,000 | 692,222 | |||||
Allen County Economic Development Revenue, 5.60% due 12/30/2009 (Indiana Institute of Technology Project) | NR/NR | 1,110,000 | 1,153,678 | |||||
Allen County Economic Development Revenue, 5.00% due 12/30/2012 (Indiana Institute of Technology Project) | NR/NR | 1,370,000 | 1,416,690 | |||||
Allen County Jail Building Corp. First Mortgage, 5.75% due 10/1/2010 (ETM) | Aa3/NR | 1,115,000 | 1,205,839 | |||||
Allen County Jail Building Corp. First Mortgage GO, 5.00% due 10/1/2011 (Insured: XLCA) | Aaa/AAA | 2,390,000 | 2,528,548 | |||||
Allen County Jail Building Corp. First Mortgage GO, 5.00% due 10/1/2012 (Insured: XLCA) | Aaa/AAA | 1,275,000 | 1,358,232 | |||||
Allen County Jail Building Corp. First Mortgage GO, 5.00% due 10/1/2014 (Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,076,800 | |||||
Allen County Jail Building Corp. First Mortgage GO, 5.00% due 10/1/2015 (Insured: XLCA) | Aaa/AAA | 1,480,000 | 1,599,717 | |||||
Allen County Jail Building Corp. First Mortgage GO, 5.00% due 10/1/2016 (Insured: XLCA) | Aaa/AAA | 1,520,000 | 1,642,330 | |||||
Allen County Redevelopment District Tax Series A, 5.00% due 11/15/2016 | A3/NR | 1,000,000 | 1,042,740 | |||||
Ball State University Revenues Student Fee Series K, 5.75% due 7/1/2012 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,099,040 | |||||
Boone County Hospital Association Lease Revenue, 5.00% due 1/15/2007 (ETM) | Aaa/AAA | 1,085,000 | 1,089,600 | |||||
Boonville Junior High School Building Corp. Revenue, 0% due 7/1/2010 (State Aid Withholding) | NR/A | 850,000 | 722,891 | |||||
Boonville Junior High School Building Corp. Revenue, 0% due 1/1/2011 (State Aid Withholding) | NR/A | 850,000 | 704,820 | |||||
Boonville Junior High School Building Corp. Revenue, 0% due 7/1/2011 (State Aid Withholding) | NR/A | 950,000 | 770,593 | |||||
Brownsburg 1999 School Building, 5.00% due 8/1/2011 (Insured: FSA) | NR/AAA | 1,835,000 | 1,948,660 | |||||
Brownsburg 1999 School Building, 5.25% due 2/1/2012 (Insured: FSA) | NR/AAA | 1,880,000 | 2,025,380 | |||||
Brownsburg 1999 School Building, 5.25% due 8/1/2012 (Insured: FSA) | NR/AAA | 1,755,000 | 1,901,191 | |||||
Carmel Redevelopment Authority Lease Performing Arts, 0% due 2/1/2015 | Aa2/AA | 1,575,000 | 1,119,856 | |||||
Center Grove 2000 Building First Mortgage, 5.00% due 7/15/2009 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,175,000 | 1,220,202 | |||||
Center Grove 2000 Building First Mortgage, 5.00% due 7/15/2010 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,135,000 | 1,193,214 | |||||
Dekalb County Redevelopment Authority Lease Rental Revenue Refunding, 5.00% due 1/15/2011 (Mini Mill Local Public Improvement Project; Insured: XLCA) | Aaa/AAA | 1,015,000 | 1,064,796 | |||||
Dekalb County Redevelopment Authority Lease Rental Revenue Refunding, 5.00% due 1/15/2012 (Mini Mill Local Public Improvement Project; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,056,460 | |||||
Dekalb County Redevelopment Authority Lease Rental Revenue Refunding, 5.25% due 1/15/2013 (Mini Mill Local Public Improvement Project; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,074,540 | |||||
Dekalb County Redevelopment Authority Lease Rental Revenue Refunding, 5.25% due 1/15/2014 (Mini Mill Local Public Improvement Project; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,072,010 |
20 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Eagle Union Middle School Building Corp., 5.50% due 7/15/2009 (ETM) | Aaa/AAA | $ | 910,000 | $ | 957,011 | |||
Elberfeld J. H. Castle School Building Corp. Indiana First Mortgage Refunding, 0% due 7/5/2008 (Insured: MBIA) | NR/AAA | 1,860,000 | 1,744,531 | |||||
Evansville Vanderburgh Refunding, 5.00% due 7/15/2014 (Insured: AMBAC) | NR/AAA | 1,000,000 | 1,080,170 | |||||
Evansville Vanderburgh Refunding, 5.00% due 7/15/2015 (Insured: AMBAC) | NR/AAA | 1,000,000 | 1,084,970 | |||||
Goshen Multi-School Building Corp. First Mortgage, 5.20% due 7/15/2007 (Insured: MBIA) (ETM) | Aaa/AAA | 965,000 | 973,116 | |||||
Hammond Multi-School Building Corp. First Mortgage Refunding Bond Series 1997, 6.00% due 7/15/2008 (Lake County Project; State Aid Withholding) | Aaa/A | 1,850,000 | 1,897,452 | |||||
Huntington Economic Development Revenue, 6.00% due 11/1/2006 (United Methodist Membership Project) | NR/NR | 105,000 | 105,139 | |||||
Huntington Economic Development Revenue, 6.15% due 11/1/2008 (United Methodist Membership Project) | NR/NR | 700,000 | 721,511 | |||||
Huntington Economic Development Revenue, 6.20% due 11/1/2010 (United Methodist Membership Project) | NR/NR | 790,000 | 817,144 | |||||
Indiana Health Facility Financing Authority Hospital Revenue Series D, 5.00% due 11/1/2026 pre-refunded 11/1/2007 | Aaa/NR | 1,600,000 | 1,623,328 | |||||
Indiana State Educational Facilities Authority Revenue, 5.75% due 10/1/2009 (University of Indianapolis Project) | NR/A- | 670,000 | 703,085 | |||||
Indiana University Revenues Refunding, 0% due 8/1/2007 (Insured: AMBAC) | Aaa/AAA | 2,500,000 | 2,426,425 | |||||
Indianapolis Airport Authority Revenue Refunding Series A, 5.35% due 7/1/2007 (Insured: FGIC) | Aaa/AAA | 1,100,000 | 1,114,399 | |||||
Indianapolis Local Public Improvement Bond Series D, 5.00% due 7/1/2016 (Insured: FGIC) | Aaa/AAA | 1,030,000 | 1,116,479 | |||||
Indianapolis Local Public Improvement Bond Series F, 5.00% due 1/1/2015 (Waterworks Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,084,290 | |||||
Indianapolis Local Public Improvement Bond Series F, 5.00% due 7/1/2015 (Waterworks Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,087,830 | |||||
Indianapolis Resource Recovery Revenue Refunding, 6.75% due 12/1/2006 (Ogden Martin Systems, Inc. Project; Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,009,840 | |||||
Knox Middle School Building Corp. First Mortgage, 6.00% due 7/15/2008 (Insured: FGIC) | Aaa/AAA | 855,000 | 890,568 | |||||
Knox Middle School Building Corp. First Mortgage, 6.00% due 7/15/2009 (Insured: FGIC) | Aaa/AAA | 455,000 | 483,756 | |||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2014 (Insured: FGIC) | Aaa/AAA | 1,200,000 | 1,297,044 | |||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2015 (Insured: FGIC) | Aaa/AAA | 1,250,000 | 1,357,187 | |||||
Monroe County Community School Building Corp. Revenue Refunding, 5.00% due 1/15/2007 (Insured: AMBAC) | Aaa/AAA | 315,000 | 316,298 | |||||
Mount Vernon of Hancock County Refunding First Mortgage, 5.00% due 7/15/2013 (Insured: MBIA) | Aaa/AAA | 1,055,000 | 1,135,887 | |||||
Mount Vernon of Hancock County Refunding First Mortgage, 5.00% due 7/15/2014 (Insured: MBIA) | Aaa/AAA | 1,135,000 | 1,227,593 | |||||
Mount Vernon of Hancock County Refunding First Mortgage, 5.00% due 7/15/2015 (Insured: MBIA) | Aaa/AAA | 1,140,000 | 1,238,644 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2016 (146th Street Extension A Project) | NR/A+ | 1,660,000 | 1,760,546 | |||||
Northwestern School Building Corp., 5.00% due 7/15/2011 (State Aid Withholding) | NR/AAp | 1,240,000 | 1,312,280 | |||||
Perry Township Multi School Building Refunding, 5.00% due 1/10/2013 (Insured: FSA) | Aaa/NR | 1,225,000 | 1,309,905 | |||||
Perry Township Multi School Building Refunding, 5.00% due 7/10/2013 (Insured: FSA) | Aaa/NR | 2,025,000 | 2,173,817 | |||||
Perry Township Multi School Building Refunding, 5.00% due 7/10/2014 (Insured: FSA) | Aaa/NR | 2,130,000 | 2,297,674 | |||||
Peru Community School Corp. Refunding First Mortgage, 0% due 7/1/2010 (State Aid Withholding) | NR/A | 835,000 | 710,134 | |||||
Plainfield Community High School Building Corp. First Mortgage, 5.00% due 1/15/2015 (Insured: FGIC) | Aaa/AAA | 1,445,000 | 1,565,051 | |||||
Rockport PCR Series C, 2.625% due 4/1/2025 put 10/1/2006 (Indiana Michigan Power Co. Project) | Baa2/BBB | 4,030,000 | 4,030,000 | |||||
Warren Township Vision 2005, 5.00% due 7/10/2015 (Insured: FGIC) | Aaa/AAA | 2,095,000 | 2,267,418 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2010 (State Aid Withholding) (ETM) | NR/AA | 995,000 | 1,063,546 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2011 (State Aid Withholding) (ETM) | NR/AA | 1,095,000 | 1,187,714 | |||||
West Clark 2000 School Building Corp., 5.25% due 1/15/2013 (Insured: MBIA) | Aaa/AAA | 1,235,000 | 1,341,469 | |||||
West Clark 2000 School Building Corp., 5.25% due 7/15/2013 (Insured: MBIA) | Aaa/AAA | 1,305,000 | 1,424,486 | |||||
West Clark 2000 School Building Corp., 5.25% due 1/15/2014 (Insured: MBIA) | Aaa/AAA | 1,335,000 | 1,460,623 | |||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2011 (State Aid Withholding) | Aaa/AAA | 2,080,000 | 2,273,086 | |||||
Westfield Elementary School Building Corp. First Mortgage Series 1997, 6.80% due 7/15/2007 (ETM) | Aaa/AAA | 765,000 | 778,388 | |||||
Whitko Middle School Building Corp. Refunding, 5.35% due 7/15/2007 (Insured: FSA) | Aaa/AAA | 665,000 | 671,451 |
Certified Annual Report | 21 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
IOWA — 2.62% | ||||||||
Ankeny Community School District Sales & Services Tax Revenue, 5.00% due 7/1/2010 | NR/AA- | $ | 2,900,000 | $ | 3,016,435 | |||
Des Moines Limited Obligation Revenue, 4.00% due 12/1/2015 put 12/1/2006 (Des Moines Parking Associates Project; LOC: Wells Fargo Bank) | NR/NR | 3,180,000 | 3,177,711 | |||||
Dubuque Community School District Series B, 5.00% due 1/1/2013 | NR/NR | 1,600,000 | 1,622,832 | |||||
Dubuque Community School District Series B, 5.00% due 7/1/2013 | NR/NR | 1,640,000 | 1,663,124 | |||||
Iowa Finance Authority Commercial Development Revenue Refunding, 5.75% due 4/1/2014 put 4/1/2010 (Governor Square Project; Insured: AXA) | NR/AA- | 6,650,000 | 6,835,801 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.50% due 2/15/2007 (Iowa Health Services Project) | Aa3/NR | 435,000 | 439,076 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.50% due 2/15/2009 (Iowa Health Services Project) | Aa3/NR | 1,825,000 | 1,922,528 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.50% due 2/15/2010 (Iowa Health Services Project) | Aa3/NR | 1,955,000 | 2,101,351 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.00% due 2/15/2011 pre-refunded 2/15/2010 (Iowa Health Services Project; Insured: AMBAC) | Aaa/AAA | 3,145,000 | 3,410,784 | |||||
Iowa Finance Authority Revenue Trinity Health Series B, 5.75% due 12/1/2007 | Aa3/AA- | 1,430,000 | 1,462,132 | |||||
Iowa Finance Authority Revenue Trinity Health Series B, 5.75% due 12/1/2010 | Aa3/AA- | 3,295,000 | 3,498,565 | |||||
Tobacco Settlement Authority, 5.30% due 6/1/2025 pre-refunded 6/1/2011 | NR/AAA | 2,695,000 | 2,884,243 | |||||
KENTUCKY — 1.33% | ||||||||
Kentucky Economic Development Finance Authority Series C, 5.35% due 10/1/2009 (Norton Healthcare Project; Insured: MBIA) | Aaa/AAA | 7,400,000 | 7,752,906 | |||||
Kentucky Economic Development Finance Authority Series C, 5.40% due 10/1/2010 (Norton Healthcare Project; Insured: MBIA) | Aaa/AAA | 7,830,000 | 8,325,796 | |||||
Louisville Water Revenue Refunding, 6.00% due 11/15/2006 (ETM) | Aaa/AAA | 150,000 | 150,429 | |||||
LOUISIANA — 3.25% | ||||||||
England District, 5.00% due 8/15/2010 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,047,550 | |||||
Jefferson Sales Tax District Special Sales Tax Revenue, 5.25% due 12/1/2006 (Insured: AMBAC) | Aaa/AAA | 1,440,000 | 1,443,845 | |||||
Jefferson Sales Tax District Special Sales Tax Revenue, 5.25% due 12/1/2007 (Insured: AMBAC) | Aaa/AAA | 1,515,000 | 1,542,664 | |||||
Louisiana Environmental Facilities & Community Development Authority Multi Family Revenue Series A, 5.00% due 9/1/2012 (Bellemont Apartments Project) | Baa1/NR | 1,000,000 | 998,950 | |||||
Louisiana Public Facilities Authority Hospital Revenue Series A, 5.50% due 7/1/2010 (Franciscan Missionaries Project; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,059,990 | |||||
Louisiana Public Facilities Authority Revenue, 5.50% due 10/1/2006 (Loyola University Project) | A1/A+ | 1,280,000 | 1,280,064 | |||||
Louisiana Public Facilities Authority Revenue, 5.75% due 10/1/2008 (Loyola University Project) | A1/A+ | 1,000,000 | 1,022,560 | |||||
Louisiana Public Facilities Authority Revenue, 5.375% due 12/1/2008 (Wynhoven Health Care Center Project; Guaranty: Archdiocese of New Orleans) | NR/NR | 1,425,000 | 1,432,567 | |||||
Louisiana State Citizens Property Insurance Corp., 5.00% due 6/1/2015 (Insured: AMBAC) | Aaa/AAA | 5,000,000 | 5,413,400 | |||||
Louisiana State Correctional Facilities Corp. Lease Refunding, 5.00% due 12/15/2008 (Insured: Radian) | NR/AA | 7,135,000 | 7,309,950 | |||||
Louisiana State Correctional Facilities Corp. Lease Revenue Refunding, 5.00% due 12/15/2007 (Insured: Radian) | NR/AA | 3,760,000 | 3,811,813 | |||||
Louisiana State Office Facilities Corp., 5.50% due 5/1/2013 (Capitol Complex Project; Insured: AMBAC) | Aaa/AAA | 1,150,000 | 1,238,228 | |||||
Louisiana State Offshore Terminal Authority Deepwater Port Revenue, 4.375% due 10/1/2020 put 6/1/2007 (Loop LLC Project) | A3/A | 2,350,000 | 2,356,768 | |||||
Louisiana State Series A, 5.50% due 11/15/2008 (Insured: FGIC) | Aaa/AAA | 1,980,000 | 2,057,953 | |||||
Monroe Sales Tax Increment Garrett Road Economic Development Area, 5.00% due 3/1/2017 (Insured: Radian) | Aa3/AA | 1,505,000 | 1,594,773 | |||||
New Orleans Exhibit Hall Authority Series A, 5.00% due 7/15/2009 (Ernest N. Morial Convention Center Project; Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,065,100 | |||||
New Orleans Parish School Board, 0% due 2/1/2008 (ETM) | Aaa/AAA | 3,480,000 | 3,115,783 | |||||
St. Tammany Parish Sales Tax, 5.00% due 6/1/2010 (Insured: CIFG) | NR/AAA | 1,000,000 | 1,047,360 |
22 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
MARYLAND — 0.33% | ||||||||
Howard County Retirement Community Revenue Series A, 7.25% due 5/15/2015 pre-refunded 5/15/2010 | NR/AAA | $ | 1,000,000 | $ | 1,149,950 | |||
Howard County Retirement Community Revenue Series A, 7.875% due 5/15/2021 pre-refunded 5/15/2010 | NR/AAA | 2,500,000 | 2,925,700 | |||||
MASSACHUSETTS — 3.47% | ||||||||
Massachusetts Development Finance Agency Resource Recovery Revenue Series A, 5.50% due 1/1/2011 (Seamass Partnership; Insured: MBIA) | Aaa/AAA | 3,470,000 | 3,712,241 | |||||
Massachusetts Development Finance Agency Resource Recovery Revenue Series B, 5.625% due 1/1/2012 (Seamass Partnership; Insured: MBIA) | Aaa/AAA | 1,240,000 | 1,348,661 | |||||
Massachusetts State Construction Loan Series C, 5.50% due 11/1/2013 (Insured: FGIC) | Aaa/AAA | 685,000 | 761,556 | |||||
Massachusetts State Construction Loan Series C, 5.00% due 9/1/2015 | Aa2/AA | 10,000,000 | 10,890,300 | |||||
Massachusetts State Construction Loan Series D, 6.00% due 11/1/2013 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,141,360 | |||||
Massachusetts State Health & Educational Berkshire Health Systems Series F, 5.00% due 10/1/2011 (Insured: Assured Guaranty) | NR/AAA | 2,345,000 | 2,484,223 | |||||
Massachusetts State Health & Educational Berkshire Health Systems Series F, 5.00% due 10/1/2012 (Insured: Assured Guaranty) | NR/AAA | 2,330,000 | 2,485,970 | |||||
Massachusetts State Health & Educational Berkshire Health Systems Series F, 5.00% due 10/1/2013 (Insured: Assured Guaranty) | NR/AAA | 3,215,000 | 3,450,338 | |||||
Massachusetts State Health & Educational Facilities Authority Revenue Series H, 5.375% due 5/15/2012 (New England Medical Center Hospital Project; Insured: FGIC) | Aaa/AAA | 3,415,000 | 3,707,221 | |||||
Massachusetts State Industrial Finance Agency, 5.90% due 7/1/2027 pre-refunded 7/1/2007 (Dana Hall School Project) | NR/NR | 1,220,000 | 1,264,725 | |||||
Massachusetts State Industrial Finance Agency Biomedical A, 0% due 8/1/2010 | Aa2/AA- | 10,000,000 | 8,651,200 | |||||
Massachusetts State Refunding GO Series A, 6.00% due 11/1/2008 | Aa2/AA | 1,000,000 | 1,049,080 | |||||
Massachusetts State Refunding GO Series A, 5.50% due 1/1/2010 | Aa2/AA | 1,500,000 | 1,588,620 | |||||
MICHIGAN — 2.67% | ||||||||
Dearborn Economic Development Corp. Oakwood Obligation Group Series A, 5.75% due 11/15/2015 (Insured: FGIC) | Aaa/AAA | 2,450,000 | 2,496,427 | |||||
Detroit Convention Facility, 5.25% due 9/30/2007 | NR/A | 1,000,000 | 1,014,230 | |||||
Detroit Series A, 6.00% due 4/1/2007 (ETM) | Aaa/AAA | 1,405,000 | 1,422,520 | |||||
Dickinson County Healthcare Systems Hospital Revenue Refunding, 5.50% due 11/1/2013 (Insured: ACA) | NR/A | 2,500,000 | 2,624,975 | |||||
Gull Lake Community School District GO, 0% due 5/1/2013 (Insured: FGIC) | Aaa/AAA | 3,000,000 | 2,158,200 | |||||
Michigan HFA Revenue, 5.375% due 7/1/2012 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,022,400 | |||||
Michigan HFA Revenue Series A, 5.375% due 11/15/2033 put 11/15/2007 (Ascension Health Project) | Aa2/AA | 10,000,000 | 10,185,400 | |||||
Michigan State COP Series A, 5.00% due 9/1/2031 put 9/1/2011 (Insured: MBIA) | Aaa/AAA | 6,000,000 | 6,326,640 | |||||
Michigan State Strategic Fund Refunding Detroit Educational, 4.85% due 9/1/2030 put 9/1/2011 (Insured: AMBAC) | Aaa/NR | 2,075,000 | 2,166,508 | |||||
Oakland County Economic Development Corp. Limited, 5.50% due 6/1/2014 pre-refunded 6/1/2007 (Lutheran Social Services; LOC: First America Bank) | Aa3/NR | 1,000,000 | 1,032,800 | |||||
Summit Academy North Michigan School District, 8.75% due 7/1/2030 pre-refunded 7/1/2010 | NR/NR | 1,100,000 | 1,289,475 | |||||
MINNESOTA — 0.22% | ||||||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2012 (Healthpartners Obligation Group Project) | Baa1/BBB+ | 1,000,000 | 1,063,330 | |||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2013 (Healthpartners Obligation Group Project) | Baa1/BBB+ | 1,500,000 | 1,602,510 |
Certified Annual Report | 23 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
MISSISSIPPI — 0.67% | ||||||||
De Soto County School District Trust Certificates, 5.00% due 12/1/2015 (Insured: MBIA) | Aaa/NR | $ | 1,000,000 | $ | 1,035,790 | |||
Gautier Utility District Systems Revenue Refunding, 5.50% due 3/1/2012 (Insured: FGIC) | Aaa/NR | 1,020,000 | 1,108,220 | |||||
Mississippi Hospital Equipment & Facilities Authority Revenue Refunding, 6.00% due 1/1/2015 (Forrest County General Hospital Project; Insured: FSA) | Aaa/NR | 1,365,000 | 1,484,519 | |||||
Mississippi Hospital Equipment & Facilities Baptist Memorial Health B2, 3.50% due 9/1/2022 put 10/1/2006 | NR/NR | 3,500,000 | 3,499,895 | |||||
Mississippi State GO, 6.20% due 2/1/2008 (ETM) | Aaa/AAA | 985,000 | 1,015,525 | |||||
MISSOURI — 0.40% | ||||||||
Missouri Development Finance Board Healthcare Facilities Revenue Series A, 4.80% due 11/1/2012 (Lutheran Home Aged Project; LOC: Commerce Bank) | Aa3/NR | 1,275,000 | 1,300,130 | |||||
Missouri State Health & Educational Facilities Authority Revenue Series A, 5.00% due 6/1/2011 | NR/AA- | 1,000,000 | 1,052,280 | |||||
St. Louis County Refunding, 5.00% due 8/15/2007 (Convention & Sports Facility Project B 1; Insured: AMBAC) | Aaa/AAA | 2,495,000 | 2,526,437 | |||||
MONTANA — 1.29% | ||||||||
Forsyth PCR Refunding, 5.00% due 10/1/2032 put 12/30/2008 (Insured: AMBAC) | Aaa/AAA | 11,440,000 | 11,735,495 | |||||
Forsyth PCR Refunding, 5.20% due 5/1/2033 put 5/1/2009 (Portland General Project) | Baa1/BBB+ | 4,000,000 | 4,109,560 | |||||
NEBRASKA — 0.71% | ||||||||
Madison County Hospital Authority Revenue 1, 5.25% due 7/1/2010 (Faith Regional Health Services Project; Insured: Radian) | NR/AA | 1,455,000 | 1,529,671 | |||||
Madison County Hospital Authority Revenue 1, 5.50% due 7/1/2012 (Faith Regional Health Services Project; Insured: Radian) | NR/AA | 1,625,000 | 1,749,767 | |||||
Omaha Public Power District Electric Revenue Refunding Systems B, 5.00% due 2/1/2013 | Aa2/AA | 5,000,000 | 5,353,550 | |||||
NEVADA — 1.49% | ||||||||
Clark County District 121 A Refunding, 5.00% due 12/1/2015 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,158,880 | |||||
Clark County School District Series D GO, 5.00% due 6/15/2015 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,075,080 | |||||
Humboldt County PCR Refunding, 6.55% due 10/1/2013 (Sierra Pacific Project; Insured: AMBAC) | Aaa/AAA | 5,000,000 | 5,091,050 | |||||
Las Vegas Special Refunding Local Improvement District 707 Series A, 5.125% due 6/1/2011 (Insured: FSA) | Aaa/AAA | 1,670,000 | 1,740,691 | |||||
Nevada Housing Division Multi Family Certificate A, 4.80% due 4/1/2008 (Collateralized: FNMA) | NR/AAA | 220,000 | 219,914 | |||||
Nevada State Colorado River Commission Power Delivery Series A GO, 7.00% due 9/15/2008 pre-refunded 9/15/2007 | Aa1/AA+ | 840,000 | 867,493 | |||||
Sparks Redevelopment Agency Tax Allocation Revenue Refunding Series A, 5.75% due 1/15/2009 (Insured: Radian) | NR/AA | 1,000,000 | 1,042,780 | |||||
Sparks Redevelopment Agency Tax Allocation Revenue Refunding Series A, 5.75% due 1/15/2010 (Insured: Radian) | NR/AA | 1,000,000 | 1,057,710 | |||||
Sparks Redevelopment Agency Tax Allocation Revenue Refunding Series A, 5.75% due 1/15/2011 (Insured: Radian) | NR/AA | 1,285,000 | 1,368,243 | |||||
Washoe County School District, 5.50% due 6/1/2008 (Insured: FSA) | Aaa/AAA | 3,500,000 | 3,610,810 | |||||
NEW HAMPSHIRE — 0.42% | ||||||||
Manchester Housing & Redevelopment Authority Series A, 6.05% due 1/1/2012 (Insured: ACA) | NR/A | 1,500,000 | 1,600,380 | |||||
New Hampshire Industrial Development Authority Revenue, 3.75% due 12/1/2009 (Central Vermont Public Services Project; LOC: Citizens Bank) | NR/AA- | 2,880,000 | 2,889,302 | |||||
New Hampshire System Revenue Series A, 7.00% due 11/1/2006 (Insured: FGIC) | Aaa/AAA | 665,000 | 666,949 | |||||
NEW JERSEY — 2.68% | ||||||||
Hudson County COP, 7.00% due 12/1/2012 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,170,440 | |||||
Hudson County COP, 6.25% due 12/1/2014 (Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,737,960 |
24 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
New Jersey Economic Development Authority Revenue Cigarette Tax, 5.00% due 6/15/2010 (Insured: FSA) | Aaa/AAA | $ | 1,000,000 | $ | 1,048,530 | |||
New Jersey Economic Development Authority Revenue Cigarette Tax, 5.00% due 6/15/2012 (Insured: FGIC) | Aaa/AAA | 7,375,000 | 7,860,570 | |||||
New Jersey State Transportation Corp. Fed Transportation Administration Grants Series A, 5.50% due 9/15/2013 (Insured: AMBAC) | Aaa/AAA | 7,650,000 | 8,449,578 | |||||
New Jersey State Transportation Corp. Series A, 5.25% due 9/15/2013 (Insured: AMBAC) | Aaa/AAA | 5,000,000 | 5,446,750 | |||||
New Jersey State Transportation Trust Fund Authority Series C, 5.25% due 6/15/2013 (Transportation Systems Project; Insured: MBIA) (ETM) | Aaa/AAA | 5,000,000 | 5,470,250 | |||||
Newark Housing Authority Port Authority Rental Backed, 5.00% due 1/1/2010 (Newark Marine Terminal Redevelopment Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,043,530 | |||||
Pequannock River Basin Regional Sewage Authority Refunding Series M, 5.00% due 12/1/2006 (Sewer Revenue Project; Insured: MBIA) | Aaa/NR | 630,000 | 631,556 | |||||
NEW MEXICO — 1.49% | ||||||||
Albuquerque Joint Water & Sewage Systems Revenue Refunding & Improvement Series A, 5.25% due 7/1/2011 | Aa2/AA | 1,135,000 | 1,218,173 | |||||
Farmington PCR, 3.85% due 9/1/2024 put 10/2/2006 (LOC: Barclays Bank) (daily demand notes) | P1/A-1+ | 1,000,000 | 1,000,000 | |||||
Farmington Utility Systems Revenue Refunding Series A, 5.00% due 5/15/2011 (Insured: FSA) | Aaa/AAA | 3,000,000 | 3,183,090 | |||||
Gallup PCR Refunding Tri State Generation, 5.00% due 8/15/2012 (Insured: AMBAC) | Aaa/AAA | 3,345,000 | 3,561,421 | |||||
New Mexico Highway Commission Revenue Subordinated Lien Tax Series B, 5.00% due 6/15/2011 (Insured: AMBAC) (ETM) | Aaa/AAA | 4,865,000 | 5,148,824 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 1/1/2011 (Insured: FSA & FHA) | Aaa/AAA | 1,790,000 | 1,887,967 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 7/1/2011 (Insured: FSA & FHA) | Aaa/AAA | 2,065,000 | 2,189,292 | |||||
NEW YORK — 6.99% | ||||||||
Brookhaven Industrial Development Agency Revenue, 4.375% due 11/1/2031 put 11/1/2006 (Methodist Retirement Community Project; LOC: Northfork Bank) | A1/A- | 2,100,000 | 2,100,714 | |||||
Hempstead Town Industrial Development Agency Resource Recovery Revenue, 5.00% due 12/1/2008 (American Ref-Fuel Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,022,190 | |||||
Long Island Power Authority Electric Systems Revenue General Series A, 6.00% due 12/1/2007 (Insured: AMBAC) | Aaa/AAA | 2,285,000 | 2,349,117 | |||||
Long Island Power Authority Electric Systems Revenue General Series B, 5.00% due 12/1/2006 | A3/A- | 7,000,000 | 7,015,680 | |||||
Metropolitan Transportation Authority Revenue Series B, 5.00% due 11/15/2007 | A2/A | 5,000,000 | 5,077,050 | |||||
Metropolitan Transportation Authority Service Series B, 5.25% due 7/1/2007 | A1/AA- | 4,535,000 | 4,591,370 | |||||
Monroe County Industrial Development Agency, 5.375% due 6/1/2007 (St. John Fisher College Project; Insured: Radian) | NR/AA | 1,050,000 | 1,061,309 | |||||
New York City Housing Development Corp. Multi Family Housing Revenue Refunding Series A, 5.50% due 11/1/2009 (Insured: FHA) | Aa2/AA | 185,000 | 186,108 | |||||
New York City Industrial Development Agency Civic Facility Series A, 5.25% due 6/1/2011 (Lycee Francais De New York Project; Insured: ACA) | NR/A | 2,215,000 | 2,331,996 | |||||
New York City Industrial Development Agency Civic Facility Series A, 5.25% due 6/1/2012 (Lycee Francais De New York Project; Insured: ACA) | NR/A | 2,330,000 | 2,468,472 | |||||
New York City Refunding Series B GO, 5.50% due 8/1/2011 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,084,930 | |||||
New York City Series G GO, 5.25% due 8/1/2016 | A1/AA- | 4,000,000 | 4,108,600 | |||||
New York City Transitional Finance Authority Facilities Refunding Series A 1, 5.00% due 11/1/2014 | Aa1/AAA | 2,000,000 | 2,179,240 | |||||
New York City Transitional Finance Authority Facilities Refunding Series A 1, 5.00% due 11/1/2015 | Aa1/AAA | 1,500,000 | 1,642,395 | |||||
New York City Transitional Refunding Future Tax Series A1, 5.00% due 11/1/2012 | Aa1/AAA | 5,000,000 | 5,386,050 | |||||
New York Dormitory Authority Revenues Mental Health Services Facilities Improvement B, 5.00% due 8/15/2010 (Insured: MBIA) | Aaa/AAA | 1,600,000 | 1,682,576 | |||||
New York State Dormitory Authority Revenue Hospital Refunding, 5.00% due 2/15/2010 (Wyckoff Heights Project; Insured: AMBAC) | Aaa/AAA | 4,870,000 | 5,026,181 |
Certified Annual Report | 25 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
New York State Dormitory Authority Revenue Hospital Series A, 5.25% due 8/15/2013 (Presbyterian Hospital; Insured: FHA & FSA) | Aaa/AAA | $ | 3,800,000 | $ | 4,136,566 | |||
New York State Dormitory Authority Revenues, 5.00% due 7/1/2007 (City University Systems Project) | A1/AA- | 3,500,000 | 3,535,490 | |||||
New York State Dormitory Authority Revenues, 6.00% due 7/1/2007 (Champlain Valley Physicians Project; Insured: Connie Lee) | NR/AAA | 1,040,000 | 1,058,377 | |||||
New York State Dormitory Authority Revenues, 5.50% due 7/1/2012 (South Nassau Community Hospital B Project) | Baa1/NR | 1,820,000 | 1,952,223 | |||||
New York State Dormitory Authority Revenues, 5.50% due 7/1/2013 (South Nassau Community Hospital B Project) | Baa1/NR | 1,500,000 | 1,618,125 | |||||
New York State Dormitory Authority Revenues Aids Long Term Health Facilities, 5.00% due 11/1/2012 (Insured: SONYMA) | Aa1/NR | 2,000,000 | 2,092,340 | |||||
New York State Dormitory Authority Revenues Aids Long Term Health Facilities, 5.00% due 11/1/2013 (Insured: SONYMA) | Aa1/NR | 4,600,000 | 4,805,298 | |||||
New York State Dormitory Authority Revenues Aids Long Term Health Facilities, 5.00% due 11/1/2014 (Insured: SONYMA) | Aa1/NR | 1,500,000 | 1,566,945 | |||||
New York State Dormitory Authority Revenues Secured Hospital Interfaith Medical Center Series D, 5.75% due 2/15/2008 (Insured: FSA) | Aaa/AAA | 2,515,000 | 2,583,509 | |||||
New York State Dormitory Authority Revenues Series B, 5.25% due 11/15/2026 put 5/15/2012 (Insured: AMBAC) | Aaa/AAA | 4,000,000 | 4,303,800 | |||||
New York State Housing Finance Service Contract Series A, 6.25% due 9/15/2010 pre-refunded 9/15/2007 | A1/AAA | 1,920,000 | 1,964,851 | |||||
Oneida County Industrial Development Agency Series C, 6.00% due 1/1/2009 (Civic Facility Faxton Hospital Project; Insured: Radian) | NR/AA | 710,000 | 743,569 | |||||
Tobacco Settlement Financing Corp. Revenue Asset Backed Series A-1C, 5.25% due 6/1/2012 (Secured: State Contingency Contract) | A1/AA- | 1,190,000 | 1,191,642 | |||||
Tobacco Settlement Financing Corp. Revenue Asset Backed Series B-1C, 5.25% due 6/1/2013 | A1/AA- | 2,600,000 | 2,667,652 | |||||
Tobacco Settlement Financing Corp. Revenue Asset Backed Series B-1C, 5.25% due 6/1/2013 (Insured: XLCA) | Aaa/AAA | 2,000,000 | 2,055,980 | |||||
NORTH CAROLINA — 2.15% | ||||||||
North Carolina Eastern Municipal Power Agency Power Systems Revenue Refunding Series A, 5.50% due 1/1/2012 | Baa2/BBB | 1,000,000 | 1,074,810 | |||||
North Carolina Eastern Municipal Power Agency Power Systems Revenue Refunding Series C, 5.25% due 1/1/2012 | Baa2/BBB | 650,000 | 690,976 | |||||
North Carolina Eastern Municipal Power Agency Power Systems Revenue Refunding Series C, 5.25% due 1/1/2013 | Baa2/BBB | 1,055,000 | 1,127,278 | |||||
North Carolina Eastern Municipal Power Agency Power Systems Revenue Refunding Series D, 5.375% due 1/1/2011 | Baa2/BBB | 3,000,000 | 3,176,610 | |||||
North Carolina Municipal Power Agency 1 Catawba Electric Revenue Refunding, 6.00% due 1/1/2010 (Insured: MBIA) | Aaa/AAA | 2,400,000 | 2,577,600 | |||||
North Carolina Municipal Power Agency 1 Catawba Electric Revenue Series A, 5.50% due 1/1/2013 | A3/BBB+ | 2,505,000 | 2,708,106 | |||||
North Carolina Municipal Power Agency 1 Catawba Electric Revenue Series B, 6.375% due 1/1/2013 | A3/BBB+ | 1,000,000 | 1,078,950 | |||||
North Carolina Municipal Power Agency Catawba Electric Series A, 6.00% due 1/1/2007 (Insured: MBIA) | Aaa/AAA | 3,400,000 | 3,421,012 | |||||
North Carolina Municipal Power Agency Catawba Electric Series A, 6.00% due 1/1/2008 (Insured: MBIA) | Aaa/AAA | 3,900,000 | 4,016,571 | |||||
North Carolina State Infrastructure, 5.00% due 2/1/2016 (Correctional Facilities Project A) | Aa2/AA+ | 5,000,000 | 5,343,900 | |||||
University of North Carolina Systems Pool Revenue Refunding Series B, 5.00% due 4/1/2012 (Insured: AMBAC) | Aaa/AAA | 1,030,000 | 1,101,698 |
26 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
OHIO — 2.38% | ||||||||
Akron COP Refunding, 5.00% due 12/1/2013 (Insured: Assured Guaranty) | NR/AAA | $ | 3,000,000 | $ | 3,199,350 | |||
Akron COP Refunding, 5.00% due 12/1/2014 (Insured: Assured Guaranty) | NR/AAA | 2,000,000 | 2,141,300 | |||||
Cleveland Cuyahoga County Port Authority Revenue, 6.00% due 11/15/2010 | NR/NR | 2,815,000 | 2,922,871 | |||||
Greater Cleveland Regional Transportation Authority GO, 5.00% due 12/1/2015 (Insured: MBIA) | Aaa/NR | 1,000,000 | 1,095,560 | |||||
Hudson City Library Improvement, 6.35% due 12/1/2011 | Aa1/NR | 1,400,000 | 1,562,456 | |||||
Lake County Sewer & Water District Improvement, 5.30% due 12/1/2011 | Aa2/NR | 390,000 | 403,794 | |||||
Lorain County Hospital Revenue Refunding Catholic Healthcare Partners B, 6.00% due 9/1/2008 (Insured: MBIA) | Aaa/AAA | 1,200,000 | 1,246,956 | |||||
Mahoning Valley District Water Refunding, 5.85% due 11/15/2008 (Insured: FSA) | Aaa/AAA | 1,300,000 | 1,361,568 | |||||
Mahoning Valley District Water Refunding, 5.90% due 11/15/2009 (Insured: FSA) | Aaa/AAA | 770,000 | 823,746 | |||||
Montgomery County Revenue, 6.00% due 12/1/2008 (Catholic Health Initiatives Project) | Aa2/AA | 2,250,000 | 2,349,743 | |||||
Montgomery County Revenue, 6.00% due 12/1/2009 (Catholic Health Initiatives Project) | Aa2/AA | 2,385,000 | 2,532,202 | |||||
Montgomery County Revenue, 6.00% due 12/1/2010 (Catholic Health Initiatives Project) | Aa2/AA | 1,530,000 | 1,650,044 | |||||
Ohio State Unlimited Tax Series A GO, 5.75% due 6/15/2010 pre-refunded 6/15/2009 | Aa1/AA+ | 5,000,000 | 5,284,300 | |||||
Plain Local School District, 0% due 12/1/2006 (Insured: FGIC) | Aaa/NR | 680,000 | 675,947 | |||||
Plain Local School District, 0% due 12/1/2007 (Insured: FGIC) | Aaa/NR | 845,000 | 810,456 | |||||
Reading Revenue Development, 6.00% due 2/1/2009 (St. Mary’s Educational Institute Project; Insured: Radian) | NR/AA | 975,000 | 1,024,140 | |||||
OKLAHOMA — 1.46% | ||||||||
Claremore Public Works Authority Revenue Refunding, 6.00% due 6/1/2007 (Insured: FSA) (ETM) | Aaa/NR | 1,340,000 | 1,362,083 | |||||
Comanche County Hospital Authority Revenue Refunding, 4.00% due 7/1/2007 (Insured: Radian) | Aa3/AA | 1,265,000 | 1,268,023 | |||||
Comanche County Hospital Authority Revenue Refunding, 5.00% due 7/1/2011 (Insured: Radian) | Aa3/AA | 1,000,000 | 1,051,260 | |||||
Comanche County Hospital Authority Revenue Refunding, 5.25% due 7/1/2015 (Insured: Radian) | Aa3/AA | 1,340,000 | 1,462,623 | |||||
Grand River Dam Authority Revenue, 5.50% due 6/1/2010 | A2/BBB+ | 1,200,000 | 1,273,128 | |||||
Jenks Aquarium Authority Revenue First Mortgage, 5.50% due 7/1/2010 (ETM) | Aaa/NR | 415,000 | 430,700 | |||||
Oklahoma DFA Health Facilities Revenue, 5.75% due 6/1/2011 (Insured: AMBAC) | Aaa/AAA | 740,000 | 804,521 | |||||
Oklahoma DFA Hospital Revenue Refunding, 5.00% due 10/1/2012 (Unity Health Center Project) | NR/BBB+ | 1,070,000 | 1,119,937 | |||||
Oklahoma DFA Hospital Revenue Series A, 5.25% due 12/1/2011 (Duncan Regional Hospital Project) | NR/A- | 1,215,000 | 1,280,088 | |||||
Oklahoma DFA Hospital Revenue Series A, 5.25% due 12/1/2012 (Duncan Regional Hospital Project) | NR/A- | 1,330,000 | 1,409,760 | |||||
Oklahoma DFA Hospital Revenue Series A, 5.25% due 12/1/2013 (Duncan Regional Hospital Project) | NR/A- | 1,350,000 | 1,435,374 | |||||
Oklahoma State Industrial Authority Revenue Health System Obligation A, 6.00% due 8/15/2010 pre-refunded 8/15/2009 | Aaa/AAA | 190,000 | 203,904 | |||||
Oklahoma State Industrial Authority Revenue Health System Series A, 6.00% due 8/15/2010 (Insured: MBIA) | Aaa/AAA | 2,150,000 | 2,306,606 | |||||
Oklahoma State Industrial Authority Revenue Refunding Health Systems Obligation Group Series A, 5.75% due 8/15/2007 (Insured: MBIA) | Aaa/AAA | 2,380,000 | 2,424,125 | |||||
OREGON — 0.60% | ||||||||
Clackamas County Hospital Facility Authority Revenue Refunding, 5.00% due 5/1/2008 (Legacy Health Systems Project) | A1/AA- | 4,000,000 | 4,086,040 | |||||
Oregon State Department Administrative Services COP Series B, 5.00% due 11/1/2013 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,078,240 | |||||
Oregon State Department Administrative Services COP Series B, 5.00% due 11/1/2014 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,083,800 | |||||
Oregon State Department Administrative Services COP Series B, 5.00% due 11/1/2015 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,088,500 | |||||
PENNSYLVANIA — 1.90% | ||||||||
Allegheny County Hospital Development Health Series B, 6.30% due 5/1/2009 (South Hills Health System Project) | Baa1/NR | 1,160,000 | 1,212,362 | |||||
Chester County School Authority, 5.00% due 4/1/2016 (Intermediate School Project; Insured: AMBAC) | NR/AAA | 1,915,000 | 2,077,469 | |||||
Delaware County Authority Revenue, 5.50% due 11/15/2007 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,020,880 | |||||
Geisinger Authority Health Systems Revenue, 5.50% due 8/15/2009 | Aa3/AA- | 1,000,000 | 1,039,430 | |||||
Montgomery County Higher Education & Health Authority, 6.375% due 7/1/2007 | Baa3/NR | 550,000 | 555,527 |
Certified Annual Report | 27 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Pennsylvania Higher Educational Facilities Series A, 5.00% due 8/15/2008 (University of Pennsylvania Health Systems Project) | A2/A+ | $ | 1,250,000 | $ | 1,277,450 | |||
Philadelphia Gas Works Revenue Fifth Series A-1, 5.00% due 9/1/2014 (Insured: FSA) | Aaa/AAA | 3,000,000 | 3,239,310 | |||||
Pittsburgh Series A, 5.00% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 3,415,000 | 3,659,753 | |||||
Pittsburgh Series A, 5.00% due 9/1/2013 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,157,820 | |||||
Pittsburgh Series A, 5.50% due 9/1/2014 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,156,260 | |||||
Sayre Health Care Facilities Authority Series A, 5.00% due 7/1/2008 (Latrobe Area Hospital Project; Insured: AMBAC) | Aaa/AAA | 1,255,000 | 1,285,635 | |||||
Sayre Health Care Facilities Authority Series A, 5.25% due 7/1/2011 (Latrobe Area Hospital Project; Insured: AMBAC) | Aaa/AAA | 1,400,000 | 1,495,634 | |||||
Sayre Health Care Facilities Authority Series A, 5.25% due 7/1/2012 (Latrobe Area Hospital Project; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,078,020 | |||||
Scranton Lackawanna Health & Welfare Authority, 7.125% due 1/15/2013 pre-refunded 1/15/2007 (Marian Community Hospital Project) | NR/NR | 1,000,000 | 1,029,120 | |||||
PUERTO RICO — 0.08% | ||||||||
Puerto Rico Commonwealth Highway & Transportation Authority Revenue Refunding Series AA, 5.00% due 7/1/2008 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,025,620 | |||||
RHODE ISLAND — 0.81% | ||||||||
Providence Public Building Authority Refunding Series B, 5.75% due 12/15/2007 (Insured: FSA) | Aaa/AAA | 1,075,000 | 1,102,724 | |||||
Providence Series C GO, 5.50% due 1/15/2012 (Insured: FGIC) | Aaa/AAA | 1,880,000 | 2,050,591 | |||||
Rhode Island State, 5.00% due 10/1/2014 (Providence Plantations Project; Insured MBIA) | Aaa/AAA | 1,000,000 | 1,073,950 | |||||
Rhode Island State Economic Development Corp. Revenue, 5.75% due 7/1/2010 (Providence Place Mall Project; Insured: Radian) | NR/AA | 2,000,000 | 2,077,300 | |||||
Rhode Island State Health & Education Building Corp., 4.50% due 9/1/2009 (Butler Hospital Project; LOC: Fleet National Bank) | NR/AA | 1,960,000 | 2,000,984 | |||||
Rhode Island State Health & Education Building Corp. Revenue Hospital Financing, 5.25% due 7/1/2014 (Memorial Hospital Project; LOC: Fleet Bank) | NR/AA | 1,565,000 | 1,658,791 | |||||
SOUTH CAROLINA — 1.58% | ||||||||
Charleston County COP, 6.00% due 12/1/2007 (Insured: MBIA) | Aaa/AAA | 2,050,000 | 2,095,367 | |||||
Georgetown County Environment Refunding International Paper Co. Project Series A, 5.70% due 4/1/2014 | Baa3/BBB | 7,975,000 | 8,682,622 | |||||
Greenville County School District Building Equity Sooner Tomorrow, 5.25% due 12/1/2015 | Aa3/AA- | 1,000,000 | 1,085,130 | |||||
Greenwood County Hospital Revenue Refunding Facilities Self Regional Healthcare A, 5.00% due 10/1/2013 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,154,040 | |||||
South Carolina Jobs Economic Development Authority Hospital Facilities Revenue Improvement Series A, 7.375% due 12/15/2021 pre-refunded 12/15/2010 (Palmetto Health Alliance Project) | NR/NR | 2,600,000 | 3,014,908 | |||||
South Carolina State Public Service Authority Revenue Refunding Series D, 5.00% due 1/1/2007 | Aa2/AA- | 2,315,000 | 2,323,542 | |||||
SOUTH DAKOTA — 0.18% | ||||||||
South Dakota State Health & Educational Facilities Authority Revenue, 5.50% due 9/1/2011 (Rapid City Regional Hospital Project; Insured: MBIA) | Aaa/AAA | 1,100,000 | 1,186,933 | |||||
South Dakota State Health & Educational Facilities Authority Revenue Refunding, 6.25% due 7/1/2009 (McKennan Hospital Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,065,610 | |||||
TENNESSEE — 0.44% | ||||||||
Franklin County Health & Educational Facilities University of the South, 4.75% due 9/1/2009 | NR/A+ | 1,005,000 | 1,033,190 | |||||
Franklin Industrial Development Multi Family Refunding Housing Series A, 5.75% due 4/1/2010 (Insured: FSA) | Aaa/AAA | 540,000 | 550,859 |
28 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Metro Government Nashville Multi Family Refunding, 7.50% due 11/15/2010 pre-refunded 5/15/2010 | Aaa/AAA | $ | 2,000,000 | $ | 2,265,120 | |||
Metro Government Nashville Water & Sewer, 6.50% due 12/1/2014 (ETM) | Aaa/AAA | 1,240,000 | 1,480,635 | |||||
TEXAS — 14.53% | ||||||||
Amarillo Health Facilities Corp. Hospital Revenue, 5.50% due 1/1/2011 (Baptist St. Anthony’s Hospital Corp. Project; Insured: FSA) | Aaa/NR | 1,350,000 | 1,441,503 | |||||
Austin Refunding, 5.00% due 3/1/2011 | Aa1/AA+ | 1,000,000 | 1,057,870 | |||||
Austin Water & Wastewater Refunding Series A, 5.00% due 5/15/2013 (Insured: AMBAC) | Aaa/AAA | 1,920,000 | 2,062,291 | |||||
Austin Water & Wastewater Refunding Series A, 5.00% due 5/15/2014 (Insured: AMBAC) | Aaa/AAA | 2,890,000 | 3,118,657 | |||||
Austin Water & Wastewater Refunding Series A, 5.00% due 5/15/2015 (Insured: AMBAC) | Aaa/AAA | 1,520,000 | 1,647,574 | |||||
Bastrop Independent School District, 0% due 2/15/2009 (Guaranty: PSF) | Aaa/AAA | 1,390,000 | 1,271,878 | |||||
Bell County Health Facilities Development Corp. Revenue Series A, 6.25% due 8/15/2010 (Scott & White Memorial Hospital Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,087,330 | |||||
Bexar County Housing Finance Corp. Multi Family Housing Revenue, 5.00% due 1/1/2011 (Insured: MBIA) | Aaa/NR | 1,800,000 | 1,859,724 | |||||
Cedar Hill Independent School District Unrefunded balance, 0% due 8/15/2010 (Insured: PSF-GTD) | NR/AAA | 440,000 | 372,838 | |||||
Central Texas Regional Mobility Authority Revenue Anticipation Notes, 5.00% due 1/1/2008 | Aa3/AA | 7,000,000 | 7,118,020 | |||||
Clint Independent School District Refunding, 5.50% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 1,700,000 | 1,830,237 | |||||
Clint Independent School District Refunding, 5.50% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,425,000 | 1,532,502 | |||||
Collin County Limited Tax Improvement, 5.00% due 2/15/2016 | Aaa/AAA | 1,465,000 | 1,597,465 | |||||
Coppell Independent School District Refunding, 0% due 8/15/2007 (Guaranty: PSF) | NR/AAA | 3,300,000 | 3,197,700 | |||||
Corpus Christi Business & Job Development Corp. Sales Tax Revenue, 5.00% due 9/1/2012 (Refunding & Improvement Arena Project; Insured: AMBAC) | Aaa/AAA | 1,025,000 | 1,096,771 | |||||
Corpus Christi Utility Systems Revenue Refunding, 5.50% due 7/15/2008 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,067,040 | |||||
Corpus Christi Utility Systems Revenue Refunding, 5.50% due 7/15/2009 (Insured: FSA) | Aaa/AAA | 4,780,000 | 5,023,015 | |||||
Duncanville Independent School District Refunding Series B, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 4,945,000 | 4,188,316 | |||||
Duncanville Independent School District Refunding Series B, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,245,000 | 1,014,687 | |||||
Fort Worth Water & Sewer Revenue, 5.25% due 2/15/2011 (Tarrant & Denton County Project) | Aa2/AA | 1,390,000 | 1,481,949 | |||||
Fort Worth Water & Sewer Revenue Refunding & Improvement, 5.25% due 2/15/2011 pre-refunded 2/15/2008 | Aa2/NR | 3,800,000 | 3,886,982 | |||||
Grapevine Colleyville Independent School District, 0% due 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 7,350,000 | 6,108,291 | |||||
Grapevine GO, 5.25% due 2/15/2012 (Insured: FGIC) | Aaa/AAA | 2,005,000 | 2,007,506 | |||||
Gulf Coast Waste Disposal Authority Environmental Facilities Revenue Refunding, 4.20% due 11/1/2006 (Occidental Project) | A3/A- | 4,000,000 | 4,000,360 | |||||
Gulf Coast Waste Disposal Authority Revenue Refunding, 5.00% due 10/1/2010 (Bayport Area Systems Project; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,051,220 | |||||
Gulf Coast Waste Disposal Authority Revenue Refunding, 5.00% due 10/1/2011 (Bayport Area Systems Project; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,061,250 | |||||
Harlingen Consolidated Independent School District, 7.50% due 8/15/2009 (Guaranty: PSF) | Aaa/AAA | 750,000 | 828,375 | |||||
Harris County GO, 0% due 8/1/2008 | Aa1/AA+ | 7,000,000 | 6,548,710 | |||||
Harris County Health Facilities Development Corp. Hospital Revenue Refunding Series A, 6.00% due 6/1/2012 (Memorial Hospital Systems Project; Insured: MBIA) | Aaa/AAA | 500,000 | 558,650 | |||||
Harris County Health Facilities Development Corp.Thermal Utility Revenue, 5.45% due 2/15/2011 (Teco Project; Insured: AMBAC) | Aaa/AAA | 3,745,000 | 3,935,396 | |||||
Harris County Health Facilities Development Corp.Thermal Utility Revenue, 5.00% due 11/15/2015 (Teco Project; Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,598,190 | |||||
Harris County Health Facilities Hospital Series A, 6.00% due 6/1/2010 (Memorial Hospital Systems Project; Insured: MBIA) | Aaa/AAA | 3,100,000 | 3,337,243 | |||||
Harris County Hospital District Mortgage Revenue, 7.40% due 2/15/2010 (Insured: AMBAC) | Aaa/AAA | 1,605,000 | 1,711,684 | |||||
Harris County Hospital District Mortgage Revenue Refunding, 7.40% due 2/15/2010 (ETM) | Aaa/AAA | 260,000 | 273,590 | |||||
Harris County Hospital District Revenue Refunding, 5.75% due 2/15/2011 (Insured: MBIA) | Aaa/AAA | 10,000,000 | 10,718,100 | |||||
Harris County Hospital District Revenue Refunding, 5.75% due 2/15/2012 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,138,540 | |||||
Harris County Sports Authority Revenue Senior Lien Series G, 0% due 11/15/2010 (Insured: MBIA) | Aaa/AAA | 3,260,000 | 2,790,853 | |||||
Houston Community College Systems Refunding Student Fee, 5.25% due 4/15/2011 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,068,330 |
Certified Annual Report | 29 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Houston Community College Systems Refunding Student Fee, 5.25% due 4/15/2012 (Insured: FSA) | Aaa/AAA | $ | 1,460,000 | $ | 1,575,048 | |||
Houston Community College Systems Refunding Student Fee, 5.25% due 4/15/2013 (Insured: FSA) | Aaa/AAA | 1,250,000 | 1,359,713 | |||||
Houston Independent School District Pubic West Side Series B, 0% due 9/15/2014 (Insured: AMBAC) | Aaa/AAA | 6,190,000 | 4,525,199 | |||||
Irving Independent School District GO, 0% due 2/15/2017 (Guaranty: PSF) | Aaa/AAA | 1,000,000 | 645,850 | |||||
Keller Independent School District Refunding, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,250,000 | 999,575 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2012 (Insured: AMBAC) | Aaa/AAA | 1,660,000 | 1,763,767 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2013 (Insured: AMBAC) | Aaa/AAA | 1,745,000 | 1,866,627 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2014 (Insured: AMBAC) | Aaa/AAA | 1,835,000 | 1,973,414 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2015 (Insured: AMBAC) | Aaa/AAA | 1,930,000 | 2,084,033 | |||||
Longview Water & Sewer Revenue Refunding, 5.00% due 3/1/2012 (Insured: MBIA) | Aaa/AAA | 1,150,000 | 1,224,957 | |||||
Lower Colorado River Authority Revenue Refunding & Improvement, 8.00% due 5/15/2010 (Transportation Systems Project; Insured: FSA) | Aaa/AAA | 750,000 | 858,495 | |||||
Mesquite Independent School District Refunding, 0% due 8/15/2011 (Guaranty: PSF) | NR/AAA | 3,065,000 | 2,513,576 | |||||
Midlothian Independent School District Refunding, 0% due 2/15/2008 (ETM) | Aaa/NR | 1,055,000 | 1,003,980 | |||||
Midlothian Independent School District Refunding, 0% due 2/15/2008 (Guaranty: PSF) | Aaa/NR | 360,000 | 342,500 | |||||
Midlothian Independent School District Refunding, 0% due 2/15/2009 (ETM) | Aaa/NR | 570,000 | 522,662 | |||||
Midlothian Independent School District Refunding, 0% due 2/15/2009 (Guaranty: PSF) | Aaa/NR | 630,000 | 577,004 | |||||
Midtown Redevelopment Authority Texas Tax, 6.00% due 1/1/2010 (Insured: Radian) | Aa3/AA | 700,000 | 745,591 | |||||
Midtown Redevelopment Authority Texas Tax, 6.00% due 1/1/2011 (Insured: Radian) | Aa3/AA | 740,000 | 800,946 | |||||
Red River Education Finance Corp., 2.10% due 12/1/2034 put 12/1/2007 (Parish Episcopal School Project; LOC: Allied Irish Banks plc) | Aa3/NR | 2,500,000 | 2,433,775 | |||||
Richardson Refunding & Improvement GO, 5.00% due 2/15/2014 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,232,590 | |||||
Sam Rayburn Municipal Power Agency Refunding, 5.50% due 10/1/2012 | Baa2/BBB- | 6,000,000 | 6,309,480 | |||||
Socorro Independent School District Series A, 5.75% due 2/15/2011 pre-refunded 2/15/2008 (Guaranty: PSF) | NR/AAA | 1,970,000 | 2,028,214 | |||||
Southlake Tax Increment GO Series B, 0% due 2/15/2007 (Insured: AMBAC) | Aaa/AAA | 965,000 | 946,337 | |||||
Spring Branch Independent School District, 7.50% due 2/1/2011 (Guaranty: PSF) | Aaa/AAA | 500,000 | 575,655 | |||||
Springhill Courtland Heights Public Facility Corp. Multi Family Revenue Senior Lien Housing Series A, 5.125% due 12/1/2008 | NR/BB | 885,000 | 884,823 | |||||
Tarrant County Health Facilities Development Corp. Health Systems Revenue Series A, 5.75% due 2/15/2008 (Texas Health Resources Systems Project; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,084,570 | |||||
Tarrant County Health Facilities Development Corp. Health Systems Revenue Series A, 5.75% due 2/15/2009 (Texas Health Resources Systems Project; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,120,570 | |||||
Tarrant County Health Facilities Development Corp. Health Systems Revenue Series A, 5.75% due 2/15/2011 (Texas Health Resources Project; Insured: MBIA) | Aaa/AAA | 1,400,000 | 1,462,636 | |||||
Tarrant County Health Facilities Development Corp. Hospital Revenue, 5.875% due 11/15/2007 (Adventist/Sunbelt Health System Project) (ETM) | A2/NR | 580,000 | 594,494 | |||||
Tarrant County Health Facilities Development Corp. Hospital Revenue, 6.00% due 11/15/2009 (Adventist/Sunbelt Health System Project) (ETM) | A2/NR | 650,000 | 694,532 | |||||
Tarrant County Health Facilities Development Corp. Hospital Revenue, 6.10% due 11/15/2011 pre-refunded 11/15/2010 (Adventist/Sunbelt Health System Project) | A2/NR | 730,000 | 803,621 | |||||
Texarkana Health Facilities Development Corp. Hospital Revenue, 5.75% due 10/1/2008 (Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,560,090 | |||||
Texas Municipal Power Agency Revenue B, 0% due 9/1/2013 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 766,950 | |||||
Texas State Affordable Housing Corp. Series A, 4.85% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 1,945,000 | 1,948,909 | |||||
Texas State Public Finance Authority Building Revenue Series B, 6.00% due 8/1/2011 pre-refunded 8/1/2009 (State Preservation Project; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,064,910 | |||||
Texas State Public Finance Authority Stephen F. Austin University Financing, 5.00% due 10/15/2014 (Insured: MBIA) | Aaa/NR | 1,305,000 | 1,414,907 | |||||
Texas State Public Finance Authority Stephen F. Austin University Financing, 5.00% due 10/15/2015 (Insured: MBIA) | Aaa/NR | 1,450,000 | 1,579,094 | |||||
Tomball Hospital Authority Revenue Refunding, 5.00% due 7/1/2013 | Baa3/NR | 1,460,000 | 1,507,173 | |||||
Travis County Health Facilities Development Corp. Revenue, 5.75% due 11/15/2010 (Ascension Health Project; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,136,140 |
30 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Travis County Health Facilities Development Corp. Revenue Ascension Health Credit Series A, 5.75% due 11/15/2007 (Insured: MBIA) | Aaa/AAA | $ | 1,000,000 | $ | 1,023,170 | |||
Travis County Health Facilities Development Corp. Revenue Ascension Health Credit Series A, 5.75% due 11/15/2008 (Insured: MBIA) | Aaa/AAA | 2,300,000 | 2,397,911 | |||||
Travis County Health Facilities Development Corp. Revenue Ascension Health Credit Series A, 5.75% due 11/15/2009 (Insured: MBIA) | Aaa/AAA | 3,750,000 | 3,973,763 | |||||
Washington County Health Facilities Development Corp. Revenue, 5.35% due 6/1/2009 (Insured: ACA) | NR/A | 1,280,000 | 1,307,622 | |||||
West Harris County Regional Water, 5.25% due 12/15/2010 (Insured: FSA) | Aaa/AAA | 1,700,000 | 1,809,361 | |||||
West Harris County Regional Water, 5.25% due 12/15/2011 (Insured: FSA) | Aaa/AAA | 2,315,000 | 2,491,704 | |||||
West Harris County Regional Water, 5.25% due 12/15/2012 (Insured: FSA) | Aaa/AAA | 2,435,000 | 2,645,554 | |||||
Wylie Independent School District, 5.00% due 8/15/2011 (Guaranty PSF) | NR/AAA | 1,000,000 | 1,061,850 | |||||
UTAH — 0.67% | ||||||||
Intermountain Power Agency Power Supply Revenue Series A, 5.00% due 7/1/2012 (ETM) | Aaa/AAA | 4,355,000 | 4,359,834 | |||||
Salt Lake County Municipal Building Authority, 5.50% due 10/1/2009 | Aa1/AA+ | 1,500,000 | 1,583,565 | |||||
Snyderville Basin Sewer Improvement, 5.00% due 11/1/2006 (Insured: AMBAC) | Aaa/AAA | 675,000 | 675,850 | |||||
Utah State Board of Regents Auxiliary Systems & Student Fee Revenue Refunding Series A, 5.00% due 5/1/2010 | NR/AA | 510,000 | 533,297 | |||||
Utah State University Hospital Board of Regents Revenue, 5.25% due 8/1/2008 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,029,000 | |||||
VIRGINIA — 1.59% | ||||||||
Alexandria Industrial Development Authority Revenue, 5.75% due 10/1/2007 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,010,000 | 1,032,260 | |||||
Alexandria Industrial Development Authority Revenue, 5.75% due 10/1/2008 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,070,000 | 1,115,818 | |||||
Alexandria Industrial Development Authority Revenue, 5.75% due 10/1/2009 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,130,000 | 1,201,608 | |||||
Alexandria Industrial Development Authority Revenue, 5.75% due 10/1/2010 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,195,000 | 1,293,743 | |||||
Chesterfield County Industrial Development, 5.50% due 10/1/2009 (Vepco Project) | Baa1/BBB | 1,500,000 | 1,517,190 | |||||
Hampton Refunding Bond GO, 5.85% due 3/1/2007 | Aa2/AA | 595,000 | 596,101 | |||||
Norton Industrial Development Authority Hospital Revenue Refunding Improvement, 5.75% due 12/1/2012 (Norton Community Hospital Project; Insured: ACA) | NR/A | 1,460,000 | 1,588,188 | |||||
Suffolk Redevelopment Housing Authority Refunding, 4.85% due 7/1/2031 put 7/1/2011 (Windsor at Potomac Project; Collateralized: FNMA) | Aaa/NR | 3,000,000 | 3,125,100 | |||||
Virginia Toll Road Series B, 0% due 8/15/2025 pre-refunded 8/15/2008 (Pocahontas Parkway Association Project) | NR/AAA | 22,600,000 | 8,049,894 | |||||
WASHINGTON — 2.86% | ||||||||
Conservation & Renewable Energy Systems Revenue Refunding, 5.00% due 10/1/2007 (Washington Conservation Project) | Aaa/AA- | 1,000,000 | 1,014,200 | |||||
Energy Northwest Washington Electric Revenue Refunding Series A, 5.375% due 7/1/2013 (Project Number 1; Insured: FSA) | Aaa/AAA | 2,000,000 | 2,164,260 | |||||
Energy Northwest Washington Electric Revenue Series A, 4.75% due 7/1/2007 (Wind Project) | A3/A- | 1,675,000 | 1,681,432 | |||||
Energy Northwest Washington Electric Revenue Series A, 4.95% due 7/1/2008 (Wind Project) | A3/A- | 1,760,000 | 1,799,072 | |||||
Energy Northwest Washington Electric Revenue Series B, 4.95% due 7/1/2008 (Wind Project) | A3/A- | 705,000 | 712,741 | |||||
Energy Northwest Washington Electric Revenue Series B, 5.20% due 7/1/2010 pre-refunded 1/1/2007 (Wind Project) | A3/A- | 785,000 | 811,525 | |||||
Goat Hill Properties Lease Revenue, 5.00% due 12/1/2012 (Government Office Building Project; Insured: MBIA) | Aaa/AAA | 2,055,000 | 2,200,165 | |||||
Snohomish County Public Utilities District No 001 Electric Revenue, 5.00% due 12/1/2015 (Insured: FSA) | Aaa/AAA | 5,015,000 | 5,398,848 | |||||
Spokane Refunding, 5.00% due 12/15/2010 | A2/AA- | 2,430,000 | 2,466,985 | |||||
Spokane Regional Solid Waste Refunding, 5.00% due 12/1/2006 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,002,070 | |||||
Spokane Regional Solid Waste Refunding, 5.25% due 12/1/2007 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,017,220 | |||||
University of Washington Alumni Association Lease Revenue Refunding, 5.00% due 8/15/2007 (Medical Center Project; Insured: MBIA) | Aaa/AAA | 1,100,000 | 1,113,431 |
Certified Annual Report | 31 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Washington State Health Care Facilities Authority Revenue, 5.50% due 12/1/2009 (Providence Services Project; Insured: MBIA) | Aaa/AAA | $ | 1,500,000 | $ | 1,585,095 | |||
Washington State Health Care Facilities Overlake Hospital Medical Center A, 5.00% due 7/1/2013 (Credit Support: Assured Guarantee) | Aa1/AAA | 1,000,000 | 1,062,890 | |||||
Washington State Public Power Supply Systems Revenue, 5.40% due 7/1/2012 (Nuclear Project Number 2; Insured: FSA) | Aaa/AAA | 900,000 | 980,559 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series A, 6.00% due 7/1/2008 (Nuclear Project Number 1; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,040,930 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series A, 5.10% due 7/1/2010 (Nuclear Project Number 2; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,031,410 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series A, 5.00% due 7/1/2011 (Insured: FSA) | Aaa/AAA | 2,500,000 | 2,603,225 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series B, 0% due 7/1/2008 (Nuclear Project Number 3) | Aaa/AA- | 830,000 | 777,727 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series B, 0% due 7/1/2008 (Nuclear Project Number 3) | Aaa/AA- | 1,140,000 | 1,068,203 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series C, 0% due 7/1/2013 (Insured: MBIA-IBC) | Aaa/AAA | 1,760,000 | 1,354,882 | |||||
Washington State Public Power Supply Systems Revenue Refunding Series C, 0% due 7/1/2015 (Insured: MBIA-IBC) | Aaa/AAA | 3,000,000 | 2,113,650 | |||||
WEST VIRGINIA — 0.27% | ||||||||
Harrison County Nursing Facility Revenue Refunding, 5.625% due 9/1/2010 (Salem Health Care Corp. Project; LOC: Fleet Bank) | NR/NR | 320,000 | 326,646 | |||||
Kanawha, Mercer, Nicholas, Counties Single Family Mortgage, 0% due 2/1/2015 pre-refunded 2/1/14 | Aaa/NR | 2,260,000 | 1,511,488 | |||||
Pleasants County PCR, 4.70% due 11/1/2007 (Monongahela Power Co. Project; Insured: AMBAC) | Aaa/AAA | 1,500,000 | 1,518,870 | |||||
WISCONSIN — 0.30% | ||||||||
Bradley PCR, 6.75% due 7/1/2009 (Owens Illinois Waste Project) (ETM) | NR/B | 1,500,000 | 1,621,155 | |||||
Wisconsin State Health & Educational Facilities Authority Revenue, 6.00% due 8/15/2008 (Aurora Health Care Inc. Project; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,079,700 | |||||
WYOMING — 0.32% | ||||||||
West Park Hospital District Revenue, 5.90% due 7/1/2010 (Insured: ACA) | NR/A | 1,615,000 | 1,637,852 | |||||
Wyoming Farm Loan Board Revenue, 0% due 4/1/2009 | NR/AA | 2,500,000 | 2,274,975 | |||||
TOTAL INVESTMENTS — 98.77% (Cost $1,189,267,811) | $ | 1,209,445,074 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.23% | 15,057,313 | |||||||
NET ASSETS — 100.00% | $ | 1,224,502,387 | ||||||
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. |
See notes to financial statements.
(1) | When-issued security. |
(2) | Segregated as collateral for a when-issued security. |
32 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access |
AMBAC | Insured by American Municipal Bond Assurance Corp. |
CIFG | CIFG Assurance North America Inc. |
COP | Certificates of Participation |
DFA | Development Finance Authority |
ETM | Escrowed to Maturity |
FGIC | Insured by Financial Guaranty Insurance Co. |
FHA | Insured by Federal Housing Administration |
FNMA | Collateralized by Federal National Mortgage Association |
FSA | Insured by Financial Security Assurance Co. |
GNMA | Insured by Government National Mortgage Co. |
GO | General Obligation |
HFA | Health Facilities Authority |
IDRB | Industrial Development Revenue Bond |
MBIA | Insured by Municipal Bond Investors Assurance |
MBIA-IBC | Insured by Municipal Bond Investors Assurance - Insured Bond Certificates |
PCR | Pollution Control Revenue Bond |
PSF | Guaranteed by Permanent School Fund |
RADIAN | Insured by Radian Asset Assurance |
SONYMA | State of New York Mortgage Authority |
XLCA | Insured by XL Capital Assurance |
SUMMARY OF SECURITY CREDIT RATINGS†
Ratings are a blend of Moody’s and Standard & Poor’s, using the higher rating. Some bonds are rated by only one service.
Certified Annual Report | 33 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Limited Term Municipal Fund
To the Trustees and Class I Shareholders of
Thornburg Limited Term 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 Limited Term Municipal Fund (one of the Portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
34 | Certified Annual Report |
EXPENSE EXAMPLE | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur ongoing costs, including management and administration fees and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06-9/30/06 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000 | $ | 1,026.10 | $ | 2.90 | |||
Hypothetical* | $ | 1,000 | $ | 1,022.20 | $ | 2.90 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.57%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Certified Annual Report | 35 |
INDEX COMPARISON | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Limited Term Municipal Fund Class I Total Returns versus
Lehman Brothers Five Year Municipal Bond Index and Consumer Price Index
(July 5, 1996 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
I Shares (Incep: 7/5/96) | 3.22 | % | 3.45 | % | 4.33 | % | 4.45 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 7/5/96) | 3.70 | % | 3.38 | % | $ | 13.53 | $ | 13.53 |
Performance data reflect past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains. There is no up front sales charge for this class of shares.
The Consumer Price Index (“CPI”) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
The Lehman Brothers Five-Year Municipal Bond Index is a rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must have a minimum credit rating of Baa.The approximate maturity of the municipal bonds in the index is five 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.
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 Net Asset Value (NAV) to arrive at the annualized distribution yield. The yield is calculated on a periodic basis and is subject to change depending on the Funds’ NAV and current distributions.
36 | Certified Annual Report |
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP,Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report | 37 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
38 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report | 39 |
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, 100% of dividends paid by the Fund are tax exempt dividends for Federal Income Tax purposes. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Limited Term Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor on a range of matters, including information (among other things) respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time relative to categories of mutual funds sharing certain comparable characteristics and selected by independent mutual fund analyst firms, and relative to a broad based securities index; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of
40 | Certified Annual Report |
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to single state municipal bond mutual fund categories, and in particular to broad based securities indices, is limited because the Fund’s investment objectives and strategies, as defined in its prospectuses, are unique and may vary from the parameters for selecting investments for other funds and indices, and the largely theoretical character of fixed income security indices.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully and competently pursue and achieve the Fund’s stated objectives, as reflected particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluation the Fund’s above average or better investment returns over most periods relative to two categories of mutual funds sharing certain characteristics comparable to the Fund and selected by independent mutual fund analyst firms, and the Fund’s relative performance against comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of short-intermediate term mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the management fee and expenses charged to the Fund were generally comparable to average and median fees and expenses charged to the grouping of mutual funds assembled by the mutual fund analyst firm. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by the Fund and other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
Certified Annual Report | 41 |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
42 | This page is not part of the Annual Report. |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. | 43 |
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 | 119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 |
Thornburg California Limited Term Municipal Fund
Laddering – an All Weather Strategy
The Fund will invest primarily in municipal obligations originating in California with the objective of obtaining as high a level of current income exempt from Federal and California state individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital.
The Fund offers California investors double tax-free yields (may be subject to Alternative Minimum Tax) in a laddered municipal bond portfolio with an average maturity of five years or less. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year; cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. The strategy is a good compromise for managing different types of risk.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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2 | This page is not part of the Annual Report. |
Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We aspire to accomplish this through a family of laddered bond funds that focus on quality, stability, and minimization of risk over time, and through a range of equity funds that redefine traditional measures of value and growth.
Our bond funds have always been managed using the highly disciplined approach of laddering short and intermediate bond maturities, seeking to provide both an attractive return and stability of principal. Laddering is an all-weather strategy, designed to perform in uncertain markets like the ones we have seen in the last two years. Moreover, all of the bond funds focus on buying investment-grade securities. We have found this strategy to be the best at managing both interest-rate risk and credit risk, and we believe this approach has served our shareholders well over time.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Our bond fund portfolio managers have many years of experience. We are proud of this consistency and experience and look forward to many more successful years with them at the helm.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely,
Garrett Thornburg
Chairman & CEO
This page is not part of the Annual Report. | 3 |
2006
Certified Annual Report
Thornburg California Limited Term Municipal Fund
September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 | Certified Annual Report |
Important Information
Performance data represent past performance and do not guarantee future results. Investment return and principal value will fluctuate. Upon redemption, an investor’s shares may be worth more or less than their original cost. Current returns may be lower or higher than those shown. For performance current to the most recent month end, visit www.thornburg.com.
The maximum sales charge for the Fund’s Class A shares is 1.50%. Class C shares include a 0.50% contingent deferred sales charge (CDSC) for the first year only.
Performance data given at net asset value (NAV) does not take into account these sales charges. If the sales charges had been included, the performance would have been lower.
Shares in the Fund carry risks, including possible loss of principal. As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Glossary
The Lehman Brothers Five-Year Municipal Bond Index – A rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must have a minimum credit rating of Baa. The approximate maturity of the municipal bonds in the index is five 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.
Duration – The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.
Weighted Average Maturity – A weighted average of all the effective maturities of the bonds in a portfolio. Effective maturity takes into consideration mortgage prepayments, puts, sinking funds, adjustable coupons, and other features of individual bonds and is thus a more accurate measure of interest-rate sensitivity. Longer-maturity funds are generally considered more interest-rate sensitive than their shorter counterparts.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Treasury Notes – a debt obligation of the US government backed by the “full faith and credit” of the government. Notes are intermediate to long term investments typically issued in maturities of two, five and ten years. Interest is paid semi-annually.
Certified Annual Report | 5 |
George Strickland
Portfolio Manager
October 17, 2006
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg California Limited Term Municipal Fund. The net asset value of the Class A shares decreased by 2 cents to $12.77 during the twelve months ended September 30, 2006. If you were with us for the entire period, you received dividends of 40.4 cents per share. If you reinvested dividends, you received 41.0 cents per share. Investors who owned Class C shares received dividends of 37.2 and 37.7 cents per share, respectively.
Over the last twelve months, interest rates on bonds that mature in ten years or less have risen, while interest rates on long-term bonds have fallen. Higher interest rates on short-term bonds have lowered the price of most of the bonds owned by the Fund somewhat, but have allowed us to buy new bonds at higher yields and increase the yield of the portfolio. The Class A shares of your Fund produced a total return of 3.06% (at NAV) over the twelve month period ended September 30, 2006, compared to a 3.01% return for the Lehman Five Year Municipal Bond Index. Several of the bond positions in the Fund were upgraded by rating agencies due to a strong California economy and other factors. This contributed to performance and helped the Fund marginally outperform the index.
After rising for most of the year, bond yields fell in the third quarter of 2006 because the bond market started to anticipate a slower economy, reduced inflation, and a lower Fed Funds rate. While such an outcome is certainly possible, we believe the preponderance of evidence points to continued economic growth and a Federal Reserve that must stay on high alert to avoid inflationary acceleration.
The current case for a weak economy revolves around the detrimental effects of a declining housing market. However, slackness in residential housing is being countered with strength in commercial real estate, capital spending, state and federal government spending, and exports. Some consumers are feeling pinched by higher rates on adjustable rate mortgages, but many more are enjoying higher incomes in an economy that has produced 1.8 million new jobs over the last twelve months. So consumer spending should continue growing, and may accelerate if oil and gas prices hold in their current ranges. This should drive the economy to solid, but not spectacular, growth.
No matter how you measure it, inflation has doubled over the last three years. The current levels are not terribly alarming, but they are significantly above the Federal Reserve’s comfort zone. Fed Chairman Bernanke has stated that he thinks inflation should moderate next year, but there are reasons to think that it might not. U.S. hourly earnings are rising at a 4% rate, up from 1.6% in early 2004, and import prices have been rising steadily. These and other pressures could keep inflation stubbornly in the Fed’s discomfort zone.
So, when we look at current yield curves – inverted for Treasury notes and bonds, and very flat for municipal bonds – it appears to us that the optimistic inflation scenario is already priced into the market. In order to justify today’s 4.8% 10-year Treasury note, one must assume the Federal Reserve will begin easing monetary policy fairly soon. That implies that inflation will drop back down below 2%. If all that unfolds as expected, then current levels are justified. If it does not, then interest rates should rise on intermediate and long-term bonds. Clearly, it seems that risks are somewhat skewed toward higher interest rates.
6 | Certified Annual Report |
Your Thornburg California Limited Term Municipal Fund is a laddered portfolio of over 100 municipal obligations from all over California. Today, your Fund’s weighted average maturity is 4.56 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 short and 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 chart below describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
We took advantage of rising rates to extend the duration of the Fund over the last year. We are now firmly in neutral territory and the ladder is fairly evenly distributed (just a little light in the last three years). We are planning to gradually shorten portfolio duration over time unless new opportunities open up to us over the next few months. If interest rates on long-term bonds rise, Thornburg laddered bond portfolios should outperform more aggressive bond strategies. If interest rates hold steady or decline, then Thornburg bond portfolios should produce compelling risk-adjusted returns.
% of portfolio maturing | Cumulative % maturing | |||||||||
1 year | = | 10.2% | Year 1 | = | 10.2% | |||||
1 to 2 years | = | 9.9% | Year 2 | = | 20.1% | |||||
2 to 3 years | = | 12.9% | Year 3 | = | 33.0% | |||||
3 to 4 years | = | 9.9% | Year 4 | = | 42.9% | |||||
4 to 5 years | = | 9.1% | Year 5 | = | 52.0% | |||||
5 to 6 years | = | 14.6% | Year 6 | = | 66.6% | |||||
6 to 7 years | = | 8.7% | Year 7 | = | 75.3% | |||||
7 to 8 years | = | 7.2% | Year 8 | = | 82.5% | |||||
8 to 9 years | = | 7.5% | Year 9 | = | 90.0% | |||||
Over 9 years | = | 10.0% | Over 9 years | = | 100.0% |
Percentages can and do vary. Data as of 9/30/06.
California state general fund revenues surged 13.2% in the 2006 fiscal year on the strength of increases in capital gains taxes and income taxes related to stock options. The 2007 state budget forecasts spending growth over 9% and an ending budgetary reserve of just $2.1 billion. If tax revenues continue to grow rapidly, then the reserve balance should expand; but if the economy falters, the reserve will quickly disappear. State finances have improved dramatically, but are still very dependent upon volatile income taxes, and stock market and real estate values.
Other types of bonds, such as school district, utility, and health care bonds, are also generally showing solid credit characteristics. All the good news has, in our opinion, led market participants to take a very relaxed stance toward taking on credit risk. Yield spreads for lower investment grade and speculative grade bonds are well below long-term averages. While we are not anticipating impending doom for low quality bonds, we do believe it is prudent to keep credit quality high in the current environment. Your Fund is well diversified and 93% invested in bonds rated A or above by at least one of the major rating agencies.
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 California Limited Term Municipal Fund.
Sincerely,
George Strickland
Portfolio Manager
Certified Annual Report | 7 |
STATEMENT OF ASSETS AND LIABILITIES
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
ASSETS | ||||
Investments at value (cost $120,345,942) | $ | 122,284,853 | ||
Cash | 157,780 | |||
Receivable for investments sold | 1,810,277 | |||
Receivable for fund shares sold | 185,396 | |||
Interest receivable | 1,570,105 | |||
Prepaid expenses and other assets | 30,732 | |||
Total Assets | 126,039,143 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 80,835 | |||
Payable to investment advisor and other affiliates (Note 3) | 84,652 | |||
Accounts payable and accrued expenses | 41,707 | |||
Dividends payable | 108,258 | |||
Total Liabilities | 315,452 | |||
NET ASSETS | $ | 125,723,691 | ||
NET ASSETS CONSIST OF: | ||||
Net unrealized appreciation on investments | $ | 1,938,762 | ||
Accumulated net realized gain (loss) | (1,074,077 | ) | ||
Net capital paid in on shares of beneficial interest | 124,859,006 | |||
$ | 125,723,691 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($80,588,639 applicable to 6,311,431 shares of beneficial interest outstanding - Note 4) | $ | 12.77 | ||
Maximum sales charge, 1.50% of offering price | 0.19 | |||
Maximum offering price per share | $ | 12.96 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($16,801,080 applicable to 1,314,783 shares of beneficial interest outstanding - Note 4) | $ | 12.78 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($28,333,972 applicable to 2,216,877 shares of beneficial interest outstanding - Note 4) | $ | 12.78 | ||
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. |
8 | Certified Annual Report |
Thornburg California Limited Term Municipal Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $1,564,485) | $ | 5,602,633 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 693,537 | |||
Administration fees (Note 3) | ||||
Class A Shares | 115,747 | |||
Class C Shares | 22,679 | |||
Class I Shares | 13,983 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 231,494 | |||
Class C Shares | 182,739 | |||
Transfer agent fees | ||||
Class A Shares | 44,232 | |||
Class C Shares | 20,106 | |||
Class I Shares | 20,539 | |||
Registration and filing fees | ||||
Class A Shares | 69 | |||
Class C Shares | 70 | |||
Class I Shares | 69 | |||
Custodian fees (Note 3) | 68,239 | |||
Professional fees | 22,766 | |||
Accounting fees | 12,865 | |||
Trustee fees | 1,466 | |||
Other expenses | 19,193 | |||
Total Expenses | 1,469,793 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (44,032 | ) | ||
Management fees waived by investment advisor (Note 3) | (95,215 | ) | ||
Distribution and service fees waived (Note 3) | (91,370 | ) | ||
Fees paid indirectly (Note 3) | (75,049 | ) | ||
Net Expenses | 1,164,127 | |||
Net Investment Income | 4,438,506 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on Investments | (480,334 | ) | ||
Net change in unrealized appreciation (depreciation) of Investments | 11,918 | |||
Net Realized and Unrealized Loss on Investments | (468,416 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 3,970,090 | ||
See notes to financial statements.
Certified Annual Report | 9 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg California Limited Term Municipal Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,438,506 | $ | 4,817,185 | ||||
Net realized loss on investments | (480,334 | ) | (139,338 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 11,918 | (2,988,040 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,970,090 | 1,689,807 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,931,630 | ) | (3,392,991 | ) | ||||
Class C Shares | (529,444 | ) | (533,799 | ) | ||||
Class I Shares | (977,432 | ) | (890,395 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (30,148,546 | ) | (21,261,597 | ) | ||||
Class C Shares | (3,174,793 | ) | (1,532,552 | ) | ||||
Class I Shares | (2,450,712 | ) | 5,630,725 | |||||
Net Decrease in Net Assets | (36,242,467 | ) | (20,290,802 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 161,966,158 | 182,256,960 | ||||||
End of year | $ | 125,723,691 | $ | 161,966,158 | ||||
See notes to financial statements.
10 | Certified Annual Report |
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
NOTE 1 – ORGANIZATION
Thornburg California Limited Term Municipal Fund (the “Fund”) (formerly Thornburg Limited Term Municipal Fund –California Portfolio) 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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg New York Intermediate Municipal Fund, Thornburg New Mexico 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, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 and California state individual income tax as is consistent, in the view of the Fund’s investment advisor, 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, 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 I shares are sold at net asset value without a sales charge at the time of purchase, and (iv) the respective classes may have different reinvestment privileges and conversion rights.
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, administrative fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: The Trust determines the value of investments utilizing an independent pricing service approved by the Board of 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 p.m. EST. When quotations are not readily available, securities are valued at evaluated prices 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; and indications as to value from dealers and general market conditions. In any case where a price is not available from a pricing service for an investment, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the Trustees. 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 Board of Trustees. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable (if any) and tax exempt income of the Fund to the shareholders. Therefore, no provision for Federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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 realized 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
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
shares at the beginning of the day (after adjusting for the current capital shares 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, 2006, these fees were payable at annual rates ranging from .50 of 1% to .225 of 1% per annum of the average daily net assets of the Fund. For the year ended September 30, 2006, the Advisor voluntarily waived investment Advisory fees of $95,215. The Trust also has 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $17,930 for Class A shares, $14,918 for Class C shares, and $11,184 for Class I shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned no commissions from the sale of Class A shares, and collected contingent deferred sales charges aggregating $1,070 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 amounts 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 persons for distribution of the Fund’s shares and to obtain various shareholder and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust also has 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 1% per annum 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 and Class C distribution fees waived by the Distributor for the year ended September 30, 2006, are set forth in the Statement of Operations. Distribution fees in the amount of $91,370 were waived for Class C shares.
The Trust 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, 2006, fees paid indirectly were $75,049. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
12 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 500,010 | $ | 6,354,937 | 851,431 | $ | 10,982,577 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 157,167 | 1,996,487 | 174,031 | 2,241,423 | ||||||||||
Shares repurchased | (3,033,930 | ) | (38,499,970 | ) | (2,675,964 | ) | (34,485,597 | ) | ||||||
Net Increase (Decrease) | (2,376,753 | ) | $ | (30,148,546 | ) | (1,650,502 | ) | $ | (21,261,597 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 144,307 | $ | 1,835,245 | 306,700 | $ | 3,962,605 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 30,762 | 391,006 | 27,743 | 357,622 | ||||||||||
Shares repurchased | (424,743 | ) | (5,401,044 | ) | (454,085 | ) | (5,852,779 | ) | ||||||
Net Increase (Decrease) | (249,674 | ) | $ | (3,174,793 | ) | (119,642 | ) | $ | (1,532,552 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 917,264 | $ | 11,673,302 | 1,134,747 | $ | 14,661,908 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 61,670 | 784,049 | 54,521 | 702,734 | ||||||||||
Shares repurchased | (1,171,724 | ) | (14,908,063 | ) | (754,043 | ) | (9,733,917 | ) | ||||||
Net Increase (Decrease) | (192,790 | ) | $ | (2,450,712 | ) | 435,225 | $ | 5,630,725 | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $34,798,962 and $75,002,476, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 120,345,942 | ||
Gross unrealized appreciation on a tax basis | $ | 2,125,172 | ||
Gross unrealized depreciation on a tax basis | (186,261 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 1,938,911 | ||
At September 30, 2006, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2006, the Fund had tax basis capital losses, which may be carried over to offset future capital gains. To the extent such carry forwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryovers expire as follows:
2007 | $ | 205,990 | |
2008 | 214,571 | ||
2012 | 33,844 | ||
2014 | 148,124 | ||
$ | 602,529 | ||
At September 30, 2006, the Fund had deferred capital losses occurring subsequent to October 31, 2005 of $471,548. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
All dividends paid by the Fund for the year ended September 30, 2006 and September 30, 2005, represent exempt interest dividends, which are excludable by shareholders from gross income for Federal income tax purposes.
Certified Annual Report | 13 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
14 | Certified Annual Report |
Thornburg California Limited Term Municipal Fund
Year Ended Sept. 30, | 3 Months 2004(c) | Year Ended June 30 | ||||||||||||||||||||||
Class A Shares: | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.79 | $ | 13.02 | $ | 12.87 | $ | 13.20 | $ | 12.96 | $ | 12.79 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.40 | 0.36 | 0.08 | 0.35 | 0.38 | 0.46 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | 0.24 | 0.17 | |||||||||||||||
Total from investment operations | 0.38 | 0.13 | 0.23 | 0.02 | 0.62 | 0.63 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.40 | ) | (0.36 | ) | (0.08 | ) | (0.35 | ) | (0.38 | ) | (0.46 | ) | ||||||||||||
Change in net asset value | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | 0.24 | 0.17 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 12.77 | $ | 12.79 | $ | 13.02 | $ | 12.87 | $ | 13.20 | $ | 12.96 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.06 | % | 0.98 | % | 1.81 | % | 0.13 | % | 4.83 | % | 5.03 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.17 | % | 2.75 | % | 2.53 | %(b) | 2.66 | % | 2.87 | % | 3.58 | % | ||||||||||||
Expenses, after expense reductions | 0.92 | % | 1.00 | % | 0.99 | %(b) | 0.99 | % | 0.99 | % | 1.00 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.87 | % | 0.99 | % | 0.99 | %(b) | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||||
Expenses, before expense reductions | 1.01 | % | 1.02 | % | 1.05 | %(b) | 1.04 | % | 1.02 | % | 1.01 | % | ||||||||||||
Portfolio turnover rate | 25.77 | % | 26.33 | % | 4.18 | % | 23.80 | % | 26.03 | % | 25.16 | % | ||||||||||||
Net assets at end of period (000) | $ | 80,589 | $ | 111,102 | $ | 134,588 | $ | 131,158 | $ | 149,269 | $ | 115,237 |
(a) | Sales loads are not reflected in computing total return, which is not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
Certified Annual Report | 15 |
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund |
Year Ended Sept. 30, | 3 Months 2004(c) | Year Ended June 30, | ||||||||||||||||||||||
Class C Shares: | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.80 | $ | 13.03 | $ | 12.88 | $ | 13.21 | $ | 12.97 | $ | 12.80 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.37 | 0.32 | 0.07 | 0.32 | 0.34 | 0.41 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | 0.24 | 0.17 | |||||||||||||||
Total from investment operations | 0.35 | 0.09 | 0.22 | (0.01 | ) | 0.58 | 0.58 | |||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.37 | ) | (0.32 | ) | (0.07 | ) | (0.32 | ) | (0.34 | ) | (0.41 | ) | ||||||||||||
Change in net asset value | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | 0.24 | 0.17 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.88 | $ | 13.21 | $ | 12.97 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 2.80 | % | 0.73 | % | 1.75 | % | (0.12 | )% | 4.51 | % | 4.60 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 2.92 | % | 2.50 | % | 2.28 | %(b) | 2.41 | % | 2.56 | % | 3.15 | % | ||||||||||||
Expenses, after expense reductions | 1.18 | % | 1.25 | % | 1.24 | %(b) | 1.24 | % | 1.30 | % | 1.38 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 1.13 | % | 1.24 | % | 1.24 | %(b) | 1.24 | % | 1.30 | % | 1.37 | % | ||||||||||||
Expenses, before expense reductions | 1.83 | % | 1.82 | % | 1.87 | %(b) | 1.86 | % | 1.80 | % | 1.86 | % | ||||||||||||
Portfolio turnover rate | 25.77 | % | 26.33 | % | 4.18 | % | 23.80 | % | 26.03 | % | 25.16 | % | ||||||||||||
Net assets at end of period (000) | $ | 16,801 | $ | 20,021 | $ | 21,941 | $ | 22,363 | $ | 22,487 | $ | 16,081 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
16 | Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund |
Year Ended Sept. 30, | 3 Months 2004(c) | Year Ended June 30, | ||||||||||||||||||||||
Class I Shares: | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.80 | $ | 13.03 | $ | 12.89 | $ | 13.22 | $ | 12.97 | $ | 12.79 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.44 | 0.40 | 0.09 | 0.39 | 0.42 | 0.51 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | (0.23 | ) | 0.14 | (0.33 | ) | 0.25 | 0.18 | |||||||||||||||
Total from investment operations | 0.42 | 0.17 | 0.23 | 0.06 | 0.67 | 0.69 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.44 | ) | (0.40 | ) | (0.09 | ) | (0.39 | ) | (0.42 | ) | (0.51 | ) | ||||||||||||
Change in net asset value | (0.02 | ) | (0.23 | ) | 0.14 | (0.33 | ) | 0.25 | 0.18 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.89 | $ | 13.22 | $ | 12.97 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.39 | % | 1.31 | % | 1.81 | % | 0.46 | % | 5.27 | % | 5.48 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.50 | % | 3.09 | % | 2.85 | %(b) | 2.99 | % | 3.20 | % | 3.92 | % | ||||||||||||
Expenses, after expense reductions | 0.66 | % | 0.68 | % | 0.67 | %(b) | 0.67 | % | 0.65 | % | 0.66 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.55 | % | 0.67 | % | 0.67 | %(b) | 0.67 | % | 0.65 | % | 0.65 | % | ||||||||||||
Expenses, before expense reductions | 0.71 | % | 0.73 | % | 0.77 | %(b) | 0.78 | % | 0.75 | % | 0.84 | % | ||||||||||||
Portfolio turnover rate | 25.77 | % | 26.33 | % | 4.18 | % | 23.80 | % | 26.03 | % | 25.16 | % | ||||||||||||
Net assets at end of period (000) | $ | 28,334 | $ | 30,843 | $ | 25,728 | $ | 22,929 | $ | 20,592 | $ | 10,133 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
Certified Annual Report | 17 |
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-426, CLASS C - 885-215-418, CLASS I - 885-215-392
NASDAQ SYMBOLS: CLASS A - LTCAX, CLASS C - LTCCX, CLASS I - LTCIX
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
ABAG Finance Authority, 4.75% due 10/1/2011 (California School of Mechanical Arts Project) | A3/NR | $ | 435,000 | $ | 452,970 | |||
ABAG Finance Authority, 4.75% due 10/1/2012 (California School of Mechanical Arts Project) | A3/NR | 455,000 | 475,034 | |||||
Alum Rock Union Elementary School District GO Refunding Bonds, 8.00% due 9/1/2007 (Insured: FGIC) | Aaa/AAA | 380,000 | 395,333 | |||||
Bay Area Toll Bridge Revenue San Francisco Bay Area Series F, 5.00% due 4/1/2016 | Aa3/AA | 2,075,000 | 2,285,156 | |||||
California Health Facilities Financing, 5.50% due 10/1/2006 (Sisters of Providence Project) | Aa2/AA | 1,235,000 | 1,235,111 | |||||
California Health Facilities Financing Authority Revenue Refunding Series B, 5.25% due 10/1/2013 (Kaiser Permanente Project) (ETM) | A3/AAA | 2,000,000 | 2,082,700 | |||||
California HFA Revenue Series 1985-B, 9.875% due 2/1/2017 | Aa2/AA- | 670,000 | 687,440 | |||||
California Infrastructure & Economic Development Bank Revenue, 5.00% due 7/1/2010 (Bay Area Toll Bridges Project; Insured: FSA) (ETM) | Aaa/AAA | 1,000,000 | 1,055,190 | |||||
California Mobile Home Park Financing Authority Series A, 4.75% due 11/15/2010 (Rancho Vallecitos Project; Insured: ACA) | NR/A | 500,000 | 514,215 | |||||
California Mobile Home Park Financing Authority Series A, 5.00% due 11/15/2013 (Rancho Vallecitos Project; Insured: ACA) | NR/A | 570,000 | 597,200 | |||||
California Pollution Control Financing Authority Solid Waste Disposal Revenue, 6.75% due 7/1/2011 (ETM) | Aaa/NR | 2,290,000 | 2,436,926 | |||||
California Pollution Control Financing Authority Solid Waste Disposal Revenue, 5.00% due 6/1/2018 put 6/1/2008 | NR/BBB | 1,100,000 | 1,115,829 | |||||
California State Department of Transportation COP Refunding Series A, 5.25% due 3/1/2016 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,052,140 | |||||
California State Department of Water Resources Power Series A, 5.50% due 5/1/2011 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,166,660 | |||||
California State Department of Water Resources Series B-2, 3.66% due 5/1/2022 put 10/2/2006 (LOC: BNP Paribas) (daily demand notes) | VMIG1/A-1+ | 3,500,000 | 3,500,000 | |||||
California State Economic Recovery Series C-1, 3.65% due 7/1/2023 put 10/2/2006 (Guaranty: Landesbank) (daily demand notes) | VMIG1/A-1+ | 350,000 | 350,000 | |||||
California State GO, 7.50% due 10/1/2007 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,078,160 | |||||
California State GO, 6.60% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 560,000 | 613,502 | |||||
California State GO, 6.50% due 9/1/2010 (Insured: AMBAC) | Aaa/AAA | 1,250,000 | 1,384,200 | |||||
California State GO, 5.50% due 3/1/2012 (Insured: FGIC) | Aaa/AAA | 230,000 | 231,783 | |||||
California State GO, 6.25% due 9/1/2012 | A1/A+ | 3,000,000 | 3,343,950 | |||||
California State GO Economic Recovery Series A, 5.00% due 1/1/2008 | Aa3/AA+ | 1,000,000 | 1,018,960 | |||||
California State GO Economic Recovery Series A, 5.25% due 7/1/2013 | Aa3/AA+ | 2,500,000 | 2,740,575 | |||||
California State Public Works Board Lease Revenue, 5.00% due 1/1/2015 (Department of Corrections Project; Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,177,460 | |||||
California State Public Works Board Lease Revenue, 5.50% due 6/1/2010 (Various Universities Project) | Aa2/AA- | 530,000 | 559,240 | |||||
California State Public Works Board Lease Revenue, 5.00% due 11/1/2015 | Aa2/AA- | 1,000,000 | 1,079,750 | |||||
California State Refunding, 5.75% due 10/1/2010 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,083,610 | |||||
California State Veterans Bonds, 9.50% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,184,250 | |||||
California Statewide Community Development Authority COP, 5.30% due 12/1/2015 (ETM) | Aaa/AAA | 2,600,000 | 2,700,022 | |||||
California Statewide Community Development Authority Revenue, 5.125% due 6/1/2008 (Louisiana Orthopedic Hospital Foundation Project; Insured: AMBAC) | Aaa/AAA | 595,000 | 607,233 | |||||
California Statewide Community Development Authority Revenue COP, 6.50% due 8/1/2012 (Cedars Sinai Center Hospital Project; Insured: MBIA) | Aaa/AAA | 765,000 | 826,582 | |||||
California Statewide Community Development Authority Solid Waste Revenue, 2.90% due 4/1/2011 put 4/1/2007 (Waste Management Inc. Project) | NR/BBB | 1,000,000 | 994,500 | |||||
California Statewide Community Development Series E, 4.70% due 11/1/2036 put 6/1/2009 (Kaiser Permanente Project) | A3/A-1 | 2,000,000 | 2,050,500 |
18 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Central Union High School District Imperial County Refunding, 5.00% due 8/1/2012 (Insured: FGIC) | Aaa/AAA | $ | 830,000 | $ | 894,740 | |||
Central Valley School Districts Financing Authority, 0% due 2/1/2007 (Insured: MBIA) | Aaa/AAA | 205,000 | �� | 202,612 | ||||
East Palo Alto Public Financing University Circle Gateway/101 Series A, 5.00% due 10/1/2014 (Insured: Radian) | Aa3/AA | 670,000 | 716,934 | |||||
East Palo Alto Public Financing University Circle Gateway/101 Series A, 5.00% due 10/1/2016 (Insured: Radian) | Aa3/AA | 735,000 | 790,404 | |||||
El Monte COP Senior Department Public Services Facility Phase II, 5.00% due 1/1/2009 (Insured: AMBAC) | Aaa/AAA | 2,730,000 | 2,783,098 | |||||
Escondido Joint Powers Financing Authority Lease Revenue Refunding, 0% due 9/1/2013 (California Center For The Arts Project; Insured: AMBAC) | Aaa/AAA | 500,000 | 326,725 | |||||
Fresno County Housing Authority Multi Family Revenue Refunding Series A, 4.90% due 11/1/2027 mandatory put 11/1/2007 (Creek Park Apartments Project; Collateralized: FNMA) | NR/AAA | 400,000 | 403,628 | |||||
Fresno Unified School District Series D, 5.00% due 8/1/2009 (ETM) | Aaa/AAA | 545,000 | 558,325 | |||||
Hawaiian Gardens Redevelopment Agency Refunding, 5.50% due 12/1/2008 | NR/BBB+ | 575,000 | 595,045 | |||||
Irvine California Improvement Bond Act 1915, 3.65% due 9/2/2022 put 10/2/2006 (LOC: State Street Bank & Trust) (daily demand notes) | VMIG1/A-1+ | 1,500,000 | 1,500,000 | |||||
Kern High School District, 7.00% due 8/1/2010 (ETM) | A1/NR | 165,000 | 185,547 | |||||
Kern High School District Refunding Series A, 6.30% due 8/1/2011 (Insured: MBIA) | Aaa/AAA | 500,000 | 556,715 | |||||
Los Angeles Community Redevelopment Agency, 5.00% due 7/1/2009 (Cinerama Dome Public Parking Project; Insured: ACA) | NR/A | 835,000 | 856,969 | |||||
Los Angeles Community Redevelopment Agency, 5.75% due 7/1/2010 (Cinerama Dome Public Parking Project; Insured: ACA) | NR/A | 435,000 | 453,257 | |||||
Los Angeles COP, 5.00% due 2/1/2012 (Insured: MBIA) | Aaa/AAA | 1,400,000 | 1,495,060 | |||||
Los Angeles County Capital Asset Leasing Corp., 5.00% due 4/1/2008 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,044,220 | |||||
Los Angeles Department of Water & Power Revenue Series A, 5.25% due 7/1/2011 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,232,080 | |||||
Los Angeles Multi Family Revenue, 5.85% due 12/1/2027 put 12/01/2007 (Collateralized: FNMA) (AMT) | NR/AAA | 610,000 | 620,150 | |||||
Los Angeles Unified School District Series E, 5.50% due 7/1/2012 (Insured: MBIA) | Aaa/AAA | 2,500,000 | 2,757,100 | |||||
Milpitas California Agency Tax Allocation Redevelopment Project Area No 1, 5.00% due 9/1/2015 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,150,240 | |||||
Moorpark Mobile Home Park Revenue Series A, 5.80% due 5/15/2010 (Villa Delaware Arroyo Project; Insured: ACA) | NR/A | 990,000 | 1,026,095 | |||||
New Haven Unified School District Refunding, 12.00% due 8/1/2008 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,145,160 | |||||
Northern California Power Agency Public Power Revenue, 5.65% due 7/1/2007 (Geothermal Project 3-A) (ETM) | A2/BBB+ | 360,000 | 366,026 | |||||
Northern California Power Agency Public Power Revenue, 5.65% due 7/1/2007 (Geothermal Project 3-A) | A2/BBB+ | 340,000 | 344,430 | |||||
Northern California Power Agency Public Power Revenue Series A, 5.00% due 7/1/2009 (Geothermal Project Number 3) | A2/BBB+ | 4,000,000 | 4,003,480 | |||||
Norwalk California Redevelopment Agency Refunding Tax Allocation, 5.00% due 10/1/2014 (Insured: MBIA) | Aaa/AAA | 625,000 | 681,081 | |||||
Oakland Redevelopment Agency, 7.40% due 5/1/2007 (Insured: AMBAC) | Aaa/AAA | 20,000 | 20,061 | |||||
Orange County Airport Revenue Bond, 6.00% due 7/1/2007 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,017,820 | |||||
Oxnard Financing Authority Solid Waste Refunding, 5.00% due 5/1/2013 (Insured:AMBAC) (AMT) | NR/AAA | 2,115,000 | 2,238,495 | |||||
Piedmont Unified School District Series B, 0% due 8/1/2013 pre-refunded 8/1/2007 | Aa3/NR | 1,000,000 | 674,240 | |||||
Pittsburg California Redevelopment Agency Tax Allocation Refunding, 5.25% due 8/1/2012 (Los Medanos Community Development Project A; Insured: MBIA) | Aaa/AAA | 3,350,000 | 3,644,096 | |||||
Pomona Unified School District Refunding Series A, 6.10% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 320,000 | 345,984 | |||||
Richmond Joint Powers Financing Authority Refunding Lease & Gas Tax Series A, 5.25% due 5/15/2013 | NR/BBB | 2,000,000 | 2,027,580 | |||||
Sacramento California City Financing Authority, 0% due 11/1/2014 (Insured: MBIA) | Aaa/AAA | 3,310,000 | 2,426,230 | |||||
Sacramento County Sanitation District Financing Authority Revenue Series A, 5.75% due 12/1/2009 | Aa3/AA | 560,000 | 596,798 | |||||
Sacramento Municipal Utility District Electric Revenue Refunding Series C, 5.75% due 11/15/2007 (ETM) | Aaa/AAA | 330,000 | 330,624 | |||||
Salinas Redevelopment Agency Tax Allocation Series A, 0% due 11/1/2022 (Insured: FSA) | Aaa/AAA | 1,450,000 | 608,507 |
Certified Annual Report | 19 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
San Bernardino County Multi Family Housing Revenue Refunding Series A, 4.75% due 12/15/2031 put 12/15/2011 (Collateralized: FNMA) | Aaa/NR | $ | 3,000,000 | $ | 3,109,140 | |||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.10% due 9/1/2011 | NR/NR | 190,000 | 195,721 | |||||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.20% due 9/1/2012 | NR/NR | 205,000 | 212,942 | |||||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.30% due 9/1/2013 | NR/NR | 300,000 | 313,947 | |||||
San Bernardino County Transportation Authority Sales Tax Revenue Series A, 6.00% due 3/1/2010 (ETM) | Aaa/AAA | 720,000 | 749,304 | |||||
San Diego County California COP, 5.625% due 9/1/2012 (Insured: AMBAC) | Aaa/AAA | 500,000 | 531,370 | |||||
San Diego County California COP Developmental Services Foundation, 5.50% due 9/1/2017 | Baa3/BBB- | 2,000,000 | 2,108,940 | |||||
San Diego County Regional Airport Authority, 5.00% due 7/1/2013 (Insured: AMBAC) (AMT) | Aaa/AAA | 1,000,000 | 1,064,110 | |||||
San Diego Public Facilities Financing Authority Lease Revenue, 7.00% due 4/1/2007 (Insured: MBIA) | Aaa/AAA | 425,000 | 432,280 | |||||
San Francisco City & County Redevelopment Agency, 0% due 7/1/2010 (George R Moscone Project) | A1/AA- | 1,380,000 | 1,198,075 | |||||
San Francisco Laguna Honda Hospital Series I, 5.00% due 6/15/2014 (Insured: FSA) | Aaa/AAA | 2,320,000 | 2,513,001 | |||||
San Jose California Unified School District COP, 4.50% due 6/1/2011 (Insured: FGIC) | AAA/AAA | 1,015,000 | 1,057,559 | |||||
San Jose California Unified School District COP, 5.00% due 6/1/2013 (Insured: FGIC) | AAA/AAA | 1,090,000 | 1,179,206 | |||||
San Jose Evergreen Community College District Series C, 0% due 9/1/2011 crossover refunded 9/1/2010 (Insured: AMBAC) | Aaa/AAA | 2,200,000 | 1,785,740 | |||||
San Marcos Public Facilities Authority Revenue Community Facilities District 88-1, 0% due 3/1/2008 (ETM) | Aaa/NR | 1,900,000 | 1,807,679 | |||||
Seal Beach Redevelopment Agency Mobile Home Park Revenue Series A, 5.20% due 12/15/2013 (Insured: ACA) | NR/A | 575,000 | 609,719 | |||||
Southeast Resources Recovery Facilities Authority Lease Revenue Refunding Series B, 5.375% due 12/1/2013 (Insured: AMBAC) | Aaa/AAA | 1,060,000 | 1,150,174 | |||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Public Power Project; Insured: AMBAC) | Aaa/AAA | 350,000 | 385,987 | |||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Public Power Project; Insured: AMBAC) | Aaa/AAA | 250,000 | 275,705 | |||||
Stanton Multi Family Housing Revenue Bond Series 1997, 5.625% due 8/1/2029 put 8/1/2009 (Continental Gardens Project; Collateralized: FNMA) | NR/AAA | 4,490,000 | 4,627,439 | |||||
Val Verde Unified School District COP, 5.00% due 1/1/2014 (Insured: FGIC) (ETM) | Aaa/AAA | 445,000 | 484,445 | |||||
Val Verde Unified School District COP Series B, 5.00% due 1/1/2013 (Insured: FGIC) | Aaa/AAA | 360,000 | 387,986 | |||||
Val Verde Unified School District COP Series B, 5.00% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | 430,000 | 466,116 | |||||
Ventura County Community College Series A, 5.00% due 8/1/2012 (Insured: MBIA) | Aaa/AAA | 500,000 | 539,000 | |||||
Victorville Redevelopment Agency Tax Allocation Bear Valley Road Special Escrow Fund A, 5.00% due 12/1/2014 (Insured: FSA) | Aaa/AAA | 420,000 | 440,052 | |||||
Walnut Valley Unified School District, 8.75% due 8/1/2010 (ETM) | Aaa/AAA | 1,000,000 | 1,186,150 | |||||
Walnut Valley Unified School District Series A, 6.80% due 2/1/2007 (Insured: MBIA) | Aaa/AAA | 250,000 | 252,740 | |||||
Walnut Valley Unified School District Series A, 6.90% due 2/1/2008 (Insured: MBIA) | Aaa/AAA | 250,000 | 261,040 | |||||
Walnut Valley Unified School District Series A, 7.00% due 8/1/2008 (Insured: MBIA) | Aaa/AAA | 100,000 | 106,193 | |||||
Washington Township Health Care District Revenue, 5.00% due 7/1/2009 | A2/NR | 450,000 | 460,422 | |||||
West Contra Costa Unified School District Series A, 7.00% due 8/1/2008 (Insured: MBIA) | Aaa/AAA | 655,000 | 695,564 | |||||
Whittier Solid Waste Revenue Refunding Series A, 5.375% due 8/1/2014 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,001,370 | |||||
TOTAL INVESTMENTS — 97.26% (Cost $120,345,942) | $ | 122,284,853 | ||||||
OTHER ASSETS LESS LIABILITIES — 2.74% | 3,438,838 | |||||||
NET ASSETS — 100.00% | $ | 125,723,691 | ||||||
20 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. |
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access |
AMBAC | Insured by American Municipal Bond Assurance Corp. |
AMT | Alternative Minimum Tax |
COP | Certificates of Participation |
ETM | Escrowed to Maturity |
FGIC | Insured by Financial Guaranty Insurance Co. |
FNMA | Collateralized by Federal National Mortgage Association |
FSA | Insured by Financial Security Assurance Co. |
GO | General Obligation |
HFA | Housing Finance Authority |
MBIA | Insured by Municipal Bond Investors Assurance |
RADIAN | Insured by Radian Asset Assurance |
SUMMARY OF SECURITY CREDIT RATINGS†
Ratings are a blend of Moody’s and Standard & Poor’s, using the higher rating. Some bonds are rated by only one service.
Certified Annual Report | 21 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg California Limited Term Municipal Fund
To the Trustees and Shareholders of
Thornburg California Limited Term 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 California Limited Term Municipal Fund (one of the Portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
22 | Certified Annual Report |
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including
(a) sales charges (loads) on purchase payments, for Class A shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(c) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06-9/30/06 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000 | $ | 1,023.70 | $ | 4.98 | |||
Hypothetical* | $ | 1,000 | $ | 1,020.15 | $ | 4.97 | |||
Class C Shares | |||||||||
Actual | $ | 1,000 | $ | 1,022.40 | $ | 6.29 | |||
Hypothetical* | $ | 1,000 | $ | 1,018.85 | $ | 6.27 | |||
Class I Shares | |||||||||
Actual | $ | 1,000 | $ | 1,025.30 | $ | 3.36 | |||
Hypothetical* | $ | 1,000 | $ | 1,021.75 | $ | 3.35 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.98%; C: 1.24%; and I: 0.66%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report | 23 |
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg California Limited Term Municipal Fund Class A Total Returns versus Lehman
Brothers Five-Year Municipal Bond Index and Consumer Price Index
(February 28, 1987 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 2/19/87) | 1.55 | % | 2.44 | % | 3.57 | % | 4.83 | % | ||||
C Shares (Incep: 9/1/94) | 2.30 | % | 2.46 | % | 3.36 | % | 3.60 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 2/19/87) | 3.36 | % | 2.85 | % | $ | 12.77 | $ | 12.96 | ||||
C Shares (Incep: 9/1/94) | 3.07 | % | 2.59 | % | $ | 12.78 | $ | 12.78 |
Performance data reflect past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 1.50%. Class C shares assume deduction of a 0.50% contingent deferred sales charge (CDSC) for the first year only.
The Consumer Price Index (“CPI”) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
The Lehman Brothers Five-Year Municipal Bond Index is a rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must have a minimum credit rating of Baa. The approximate maturity of the municipal bonds in the index is five 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.
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 Net Asset Value (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.
24 | Certified Annual Report |
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report | 25 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
26 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report | 27 |
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, 100% of dividends paid by the Fund are tax exempt dividends for Federal Income Tax purposes. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg California Limited Term Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor on a range of matters, including (among other things) information respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees primarily considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time relative to different categories of mutual funds sharing certain comparable characteristics and selected by independent firms, and relative to a broad based securities index; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by
28 | Certified Annual Report |
OTHER INFORMATION, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories, and in particular to broad based securities indices, may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully and competently pursue and achieve the Fund’s stated objectives, as reflected particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s average or better investment returns over most periods relative to a category of mutual funds selected by an independent mutual fund analyst firm and considered by the Trustees to be most comparable to the Fund of the categories reviewed, and the Fund’s performance relative to comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of municipal debt mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the overall expenses for the Fund were somewhat higher than average and median expenses for the grouping of mutual funds assembled by the mutual fund analyst firm, but that the difference was not notable in view of its degree and the other factors considered. The Trustees further noted in this regard that the Advisor is currently waiving a portion of the management fee, and that the reduced fee charged to the Fund was comparable to the average and median management fees for the group of mutual funds. The Trustees also observed in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
Certified Annual Report | 29 |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
30 | This page is not part of the Annual Report. |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. | 31 |
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses.We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 | 119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 |
Thornburg California Limited Term Municipal Fund
Laddering – an All Weather Strategy
The Fund will invest primarily in municipal obligations originating in California with the objective of obtaining as high a level of current income exempt from Federal and California state individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital.
The Fund offers California investors double tax-free yields (may be subject to Alternative Minimum Tax) in a laddered municipal bond portfolio with an average maturity of five years or less. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year; cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. The strategy is a good compromise for managing different types of risk.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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2 | This page is not part of the Annual Report. |
Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We aspire to accomplish this through a family of laddered bond funds that focus on quality, stability, and minimization of risk over time, and through a range of equity funds that redefine traditional measures of value and growth.
Our bond funds have always been managed using the highly disciplined approach of laddering short and intermediate bond maturities, seeking to provide both an attractive return and stability of principal. Laddering is an all-weather strategy, designed to perform in uncertain markets like the ones we have seen in the last two years. Moreover, all of the bond funds focus on buying investment-grade securities. We have found this strategy to be the best at managing both interest-rate risk and credit risk, and we believe this approach has served our shareholders well over time.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Our bond fund portfolio managers have many years of experience. We are proud of this consistency and experience and look forward to many more successful years with them at the helm.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely, |
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Garrett Thornburg |
Chairman & CEO |
This page is not part of the Annual Report. | 3 |
2006 Certified Annual Report
Thornburg California Limited Term Municipal Fund
I Shares – September 30, 2006
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26 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 | Certified Annual Report |
Important Information
Performance data represent past performance and do not guarantee future results. Investment return and principal value will fluctuate. Upon redemption, an investor’s shares may be worth more or less than their original cost. Current returns may be lower or higher than those shown. For performance current to the most recent month end, visit www.thornburg.com.
Minimum investments for Class I shares are higher than those for other classes. Returns reflect the reinvestment of dividends and capital gains. There is no up front sales charge for this class of shares.
Shares in the Fund carry risks, including possible loss of principal. As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Glossary
The Lehman Brothers Five-Year Municipal Bond Index – A rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must have a minimum credit rating of Baa. The approximate maturity of the municipal bonds in the index is five 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.
Duration – The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.
Weighted Average Maturity – A weighted average of all the effective maturities of the bonds in a portfolio. Effective maturity takes into consideration mortgage prepayments, puts, sinking funds, adjustable coupons, and other features of individual bonds and is thus a more accurate measure of interest-rate sensitivity. Longer-maturity funds are generally considered more interest-rate sensitive than their shorter counterparts.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Treasury Notes – a debt obligation of the US government backed by the “full faith and credit” of the government. Notes are intermediate to long term investments typically issued in maturities of two, five and ten years. Interest is paid semi-annually.
Certified Annual Report | 5 |
George Strickland
Portfolio Manager
October 17, 2006
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg California Limited Term Municipal Fund. The net asset value of the I shares decreased by 2 cents to $12.78 during the twelve months ended September 30, 2006. If you were with us for the entire period, you received dividends of 44.5 cents per share. If you reinvested dividends, you received 45.2 cents per share.
Over the last twelve months, interest rates on bonds that mature in ten years or less have risen, while interest rates on long-term bonds have fallen. Higher interest rates on short-term bonds have lowered the price of most of the bonds owned by the Fund somewhat, but have allowed us to buy new bonds at higher yields and increase the yield of the portfolio. The Class I shares of your Fund produced a total return of 3.39% over the twelve month period ended September 30, 2006, compared to a 3.01% return for the Lehman Five Year Municipal Bond Index. Several of the bond positions in the Fund were upgraded by rating agencies due to a strong California economy and other factors. This contributed to performance and helped the Fund outperform the index.
After rising for most of the year, bond yields fell in the third quarter of 2006 because the bond market started to anticipate a slower economy, reduced inflation, and a lower Fed Funds rate. While such an outcome is certainly possible, we believe the preponderance of evidence points to continued economic growth and a Federal Reserve that must stay on high alert to avoid inflationary acceleration.
The current case for a weak economy revolves around the detrimental effects of a declining housing market. However, slackness in residential housing is being countered with strength in commercial real estate, capital spending, state and federal government spending, and exports. Some consumers are feeling pinched by higher rates on adjustable rate mortgages, but many more are enjoying higher incomes in an economy that has produced 1.8 million new jobs over the last twelve months. So consumer spending should continue growing, and may accelerate if oil and gas prices hold in their current ranges. This should drive the economy to solid, but not spectacular, growth.
No matter how you measure it, inflation has doubled over the last three years. The current levels are not terribly alarming, but they are significantly above the Federal Reserve’s comfort zone. Fed Chairman Bernanke has stated that he thinks inflation should moderate next year, but there are reasons to think that it might not. U.S. hourly earnings are rising at a 4% rate, up from 1.6% in early 2004, and import prices have been rising steadily. These and other pressures could keep inflation stubbornly in the Fed’s discomfort zone.
So, when we look at current yield curves – inverted for Treasury notes and bonds, and very flat for municipal bonds – it appears to us that the optimistic inflation scenario is already priced into the market. In order to justify today’s 4.8% 10-year Treasury note, one must assume the Federal Reserve will begin easing monetary policy fairly soon. That implies that inflation will drop back down below 2%. If all that unfolds as expected, then current levels are justified. If it does not, then interest rates should rise on intermediate and long-term bonds. Clearly, it seems that risks are somewhat skewed toward higher interest rates.
6 | Certified Annual Report |
Your Thornburg California Limited Term Municipal Fund is a laddered portfolio of over 100 municipal obligations from all over California. Today, your Fund’s weighted average maturity is 4.56 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 short and 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 chart below describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
% of portfolio maturing | Cumulative % maturing | |
1 year = 10.2% | Year 1 = 10.2% | |
1 to 2 years = 9.9% | Year 2 = 20.1% | |
2 to 3 years = 12.9% | Year 3 = 33.0% | |
3 to 4 years = 9.9% | Year 4 = 42.9% | |
4 to 5 years = 9.1% | Year 5 = 52.0% | |
5 to 6 years = 14.6% | Year 6 = 66.6% | |
6 to 7 years = 8.7% | Year 7 = 75.3% | |
7 to 8 years = 7.2% | Year 8 = 82.5% | |
8 to 9 years = 7.5% | Year 9 = 90.0% | |
Over 9 years = 10.0% | Over 9 years = 100.0% |
Percentages can and do vary. Data as of 9/30/06.
We took advantage of rising rates to extend the duration of the Fund over the last year. We are now firmly in neutral territory and the ladder is fairly evenly distributed (just a little light in the last three years). We are planning to gradually shorten portfolio duration over time unless new opportunities open up to us over the next few months. If interest rates on long-term bonds rise, Thornburg laddered bond portfolios should outperform more aggressive bond strategies. If interest rates hold steady or decline, then Thornburg bond portfolios should produce compelling risk-adjusted returns.
California state general fund revenues surged 13.2% in the 2006 fiscal year on the strength of increases in capital gains taxes and income taxes related to stock options. The 2007 state budget forecasts spending growth over 9% and an ending budgetary reserve of just $2.1 billion. If tax revenues continue to grow rapidly, then the reserve balance should expand; but if the economy falters, the reserve will quickly disappear. State finances have improved dramatically, but are still very dependent upon volatile income taxes, and stock market and real estate values.
Other types of bonds, such as school district, utility, and health care bonds, are also generally showing solid credit characteristics. All the good news has, in our opinion, led market participants to take a very relaxed stance toward taking on credit risk. Yield spreads for lower investment grade and speculative grade bonds are well below long-term averages. While we are not anticipating impending doom for low quality bonds, we do believe it is prudent to keep credit quality high in the current environment. Your Fund is well diversified and 93% invested in bonds rated A or above by at least one of the major rating agencies.
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 California Limited Term Municipal Fund.
Sincerely, |
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George Strickland Portfolio Manager |
Certified Annual Report | 7 |
STATEMENT OF ASSETS AND LIABILITIES
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
ASSETS | ||||
Investments at value (cost $120,345,942) | $ | 122,284,853 | ||
Cash | 157,780 | |||
Receivable for investments sold | 1,810,277 | |||
Receivable for fund shares sold | 185,396 | |||
Interest receivable | 1,570,105 | |||
Prepaid expenses and other assets | 30,732 | |||
Total Assets | 126,039,143 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 80,835 | |||
Payable to investment advisor and other affiliates (Note 3) | 84,652 | |||
Accounts payable and accrued expenses | 41,707 | |||
Dividends payable | 108,258 | |||
Total Liabilities | 315,452 | |||
NET ASSETS | $ | 125,723,691 | ||
NET ASSETS CONSIST OF: | ||||
Net unrealized appreciation on investments | $ | 1,938,762 | ||
Accumulated net realized gain (loss) | (1,074,077 | ) | ||
Net capital paid in on shares of beneficial interest | 124,859,006 | |||
$ | 125,723,691 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | ||||
($80,588,639 applicable to 6,311,431 shares of beneficial interest outstanding - Note 4) | $ | 12.77 | ||
Maximum sales charge, 1.50% of offering price | 0.19 | |||
Maximum offering price per share | $ | 12.96 | ||
Class C Shares: | ||||
Net asset value and offering price per share * | ||||
($16,801,080 applicable to 1,314,783 shares of beneficial interest outstanding - Note 4) | $ | 12.78 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | ||||
($28,333,972 applicable to 2,216,877 shares of beneficial interest outstanding - Note 4) | $ | 12.78 | ||
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. |
8 | Certified Annual Report |
Thornburg California Limited Term Municipal Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $1,564,485) | $ | 5,602,633 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 693,537 | |||
Administration fees (Note 3) | ||||
Class A Shares | 115,747 | |||
Class C Shares | 22,679 | |||
Class I Shares | 13,983 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 231,494 | |||
Class C Shares | 182,739 | |||
Transfer agent fees | ||||
Class A Shares | 44,232 | |||
Class C Shares | 20,106 | |||
Class I Shares | 20,539 | |||
Registration and filing fees | ||||
Class A Shares | 69 | |||
Class C Shares | 70 | |||
Class I Shares | 69 | |||
Custodian fees (Note 3) | 68,239 | |||
Professional fees | 22,766 | |||
Accounting fees | 12,865 | |||
Trustee fees | 1,466 | |||
Other expenses | 19,193 | |||
Total Expenses | 1,469,793 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (44,032 | ) | ||
Management fees waived by investment advisor (Note 3) | (95,215 | ) | ||
Distribution and service fees waived (Note 3) | (91,370 | ) | ||
Fees paid indirectly (Note 3) | (75,049 | ) | ||
Net Expenses | 1,164,127 | |||
Net Investment Income | 4,438,506 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on Investments | (480,334 | ) | ||
Net change in unrealized appreciation (depreciation) of Investments | 11,918 | |||
Net Realized and Unrealized Loss on Investments | (468,416 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 3,970,090 | ||
See notes to financial statements.
Certified Annual Report | 9 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg California Limited Term Municipal Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,438,506 | $ | 4,817,185 | ||||
Net realized loss on investments | (480,334 | ) | (139,338 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 11,918 | (2,988,040 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,970,090 | 1,689,807 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,931,630 | ) | (3,392,991 | ) | ||||
Class C Shares | (529,444 | ) | (533,799 | ) | ||||
Class I Shares | (977,432 | ) | (890,395 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (30,148,546 | ) | (21,261,597 | ) | ||||
Class C Shares | (3,174,793 | ) | (1,532,552 | ) | ||||
Class I Shares | (2,450,712 | ) | 5,630,725 | |||||
Net Decrease in Net Assets | (36,242,467 | ) | (20,290,802 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 161,966,158 | 182,256,960 | ||||||
End of year | $ | 125,723,691 | $ | 161,966,158 | ||||
See notes to financial statements.
10 | Certified Annual Report |
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
NOTE 1 – ORGANIZATION
Thornburg California Limited Term Municipal Fund (the “Fund”) (formerly Thornburg Limited Term Municipal Fund –California Portfolio) 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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg New York Intermediate Municipal Fund, Thornburg New Mexico 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, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 and California state individual income tax as is consistent, in the view of the Fund's investment advisor, 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, 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 I shares are sold at net asset value without a sales charge at the time of purchase, and (iv) the respective classes may have different reinvestment privileges and conversion rights. 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, administrative fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: The Trust determines the value of investments utilizing an independent pricing service approved by the Board of 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 p.m. EST. When quotations are not readily available, securities are valued at evaluated prices 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; and indications as to value from dealers and general market conditions. In any case where a price is not available from a pricing service for an investment, the Trust's valuation and pricing committee determines a fair value for the investment using factors approved by the Trustees. 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 Board of Trustees. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable (if any) and tax exempt income of the Fund to the shareholders. Therefore, no provision for Federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund's investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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 realized 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
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
shares at the beginning of the day (after adjusting for the current capital shares 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, 2006, these fees were payable at annual rates ranging from .50 of 1% to .225 of 1% per annum of the average daily net assets of the Fund. For the year ended September 30, 2006, the Advisor voluntarily waived investment Advisory fees of $95,215. The Trust also has 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $17,930 for Class A shares, $14,918 for Class C shares, and $11,184 for Class I shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned no commissions from the sale of Class A shares, and collected contingent deferred sales charges aggregating $1,070 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 amounts 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 persons for distribution of the Fund’s shares and to obtain various shareholder and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust also has 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 1% per annum 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 and Class C distribution fees waived by the Distributor for the year ended September 30, 2006, are set forth in the Statement of Operations. Distribution fees in the amount of $91,370 were waived for Class C shares.
The Trust 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, 2006, fees paid indirectly were $75,049. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
12 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 500,010 | $ | 6,354,937 | 851,431 | $ | 10,982,577 | ||||||||
Shares issued to shareholders inreinvestment of dividends | 157,167 | 1,996,487 | 174,031 | 2,241,423 | ||||||||||
Shares repurchased | (3,033,930 | ) | (38,499,970 | ) | (2,675,964 | ) | (34,485,597 | ) | ||||||
Net Increase (Decrease) | (2,376,753 | ) | $ | (30,148,546 | ) | (1,650,502 | ) | $ | (21,261,597 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 144,307 | $ | 1,835,245 | 306,700 | $ | 3,962,605 | ||||||||
Shares issued to shareholders inreinvestment of dividends | 30,762 | 391,006 | 27,743 | 357,622 | ||||||||||
Shares repurchased | (424,743 | ) | (5,401,044 | ) | (454,085 | ) | (5,852,779 | ) | ||||||
Net Increase (Decrease) | (249,674 | ) | $ | (3,174,793 | ) | (119,642 | ) | $ | (1,532,552 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 917,264 | $ | 11,673,302 | 1,134,747 | $ | 14,661,908 | ||||||||
Shares issued to shareholders inreinvestment of dividends | 61,670 | 784,049 | 54,521 | 702,734 | ||||||||||
Shares repurchased | (1,171,724 | ) | (14,908,063 | ) | (754,043 | ) | (9,733,917 | ) | ||||||
Net Increase (Decrease) | (192,790 | ) | $ | (2,450,712 | ) | �� | 435,225 | $ | 5,630,725 | |||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $34,798,962 and $75,002,476, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 120,345,942 | ||
Gross unrealized appreciation on a tax basis | $ | 2,125,172 | ||
Gross unrealized depreciation on a tax basis | (186,261 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 1,938,911 | ||
At September 30, 2006, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2006, the Fund had tax basis capital losses, which may be carried over to offset future capital gains. To the extent such carry forwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryovers expire as follows:
2007 | $ | 205,990 | |
2008 | 214,571 | ||
2012 | 33,844 | ||
2014 | 148,124 | ||
$ | 602,529 | ||
At September 30, 2006, the Fund had deferred capital losses occurring subsequent to October 31, 2005 of $471,548. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
All dividends paid by the Fund for the year ended September 30, 2006 and September 30, 2005, represent exempt interest dividends, which are excludable by shareholders from gross income for Federal income tax purposes.
Certified Annual Report | 13 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
14 | Certified Annual Report |
Thornburg California Limited Term Municipal Fund |
Year Ended Sept. 30, | 3 Months 2004(c) | Year Ended June. 30, | ||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||
Class I Shares: | ||||||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.80 | $ | 13.03 | $ | 12.89 | $ | 13.22 | $ | 12.97 | $ | 12.79 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.44 | 0.40 | 0.09 | 0.39 | 0.42 | 0.51 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | (0.23 | ) | 0.14 | (0.33 | ) | 0.25 | 0.18 | |||||||||||||||
Total from investment operations | 0.42 | 0.17 | 0.23 | 0.06 | 0.67 | 0.69 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.44 | ) | (0.40 | ) | (0.09 | ) | (0.39 | ) | (0.42 | ) | (0.51 | ) | ||||||||||||
Change in net asset value | (0.02 | ) | (0.23 | ) | 0.14 | (0.33 | ) | 0.25 | 0.18 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.89 | $ | 13.22 | $ | 12.97 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.39 | % | 1.31 | % | 1.81 | % | 0.46 | % | 5.27 | % | 5.48 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.50 | % | 3.09 | % | 2.85 | %(b) | 2.99 | % | 3.20 | % | 3.92 | % | ||||||||||||
Expenses, after expense reductions | 0.66 | % | 0.68 | % | 0.67 | %(b) | 0.67 | % | 0.65 | % | 0.66 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.55 | % | 0.67 | % | 0.67 | %(b) | 0.67 | % | 0.65 | % | 0.65 | % | ||||||||||||
Expenses, before expense reductions | 0.71 | % | 0.73 | % | 0.77 | %(b) | 0.78 | % | 0.75 | % | 0.84 | % | ||||||||||||
Portfolio turnover rate | 25.77 | % | 26.33 | % | 4.18 | % | 23.80 | % | 26.03 | % | 25.16 | % | ||||||||||||
Net assets at end of period (000) | $ | 28,334 | $ | 30,843 | $ | 25,728 | $ | 22,929 | $ | 20,592 | $ | 10,133 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
Certified Annual Report | 15 |
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-426, CLASS C - 885-215-418, CLASS I - 885-215-392
NASDAQ SYMBOLS: CLASS A - LTCAX, CLASS C - LTCCX, CLASS I - LTCIX
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
ABAG Finance Authority, 4.75% due 10/1/2011 (California School of Mechanical Arts Project) | A3/NR | $ | 435,000 | $ | 452,970 | |||
ABAG Finance Authority, 4.75% due 10/1/2012 (California School of Mechanical Arts Project) | A3/NR | 455,000 | 475,034 | |||||
Alum Rock Union Elementary School District GO Refunding Bonds, 8.00% due 9/1/2007 (Insured: FGIC) | Aaa/AAA | 380,000 | 395,333 | |||||
Bay Area Toll Bridge Revenue San Francisco Bay Area Series F, 5.00% due 4/1/2016 | Aa3/AA | 2,075,000 | 2,285,156 | |||||
California Health Facilities Financing, 5.50% due 10/1/2006 (Sisters of Providence Project) | Aa2/AA | 1,235,000 | 1,235,111 | |||||
California Health Facilities Financing Authority Revenue Refunding Series B, 5.25% due 10/1/2013 (Kaiser Permanente Project) (ETM) | A3/AAA | 2,000,000 | 2,082,700 | |||||
California HFA Revenue Series 1985-B, 9.875% due 2/1/2017 | Aa2/AA- | 670,000 | 687,440 | |||||
California Infrastructure & Economic Development Bank Revenue, 5.00% due 7/1/2010 (Bay Area Toll Bridges Project; Insured: FSA) (ETM) | Aaa/AAA | 1,000,000 | 1,055,190 | |||||
California Mobile Home Park Financing Authority Series A, 4.75% due 11/15/2010 (Rancho Vallecitos Project; Insured: ACA) | NR/A | 500,000 | 514,215 | |||||
California Mobile Home Park Financing Authority Series A, 5.00% due 11/15/2013 (Rancho Vallecitos Project; Insured: ACA) | NR/A | 570,000 | 597,200 | |||||
California Pollution Control Financing Authority Solid Waste Disposal Revenue, 6.75% due 7/1/2011 (ETM) | Aaa/NR | 2,290,000 | 2,436,926 | |||||
California Pollution Control Financing Authority Solid Waste Disposal Revenue, 5.00% due 6/1/2018 put 6/1/2008 | NR/BBB | 1,100,000 | 1,115,829 | |||||
California State Department of Transportation COP Refunding Series A, 5.25% due 3/1/2016 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,052,140 | |||||
California State Department of Water Resources Power Series A, 5.50% due 5/1/2011 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,166,660 | |||||
California State Department of Water Resources Series B-2, 3.66% due 5/1/2022 put 10/2/2006 (LOC: BNP Paribas) (daily demand notes) | VMIG1/A-1+ | 3,500,000 | 3,500,000 | |||||
California State Economic Recovery Series C-1, 3.65% due 7/1/2023 put 10/2/2006 (Guaranty: Landesbank) (daily demand notes) | VMIG1/A-1+ | 350,000 | 350,000 | |||||
California State GO, 7.50% due 10/1/2007 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,078,160 | |||||
California State GO, 6.60% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 560,000 | 613,502 | |||||
California State GO, 6.50% due 9/1/2010 (Insured: AMBAC) | Aaa/AAA | 1,250,000 | 1,384,200 | |||||
California State GO, 5.50% due 3/1/2012 (Insured: FGIC) | Aaa/AAA | 230,000 | 231,783 | |||||
California State GO, 6.25% due 9/1/2012 | A1/A+ | 3,000,000 | 3,343,950 | |||||
California State GO Economic Recovery Series A, 5.00% due 1/1/2008 | Aa3/AA+ | 1,000,000 | 1,018,960 | |||||
California State GO Economic Recovery Series A, 5.25% due 7/1/2013 | Aa3/AA+ | 2,500,000 | 2,740,575 | |||||
California State Public Works Board Lease Revenue, 5.00% due 1/1/2015 (Department of Corrections Project; Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,177,460 | |||||
California State Public Works Board Lease Revenue, 5.50% due 6/1/2010 (Various Universities Project) | Aa2/AA- | 530,000 | 559,240 | |||||
California State Public Works Board Lease Revenue, 5.00% due 11/1/2015 | Aa2/AA- | 1,000,000 | 1,079,750 | |||||
California State Refunding, 5.75% due 10/1/2010 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,083,610 | |||||
California State Veterans Bonds, 9.50% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,184,250 | |||||
California Statewide Community Development Authority COP, 5.30% due 12/1/2015 (ETM) | Aaa/AAA | 2,600,000 | 2,700,022 | |||||
California Statewide Community Development Authority Revenue, 5.125% due 6/1/2008 (Louisiana Orthopedic Hospital Foundation Project; Insured: AMBAC) | Aaa/AAA | 595,000 | 607,233 | |||||
California Statewide Community Development Authority Revenue COP, 6.50% due 8/1/2012 (Cedars Sinai Center Hospital Project; Insured: MBIA) California Statewide Community Development Authority Solid Waste Revenue, | Aaa/AAA | 765,000 | 826,582 | |||||
2.90% due 4/1/2011 put 4/1/2007 (Waste Management Inc. Project) | NR/BBB | 1,000,000 | 994,500 | |||||
California Statewide Community Development Series E, 4.70% due 11/1/2036 put 6/1/2009 (Kaiser Permanente Project) | A3/A-1 | 2,000,000 | 2,050,500 |
16 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Central Union High School District Imperial County Refunding, 5.00% due 8/1/2012 (Insured: FGIC) | Aaa/AAA | $ | 830,000 | $ | 894,740 | |||
Central Valley School Districts Financing Authority, 0% due 2/1/2007 (Insured: MBIA) | Aaa/AAA | 205,000 | 202,612 | |||||
East Palo Alto Public Financing University Circle Gateway/101 Series A, 5.00% due 10/1/2014 (Insured: Radian) | Aa3/AA | 670,000 | 716,934 | |||||
East Palo Alto Public Financing University Circle Gateway/101 Series A, 5.00% due 10/1/2016 (Insured: Radian) | Aa3/AA | 735,000 | 790,404 | |||||
El Monte COP Senior Department Public Services Facility Phase II, 5.00% due 1/1/2009 (Insured: AMBAC) | Aaa/AAA | 2,730,000 | 2,783,098 | |||||
Escondido Joint Powers Financing Authority Lease Revenue Refunding, 0% due 9/1/2013 (California Center For The Arts Project; Insured: AMBAC) | Aaa/AAA | 500,000 | 326,725 | |||||
Fresno County Housing Authority Multi Family Revenue Refunding Series A, 4.90% due 11/1/2027 mandatory put 11/1/2007 (Creek Park Apartments Project; Collateralized: FNMA) | NR/AAA | 400,000 | 403,628 | |||||
Fresno Unified School District Series D, 5.00% due 8/1/2009 (ETM) | Aaa/AAA | 545,000 | 558,325 | |||||
Hawaiian Gardens Redevelopment Agency Refunding, 5.50% due 12/1/2008 | NR/BBB+ | 575,000 | 595,045 | |||||
Irvine California Improvement Bond Act 1915, 3.65% due 9/2/2022 put 10/2/2006 (LOC: State Street Bank & Trust) (daily demand notes) | VMIG1/A-1+ | 1,500,000 | 1,500,000 | |||||
Kern High School District, 7.00% due 8/1/2010 (ETM) | A1/NR | 165,000 | 185,547 | |||||
Kern High School District Refunding Series A, 6.30% due 8/1/2011 (Insured: MBIA) | Aaa/AAA | 500,000 | 556,715 | |||||
Los Angeles Community Redevelopment Agency, 5.00% due 7/1/2009 (Cinerama Dome Public Parking Project; Insured: ACA) | NR/A | 835,000 | 856,969 | |||||
Los Angeles Community Redevelopment Agency, 5.75% due 7/1/2010 (Cinerama Dome Public Parking Project; Insured: ACA) | NR/A | 435,000 | 453,257 | |||||
Los Angeles COP, 5.00% due 2/1/2012 (Insured: MBIA) | Aaa/AAA | 1,400,000 | 1,495,060 | |||||
Los Angeles County Capital Asset Leasing Corp., 5.00% due 4/1/2008 (Insured:AMBAC) | Aaa/AAA | �� | 2,000,000 | 2,044,220 | ||||
Los Angeles Department of Water & Power Revenue Series A, 5.25% due 7/1/2011 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,232,080 | |||||
Los Angeles Multi Family Revenue, 5.85% due 12/1/2027 put 12/01/2007 (Collateralized: FNMA) (AMT) | NR/AAA | 610,000 | 620,150 | |||||
Los Angeles Unified School District Series E, 5.50% due 7/1/2012 (Insured: MBIA) | Aaa/AAA | 2,500,000 | 2,757,100 | |||||
Milpitas California Agency Tax Allocation Redevelopment Project Area No 1, 5.00% due 9/1/2015 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,150,240 | |||||
Moorpark Mobile Home Park Revenue Series A, 5.80% due 5/15/2010 (Villa Delaware Arroyo Project; Insured: ACA) | NR/A | 990,000 | 1,026,095 | |||||
New Haven Unified School District Refunding, 12.00% due 8/1/2008 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,145,160 | |||||
Northern California Power Agency Public Power Revenue, 5.65% due 7/1/2007 (Geothermal Project 3-A) (ETM) | A2/BBB+ | 360,000 | 366,026 | |||||
Northern California Power Agency Public Power Revenue, 5.65% due 7/1/2007 (Geothermal Project 3-A) | A2/BBB+ | 340,000 | 344,430 | |||||
Northern California Power Agency Public Power Revenue Series A, 5.00% due 7/1/2009 (Geothermal Project Number 3) | A2/BBB+ | 4,000,000 | 4,003,480 | |||||
Norwalk California Redevelopment Agency Refunding Tax Allocation, 5.00% due 10/1/2014 (Insured: MBIA) | Aaa/AAA | 625,000 | 681,081 | |||||
Oakland Redevelopment Agency, 7.40% due 5/1/2007 (Insured:AMBAC) | Aaa/AAA | 20,000 | 20,061 | |||||
Orange County Airport Revenue Bond, 6.00% due 7/1/2007 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,017,820 | |||||
Oxnard Financing Authority Solid Waste Refunding, 5.00% due 5/1/2013 (Insured:AMBAC) (AMT) | NR/AAA | 2,115,000 | 2,238,495 | |||||
Piedmont Unified School District Series B, 0% due 8/1/2013 pre-refunded 8/1/2007 | Aa3/NR | 1,000,000 | 674,240 | |||||
Pittsburg California Redevelopment Agency Tax Allocation Refunding, 5.25% due 8/1/2012 (Los Medanos Community Development Project A; Insured: MBIA) | Aaa/AAA | 3,350,000 | 3,644,096 | |||||
Pomona Unified School District Refunding Series A, 6.10% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 320,000 | 345,984 | |||||
Richmond Joint Powers Financing Authority Refunding Lease & Gas Tax Series A, 5.25% due 5/15/2013 | NR/BBB | 2,000,000 | 2,027,580 | |||||
Sacramento California City Financing Authority, 0% due 11/1/2014 (Insured: MBIA) | Aaa/AAA | 3,310,000 | 2,426,230 | |||||
Sacramento County Sanitation District Financing Authority Revenue Series A, 5.75% due 12/1/2009 | Aa3/AA | 560,000 | 596,798 | |||||
Sacramento Municipal Utility District Electric Revenue Refunding Series C, 5.75% due 11/15/2007 (ETM) | Aaa/AAA | 330,000 | 330,624 | |||||
Salinas Redevelopment Agency Tax Allocation Series A, 0% due 11/1/2022 (Insured: FSA) | Aaa/AAA | 1,450,000 | 608,507 |
Certified Annual Report | 17 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
San Bernardino County Multi Family Housing Revenue Refunding Series A, 4.75% due 12/15/2031 put 12/15/2011 (Collateralized: FNMA) | Aaa/NR | $ | 3,000,000 | $ | 3,109,140 | |||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.10% due 9/1/2011 | NR/NR | 190,000 | 195,721 | |||||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.20% due 9/1/2012 | NR/NR | 205,000 | 212,942 | |||||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.30% due 9/1/2013 | NR/NR | 300,000 | 313,947 | |||||
San Bernardino County Transportation Authority Sales Tax Revenue Series A, 6.00% due 3/1/2010 (ETM) | Aaa/AAA | 720,000 | 749,304 | |||||
San Diego County California COP, 5.625% due 9/1/2012 (Insured:AMBAC) | Aaa/AAA | 500,000 | 531,370 | |||||
San Diego County California COP Developmental Services Foundation, 5.50% due 9/1/2017 | Baa3/BBB- | 2,000,000 | 2,108,940 | |||||
San Diego County Regional Airport Authority, 5.00% due 7/1/2013 (Insured:AMBAC) (AMT) | Aaa/AAA | 1,000,000 | 1,064,110 | |||||
San Diego Public Facilities Financing Authority Lease Revenue, 7.00% due 4/1/2007 (Insured: MBIA) | Aaa/AAA | 425,000 | 432,280 | |||||
San Francisco City & County Redevelopment Agency, 0% due 7/1/2010 (George R Moscone Project) | A1/AA- | 1,380,000 | 1,198,075 | |||||
San Francisco Laguna Honda Hospital Series I, 5.00% due 6/15/2014 (Insured: FSA) | Aaa/AAA | 2,320,000 | 2,513,001 | |||||
San Jose California Unified School District COP, 4.50% due 6/1/2011 (Insured: FGIC) | AAA/AAA | 1,015,000 | 1,057,559 | |||||
San Jose California Unified School District COP, 5.00% due 6/1/2013 (Insured: FGIC) | AAA/AAA | 1,090,000 | 1,179,206 | |||||
San Jose Evergreen Community College District Series C, 0% due 9/1/2011 crossover refunded 9/1/2010 (Insured:AMBAC) | Aaa/AAA | 2,200,000 | 1,785,740 | |||||
San Marcos Public Facilities Authority Revenue Community Facilities District 88-1, 0% due 3/1/2008 (ETM) | Aaa/NR | 1,900,000 | 1,807,679 | |||||
Seal Beach Redevelopment Agency Mobile Home Park Revenue Series A, 5.20% due 12/15/2013 (Insured:ACA) | NR/A | 575,000 | 609,719 | |||||
Southeast Resources Recovery Facilities Authority Lease Revenue Refunding Series B, 5.375% due 12/1/2013 (Insured:AMBAC) | Aaa/AAA | 1,060,000 | 1,150,174 | |||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Public Power Project; Insured:AMBAC) | Aaa/AAA | 350,000 | 385,987 | |||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Public Power Project; Insured:AMBAC) | Aaa/AAA | 250,000 | 275,705 | |||||
Stanton Multi Family Housing Revenue Bond Series 1997, 5.625% due 8/1/2029 put 8/1/2009 (Continental Gardens Project; Collateralized: FNMA) | NR/AAA | 4,490,000 | 4,627,439 | |||||
Val Verde Unified School District COP, 5.00% due 1/1/2014 (Insured: FGIC) (ETM) | Aaa/AAA | 445,000 | 484,445 | |||||
Val Verde Unified School District COP Series B, 5.00% due 1/1/2013 (Insured: FGIC) | Aaa/AAA | 360,000 | 387,986 | |||||
Val Verde Unified School District COP Series B, 5.00% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | 430,000 | 466,116 | |||||
Ventura County Community College Series A, 5.00% due 8/1/2012 (Insured: MBIA) | Aaa/AAA | 500,000 | 539,000 | |||||
Victorville Redevelopment Agency Tax Allocation Bear Valley Road Special Escrow Fund A, 5.00% due 12/1/2014 (Insured: FSA) | Aaa/AAA | 420,000 | 440,052 | |||||
Walnut Valley Unified School District, 8.75% due 8/1/2010 (ETM) | Aaa/AAA | 1,000,000 | 1,186,150 | |||||
Walnut Valley Unified School District Series A, 6.80% due 2/1/2007 (Insured: MBIA) | Aaa/AAA | 250,000 | 252,740 | |||||
Walnut Valley Unified School District Series A, 6.90% due 2/1/2008 (Insured: MBIA) | Aaa/AAA | 250,000 | 261,040 | |||||
Walnut Valley Unified School District Series A, 7.00% due 8/1/2008 (Insured: MBIA) | Aaa/AAA | 100,000 | 106,193 | |||||
Washington Township Health Care District Revenue, 5.00% due 7/1/2009 | A2/NR | 450,000 | 460,422 | |||||
West Contra Costa Unified School District Series A, 7.00% due 8/1/2008 (Insured: MBIA) | Aaa/AAA | 655,000 | 695,564 | |||||
Whittier Solid Waste Revenue Refunding Series A, 5.375% due 8/1/2014 (Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,001,370 | |||||
TOTAL INVESTMENTS — 97.26%(Cost $ 120,345,942) | $ | 122,284,853 | ||||||
OTHER ASSETS LESS LIABILITIES — 2.74% | 3,438,838 | |||||||
NET ASSETS — 100.00% | $ | 125,723,691 | ||||||
18 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. |
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
AMT | Alternative Minimum Tax | |
COP | Certificates of Participation | |
ETM | Escrowed to Maturity | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FNMA | Collateralized by Federal National Mortgage Association | |
FSA | Insured by Financial Security Assurance Co. | |
GO | General Obligation | |
HFA | Housing Finance Authority | |
MBIA | Insured by Municipal Bond Investors Assurance | |
RADIAN | Insured by Radian Asset Assurance |
SUMMARY OF SECURITY CREDIT RATINGS†
Ratings are a blend of Moody’s and Standard & Poor’s, using the higher rating. Some bonds are rated by only one service.
Certified Annual Report | 19 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg California Limited Term Municipal Fund |
To the Trustees and Class I Shareholders of
Thornburg California Limited Term 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 California Limited Term Municipal Fund (one of the Portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
20 | Certified Annual Report |
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur ongoing costs, including management and administration fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06-9/30/06 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000 | $ | 1,025.30 | $ | 3.36 | |||
Hypothetical* | $ | 1,000 | $ | 1,021.75 | $ | 3.35 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.66%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Certified Annual Report | 21 |
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg California Limited Term Municipal Fund Class I Total Returns versus Lehman
Brothers Five-Year Municipal Bond Index and Consumer Price Index
(April 1, 1997 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006
1 Yr | 5 Yrs | 10 Yrs | Since Inception | ||||||||
I Shares (Incep: 4/1/97) | 3.39 | % | 3.09 | % | NA | 4.08 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 4/1/97) | 3.67 | % | 3.20 | % | $ | 12.78 | $ | 12.78 |
Performance data reflect past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains. There is no up front sales charge for this class of shares.
The Consumer Price Index (“CPI”) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
The Lehman Brothers Five-Year Municipal Bond Index is a rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must have a minimum credit rating of Baa. The approximate maturity of the municipal bonds in the index is five 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.
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 Net Asset Value (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.
22 | Certified Annual Report |
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report | 23 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
24 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report | 25 |
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, 100% of dividends paid by the Fund are tax exempt dividends for Federal Income Tax purposes. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg California Limited Term Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor on a range of matters, including (among other things) information respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees' evaluation of the Advisor's performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees primarily considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time relative to different categories of mutual funds sharing certain comparable characteristics and selected by independent firms, and relative to a broad based securities index; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by
26 | Certified Annual Report |
OTHER INFORMATION, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2006 (Unaudited) |
third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories, and in particular to broad based securities indices, may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully and competently pursue and achieve the Fund’s stated objectives, as reflected particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund's investment returns. The Trustees also observed in conducting their evaluations the Fund’s average or better investment returns over most periods relative to a category of mutual funds selected by an independent mutual fund analyst firm and considered by the Trustees to be most comparable to the Fund of the categories reviewed, and the Fund's performance relative to comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of municipal debt mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the overall expenses for the Fund were somewhat higher than average and median expenses for the grouping of mutual funds assembled by the mutual fund analyst firm, but that the difference was not notable in view of its degree and the other factors considered. The Trustees further noted in this regard that the Advisor is currently waiving a portion of the management fee, and that the reduced fee charged to the Fund was comparable to the average and median management fees for the group of mutual funds. The Trustees also observed in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor's receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
Certified Annual Report | 27 |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
28 | This page is not part of the Annual Report. |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 | 119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 |
Thornburg Intermediate Municipal Fund
Laddering – an All Weather Strategy
The Fund’s primary investment goal is to obtain as high a level of current income exempt from Federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital (may be subject to Alternative Minimum Tax). The secondary goal of the Fund is to reduce expected changes in its share price compared to long-term bond portfolios.
This Fund is a laddered portfolio of municipal bonds with an average maturity of ten years or less. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year; cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. We regard the strategy as a good compromise for managing different types of risk.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg invests in short-and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments. |
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value. |
More information at www.thornburg.com
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2 | This page is not part of the Annual Report. |
Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We aspire to accomplish this through a family of laddered bond funds that focus on quality, stability, and minimization of risk over time, and through a range of equity funds that redefine traditional measures of value and growth.
Our bond funds have always been managed using the highly disciplined approach of laddering short and intermediate bond maturities, seeking to provide both an attractive return and stability of principal. Laddering is an all-weather strategy, designed to perform in uncertain markets like the ones we have seen in the last two years. Moreover, all of the bond funds focus on buying investment-grade securities. We have found this strategy to be the best at managing both interest-rate risk and credit risk, and we believe this approach has served our shareholders well over time.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Our bond fund portfolio managers have many years of experience. We are proud of this consistency and experience and look forward to many more successful years with them at the helm.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely,
Garrett Thornburg
Chairman & CEO
This page is not part of the Annual Report. | 3 |
2006
Certified Annual Report
Thornburg Intermediate Municipal Fund
September 30, 2006
Letter to Shareholders | 6 | |
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 | Certified Annual Report |
Important Information
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
The maximum sales charge for Class A shares is 2.00%. Class C shares assume deduction of a 0.60% contingent deferred sales charge (CDSC) for the first year only.
Performance data given at net asset value (NAV) does not take into account these sales charges. If the sales charges had been included, the performance would have been lower.
Shares in the Fund carry risks, including possible loss of principal. As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each Fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Glossary
The Merrill Lynch 7-12 Year Municipal Bond Index – A widely-accepted unmanaged market-weighted index comprised of fixed-rate, coupon bearing bonds issued within five years of the most recent month-end with greater than $50 million principal amount having a Moody’s investment grade rating and maturities of seven to twelve years.
Duration – The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.
Weighted Average Maturity – A weighted average of all the effective maturities of the bonds in a portfolio. Effective maturity takes into consideration mortgage prepayments, puts, sinking funds, adjustable coupons, and other features of individual bonds and is thus a more accurate measure of interest-rate sensitivity. Longer-maturity funds are generally considered more interest-rate sensitive than their shorter counterparts.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Treasury Notes – a debt obligation of the US government backed by the “full faith and credit” of the government. Notes are intermediate to long term investments typically issued in maturities of two, five and ten years. Interest is paid semi-annually.
Certified Annual Report | 5 |
George Strickland
Portfolio Manager
October 15, 2006
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg Intermediate Municipal Fund. The net asset value of the Class A shares decreased by 3 cents to $13.30 during the twelve months ended September 30, 2006. If you were with us for the entire period, you received dividends of 49.4 cents per share. If you reinvested dividends, you received 50.3 cents per share. Investors who owned Class C shares received dividends of 46.2 and 46.9 cents per share, respectively.
Over the last twelve months, interest rates on bonds that mature in ten years or less have risen, while interest rates on long-term bonds have fallen. Since bond prices move in the opposite direction as yields, the longest bonds in the portfolio generally appreciated, while bonds at the short end of the Fund’s ladder generally depreciated in value. The Class A shares of your Fund produced a total return of 3.57% (at NAV) over the twelve month period ended September 30, 2006, compared to a 4.44% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Unlike the Fund, the index does not have exposure to short-term bonds. Since the short-term bonds in the Fund underperformed the index, the Fund’s return lagged the index.
After rising for most of the year, bond yields fell in the third quarter of 2006 because the bond market started to anticipate a slower economy, reduced inflation, and a lower Fed Funds rate. While such an outcome is certainly possible, we believe the preponderance of evidence points to continued economic growth and a Federal Reserve that must stay on high alert to avoid inflationary acceleration.
The current case for a weak economy revolves around the detrimental effects of a declining housing market. However, slackness in residential housing is being countered with strength in commercial real estate, capital spending, state and federal government spending, and exports. Some consumers are feeling pinched by higher rates on adjustable rate mortgages, but many more are enjoying higher incomes in an economy that has produced 1.8 million new jobs over the last twelve months. So consumer spending should continue growing, and may accelerate if oil and gas prices hold in their current ranges. This should drive the economy to solid, but not spectacular, growth.
No matter how you measure it, inflation has doubled over the last three years. The current levels are not terribly alarming, but they are significantly above the Federal Reserve’s comfort zone. Fed Chairman Bernanke has stated that he thinks inflation should moderate next year, but there are reasons to think that it might not. U.S. hourly earnings are rising at a 4% rate, up from 1.6% in early 2004, and import prices have been rising steadily. These and other pressures could keep inflation stubbornly in the Fed’s discomfort zone.
So, when we look at current yield curves – inverted for Treasury notes and bonds, and very flat for municipal bonds – it appears to us that the optimistic inflation scenario is already priced into the market. In order to justify today’s 4.8% 10-year Treasury note, one must assume the Federal Reserve will begin easing monetary policy fairly soon. That implies that inflation will drop back down below 2%. If all that unfolds as expected, then current levels are justified. If it does not, then interest rates should rise on intermediate and long-term bonds. Clearly, it seems that risks are somewhat skewed toward higher interest rates.
6 | Certified Annual Report |
Your Thornburg Intermediate Municipal Fund is a laddered portfolio of over 350 municipal obligations from 45 states. Today, your Fund’s weighted average maturity is 7.65 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 chart on the right describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
% of portfolio maturing | Cumulative % maturing | |||||||||||||||
2 years | = | 10.0 | % | Year 2 | = | 10.0 | % | |||||||||
2 to 4 years | = | 12.6 | % | Year 4 | = | 22.6 | % | |||||||||
4 to 6 years | = | 15.9 | % | Year 6 | = | 38.5 | % | |||||||||
6 to 8 years | = | 14.2 | % | Year 8 | = | 52.7 | % | |||||||||
8 to 10 years | = | 10.3 | % | Year 10 | = | 63.0 | % | |||||||||
10 to 12 years | = | 13.5 | % | Year 12 | = | 76.5 | % | |||||||||
12 to 14 years | = | 14.3 | % | Year 14 | = | 90.8 | % | |||||||||
14 to 16 years | = | 5.4 | % | Year 16 | = | 96.2 | % | |||||||||
16 to 18 years | = | 0.8 | % | Year 18 | = | 97.0 | % | |||||||||
Over 18 years | = | 3.0 | % | Over 18 years | = | 100.0 | % | |||||||||
Percentages can and do vary. Data as of 9/30/06. |
We took advantage of rising rates to extend the duration of the Fund over the last year. We are now firmly in neutral territory and the ladder is fairly evenly distributed (just a little light in the last three years). We are planning to gradually shorten portfolio duration over time unless new opportunities open up to us over the next few months. If interest rates on long-term bonds rise, the Fund should outperform more aggressive bond strategies. If interest rates hold steady or decline, then the Fund should produce compelling risk-adjusted returns.
Overall, municipal credit quality continues to improve. Supported by a strong economy, state tax revenues were up 9.9% over year-ago levels in the second quarter. Tax revenues grew fastest in the Rocky Mountain and Southwest regions. Tax revenues grew slower in the Great Lakes and Southeast regions, but were still growing in the mid single digits. Other types of bonds, such as school district, utility, and health care bonds, are also generally showing solid credit characteristics. All the good news has, in our opinion, led market participants to take a very relaxed stance toward taking on credit risk. Yield spreads for lower investment grade and speculative grade bonds are well below long-term averages. While we are not anticipating impending doom for low quality bonds, we do believe it is prudent to keep credit quality high in the current environment. Your Fund is broadly diversified and 88% invested in bonds rated A or above by at least one of the major rating agencies.
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
Certified Annual Report | 7 |
STATEMENT OF ASSETS AND LIABILITIES
Thornburg Intermediate Municipal Fund | September 30, 2006 |
ASSETS | ||||
Investments at value (cost $ 484,004,905) | $ | 503,374,209 | ||
Cash | 452,378 | |||
Receivable for investments sold | 2,212,720 | |||
Receivable for fund shares sold | 1,189,271 | |||
Interest receivable | 7,350,538 | |||
Prepaid expenses and other assets | 30,557 | |||
Total Assets | 514,609,673 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 1,819,151 | |||
Payable to investment advisor and other affiliates (Note 3) | 338,619 | |||
Accounts payable and accrued expenses | 78,678 | |||
Dividends payable | 585,711 | |||
Total Liabilities | 2,822,159 | |||
NET ASSETS | $ | 511,787,514 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (4,203 | ) | |
Net unrealized appreciation on investments | 19,369,192 | |||
Accumulated net realized gain (loss) | (9,690,784 | ) | ||
Net capital paid in on shares of beneficial interest | 502,113,309 | |||
$ | 511,787,514 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($366,701,515 applicable to 27,578,471 shares of beneficial interest outstanding - Note 4) | $ | 13.30 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
Maximum offering price per share | $ | 13.57 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($55,496,580 applicable to 4,168,527 shares of beneficial interest outstanding - Note 4) | $ | 13.31 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($89,589,419 applicable to 6,747,387 shares of beneficial interest outstanding - Note 4) | $ | 13.28 | ||
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. |
8 | Certified Annual Report |
Thornburg Intermediate Municipal Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $2,475,553) | $ | 22,371,899 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 2,365,386 | |||
Administration fees (Note 3) | ||||
Class A Shares | 432,562 | |||
Class C Shares | 68,061 | |||
Class I Shares | 36,313 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 865,124 | |||
Class C Shares | 544,353 | |||
Transfer agent fees | ||||
Class A Shares | 172,798 | |||
Class C Shares | 32,131 | |||
Class I Shares | 79,071 | |||
Registration and filing fees | ||||
Class A Shares | 25,479 | |||
Class C Shares | 18,894 | |||
Class I Shares | 23,733 | |||
Custodian fees (Note 3) | 149,964 | |||
Professional fees | 44,459 | |||
Accounting fees | 37,979 | |||
Trustee fees | 11,613 | |||
Other expenses | 56,975 | |||
Total Expenses | 4,964,895 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (146,690 | ) | ||
Distribution and service fees waived (Note 3) | (217,741 | ) | ||
Fees paid indirectly (Note 3) | (19,584 | ) | ||
Net Expenses | 4,580,880 | |||
Net Investment Income | 17,791,019 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments sold | (346,753 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | 147,221 | |||
Net Realized and Unrealized Loss on Investments | (199,532 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 17,591,487 | ||
See notes to financial statements.
Certified Annual Report | 9 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Intermediate Municipal Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 17,791,019 | $ | 16,870,399 | ||||
Net realized gain (loss) on investments | (346,753 | ) | 1,423,283 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 147,221 | (6,895,981 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 17,591,487 | 11,397,701 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (12,934,370 | ) | (13,228,266 | ) | ||||
Class C Shares | (1,899,154 | ) | (1,934,404 | ) | ||||
Class I Shares | (2,957,495 | ) | (1,707,729 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 4,082,240 | (3,168,323 | ) | |||||
Class C Shares | 242,860 | (1,924,468 | ) | |||||
Class I Shares | 37,459,390 | 19,483,987 | ||||||
Net Increase in Net Assets | 41,584,958 | 8,918,498 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 470,202,556 | 461,284,058 | ||||||
End of year | $ | 511,787,514 | $ | 470,202,556 | ||||
See notes to financial statements.
10 | Certified Annual Report |
Thornburg Intermediate Municipal Fund | September 30, 2006 |
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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg New York Intermediate Municipal 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, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 primary investment objective is to obtain as high a level of current income exempt from Federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary goal is to reduce expected changes in its share price compared to long-term bond portfolios.
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 may have different reinvestment privileges and conversion rights.
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 Trust are as follows:
Valuation of Investments: The Trust determines the value of investments utilizing an independent pricing service approved by the Board of 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 p.m. EST. When quotations are not readily available, securities are valued at evaluated prices 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; and indications as to value from dealers and general market conditions. In any case where a price is not available from a pricing service for an investment, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the Trustees. 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 Board of Trustees. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable (if any) and tax exempt income of the Fund to the shareholders. Therefore, no provision for Federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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 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
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
current capital shares 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, 2006, these fees were payable at annual rates ranging from .50 of 1% to .275 of 1% per annum of the average daily net assets of the Fund. The Trust also has 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $12,521 for Class A shares, $75,126 for Class C shares, and $59,043 for Class I shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned net commissions aggregating $2,286 from the sale of Class A shares and collected contingent deferred sales charges aggregating $6,638 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted a distribution plan pursuant to Rule 12b-1, applicable only to the Fund’s Class C shares under which the 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, 2006, are set forth in the Statement of Operations. Distribution fees in the amount of $217,741 were waived for Class C shares.
The Trust 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, 2006, fees paid indirectly were $19,584. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
12 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 3,869,378 | $ | 51,196,659 | 3,998,362 | $ | 53,659,687 | ||||||||
Shares exchanged from merger | 3,161,332 | 41,919,263 | — | — | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 561,102 | 7,415,384 | 548,300 | 7,352,541 | ||||||||||
Shares repurchased | (7,234,114 | ) | (96,449,066 | ) | (4,780,870 | ) | (64,180,551 | ) | ||||||
Net Increase (Decrease) | 357,698 | $ | 4,082,240 | (234,208 | ) | $ | (3,168,323 | ) | ||||||
Class C Shares | ||||||||||||||
Shares sold | 809,528 | $ | 10,710,147 | 715,681 | $ | 9,615,224 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 93,262 | 1,233,844 | 93,895 | 1,260,710 | ||||||||||
Shares repurchased | (884,612 | ) | (11,701,131 | ) | (953,413 | ) | (12,800,402 | ) | ||||||
Net Increase (Decrease) | 18,178 | $ | 242,860 | (143,837 | ) | $ | (1,924,468 | ) | ||||||
Class I Shares | ||||||||||||||
Shares sold | 3,700,160 | $ | 48,854,476 | 2,292,723 | $ | 30,718,233 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 135,815 | 1,791,684 | 64,408 | 862,041 | ||||||||||
Shares repurchased | (998,806 | ) | (13,186,770 | ) | (903,624 | ) | (12,096,287 | ) | ||||||
Net Increase (Decrease) | 2,837,169 | $ | 37,459,390 | 1,453,507 | $ | 19,483,987 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $130,997,959 and $87,851,810, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 484,003,095 | ||
Gross unrealized appreciation on a tax basis | $ | 19,809,426 | ||
Gross unrealized depreciation on a tax basis | (438,312 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 19,371,114 | ||
At September 30, 2006, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2006, the Fund had tax basis capital losses, which may be carried over to offset future capital gains. Such losses include losses from the merger of the Thornburg Florida Intermediate Municipal Fund. Utilization of these losses may be subject to limitations from the IRS regulations. To the extent such carry forwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryovers expire as follows:
2007 | $ | 223,208 | |
2008 | 2,389,396 | ||
2009 | 2,374,508 | ||
2011 | 11,597 | ||
2012 | 4,297,982 | ||
2013 | 39,577 | ||
$ | 9,336,268 | ||
Certified Annual Report | 13 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
At September 30, 2006, the Fund had deferred capital losses occurring subsequent to October 31, 2005 of $356,327. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
In order to account for book/tax differences, the Fund increased accumulated net realized investment loss by $544,434, increased over-distributed net investment income by $1,397, and increased net capital paid in on shares of beneficial interest by $545,831. Reclassifications result primarily from merger activity and market discount.
All dividends paid by the Fund for the year ended September 30, 2006 and September 30, 2005 represent tax exempt interest dividends, which are excludable by shareholders from gross income for Federal income tax purposes.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – MERGER
On September 15, 2006, the Fund pursuant to a plan of reorganization approved by the board of trustees and the shareholders, acquired all of the assets and assumed all of the liabilities of the Thornburg Florida Intermediate Municipal Fund (“Florida Fund”). The acquisition was accomplished by an exchange of 3,161,332.075 Class A shares for the shares of Class A then outstanding (net assets value of $12.1777 per share) of Florida Fund. Based on the opinion of Fund counsel, the reorganization qualified as a tax-free reorganization for federal income tax purposes with no gain or loss recognized by the funds or their shareholders. Florida Fund net assets including unrealized appreciation of $880,086, were combined with the Fund for total net assets after the acquisition of $512,720,030.
14 | Certified Annual Report |
Thornburg Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.33 | $ | 13.48 | $ | 13.56 | $ | 13.67 | $ | 13.28 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.49 | 0.49 | 0.52 | 0.52 | 0.56 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | 0.39 | |||||||||||
Total from investment operations | 0.46 | 0.34 | 0.44 | 0.41 | 0.95 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.49 | ) | (0.49 | ) | (0.52 | ) | (0.52 | ) | (0.56 | ) | ||||||||||
Change in net asset value | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | 0.39 | |||||||||||
NET ASSET VALUE, end of year | $ | 13.30 | $ | 13.33 | $ | 13.48 | $ | 13.56 | $ | 13.67 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 3.57 | % | 2.57 | % | 3.29 | % | 3.11 | % | 7.39 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.74 | % | 3.66 | % | 3.83 | % | 3.87 | % | 4.23 | % | ||||||||||
Expenses, after expense reductions | 0.99 | % | 0.99 | % | 0.98 | % | 0.99 | % | 0.92 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.99 | % | 0.98 | % | 0.99 | % | 0.92 | % | ||||||||||
Expenses, before expense reductions | 1.00 | % | 1.01 | % | 0.98 | % | 1.00 | % | 1.00 | % | ||||||||||
Portfolio turnover rate | 18.95 | % | 20.06 | % | 11.81 | % | 15.13 | % | 16.36 | % | ||||||||||
Net assets at end of year (000) | $ | 366,702 | $ | 362,783 | $ | 370,227 | $ | 390,080 | $ | 414,150 |
(a) | Sales loads are not reflected in computing total return. |
Certified Annual Report | 15 |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.34 | $ | 13.50 | $ | 13.58 | $ | 13.69 | $ | 13.30 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.46 | 0.46 | 0.48 | 0.47 | 0.51 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.03 | ) | (0.16 | ) | (0.08 | ) | (0.11 | ) | 0.39 | |||||||||||
Total from investment operations | 0.43 | 0.30 | 0.40 | 0.36 | 0.90 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.46 | ) | (0.46 | ) | (0.48 | ) | (0.47 | ) | (0.51 | ) | ||||||||||
Change in net asset value | (0.03 | ) | (0.16 | ) | (0.08 | ) | (0.11 | ) | 0.39 | |||||||||||
NET ASSET VALUE, end of year | $ | 13.31 | $ | 13.34 | $ | 13.50 | $ | 13.58 | $ | 13.69 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 3.31 | % | 2.24 | % | 3.02 | % | 2.73 | % | 6.97 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.49 | % | 3.41 | % | 3.57 | % | 3.50 | % | 3.84 | % | ||||||||||
Expenses, after expense reductions | 1.24 | % | 1.25 | % | 1.24 | % | 1.35 | % | 1.30 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.24 | % | 1.24 | % | 1.24 | % | 1.35 | % | 1.30 | % | ||||||||||
Expenses, before expense reductions | 1.78 | % | 1.80 | % | 1.78 | % | 1.80 | % | 1.80 | % | ||||||||||
Portfolio turnover rate | 18.95 | % | 20.06 | % | 11.81 | % | 15.13 | % | 16.36 | % | ||||||||||
Net assets at end of year (000) | $ | 55,497 | $ | 55,382 | $ | 57,979 | $ | 60,707 | $ | 47,155 |
16 | Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.31 | $ | 13.46 | $ | 13.54 | $ | 13.65 | $ | 13.26 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.54 | 0.53 | 0.56 | 0.57 | 0.61 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | 0.39 | |||||||||||
Total from investment operations | 0.51 | 0.38 | 0.48 | 0.46 | 1.00 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.54 | ) | (0.53 | ) | (0.56 | ) | (0.57 | ) | (0.61 | ) | ||||||||||
Change in net asset value | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | 0.39 | |||||||||||
NET ASSET VALUE, end of year | $ | 13.28 | $ | 13.31 | $ | 13.46 | $ | 13.54 | $ | 13.65 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 3.90 | % | 2.90 | % | 3.61 | % | 3.49 | % | 7.75 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.07 | % | 3.98 | % | 4.12 | % | 4.23 | % | 4.57 | % | ||||||||||
Expenses, after expense reductions | 0.67 | % | 0.67 | % | 0.67 | % | 0.62 | % | 0.58 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.67 | % | 0.67 | % | 0.67 | % | 0.62 | % | 0.58 | % | ||||||||||
Expenses, before expense reductions | 0.75 | % | 0.77 | % | 0.75 | % | 0.80 | % | 0.79 | % | ||||||||||
Portfolio turnover rate | 18.95 | % | 20.06 | % | 11.81 | % | 15.13 | % | 16.36 | % | ||||||||||
Net assets at end of year (000) | $ | 89,589 | $ | 52,037 | $ | 33,079 | $ | 19,333 | $ | 18,330 |
Certified Annual Report | 17 |
Thornburg Intermediate Municipal Fund | September 30, 2006 |
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
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
ALABAMA — 0.90% | ||||||||
Alabama Docks Revenue, 6.00% due 10/1/2008 (Insured: MBIA) | Aaa/AAA | $ | 800,000 | $ | 837,776 | |||
Birmingham Carraway Health Care Facilities Financing Authority Revenue, 6.25% due 8/15/2009 | NR/AAA | 2,000,000 | 2,066,560 | |||||
Lauderdale County & Florence Health Group Series A, 5.75% due 7/1/2013 | Aaa/AAA | 1,600,000 | 1,692,624 | |||||
ALASKA — 0.63% | ||||||||
Alaska Municipal Bond Bank Series A, 5.00% due 10/1/2017 (Insured: FGIC) | Aaa/AAA | 2,470,000 | 2,658,585 | |||||
Anchorage School Refunding, 6.00% due 10/1/2012 (Insured: FGIC) | Aaa/AAA | 500,000 | 549,445 | |||||
ARIZONA — 1.88% | ||||||||
Mohave County Industrial Development Authority Series A, 5.00% due 4/1/2013 | NR/AAA | 4,200,000 | 4,491,816 | |||||
Phoenix Street & Highway User Revenue, 6.50% due 7/1/2009 (ETM) | Aa3/AAA | 1,000,000 | 1,045,900 | |||||
Pima County Industrial Development Authority Series C, 6.70% due 7/1/2021 | Baa3/NR | 2,715,000 | 2,890,226 | |||||
Tucson GO Series D, 9.75% due 7/1/2012 (ETM) | NR/AA | 400,000 | 524,184 | |||||
Tucson GO Series D, 9.75% due 7/1/2013 (ETM) | NR/AA | 500,000 | 676,875 | |||||
ARKANSAS — 0.49% | ||||||||
Jefferson County Hospital Revenue Refunding & Improvement, 5.75% due 6/1/2012 | NR/A | 1,135,000 | 1,220,920 | |||||
Jefferson County Hospital Revenue Refunding & Improvement, 5.75% due 6/1/2013 | NR/A | 1,200,000 | 1,288,716 | |||||
CALIFORNIA — 3.26% | ||||||||
California Department of Water Resources Series A, 5.75% due 5/1/2017 pre-refunded 5/1/2012 | Aaa/A- | 3,000,000 | 3,367,320 | |||||
California HFA Revenue Series 1985-B, 9.875% due 2/1/2017 | Aa2/AA- | 675,000 | 692,570 | |||||
California Statewide Community Development Authority COP, 5.50% due 10/1/2007 | Aaa/AAA | 4,500,000 | 4,591,755 | |||||
East Palo Alto Public Financing Series A, 5.00% due 10/1/2017 | Aa3/AA | 770,000 | 825,579 | |||||
El Camino Hospital District Revenue Series A, 6.25% due 8/15/2017 (ETM) | Aaa/AAA | 1,000,000 | 1,153,410 | |||||
Escondido Joint Powers Financing Authority Lease Revenue, 0% due 9/1/2007 | Aaa/AAA | 1,740,000 | 1,677,290 | |||||
Golden West Schools Financing Authority, 0% due 8/1/2018 (Insured: MBIA) | Aaa/AAA | 2,140,000 | 1,177,706 | |||||
Redwood City California Redevelopment Project Area 2a, 0% due 7/15/2023 | Aaa/AAA | 2,060,000 | 982,064 | |||||
San Diego County Water Authority Revenue & Refunding Series 1993-A, 5.98% due 4/25/2007 | Aaa/AAA | 500,000 | 512,050 | |||||
San Jose California Unified School District COP, 5.00% due 6/1/2021 (Insured: FGIC) | Aaa/AAA | 1,580,000 | 1,705,405 | |||||
COLORADO — 5.56% | ||||||||
Adams County Communication Center COP Series A, 5.75% due 12/1/2016 | Baa1/NR | 1,265,000 | 1,336,814 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 2/1/2014 | NR/AAA | 1,455,000 | 1,567,763 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 8/1/2014 | NR/AAA | 1,000,000 | 1,082,050 | |||||
Arvada Industrial Development Revenue, 5.60% due 12/1/2012 | NR/NR | 450,000 | 454,986 | |||||
Central Platte Valley Metropolitan District, 5.15% due 12/1/2013 pre-refunded 12/1/2009 | NR/AAA | 1,000,000 | 1,056,810 | |||||
Central Platte Valley Metropolitan District Refunding Series A, 5.00% due 12/1/2031 put 12/1/2009 (LOC: US Bank) | NR/AA | 4,000,000 | 4,112,080 |
18 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Colorado Educational & Cultural Facilities Refunding, 5.25% due 8/15/2019 | Aaa/AAA | $ | 1,475,000 | $ | 1,599,918 | |||
Colorado Educational & Cultural Facilities Refunding, 6.00% due 4/1/2021 | Baa2/NR | 500,000 | 519,540 | |||||
Colorado Student Obligation Bond Student Loan Senior Subordinated Series B, 6.20% due 12/1/2008 | A2/A | 1,570,000 | 1,575,228 | |||||
Denver City & County COP Series B Roslyn Fire Station, 5.00% due 12/1/2011 | Aa2/AA | 2,465,000 | 2,613,639 | |||||
Denver Convention Center Hotel Authority Refunding Series, 5.125% due 12/1/2017 | Aaa/AAA | 4,215,000 | 4,624,403 | |||||
El Paso County GO School District 11, 7.10% due 12/1/2013 (State Aid Withholding) | Aa3/AA- | 500,000 | 607,250 | |||||
Murphy Creek Metro District 3 Refunding & Improvement, 6.00% due 12/1/2026 | NR/NR | 2,000,000 | 2,121,360 | |||||
Northwest Parkway Public Highway Authority Senior Convertible C, 0% due 6/15/2014 | Aaa/AAA | 1,005,000 | 869,325 | |||||
Plaza Metropolitan District 1 Colorado Public Improvement Fee/Tax Increment, 7.70% due 12/1/2017 | NR/NR | 2,500,000 | 2,768,975 | |||||
Southlands Metropolitan District Number 1 GO, 7.00% due 12/1/2024 | NR/NR | 1,370,000 | 1,513,151 | |||||
Thornton County SFMR Series 1992-A, 8.05% due 8/1/2009 | A3/NR | 5,000 | 5,016 | |||||
DELAWARE — 0.31% | ||||||||
Delaware State Health Facilities Authority Revenue Series A, 5.25% due 5/1/2016 | NR/AA | 1,500,000 | 1,588,635 | |||||
DISTRICT OF COLUMBIA — 1.96% | ||||||||
District of Columbia COP, 5.25% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | 2,000,000 | 2,180,940 | |||||
District of Columbia COP, 5.00% due 1/1/2020 (Insured: FGIC) | Aaa/AAA | 2,500,000 | 2,673,675 | |||||
District of Columbia COP, 5.00% due 1/1/2023 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,061,550 | |||||
District of Columbia Hospital Revenue, 5.375% due 8/15/2015 (ETM) | Aaa/AAA | 600,000 | 620,142 | |||||
District of Columbia Refunding Series B, 6.00% due 6/1/2015 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,474,420 | |||||
FLORIDA — 11.95% | ||||||||
Broward County HFA Multi Family Housing Revenue, 5.40% due 10/1/2011 | NR/NR | 635,000 | 650,081 | |||||
Broward County Resource Recovery Revenue Refunding, 5.00% due 12/1/2007 | A3/AA | 1,775,000 | 1,798,750 | |||||
Broward County Resource Recovery Revenue Refunding, 5.375% due 12/1/2009 | A3/AA | 1,240,000 | 1,291,262 | |||||
Broward County Resource Recovery Revenue Refunding Series A, 5.50% due 12/1/2008 | A3/AA | 500,000 | 517,850 | |||||
Broward County School Board Series A, 5.00% due 7/1/2020 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,077,540 | |||||
Capital Trust Agency Multi Family Housing Revenue Series A, 5.15% due 11/1/2030 put 11/1/2010 | Aaa/NR | 1,000,000 | 1,035,010 | |||||
Collier County HFA Multi Family Revenue A-1, 4.90% due 2/15/2032 put 2/15/2012 | �� | Aaa/NR | 800,000 | 829,984 | ||||
Cooper City Utility Systems Refunding Series A, 0% due 10/1/2013 (Insured:AMBAC) | Aaa/AAA | 3,000,000 | 1,854,030 | |||||
Crossings at Fleming Island Community Development Refunding Series A, 5.60% due 5/1/2012 | Aaa/AAA | 310,000 | 333,523 | |||||
Dade County School District GO, 4.75% due 7/15/2010 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,010,850 | |||||
Deltona Utility Systems Revenue, 5.25% due 10/1/2015 (Insured: MBIA) | Aaa/AAA | 2,185,000 | 2,386,697 | |||||
Enterprise Community Development District Assessment Bonds, 6.00% due 5/1/2010 | Aaa/AAA | 1,135,000 | 1,137,157 | |||||
Escambia County HFA Revenue, 5.95% due 7/1/2020 (Florida Health Care Facility Loan Project; Insured:AMBAC) | Aaa/NR | 560,000 | 585,082 | |||||
Escambia County HFA Revenue Series C, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB+ | 1,000,000 | 1,026,420 | |||||
Escambia County Pollution Control, 6.40% due 9/1/2030 (Champion International Corp. Project) (AMT) | Baa3/NR | 1,500,000 | 1,531,320 | |||||
Flagler County School Board COP Series A, 5.00% due 8/1/2020 (Insured: FSA) | Aaa/AAA | 2,560,000 | 2,735,130 | |||||
Florida Board of Education Capital Outlay, 9.125% due 6/1/2014 | Aa1/AAA | 905,000 | 1,110,173 | |||||
Florida Board of Education GO Capital Outlay Refunding Public Education Series D, 5.75% due 6/1/2018 | Aa1/AAA | 1,460,000 | 1,571,953 | |||||
Florida Housing Finance Agency, 3.90% due 12/1/2007 (Multi Family Guaranteed Mortgage; LOC:Wachovia Bank) | NR/NR | 1,000,000 | 1,001,440 |
�� | Certified Annual Report | 19 |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Florida Housing Finance Corp. Revenue Homeowner Mortgage Series 1, 4.80% due 1/1/2016 | Aa2/AA | $ | 360,000 | $ | 370,436 | |||
Florida Housing Finance Corp. Revenue Housing D 1, 5.10% due 10/1/2011 | Aaa/NR | 200,000 | 204,032 | |||||
Florida Housing Finance Corp. Revenue Housing D 1, 5.40% due 4/1/2014 | Aaa/NR | 415,000 | 428,533 | |||||
Florida State Board of Education Series C, 6.00% due 5/1/2007 (ETM) | NR/NR | 300,000 | 300,501 | |||||
Florida State Board of Education Series D, 6.20% due 5/1/2007 (Insured: MBIA) (ETM) | Aaa/AAA | 220,000 | 220,405 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2018 | NR/AA+ | 2,090,000 | 2,240,689 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2019 | NR/AA+ | 2,255,000 | 2,408,633 | |||||
Florida State Department of Environmental Protection Revenue Series A, 5.00% due 7/1/2017 | Aaa/AAA | 1,000,000 | 1,076,740 | |||||
Grand Haven Community Development District Florida Special Assessment Series A, 6.90% due 5/1/2019 | NR/NR | 275,000 | 275,440 | |||||
Gulf Breeze Revenue, 4.70% due 12/1/2015 put 12/1/2010 (Insured: FGIC) | Aaa/AAA | 375,000 | 385,189 | |||||
Highlands County Health Facilities Authority Refunding Series A, 5.00% due 11/15/2019 | A2/A+ | 1,100,000 | 1,158,421 | |||||
Highlands County Health Facilities Refunding Series A, 5.00% due 11/15/2019 put 11/15/15 | A2/A+ | 1,000,000 | 1,053,110 | |||||
Hillsborough County Assessment Capacity, 5.00% due 3/1/2017 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,079,300 | |||||
Hillsborough County Aviation Authority Revenue Tampa International Airport Series A, 5.25% due 10/1/2009 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,044,860 | |||||
Hillsborough County Industrial Development Authority, 5.10% due 10/1/2013 | Baa2/BBB- | 1,000,000 | 1,034,880 | |||||
Jacksonville HFA Hospital Revenue, 5.75% due 8/15/2014 pre-refunded 8/15/2011 | Aa2/NR | 1,000,000 | 1,067,540 | |||||
Jacksonville Water & Sewer District COP, 5.00% due 10/1/2020 pre-refunded 10/1/2008 | Aaa/AAA | 1,000,000 | 1,021,080 | |||||
Lee County COP, 4.90% due 10/1/2006 (Master Lease Project; Insured:AMBAC) | Aaa/AAA | 500,000 | 500,035 | |||||
Manatee County Florida Revenue Refunding, 5.00% due 10/1/2016 (Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,081,950 | |||||
Miami Dade County Special Housing Revenue Refunding, 5.80% due 10/1/2012 | Baa3/NR | 795,000 | 797,790 | |||||
Miami Refunding, 5.375% due 9/1/2015 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,089,990 | |||||
North Miami HFA Revenue, 6.00% due 8/15/2024 | AA2/NR | 300,000 | 306,468 | |||||
Northern Palm Beach County Water Control & Improvement Unit Development 5A, 6.00% due 8/1/2010 | NR/NR | 440,000 | 455,470 | |||||
Orange County HFA Revenue Refunding, 5.125% due 6/1/2014 | NR/AA | 1,000,000 | 1,038,730 | |||||
Orange County HFA Revenue Refunding, 6.375% due 11/15/2020 pre-refunded 11/15/10 | A2/NR | 1,000,000 | 1,111,090 | |||||
Orange County HFA Revenue Unrefunded Balance 2006 Series A, 6.25% due 10/1/2016 (Insured: MBIA) | Aaa/AAA | 280,000 | 327,796 | |||||
Orange County HFA Revenue Unrefunded Balance Series A, 6.25% due 10/1/2013 | Aaa/AAA | 440,000 | 504,882 | |||||
Orange County School Board COP Series A, 6.00% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 1,580,000 | 1,646,518 | |||||
Orange County School Board COP Series A, 5.50% due 8/1/2017 pre-refunded 8/01/2012 | Aaa/AAA | 735,000 | 807,912 | |||||
Orlando & Orange County Expressway Revenue, 8.25% due 7/1/2014 (Insured: FGIC) | Aaa/AAA | 500,000 | 648,670 | |||||
Palm Beach County IDRB Series 1996, 6.10% due 12/1/2007 pre-refunded 12/1/2006 | NR/NR | 515,000 | 527,375 | |||||
Palm Beach County IDRB Series 1996, 6.20% due 12/1/2008 pre-refunded 12/1/2006 | NR/NR | 270,000 | 276,534 | |||||
Port Everglades Authority Revenue Refunding Series A, 5.00% due 9/1/2016 | Aaa/AAA | 5,635,000 | 5,653,483 | |||||
St. John’s County Industrial Development Authority Series A, 5.50% due 8/1/20140 | NR/NR | 1,000,000 | 1,066,740 |
20 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Tampa Revenue, 5.50% due 11/15/2013 | Aaa/AAA | $ | 1,050,000 | $ | 1,160,838 | |||
Turtle Run Community Development District Water Management Special Assessment, 5.00% due 5/1/2011 | Aaa/AAA | 1,000,000 | 1,033,190 | |||||
University of Central Florida COP Convocation Corp. Series A, 5.00% due 10/1/2019 | Aaa/AAA | 1,135,000 | 1,219,410 | |||||
USF Financing Corp. COP Master Lease Program Series A, 5.00% due 7/1/2018 | Aaa/AAA | 1,000,000 | 1,070,520 | |||||
GEORGIA — 0.05% | ||||||||
Georgia Municipal Electric Authority Power Revenue Unrefunded Balance 2005 Series Y, 10.00% due 1/1/2010 | A1/A+ | 230,000 | 273,723 | |||||
HAWAII — 0.45% | ||||||||
Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,310,980 | |||||
IDAHO — 0.40% | ||||||||
Boise City IDRB Corp., 5.00% due 5/15/2020 | Aaa/NR | 2,000,000 | 2,022,040 | |||||
ILLINOIS — 8.24% | ||||||||
Champaign County Community School District GO Series C, 0% due 1/1/2011 pre-refunded 1/1/2010 | Aaa/AAA | 800,000 | 671,520 | |||||
Chicago Housing Authority, 5.00% due 7/1/2008 (ETM) | Aa3/NR | 3,020,000 | 3,093,205 | |||||
Chicago Midway Airport Revenue Refunding Second Lien Series A, 5.00% due 1/1/2019 | Aaa/AAA | 1,210,000 | 1,269,121 | |||||
Chicago Tax Increment Allocation, 5.30% due 1/1/2014 | NR/A | 2,285,000 | 2,361,205 | |||||
Chicago Wastewater Transmission Revenue Refunding Second Lien, 5.50% due 1/1/2013 | Aaa/AAA | 650,000 | 714,005 | |||||
Cook County Capital Improvement GO, 5.50% due 11/15/2008 (Insured: FGIC) | Aaa/AAA | 500,000 | 506,125 | |||||
Cook County School District GO Series D, 0% due 12/1/2022 | NR/NR | 2,000,000 | 940,520 | |||||
Du Page County School District GO, 0% due 2/1/2010 (Insured: FGIC) | Aaa/NR | 655,000 | 577,638 | |||||
Freeport Illinois GO, 5.375% due 1/1/2018 (Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,627,740 | |||||
Illinois Development Finance Authority Revenue, 6.00% due 11/15/2012 | Aaa/AAA | 2,860,000 | 3,126,066 | |||||
Illinois Development Finance Authority Revenue Refunding Community Rehab Providers A, 5.90% due 7/1/2009 | NR/BBB | 820,000 | 834,514 | |||||
Illinois Educational Facilities Authority, 4.75% due 11/1/2036 put 11/1/2016 | A2/A | 1,160,000 | 1,194,661 | |||||
Illinois Educational Facilities Authority Series B, 5.50% due 5/15/2018 | NR/A | 1,500,000 | 1,538,580 | |||||
Illinois HFA, 5.50% due 10/1/2009 (Decatur Memorial Hospital Project) | A2/A | 1,055,000 | 1,099,489 | |||||
Illinois HFA, 6.00% due 7/1/2011 (Loyola Univ. Health Systems; Insured: MBIA) | Aaa/AAA | 770,000 | 848,294 | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola Univ. Health Systems; Insured: MBIA) (ETM) | Aaa/AAA | 230,000 | 257,816 | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola Univ. Health Systems; Insured: MBIA) | Aaa/AAA | 1,080,000 | 1,201,727 | |||||
Illinois HFA, 6.25% due 11/15/2019 pre-refunded 11/15/2009 (OSF Healthcare Project) | A2/A | 1,250,000 | 1,358,275 | |||||
Illinois HFA, 5.70% due 2/20/2021 | Aaa/NR | 990,000 | 1,061,389 | |||||
Illinois HFA Series A, 5.75% due 8/15/2013 pre-refunded 8/15/2009 | Aaa/AAA | 1,900,000 | 2,028,326 | |||||
Illinois University Revenues, 5.25% due 1/15/2018 | Aaa/AAA | 1,205,000 | 1,306,545 | |||||
Marion Refunding, 5.00% due 9/15/2012 (Insured: FGIC) | Aaa/AAA | 755,000 | 806,672 | |||||
Melrose Park Tax Increment Series B, 6.50% due 12/15/2015 (Insured: FSA) | Aaa/AAA | 1,015,000 | 1,126,061 | |||||
Sangamon County Property Tax Lease Receipts, 7.45% due 11/15/2006 | Aa3/NR | 295,000 | 296,389 | |||||
Sangamon County School District Series A, 5.875% due 8/15/2018 | NR/A | 2,400,000 | 2,587,896 | |||||
Sherman Revenue Refunding Mortgage, 6.10% due 10/1/2014 | NR/AAA | 1,170,000 | 1,246,120 | |||||
Sherman Revenue Refunding Mortgage, 6.20% due 10/1/2019 | NR/AAA | 1,600,000 | 1,704,864 | |||||
Southern Illinois University Revenues, 0% due 4/1/2014 (Insured: MBIA) | Aaa/AAA | 1,425,000 | 1,064,817 |
Certified Annual Report | 21 |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
University of Illinois Revenue, 0% due 4/1/2014 (Insured: MBIA) | Aaa/AAA | $ | 1,590,000 | $ | 1,189,861 | |||
West Chicago IDRB, 6.90% due 9/1/2024 (Leggett & Platt Inc. Project) | NR/A+ | 1,000,000 | 1,002,430 | |||||
Will & Kendall Counties Community Series B, 5.125% due 1/1/2014 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,054,770 | |||||
Will County Community School District 365-U, 0% due 11/1/2011 (Insured: FSA) | Aaa/AAA | 3,000,000 | 2,473,290 | |||||
INDIANA — 7.17% | ||||||||
Allen County Economic Development, 5.80% due 12/30/2012 | NR/NR | 895,000 | 930,299 | |||||
Allen County Economic Development, 5.75% due 12/30/2015 | NR/NR | 1,355,000 | 1,453,508 | |||||
Allen County Jail Building Corp. GO, 5.00% due 4/1/2018 (Insured: XLCA) | Aaa/NR | 2,495,000 | 2,682,100 | |||||
Allen County Redevelopment District Tax Series A, 5.00% due 11/15/2018 | A3/NR | 1,560,000 | 1,644,880 | |||||
Allen County War Memorial Series A, 5.25% due 11/1/2013 (Insured:AMBAC) | Aaa/NR | 1,000,000 | 1,076,040 | |||||
Boone County Hospital Association, 5.625% due 1/15/2015 pre-refunded 7/15/2011 | Aaa/AAA | 1,000,000 | 1,087,830 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2016 (Performing Arts Center) | Aa2/AA | 1,730,000 | 1,172,162 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2021 (Performing Arts Center) | Aa2/AA | 2,000,000 | 1,040,420 | |||||
Dyer Redevelopment Authority, 6.40% due 7/15/2015 pre-refunded 7/15/2009 | NR/A- | 1,515,000 | 1,640,169 | |||||
Dyer Redevelopment Authority, 6.50% due 7/15/2016 pre-refunded 7/15/2009 | NR/A- | 1,910,000 | 2,072,636 | |||||
East Chicago Elementary School Building First Mortgage Series A, 6.25% due 7/5/2008 | NR/A | 350,000 | 359,139 | |||||
Fishers Redevelopment Authority, 5.25% due 2/1/2018 (Insured: XLCA) | Aaa/AAA | 1,500,000 | 1,650,855 | |||||
Fishers Redevelopment Authority, 5.25% due 2/1/2020 (Insured: XLCA) | Aaa/AAA | 1,025,000 | 1,124,815 | |||||
Gary Indiana Building Corp. - Lake County First Mortgage Series 1994-B, 8.25% due 7/1/2010 | NR/NR | 715,000 | 721,721 | |||||
Goshen Chandler School Building, 0% due 1/15/2011 (Insured: MBIA) | Aaa/AAA | 1,020,000 | 866,653 | |||||
Huntington Economic Development Revenue, 6.40% due 5/1/2015 | NR/NR | 1,000,000 | 1,040,890 | |||||
Indiana Bond Bank Special Program Hendrick’s Redevelopment Series B, 6.20% due 2/1/2023 pre-refunded 2/1/2007 | NR/NR | 1,500,000 | 1,542,945 | |||||
Indiana Health Facility Hospital Revenue, 5.75% due 9/1/2015 (ETM) | A3/AAA | 575,000 | 581,578 | |||||
Indiana Health Facility Hospital Revenue, 5.40% due 2/15/2016 pre-refunded 8/15/2010 | Aaa/AAA | 1,000,000 | 1,077,810 | |||||
Indiana State Educational Facilities Authority Revenue, 5.65% due 10/1/2015 | NR/A- | 1,065,000 | 1,125,268 | |||||
Indiana State Educational Facilities Authority Revenue, 5.70% due 10/1/2016 | NR/A- | 1,025,000 | 1,083,015 | |||||
Indianapolis Local Public Improvement Bond Bank, 0% due 7/1/2009 (ETM) | Aa2/NR | 740,000 | 669,256 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2017 | NR/A+ | 1,000,000 | 1,057,270 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2020 | NR/A+ | 1,000,000 | 1,048,250 | |||||
Portage Township Multi School Building Corp., 5.50% due 7/15/2015 (Insured: FGIC) | Aaa/AAA | 500,000 | 547,890 | |||||
Rockport PCR Series A, 4.90% due 6/1/2025 put 6/1/2007 | Baa2/BBB | 3,165,000 | 3,193,960 | |||||
Vanderburgh County Redevelopment District Tax Increment, 5.00% due 2/1/2020 | NR/A- | 1,000,000 | 1,039,340 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2012 pre-refunded 1/15/2012 | NR/AA | 1,200,000 | 1,319,976 | |||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2017 | Aaa/AAA | 1,685,000 | 1,859,650 | |||||
IOWA — 1.58% | ||||||||
Coralville COP Series D, 5.25% due 6/1/2022 | A2/NR | 1,250,000 | 1,320,775 | |||||
Iowa Finance Authority Health Care Facilities, 6.00% due 7/1/2013 | A1/NR | 1,000,000 | 1,064,010 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.00% due 7/1/2012 | Aaa/AAA | 1,000,000 | 1,085,600 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.75% due 2/15/2016 pre-refunded 2/15/2010 (Iowa Health Services Project) | Aa3/NR | 1,000,000 | 1,107,820 | |||||
Iowa Finance Authority Revenue, 6.00% due 12/1/2018 | Aa2/AA | 2,000,000 | 2,164,640 | |||||
Iowa Finance Authority Revenue Refunding Trinity Health Series B, 5.75% due 12/1/2015 | Aa3/AA- | 1,250,000 | 1,340,825 |
22 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
KANSAS — 1.11% | ||||||||
Wichita Hospital Revenue Refunding Improvement Series XI, 6.75% due 11/15/2019 | NR/A+ | $ | 4,200,000 | $ | 4,552,632 | |||
Wyandotte County Kansas School District 204 Refunding & Improvement Series A, 5.00% due 9/1/2014 | Aaa/NR | 1,030,000 | 1,120,228 | |||||
KENTUCKY — 1.00% | ||||||||
Kentucky Economic Development Finance Authority Series C, 5.85% due 10/1/2015 | Aaa/AAA | 4,000,000 | 4,503,320 | |||||
Wilmore Housing Facilities Revenue, 5.55% due 7/1/2013 (LOC: Allied Irish Bank plc) | NR/NR | 595,000 | 617,164 | |||||
LOUISIANA — 1.81% | ||||||||
Jefferson Sales Tax District Revenue Series B, 5.50% due 12/1/2008 (Insured:AMBAC) | Aaa/AAA | 1,595,000 | 1,656,344 | |||||
Louisiana Local Govt. Environment Series A, 4.10% due 9/1/2007 (Bellemont Apartment Housing Project) | Baa1/NR | 175,000 | 175,404 | |||||
Morehouse Parish Pollution Revenue Refunding Series A, 5.25% due 11/15/2013 | Baa3/BBB | 3,000,000 | 3,188,340 | |||||
New Orleans Sewer Service Revenue, 5.50% due 6/1/2017 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,056,600 | |||||
Orleans Levee District Trust Receipts Series A, 5.95% due 11/1/2007 (Insured: FSA) | Aaa/AAA | 690,000 | 706,615 | |||||
St.Tammany Parish Sales Tax District No. 03 Sales & Use Tax Revenue, 5.00% due 6/1/2019 (Insured: CIFG) | NR/AAA | 1,300,000 | 1,408,511 | |||||
St.Tammany Parish Sales Tax District No. 03 Sales & Use Tax Revenue, 5.00% due 6/1/2020 (Insured: CIFG) | NR/AAA | 1,000,000 | 1,082,130 | |||||
MAINE — 0.21% | ||||||||
Jay Solid Waste Disposal Revenue Series B, 6.20% due 9/1/2019 | Baa3/BBB | 1,000,000 | 1,059,170 | |||||
MASSACHUSETTS — 0.32% | ||||||||
Massachusetts HFA Housing Development Series A, 5.05% due 6/1/2010 | Aaa/AAA | 515,000 | 515,587 | |||||
Massachusetts HFA Refunding Series A, 6.125% due 12/1/2011 pre-refunded 12/1/2006 | Aaa/AAA | 150,000 | 153,512 | |||||
Massachusetts HFA Unrefunded Balance Series A, 6.125% due 12/1/2011 | Aaa/AAA | 950,000 | 968,050 | |||||
MICHIGAN — 1.33% | ||||||||
Kalamazoo Hospital Finance Authority Revenue Series 1994-A, 6.25% due 6/1/2014 | Aaa/AAA | 650,000 | 756,490 | |||||
Kent Hospital Finance Authority Michigan Hospital, 7.25% due 1/15/2013 | Aaa/AAA | 1,000,000 | 1,121,060 | |||||
Michigan Public Educational Facilities Authority Revenue, 5.50% due 9/1/2022 | NR/NR | 1,110,000 | 1,122,643 | |||||
Michigan State Building Authority Revenue Refunding Facilities Program Series I, 5.25% due 10/15/2017 (Insured: FSA) | Aaa/AAA | 2,450,000 | 2,661,410 | |||||
Southfield Economic Development Corp. Refunding Revenue, 7.25% due 12/1/2010 | NR/NR | 1,165,000 | 1,165,128 | |||||
MINNESOTA — 1.04% | ||||||||
Minneapolis St. Paul Health, 6.00% due 12/1/2018 | Baa1/BBB+ | 1,000,000 | 1,102,600 | |||||
Minneapolis St. Paul Housing & Redevelopment Authority, 4.75% due 11/15/2018 | Aaa/AAA | 3,500,000 | 3,502,065 | |||||
Southern Minnesota Municipal Power Agency Supply Series A, 5.75% due 1/1/2018 pre-refunded to various dates (Insured: MBIA) | Aaa/AAA | 700,000 | 738,913 |
Certified Annual Report | 23 |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
MISSISSIPPI — 0.70% | ||||||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply Series A, 5.00% due 3/1/2018 (Insured: XLCA) | Aaa/AAA | $ | 920,000 | $ | 991,456 | |||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply Series A, 5.00% due 3/1/2020 (Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,070,530 | |||||
Mississippi Higher Educational Authority Series C, 7.50% due 9/1/2009 | A2/NR | 1,500,000 | 1,503,600 | |||||
MISSOURI — 0.83% | ||||||||
Missouri Development Finance Board Healthcare Series A, 5.40% due 11/1/2018 | Aa3/NR | 2,025,000 | 2,091,542 | |||||
Springfield Public Utilities Revenue Series A, 5.00% due 12/1/2013 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,166,700 | |||||
NEBRASKA — 0.18% | ||||||||
Madison County Hospital Authority 1 Hospital Revenue, 5.50% due 7/1/2014 | NR/AA | 845,000 | 906,144 | |||||
NEVADA — 0.86% | ||||||||
Las Vegas Special Improvement District Refunding Senior Local Improvement Series A, 5.375% due 6/1/2013 (Insured: FSA) | Aaa/AAA | 1,155,000 | 1,204,677 | |||||
Reno Sparks Indian Colony, 5.00% due 6/1/2021 (LOC: U.S. Bank NA) | NR/NR | 1,000,000 | 1,050,010 | |||||
Washoe County Reno Sparks Series B, 0% due 7/1/2011 (Insured: FSA) | Aaa/AAA | 2,600,000 | 2,169,778 | |||||
NEW HAMPSHIRE — 1.26% | ||||||||
Manchester Housing & Redevelopment Authority Series B, 0% due 1/1/2016 | NR/A | 4,990,000 | 3,282,721 | |||||
New Hampshire Pollution Refunding Central Maine Power Co., 5.375% due 5/1/2014 | A3/BBB+ | 3,000,000 | 3,167,640 | |||||
NEW JERSEY — 0.31% | ||||||||
New Jersey EDA Refunding Revenue, 7.50% due 12/1/2019 | NR/NR | 220,000 | 220,651 | |||||
New Jersey EDA School Facilities Construction Series O, 5.00% due 3/1/2019 | A1/AA- | 1,280,000 | 1,364,877 | |||||
NEW MEXICO — 1.94% | ||||||||
Albuquerque Airport Revenue Refunding, 5.00% due 7/1/2008 | Aaa/AAA | 2,380,000 | 2,434,431 | |||||
Farmington PCR, 3.85% due 9/1/2024 put 10/2/2006 | P1/A-1+ | 3,340,000 | 3,340,000 | |||||
Farmington PCR Series A, 3.86% due 5/1/2024 put 10/2/2006 | P1/A-1+ | 500,000 | 500,000 | |||||
Sandoval County Incentive Payment Revenue Refunding, 5.00% due 6/1/2020 | NR/A+ | 2,000,000 | 2,127,140 | |||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 | NR/NR | 1,515,000 | 1,526,362 | |||||
NEW YORK — 2.09% | ||||||||
Long Island Power Authority Electric Systems Revenue General Series B, 5.00% due 12/1/2006 | A3/A- | 2,000,000 | 2,004,480 | |||||
Nassau Health Care Corp., 6.00% due 8/1/2011 pre-refunded 8/1/2009 | Aaa/AAA | 1,000,000 | 1,085,360 | |||||
New York City Industrial Development Agency Series A, 5.00% due 6/1/2010 | NR/A | 1,175,000 | 1,218,028 | |||||
New York City Transitional Finance Authority Facilities Refunding Series A 1, 5.00% due 11/1/2020 | Aa1/AAA | 3,000,000 | 3,236,100 | |||||
New York City Trust Cultural Resources, 5.75% due 7/1/2015 | NR/A | 875,000 | 932,549 | |||||
New York Housing Finance Service Series A, 6.375% due 9/15/2015 pre-refunded 9/15/2007 | A1/AAA | 220,000 | 225,854 | |||||
New York State Dorm Authority Bishop Henry B Hucles Nursing, 5.00% due 7/1/2017 (Insured: SONYMA) | Aa1/NR | 850,000 | 919,836 | |||||
New York State Dormitory Authority School Districts Financing Program Series E, 9.00% due 10/1/2007 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,052,350 |
24 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
NORTH CAROLINA — 0.67% | ||||||||
North Carolina Eastern Municipal Power Refunding Series A, 5.70% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | $ | 1,200,000 | $ | 1,229,784 | |||
North Carolina Housing Finance Agency Single Family Revenue Bond Series BB, 6.50% due 9/1/2026 | Aa2/AA | 1,070,000 | 1,093,979 | |||||
North Carolina Medical Care, 5.00% due 9/1/2013 | Aaa/AAA | 1,000,000 | 1,078,280 | |||||
NORTH DAKOTA — 0.15% | ||||||||
North Dakota State Housing Finance Agency Home Mortgage Series A, 5.70% due 7/1/2030 | Aa1/NR | 745,000 | 747,041 | |||||
OHIO — 2.78% | ||||||||
Butler County Transportation Improvement, 6.00% due 4/1/2010 pre-refunded 4/1/2008 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,055,180 | |||||
Central Ohio Solid Waste Authority Series B, 5.00% due 12/1/2008 | Aa2/AA+ | 2,530,000 | 2,605,394 | |||||
Cleveland Cuyahoga County Development Bond Fund A, 6.25% due 5/15/2016 | NR/NR | 1,330,000 | 1,420,706 | |||||
Cuyahoga County Hospital Revenue Refunding Series A, 4.75% due 2/15/2008 | Aaa/AAA | 1,000,000 | 1,015,280 | |||||
Franklin County Health Care Revenue Series 1995-A, 6.00% due 11/1/2010 | Aa2/NR | 945,000 | 965,384 | |||||
Hamilton Wastewater Systems Revenue Refunding, 5.25% due 10/1/2017 | Aaa/AAA | 1,500,000 | 1,656,735 | |||||
Marysville School District COP, 5.25% due 12/1/2017 pre-refunded 6/1/2015 | Aaa/AAA | 2,000,000 | 2,207,780 | |||||
North Ridgeville Economic Development, 0% due 2/1/2015 (Collateralized: FHA) | NR/AAA | 380,000 | 191,793 | |||||
Ohio State Higher Educational Facilities Revenue, 5.05% due 7/1/2037 put 7/1/2016 | A2/A+ | 2,200,000 | 2,342,824 | |||||
Reynoldsburg Health Care Facilities Revenue Bonds Series 1997, 5.70% due 10/20/2012 | Aaa/NR | 760,000 | 789,777 | |||||
OKLAHOMA — 3.66% | ||||||||
Alva Hospital Authority Hospital Revenue Sales Tax, 5.25% due 6/1/2025 | Aa3/AA | 1,505,000 | 1,613,119 | |||||
Comanche County Oklahoma Hospital Authority Revenue, 5.25% due 7/1/2019 | Aa3/AA | 3,345,000 | 3,606,245 | |||||
Oklahoma City Municipal Improvement Authority, 0% due 7/1/2008 | Aaa/AAA | 1,020,000 | 957,902 | |||||
Oklahoma City Municipal Water & Sewer Series C, 0% due 7/1/2011 | Aaa/AAA | 1,125,000 | 941,040 | |||||
Oklahoma City Municipal Water & Sewer Series C, 0% due 7/1/2013 | Aaa/AAA | 1,485,000 | 1,149,271 | |||||
Oklahoma Development Finance Authority Hospital Association Pooled Hospital A, 5.40% due 6/1/2013 | Aaa/AAA | 825,000 | 883,814 | |||||
Oklahoma Industrial Authority Revenue Refunding, 6.00% due 8/15/2010 | Aaa/AAA | 750,000 | 811,688 | |||||
Tulsa County Independent School District Combined Purpose, 4.50% due 8/1/2007 | Aa3/AA- | 2,800,000 | 2,822,540 | |||||
Tulsa Industrial Authority Hospital Revenue Refunding, 5.375% due 2/15/2017 | Aa3/AA | 4,000,000 | 4,044,240 | |||||
Tulsa Industrial Authority Revenue Refunding University of Tulsa Series A, 6.00% due 10/1/2016 (Insured: MBIA) | Aaa/AAA | 1,250,000 | 1,424,438 | |||||
Tulsa Public Facilities Authority Solid Waste Revenue, 5.65% due 11/1/2006 | Aaa/AAA | 500,000 | 500,840 | |||||
OREGON — 0.33% | ||||||||
Forest Grove Campus Improvement & Refunding Pacific University, 6.00% due 5/1/2015 pre-refunded 5/1/2010 (Insured: Radian) | NR/AA | 800,000 | 865,472 | |||||
Oregon State Housing & Community Services Department Single Family Mortgage Program Series B, 5.35% due 7/1/2018 (AMT) | Aa2/NR | 810,000 | 816,739 | |||||
PENNSYLVANIA — 1.97% | ||||||||
Allegheny County Hospital Development Health Series B, 6.50% due 5/1/2012 | Baa1/NR | 1,400,000 | 1,510,670 |
Certified Annual Report | 25 |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Carbon County Industrial Development Authority Refunding, 6.65% due 5/1/2010 (Panther Creek Partners Project) | NR/BBB- | $ | 1,370,000 | $ | 1,445,186 | |||
Chartiers Valley Industrial & Community Development Authority, 5.75% due 12/1/2022 (Asbury Health Center Project) | NR/NR | 900,000 | 928,593 | |||||
Chester County School Authority, 5.00% due 4/1/2020 (Intermediate Unit Project; Insured:AMBAC) | NR/AAA | 2,310,000 | 2,477,821 | |||||
Lancaster County Series B, 0% due 5/1/2014 (Insured: FGIC) | Aaa/NR | 795,000 | 587,982 | |||||
Lancaster County Series B, 0% due 5/1/2015 (Insured: FGIC) | Aaa/NR | 800,000 | 558,160 | |||||
Lehigh County General Purpose Shepard Rehab. Hospital, 6.00% due 11/15/2007 (Insured:AMBAC) | Aaa/AAA | 785,000 | 805,952 | |||||
Pennsylvania Higher Education University Series 14, 0% due 7/1/2020 (Insured:AMBAC) | Aaa/AAA | 2,032,839 | 738,347 | |||||
Pennsylvania State Higher Educational Facility Allegheny Delaware Valley Obligation A, 5.60% due 11/15/2009 (Insured: MBIA) | Aaa/AAA | 500,000 | 526,885 | |||||
Pennsylvania State Higher Educational Facility Allegheny Delaware Valley Obligation A, 5.60% due 11/15/2010 (Insured: MBIA) | Aaa/AAA | 480,000 | 513,322 | |||||
RHODE ISLAND — 0.70% | ||||||||
Rhode Island Health & Education Building Hospital Financing, 5.25% due 7/1/2015 (Memorial Hospital Project; LOC: Fleet Bank) | NR/AA | 1,325,000 | 1,401,214 | |||||
Rhode Island Health & Education Building Refunding, 6.00% due 8/1/2014 (Credit Support: FHA) | NR/AA | 1,000,000 | 1,058,210 | |||||
Rhode Island Health & Education Building Refunding Higher Education State University, 5.00% due 3/15/2014 (Insured: Radian) | NR/AA | 1,065,000 | 1,128,037 | |||||
SOUTH CAROLINA — 2.80% | ||||||||
Berkeley County School District Installment Lease, 5.00% due 12/1/2019 | A3/A- | 2,000,000 | 2,110,880 | |||||
Charleston Educational Excellence Financing Corp., 5.25% due 12/1/2020 (Charleston County School District Project) | A1/AA- | 1,855,000 | 2,012,174 | |||||
Darlington County Industrial Development, 6.00% due 4/1/2026 (Sonoco Products Co. Project) (AMT) | Baa1/BBB+ | 3,255,000 | 3,315,803 | |||||
Lexington One School Facilities Corp. School District No 1, 5.00% due 12/1/2019 | A1/NR | 1,000,000 | 1,069,120 | |||||
Lexington One School Facilities Corp. School District No 1, 5.25% due 12/1/2021 | A1/NR | 1,700,000 | 1,821,244 | |||||
Scago Educational Facilities Corp. School District No 5 Spartanburg County, 5.00% due 4/1/2019 (Insured: FSA) | Aaa/AAA | 2,740,000 | 2,938,623 | |||||
Scago Educational Facilities Corp. School District No 5 Spartanburg County, 5.00% due 4/1/2021 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,065,650 | |||||
TENNESSEE — 0.40% | ||||||||
Knox County Health, 4.90% due 6/1/2031 put 6/1/2011 (Collateralized: FNMA) | NR/AAA | 2,000,000 | 2,026,680 | |||||
TEXAS — 15.23% | ||||||||
Bexar County Health Facilities Development Corp., 6.125% due 7/1/2022 (Army Retirement Residence Project) | NR/BBB- | 1,250,000 | 1,347,387 | |||||
Bexar County Housing Finance Corp., 5.50% due 1/1/2016 (Insured: MBIA) | Aaa/NR | 600,000 | 636,492 | |||||
Bexar County Housing Finance Corp., 5.70% due 1/1/2021 (Insured: MBIA) | Aaa/NR | 1,035,000 | 1,098,342 | |||||
Bexar County Housing Finance Corp., 6.50% due 12/1/2021 | Baa1/NR | 2,000,000 | 2,124,320 | |||||
Bexar County Housing Finance Corp. Multi Family Housing, 5.40% due 8/1/2012 (Dymaxion & Marrach Park Apts. Project; Insured: MBIA) | Aaa/NR | 885,000 | 915,656 | |||||
Bexar County Housing Finance Corp. Multi Family Housing, 5.95% due 8/1/2020 (Dymaxion & Marrach Park Apts. Project; Insured: MBIA) | Aaa/NR | 1,270,000 | 1,356,982 | |||||
Bexar County Housing Finance Corp. Series A, 5.875% due 4/1/2014 (Honey Creek Apartments Project; Insured: MBIA) | Aaa/NR | 975,000 | 1,023,643 | |||||
Bexar County Housing Finance Corp. Series A, 6.125% due 4/1/2020 (Honey Creek Apartments Project; Insured: MBIA) | Aaa/NR | 800,000 | 839,520 | |||||
Birdville Independent School District Refunding, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 2,800,000 | 2,282,028 | |||||
Carroll Independent School District Refunding, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 1,130,000 | 933,527 | |||||
Cedar Park Texas Refunding & Improvement, 5.00% due 2/15/2016 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,070,420 |
26 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Central Texas Regional Mobility Authority Revenue Anticipation Notes, 5.00% due 1/1/2008 | Aa3/AA | $ | 1,100,000 | $ | 1,118,546 | |||
Coppell Independent School District Refunding, 0% due 8/15/2013 (Guaranty: PSF) | NR/AAA | 5,000,000 | 3,560,050 | |||||
Donna Independent School District Refunding, 5.00% due 2/15/2015 (Guaranty: PSF) | Aaa/AAA | 980,000 | 1,062,790 | |||||
Duncanville Independent School District Series B, 0% due 2/15/2016 pre-refunded 2/15/2012 (Insured: PSF) | Aaa/AAA | 2,985,000 | 1,938,817 | |||||
Duncanville Independent School District Series B, 0% due 2/15/2016 (Insured: PSF) | Aaa/AAA | 15,000 | 9,534 | |||||
El Paso Independent School District Refunding, 0% due 8/15/2010 (Guaranty: PSF) | Aaa/AAA | 3,750,000 | 3,150,037 | |||||
El Paso Independent School District Refunding, 0% due 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 2,500,000 | 1,985,250 | |||||
Ennis Texas Independent School District, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/NR | 835,000 | 646,524 | |||||
Ennis Texas Independent School District, 0% due 8/15/2013 (Guaranty: PSF) | Aaa/NR | 845,000 | 614,028 | |||||
Ennis Texas Independent School District, 0% due 8/15/2014 (Guaranty: PSF) | Aaa/NR | 855,000 | 582,512 | |||||
Ennis Texas Independent School District Refunding, 0% due 8/15/2012 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,625,000 | 1,276,031 | |||||
Ennis Texas Independent School District Refunding, 0% due 8/15/2013 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,645,000 | 1,212,299 | |||||
Ennis Texas Independent School District Refunding, 0% due 8/15/2014 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,670,000 | 1,153,886 | |||||
Fort Worth Water & Sewer Revenue, 5.25% due 2/15/2009 | Aa2/AA | 1,000,000 | 1,038,160 | |||||
Gulf Coast Center Revenue, 6.75% due 9/1/2020 (Mental Health Retardation Center Project) | NR/BBB | 1,320,000 | 1,423,990 | |||||
Hays Consolidated Independent School District, 0% due 8/15/2013 pre-refunded 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 6,245,000 | 4,676,381 | |||||
Irving Water Works & Sewer Revenue, 5.375% due 8/15/2014 | Aa2/AA | 350,000 | 370,983 | |||||
Irving Water Works & Sewer Revenue, 5.375% due 8/15/2014 pre-refunded 8/15/2010 | Aa2/AA | 1,150,000 | 1,224,290 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2018 (Insured:AMBAC) | Aaa/AAA | 2,040,000 | 2,181,862 | |||||
Lewisville Combination Contract Revenue Refunding Special Assessment District 2, 4.75% due 9/1/2012 (Insured:ACA) | NR/A | 2,055,000 | 2,110,732 | |||||
Mesquite Independent School District Refunding, 0% due 8/15/2012 (Guaranty: PSF) | NR/AAA | 1,420,000 | 1,102,715 | |||||
Midlothian Texas Independent School District, 0% due 2/15/2012 (ETM) | Aaa/NR | 500,000 | 408,370 | |||||
Midlothian Texas Independent School District, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/NR | 500,000 | 407,505 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2012 (Insured: Radian) | Aa3/AA | 735,000 | 793,734 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2013 (Insured: Radian) | Aa3/AA | 500,000 | 538,940 | |||||
Pharr San Juan Alamo Independent Building, 5.75% due 2/1/2013 (Guaranty: PSF) | Aaa/AAA | 1,000,000 | 1,063,450 | |||||
Port Arthur Refunding, 5.00% due 2/15/2019 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,061,700 | |||||
Richardson Refunding & Improvement, 5.00% due 2/15/2019 (Insured: MBIA) | Aaa/AAA | 2,145,000 | 2,305,875 | |||||
Sabine River Authority Texas Pollution Refunding Series A, 5.80% due 7/1/2022 (TXU Energy Co. Project) | Baa2/BBB- | 1,000,000 | 1,075,370 | |||||
Sam Rayburn Municipal Power Agency Refunding, 6.00% due 10/1/2016 | Baa2/BBB | 3,000,000 | 3,184,290 | |||||
Sam Rayburn Municipal Power Agency Refunding Series A, 6.00% due 10/1/2021 | Baa2/BBB | 675,000 | 715,743 | |||||
San Antonio Hotel Occupancy Revenue Refunding Series B, 5.00% due 8/15/2034 put 8/1/2008 (Insured:AMBAC) | Aaa/AAA | 1,350,000 | 1,381,252 | |||||
Stafford Economic Development, 6.00% due 9/1/2017 (Insured: FGIC) | Aaa/AAA | 1,775,000 | 2,060,367 | |||||
Tarrant County Health Facilities, 6.625% due 11/15/2020 pre-refunded 11/15/2010 (Adventist/Sunbelt Project) | A2/NR | 3,500,000 | 3,921,330 | |||||
Texarkana Health Facilities Hospital Refunding Series A, 5.75% due 10/1/2009 (Wadley Regional Medical Center Project; Insured: MBIA) | Aaa/AAA | 500,000 | 528,610 | |||||
Texarkana Health Facilities Hospital Refunding Series A, 5.75% due 10/1/2011 (Insured: MBIA) | Aaa/AAA | 2,500,000 | 2,725,075 | |||||
Travis County GO, 5.25% due 3/1/2021 | Aaa/AAA | 1,000,000 | 1,106,550 | |||||
Travis County Health Facilities Development Corp., 6.25% due 11/15/2014 pre-refunded 11/15/2009 (Ascension Health Project; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,257,070 | |||||
Travis County Health Facilities Development Corp. Revenue, 5.75% due 11/15/2010 (Ascension Health Project; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,136,140 | |||||
Upper Trinity Regional Water District Regional Treated Water Supply Systems Series A, 7.125% due 8/1/2008 (Insured: FGIC) | Aaa/AAA | 600,000 | 627,402 |
Certified Annual Report | 27 |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Waco Health Facilities Development Corp. Series A, 6.00% due 11/15/2015 pre-refunded 11/15/2009 (Ascension Health Project) | Aa2/AA | $ | 870,000 | $ | 939,522 | |||
Waco Health Facilities Development Corp. Series A, 6.00% due 11/15/2016 pre-refunded 11/15/2009 (Ascension Health Project) | Aa2/AA | 1,050,000 | 1,133,906 | |||||
West Harris County Municipal Utility Refunding, 6.00% due 3/1/2017 (Insured: Radian) | NR/AA | 500,000 | 513,535 | |||||
UTAH — 0.85% | ||||||||
Salt Lake City Municipal Building Series B, 5.30% due 10/15/2012 pre-refunded 10/15/2009 (Insured:AMBAC) | Aaa/AAA | 1,085,000 | 1,149,384 | |||||
Utah County Municipal Building Authority, 5.50% due 11/1/2016 pre-refunded 11/1/2011 (Insured:AMBAC) | Aaa/NR | 1,000,000 | 1,087,110 | |||||
Utah HFA, 6.05% due 7/1/2016 (Credit Support: FHA) | NR/AAA | 405,000 | 414,671 | |||||
Utah HFA SFMR D-2 Class I, 5.85% due 7/1/2015 (Credit Support: FHA) | Aa2/AA | 60,000 | 60,986 | |||||
Utah State Board of Regents Auxiliary Refunding Series A, 5.25% due 5/1/2013 | NR/AA | 595,000 | 639,078 | |||||
Utah Water Finance Agency Revenue Pooled Loan Financing Program Series A, 5.00% due 10/1/2012 (Insured:AMBAC) | Aaa/NR | 940,000 | 1,005,528 | |||||
VIRGINIA — 2.24% | ||||||||
Alexandria Industrial Development Authority Institute for Defense Analysis, 5.90% due 10/1/2020 pre-refunded 10/1/2010 (Insured:AMBAC) | Aaa/AAA | 2,000,000 | 2,193,300 | |||||
Alexandria Industrial Development Authority Institute for Defense Analysis Series A, 6.00% due 10/1/2014 pre-refunded 10/1/2010 (Insured:AMBAC) | Aaa/AAA | 1,500,000 | 1,650,300 | |||||
Alexandria Industrial Development Authority Institute for Defense Analysis Series A, 6.00% due 10/1/2015 pre-refunded 10/1/2010 (Insured:AMBAC) | Aaa/AAA | 1,590,000 | 1,749,318 | |||||
Fauquier County Industrial Development Authority, 5.50% due 10/1/2016 (Insured: Radian) | NR/AA | 1,000,000 | 1,096,550 | |||||
Hanover County Industrial Development Authority Medical Facilities Revenue, 6.00% due 10/1/2021 (ETM) | Aaa/AAA | 795,000 | 796,248 | |||||
Norton Industrial Development Authority Hospital Refunding, 6.00% due 12/1/2014 (Norton Community Hospital Project; Insured:ACA) | NR/A | 1,635,000 | 1,786,254 | |||||
Spotsylvania County IDRB, 6.00% due 9/1/2019 put 9/1/2008 (Walter Grinders Project; LOC: Deutsche Bank) (AMT) | NR/NR | 2,210,000 | 2,209,956 | |||||
WASHINGTON — 5.23% | ||||||||
Benton County Public Utility District Refunding Series A, 5.625% due 11/1/2012 (Insured: FSA) | Aaa/AAA | 1,500,000 | 1,638,585 | |||||
Energy Northwest Washington Series A, 5.60% due 7/1/2015 pre-refunded 1/1/2007 (Wind Project) | A3/A- | 1,000,000 | 1,034,800 | |||||
Energy Northwest Washington Series B, 5.10% due 7/1/2009 pre-refunded 1/1/2007 (Wind Project) | A3/A- | 745,000 | 769,987 | |||||
Port Longview Industrial Development Corp. Solid Waste Disposal Revenue, 6.875% due 10/1/2008 | NR/BBB | 1,500,000 | 1,577,730 | |||||
Tacoma Electric Systems Revenue Series A, 5.50% due 1/1/2012 (Insured: FSA) | Aaa/AAA | 750,000 | 811,545 | |||||
Vancouver Downtown Redevelopment Senior Series A, 5.50% due 1/1/2018 (Conference Center Project; Insured:ACA) | NR/A | 3,500,000 | 3,712,135 | |||||
Washington Health Care Facilities, 5.50% due 12/1/2010 (Providence Services Project; Insured: MBIA) | Aaa/AAA | 2,690,000 | 2,866,625 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2014 (Catholic Health Services Project; Insured: MBIA) | Aaa/AAA | 1,735,000 | 1,879,057 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2015 (Catholic Health Services Project; Insured: MBIA) | Aaa/AAA | 1,945,000 | 2,098,169 | |||||
Washington Health Care Facilities, 5.60% due 1/1/2018 (Sea Mar Community Center Project; LOC: U.S. Bancorp) | Aa1/NR | 1,025,000 | 1,089,964 | |||||
Washington Health Care Facilities Refunding, 6.375% due 10/1/2010 (Insured: FGIC) | Aaa/AAA | 1,500,000 | 1,653,090 | |||||
Washington Nonprofit Housing, 5.60% due 7/1/2011 (Kline Galland Center Project; Insured: Radian) | NR/AA | 500,000 | 527,405 | |||||
Washington Nonprofit Housing, 5.875% due 7/1/2019 (Kline Galland Center Project; Insured: Radian) | NR/AA | 1,000,000 | 1,057,490 | |||||
Washington Public Power Supply Refunding Series B, 0% due 7/1/2010 | Aaa/AA- | 960,000 | 832,829 | |||||
Washington Public Power Supply Refunding Series B, 0% due 7/1/2011 | Aaa/AA- | 1,000,000 | 834,140 | |||||
Washington State Health Care Facilities Series A, 4.50% due 12/1/2008 (Kadlec Medical Center Project; Insured:Assured Guaranty) | Aa1/AAA | 1,200,000 | 1,221,060 |
28 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Washington State Public Power Supply Systems Revenue Refunding Series A, 5.00% due 7/1/2011 (Insured: FSA) | Aaa/AAA | $ | 3,030,000 | $ | 3,155,109 | |||
WEST VIRGINIA — 0.32% | ||||||||
West Virginia State Hospital Finance Authority Series A, 5.00% due 6/1/2020 (United Hospital Center Project; Insured:AMBAC) | Aaa/AAA | 1,530,000 | 1,642,746 | |||||
WISCONSIN — 1.21% | ||||||||
Wisconsin Health & Educational Facilities, 5.75% due 8/15/2020 (Eagle River Memorial Hospital Inc. Project; Insured: Radian) | NR/AA | 1,000,000 | 1,067,359 | |||||
Wisconsin Housing & Economic Development Series A, 5.875% due 11/1/2016 (Insured:AMBAC) | Aaa/AAA | 1,980,000 | 2,075,614 | |||||
Wisconsin State Health & Educational Facilities, 4.50% due 12/1/2023 put 12/1/2007 (Hospital Sisters Services, Inc.; Insured: FSA) | Aaa/NR | 3,000,000 | 3,025,770 | |||||
TOTAL INVESTMENTS — 98.36% (Cost $ 484,004,905) | $ | 503,374,209 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.64% | 8,413,305 | |||||||
NET ASSETS — 100.00% | $ | 511,787,514 | ||||||
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. See notes to financial statements. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
AMT | Alternative Minimum Tax | |
CIFG | CIFG Assurance North America Inc. | |
COP | Certificates of Participation | |
EDA | Economic Development Authority | |
ETM | Escrowed to Maturity | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FHA | Insured by Federal Housing Administration | |
FNMA | Collateralized by Federal National Mortgage Association | |
FSA | Insured by Financial Security Assurance Co. | |
GNMA | Insured by Government National Mortgage Co. | |
GO | General Obligation | |
HFA | Health Facilities Authority | |
IDRB | Industrial Development Revenue Bond | |
MBIA | Insured by Municipal Bond Investors Assurance | |
PCR | Pollution Control Revenue Bond | |
PSF | Guaranteed by Permanent School Fund | |
RADIAN | Insured by Radian Asset Assurance | |
SFMR | Single Family Mortgage Revenue Bond | |
SONYMA | State of New York Mortgage Authority | |
XLCA | Insured by XL Capital Assurance |
SUMMARY OF SECURITY CREDIT RATINGS†
Ratings are a blend of Moody’s and Standard & Poor’s, using the higher rating. Some bonds are rated by only one service.
Certified Annual Report | 29 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Intermediate Municipal Fund
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 (one of the Portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
30 | Certified Annual Report |
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including
(a) sales charges (loads) on purchase payments, for Class A shares,
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(c) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06-9/30/06 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000 | $ | 1,027.70 | $ | 5.02 | |||
Hypothetical* | $ | 1,000 | $ | 1,020.12 | $ | 5.00 | |||
Class C Shares | |||||||||
Actual | $ | 1,000 | $ | 1,026.40 | $ | 6.30 | |||
Hypothetical* | $ | 1,000 | $ | 1,018.85 | $ | 6.28 | |||
Class I Shares | |||||||||
Actual | $ | 1,000 | $ | 1,029.30 | $ | 3.40 | |||
Hypothetical* | $ | 1,000 | $ | 1,021.71 | $ | 3.39 |
†Expenses are equal to the annualized expense ratio for each class (A: 0.99%; C: 1.24%; and I: 0.67%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period.
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report | 31 |
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Intermediate Municipal Fund Class A Total Returns, versus
Merrill Lynch 7-12 Year Municipal Bond Index and Consumer Price Index
(July 31, 1991 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 7/22/91) | 1.51 | % | 3.55 | % | 4.25 | % | 5.38 | % | ||||
C Shares (Incep: 9/1/94) | 2.71 | % | 3.64 | % | 4.09 | % | 4.43 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 7/22/91) | 3.78 | % | 3.05 | % | $ | 13.30 | $ | 13.57 | ||||
C Shares (Incep: 9/1/94) | 3.53 | % | 2.85 | % | $ | 13.31 | $ | 13.31 |
Performance data reflect past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 2.00%. Class C shares assume deduction of a 0.60% contingent deferred sales charge (CDSC) for the first year only.
The Consumer Price Index (“CPI”) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
The Merrill Lynch 7-12 Year Municipal Bond Index represents 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.
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 Funds’ 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 Net Asset Value (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.
32 | Certified Annual Report |
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report | 33 |
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
34 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report | 35 |
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, 100% of dividends paid by the Fund are tax exempt dividends for Federal Income Tax purposes. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006.
For the Thornburg Florida Intermediate Municipal Fund shareholders who received in exchange on September 15, 2006, Class A shares of the Thornburg Intermediate Municipal Fund, 100% of the dividends paid by the Florida Fund for the fiscal year up to the merger date of September 15, 2006 are tax exempt dividends for Federal Income Tax purposes. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
SHAREHOLDER MEETING INFORMATION
On September 7, 2006, Thornburg Florida Intermediate Municipal Fund (the “Florida Fund”), a separate series of the Trust, held a special meeting of shareholders to approve a Plan of Reorganization under which the Fund would acquire substantially all of the assets of the Florida Fund in exchange for shares of beneficial interest issued by the Fund. The Florida Fund had 3,713,057.30 shares issued and outstanding on the record date for the special meeting, and the following votes were cast at the meeting with respect to the Plan of Reorganization:
For: | 1,912,518.511 | |
Against: | 10,013.000 | |
Abstain: | 10,996.953 |
Having been approved by the affirmative vote of a majority of the outstanding shares of the Florida Fund, the reorganization was consummated on September 15, 2006. As a result, all of the Florida Fund’s assets were transferred to the Fund, and the shareholders of the Florida Fund became shareholders of the Fund.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Intermediate Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
36 | Certified Annual Report |
OTHER INFORMATION, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time relative to different categories of mutual funds sharing certain comparable characteristics and selected by independent firms, and relative to a broad based securities index; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories, and in particular to broad based securities indices, may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully and competently pursue and achieve the Fund’s stated objectives, as reflected particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluation the Fund’s above average or better investment returns over most periods, and in particular the most recent three years, relative to two categories of mutual funds sharing characteristics comparable to the Fund and selected by independent mutual fund analyst firms, and the Fund’s relative performance against comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the
Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of intermediate municipal debt mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and compared the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the overall expenses for the Fund were slightly higher than average and median expenses for the grouping of mutual funds assembled by the mutual fund analyst firm, and that the management fee was somewhat higher than the average for the same group of funds, but that the differences were not notable in view of the other factors considered. The Trustees further noted in this regard that the management fee charged to the Fund was comparable to the median management fees for the same group of mutual funds. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Certified Annual Report | 37 |
OTHER INFORMATION, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
38 | Certified Annual Report |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 | 119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 |
Thornburg Intermediate Municipal Fund
Laddering – an All Weather Strategy
The Fund’s primary investment goal is to obtain as high a level of current income exempt from Federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital (may be subject to Alternative Minimum Tax). The secondary goal of the Fund is to reduce expected changes in its share price compared to long-term bond portfolios.
This Fund is a laddered portfolio of municipal bonds with an average maturity of ten years or less. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year; cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. We regard the strategy as a good compromise for managing different types of risk.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We aspire to accomplish this through a family of laddered bond funds that focus on quality, stability, and minimization of risk over time, and through a range of equity funds that redefine traditional measures of value and growth.
Our bond funds have always been managed using the highly disciplined approach of laddering short and intermediate bond maturities, seeking to provide both an attractive return and stability of principal. Laddering is an all-weather strategy, designed to perform in uncertain markets like the ones we have seen in the last two years. Moreover, all of the bond funds focus on buying investment-grade securities. We have found this strategy to be the best at managing both interest-rate risk and credit risk, and we believe this approach has served our shareholders well over time.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Our bond fund portfolio managers have many years of experience. We are proud of this consistency and experience and look forward to many more successful years with them at the helm.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely, |
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Garrett Thornburg |
Chairman & CEO |
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2006
Certified Annual Report
Thornburg Intermediate Municipal Fund
I Shares – September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 | Certified Annual Report |
Important Information
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
Minimum investments for Class I shares are higher than those for other classes. Returns reflect the reinvestment of dividends and capital gains. There is no up front sales charge for this class of shares.
Shares in the Fund carry risks, including possible loss of principal. As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each Fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Glossary
The Merrill Lynch 7-12 Year Municipal Bond Index – A widely-accepted unmanaged market-weighted index comprised of fixed-rate, coupon bearing bonds issued within five years of the most recent month-end with greater than $50 million principal amount having a Moody’s investment grade rating and maturities of seven to twelve years.
Duration – The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.
Weighted Average Maturity – A weighted average of all the effective maturities of the bonds in a portfolio. Effective maturity takes into consideration mortgage prepayments, puts, sinking funds, adjustable coupons, and other features of individual bonds and is thus a more accurate measure of interest-rate sensitivity. Longer-maturity funds are generally considered more interest-rate sensitive than their shorter counterparts.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Treasury Notes – a debt obligation of the US government backed by the “full faith and credit” of the government. Notes are intermediate to long term investments typically issued in maturities of two, five and ten years. Interest is paid semi-annually.
Certified Annual Report | 5 |
George Strickland
Portfolio Manager
October 15, 2006
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg Intermediate Municipal Fund. The net asset value of the Class I shares decreased by 3 cents to $13.28 during the twelve months ended September 30, 2006. If you were with us for the entire period, you received dividends of 53.6 cents per share. If you reinvested dividends, you received 54.6 cents per share.
Over the last twelve months, interest rates on bonds that mature in ten years or less have risen, while interest rates on long-term bonds have fallen. Since bond prices move in the opposite direction as yields, the longest bonds in the portfolio generally appreciated, while bonds at the short end of the Fund’s ladder generally depreciated in value. The Class I shares of your Fund produced a total return of 3.90% over the twelve month period ended September 30, 2006, compared to a 4.44% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Unlike the Fund, the index does not have exposure to short-term bonds. Since the short-term bonds in the Fund underperformed the index, the Fund’s return lagged the index.
After rising for most of the year, bond yields fell in the third quarter of 2006 because the bond market started to anticipate a slower economy, reduced inflation, and a lower Fed Funds rate. While such an outcome is certainly possible, we believe the preponderance of evidence points to continued economic growth and a Federal Reserve that must stay on high alert to avoid inflationary acceleration.
The current case for a weak economy revolves around the detrimental effects of a declining housing market. However, slackness in residential housing is being countered with strength in commercial real estate, capital spending, state and federal government spending, and exports. Some consumers are feeling pinched by higher rates on adjustable rate mortgages, but many more are enjoying higher incomes in an economy that has produced 1.8 million new jobs over the last twelve months. So consumer spending should continue growing, and may accelerate if oil and gas prices hold in their current ranges. This should drive the economy to solid, but not spectacular, growth.
No matter how you measure it, inflation has doubled over the last three years. The current levels are not terribly alarming, but they are significantly above the Federal Reserve’s comfort zone. Fed Chairman Bernanke has stated that he thinks inflation should moderate next year, but there are reasons to think that it might not. U.S. hourly earnings are rising at a 4% rate, up from 1.6% in early 2004, and import prices have been rising steadily. These and other pressures could keep inflation stubbornly in the Fed’s discomfort zone.
So, when we look at current yield curves – inverted for Treasury notes and bonds, and very flat for municipal bonds – it appears to us that the optimistic inflation scenario is already priced into the market. In order to justify today’s 4.8% 10-year Treasury note, one must assume the Federal Reserve will begin easing monetary policy fairly soon. That implies that inflation will drop back down below 2%. If all that unfolds as expected, then current levels are justified. If it does not, then interest rates should rise on intermediate and long-term bonds. Clearly, it seems that risks are somewhat skewed toward higher interest rates.
6 | Certified Annual Report |
Your Thornburg Intermediate Municipal Fund is a laddered portfolio of over 350 municipal obligations from 45 states. Today, your Fund’s weighted average maturity is 7.65 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 chart on the right describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
% of portfolio maturing | Cumulative % maturing | |
2 years = 10.0% | Year 2 = 10.0% | |
2 to 4 years = 12.6% | Year 4 = 22.6% | |
4 to 6 years = 15.9% | Year 6 = 38.5% | |
6 to 8 years = 14.2% | Year 8 = 52.7% | |
8 to 10 years = 10.3% | Year 10 = 63.0% | |
10 to 12 years = 13.5% | Year 12 = 76.5% | |
12 to 14 years = 14.3% | Year 14 = 90.8% | |
14 to 16 years = 5.4% | Year 16 = 96.2% | |
16 to 18 years = 0.8% | Year 18 = 97.0% | |
Over 18 years = 3.0% | Over 18 years = 100.0% |
Percentages can and do vary. Data as of 9/30/06.
We took advantage of rising rates to extend the duration of the Fund over the last year. We are now firmly in neutral territory and the ladder is fairly evenly distributed (just a little light in the last three years). We are planning to gradually shorten portfolio duration over time unless new opportunities open up to us over the next few months. If interest rates on long-term bonds rise, the Fund should outperform more aggressive bond strategies. If interest rates hold steady or decline, then the Fund should produce compelling risk-adjusted returns.
Overall, municipal credit quality continues to improve. Supported by a strong economy, state tax revenues were up 9.9% over year-ago levels in the second quarter. Tax revenues grew fastest in the Rocky Mountain and Southwest regions. Tax revenues grew slower in the Great Lakes and Southeast regions, but were still growing in the mid single digits. Other types of bonds, such as school district, utility, and health care bonds, are also generally showing solid credit characteristics. All the good news has, in our opinion, led market participants to take a very relaxed stance toward taking on credit risk. Yield spreads for lower investment grade and speculative grade bonds are well below long-term averages. While we are not anticipating impending doom for low quality bonds, we do believe it is prudent to keep credit quality high in the current environment. Your Fund is broadly diversified and 88% invested in bonds rated A or above by at least one of the major rating agencies.
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, |
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George Strickland |
Portfolio Manager |
Certified Annual Report | 7 |
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
ASSETS | ||||
Investments at value (cost $484,004,905) | $ | 503,374,209 | ||
Cash | 452,378 | |||
Receivable for investments sold | 2,212,720 | |||
Receivable for fund shares sold | 1,189,271 | |||
Interest receivable | 7,350,538 | |||
Prepaid expenses and other assets | 30,557 | |||
Total Assets | 514,609,673 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 1,819,151 | |||
Payable to investment advisor and other affiliates (Note 3) | 338,619 | |||
Accounts payable and accrued expenses | 78,678 | |||
Dividends payable | 585,711 | |||
Total Liabilities | 2,822,159 | |||
NET ASSETS | $ | 511,787,514 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (4,203 | ) | |
Net unrealized appreciation on investments | 19,369,192 | |||
Accumulated net realized gain (loss) | (9,690,784 | ) | ||
Net capital paid in on shares of beneficial interest | 502,113,309 | |||
$ | 511,787,514 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($366,701,515 applicable to 27,578,471 shares of beneficial interest outstanding - Note 4) | $ | 13.30 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
Maximum offering price per share | $ | 13.57 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($55,496,580 applicable to 4,168,527 shares of beneficial interest outstanding - Note 4) | $ | 13.31 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($89,589,419 applicable to 6,747,387 shares of beneficial interest outstanding - Note 4) | $ | 13.28 | ||
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
8 | Certified Annual Report |
STATEMENT OF OPERATIONS | ||
Thornburg Intermediate Municipal Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $2,475,553) | $ | 22,371,899 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 2,365,386 | |||
Administration fees (Note 3) | ||||
Class A Shares | 432,562 | |||
Class C Shares | 68,061 | |||
Class I Shares | 36,313 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 865,124 | |||
Class C Shares | 544,353 | |||
Transfer agent fees | ||||
Class A Shares | 172,798 | |||
Class C Shares | 32,131 | |||
Class I Shares | 79,071 | |||
Registration and filing fees | ||||
Class A Shares | 25,479 | |||
Class C Shares | 18,894 | |||
Class I Shares | 23,733 | |||
Custodian fees (Note 3) | 149,964 | |||
Professional fees | 44,459 | |||
Accounting fees | 37,979 | |||
Trustee fees | 11,613 | |||
Other expenses | 56,975 | |||
Total Expenses | 4,964,895 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (146,690 | ) | ||
Distribution and service fees waived (Note 3) | (217,741 | ) | ||
Fees paid indirectly (Note 3) | (19,584 | ) | ||
Net Expenses | 4,580,880 | |||
Net Investment Income | 17,791,019 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments sold | (346,753 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | 147,221 | |||
Net Realized and Unrealized Loss on Investments | (199,532 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 17,591,487 | ||
See notes to financial statements.
Certified Annual Report | 9 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Intermediate Municipal Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 17,791,019 | $ | 16,870,399 | ||||
Net realized gain (loss) on investments | (346,753 | ) | 1,423,283 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 147,221 | (6,895,981 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 17,591,487 | 11,397,701 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (12,934,370 | ) | (13,228,266 | ) | ||||
Class C Shares | (1,899,154 | ) | (1,934,404 | ) | ||||
Class I Shares | (2,957,495 | ) | (1,707,729 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 4,082,240 | (3,168,323 | ) | |||||
Class C Shares | 242,860 | (1,924,468 | ) | |||||
Class I Shares | 37,459,390 | 19,483,987 | ||||||
Net Increase in Net Assets | 41,584,958 | 8,918,498 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 470,202,556 | 461,284,058 | ||||||
End of year | $ | 511,787,514 | $ | 470,202,556 | ||||
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg New York Intermediate Municipal 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, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 primary investment objective is to obtain as high a level of current income exempt from Federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary goal is to reduce expected changes in its share price compared to long-term bond portfolios.
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 may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Investments: The Trust determines the value of investments utilizing an independent pricing service approved by the Board of 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 p.m. EST. When quotations are not readily available, securities are valued at evaluated prices 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; and indications as to value from dealers and general market conditions. In any case where a price is not available from a pricing service for an investment, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the Trustees. 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 Board of Trustees. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable (if any) and tax exempt income of the Fund to the shareholders. Therefore, no provision for Federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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 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
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
capital shares 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, 2006, these fees were payable at annual rates ranging from .50 of 1% to .275 of 1% per annum of the average daily net assets of the Fund. The Trust also has 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $12,521 for Class A shares, $75,126 for Class C shares, and $59,043 for Class I shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned net commissions aggregating $2,286 from the sale of Class A shares and collected contingent deferred sales charges aggregating $6,638 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted a distribution plan pursuant to Rule 12b-1, applicable only to the Fund’s Class C shares under which the 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, 2006, are set forth in the Statement of Operations. Distribution fees in the amount of $217,741 were waived for Class C shares.
The Trust 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, 2006, fees paid indirectly were $19,584. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
12 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 3,869,378 | $ | 51,196,659 | 3,998,362 | $ | 53,659,687 | ||||||||
Shares exchanged from merger | 3,161,332 | 41,919,263 | — | — | ||||||||||
Shares issued to shareholders inreinvestment of dividends | 561,102 | 7,415,384 | 548,300 | 7,352,541 | ||||||||||
Shares repurchased | (7,234,114 | ) | (96,449,066 | ) | (4,780,870 | ) | (64,180,551 | ) | ||||||
Net Increase (Decrease) | 357,698 | $ | 4,082,240 | (234,208 | ) | $ | (3,168,323 | ) | ||||||
Class C Shares | ||||||||||||||
Shares sold | 809,528 | $ | 10,710,147 | 715,681 | $ | 9,615,224 | ||||||||
Shares issued to shareholders inreinvestment of dividends | 93,262 | 1,233,844 | 93,895 | 1,260,710 | ||||||||||
Shares repurchased | (884,612 | ) | (11,701,131 | ) | (953,413 | ) | (12,800,402 | ) | ||||||
Net Increase (Decrease) | 18,178 | $ | 242,860 | (143,837 | ) | $ | (1,924,468 | ) | ||||||
Class I Shares | ||||||||||||||
Shares sold | 3,700,160 | $ | 48,854,476 | 2,292,723 | $ | 30,718,233 | ||||||||
Shares issued to shareholders inreinvestment of dividends | 135,815 | 1,791,684 | 64,408 | 862,041 | ||||||||||
Shares repurchased | (998,806 | ) | (13,186,770 | ) | (903,624 | ) | (12,096,287 | ) | ||||||
Net Increase (Decrease) | 2,837,169 | $ | 37,459,390 | 1,453,507 | $ | 19,483,987 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $130,997,959 and $87,851,810, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 484,003,095 | ||
Gross unrealized appreciation on a tax basis | $ | 19,809,426 | ||
Gross unrealized depreciation on a tax basis | (438,312 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 19,371,114 | ||
At September 30, 2006, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2006, the Fund had tax basis capital losses, which may be carried over to offset future capital gains. Such losses include losses from the merger of the Thornburg Florida Intermediate Municipal Fund. Utilization of these losses may be subject to limitations from the IRS regulations. To the extent such carry forwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryovers expire as follows:
2007 | $ | 223,208 | |
2008 | 2,389,396 | ||
2009 | 2,374,508 | ||
2011 | 11,597 | ||
2012 | 4,297,982 | ||
2013 | 39,577 | ||
$ | 9,336,268 | ||
Certified Annual Report | 13 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
At September 30, 2006, the Fund had deferred capital losses occurring subsequent to October 31, 2005 of $356,327. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
In order to account for book/tax differences, the Fund increased accumulated net realized investment loss by $544,434, increased over-distributed net investment income by $1,397, and increased net capital paid in on shares of beneficial interest by $545,831. Reclassifications result primarily from merger activity and market discount.
All dividends paid by the Fund for the year ended September 30, 2006 and September 30, 2005 represent tax exempt interest dividends, which are excludable by shareholders from gross income for Federal income tax purposes.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – MERGER
On September 15, 2006, the Fund pursuant to a plan of reorganization approved by the board of trustees and the shareholders, acquired all of the assets and assumed all of the liabilities of the Thornburg Florida Intermediate Municipal Fund (“Florida Fund”). The acquisition was accomplished by an exchange of 3,161,332.075 Class A shares for the shares of Class A then outstanding (net assets value of $12.1777 per share) of Florida Fund. Based on the opinion of Fund counsel, the reorganization qualified as a tax-free reorganization for federal income tax purposes with no gain or loss recognized by the funds or their shareholders. Florida Fund net assets including unrealized appreciation of $880,086, were combined with the Fund for total net assets after the acquisition of $512,720,030.
14 | Certified Annual Report |
Thornburg Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.31 | $ | 13.46 | $ | 13.54 | $ | 13.65 | $ | 13.26 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.54 | 0.53 | 0.56 | 0.57 | 0.61 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | 0.39 | |||||||||||
Total from investment operations | 0.51 | 0.38 | 0.48 | 0.46 | 1.00 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.54 | ) | (0.53 | ) | (0.56 | ) | (0.57 | ) | (0.61 | ) | ||||||||||
Change in net asset value | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | 0.39 | |||||||||||
NET ASSET VALUE, end of year | $ | 13.28 | $ | 13.31 | $ | 13.46 | $ | 13.54 | $ | 13.65 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 3.90 | % | 2.90 | % | 3.61 | % | 3.49 | % | 7.75 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.07 | % | 3.98 | % | 4.12 | % | 4.23 | % | 4.57 | % | ||||||||||
Expenses, after expense reductions | 0.67 | % | 0.67 | % | 0.67 | % | 0.62 | % | 0.58 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.67 | % | 0.67 | % | 0.67 | % | 0.62 | % | 0.58 | % | ||||||||||
Expenses, before expense reductions | 0.75 | % | 0.77 | % | 0.75 | % | 0.80 | % | 0.79 | % | ||||||||||
Portfolio turnover rate | 18.95 | % | 20.06 | % | 11.81 | % | 15.13 | % | 16.36 | % | ||||||||||
Net assets at end of year (000) | $ | 89,589 | $ | 52,037 | $ | 33,079 | $ | 19,333 | $ | 18,330 |
Certified Annual Report | 15 |
SCHEDULE OF INVESTMENTS | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
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
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
ALABAMA — 0.90% | ||||||||
Alabama Docks Revenue, 6.00% due 10/1/2008 (Insured: MBIA) | Aaa/AAA | $ | 800,000 | $ | 837,776 | |||
Birmingham Carraway Health Care Facilities Financing Authority Revenue, 6.25% due 8/15/2009 (Carraway Methodist Hospitals Project; Insured: Connie Lee) | NR/AAA | 2,000,000 | 2,066,560 | |||||
Lauderdale County & Florence Health Group Series A, 5.75% due 7/1/2013 (Insured: MBIA) | Aaa/AAA | 1,600,000 | 1,692,624 | |||||
ALASKA — 0.63% | ||||||||
Alaska Municipal Bond Bank Series A, 5.00% due 10/1/2017 (Insured: FGIC) | Aaa/AAA | 2,470,000 | 2,658,585 | |||||
Anchorage School Refunding, 6.00% due 10/1/2012 (Insured: FGIC) | Aaa/AAA | 500,000 | 549,445 | |||||
ARIZONA — 1.88% | ||||||||
Mohave County Industrial Development Authority Series A, 5.00% due 4/1/2013 (Mohave Prison Project; Insured: XLCA) | NR/AAA | 4,200,000 | 4,491,816 | |||||
Phoenix Street & Highway User Revenue, 6.50% due 7/1/2009 (ETM) | Aa3/AAA | 1,000,000 | 1,045,900 | |||||
Pima County Industrial Development Authority Series C, 6.70% due 7/1/2021 (Arizona Charter Schools Project) | Baa3/NR | 2,715,000 | 2,890,226 | |||||
Tucson GO Series D, 9.75% due 7/1/2012 (ETM) | NR/AA | 400,000 | 524,184 | |||||
Tucson GO Series D, 9.75% due 7/1/2013 (ETM) | NR/AA | 500,000 | 676,875 | |||||
ARKANSAS — 0.49% | ||||||||
Jefferson County Hospital Revenue Refunding & Improvement, 5.75% due 6/1/2012 (Regional Medical Center Project) | NR/A | 1,135,000 | 1,220,920 | |||||
Jefferson County Hospital Revenue Refunding & Improvement, 5.75% due 6/1/2013 (Regional Medical Center Project) | NR/A | 1,200,000 | 1,288,716 | |||||
CALIFORNIA — 3.26% | ||||||||
California Department of Water Resources Series A, 5.75% due 5/1/2017 pre-refunded 5/1/2012 | Aaa/A- | 3,000,000 | 3,367,320 | |||||
California HFA Revenue Series 1985-B, 9.875% due 2/1/2017 | Aa2/AA- | 675,000 | 692,570 | |||||
California Statewide Community Development Authority COP, 5.50% due 10/1/2007 (Unihealth America Project) (ETM) | Aaa/AAA | 4,500,000 | 4,591,755 | |||||
East Palo Alto Public Financing Series A, 5.00% due 10/1/2017 | ||||||||
(University Circle Gateway 101 Project; Insured: Radian) | Aa3/AA | 770,000 | 825,579 | |||||
El Camino Hospital District Revenue Series A, 6.25% due 8/15/2017 (ETM) | Aaa/AAA | 1,000,000 | 1,153,410 | |||||
Escondido Joint Powers Financing Authority Lease Revenue, 0% due 9/1/2007 (Center for the Arts Project; Insured: AMBAC) | Aaa/AAA | 1,740,000 | 1,677,290 | |||||
Golden West Schools Financing Authority, 0% due 8/1/2018 (Insured: MBIA) | Aaa/AAA | 2,140,000 | 1,177,706 | |||||
Redwood City California Redevelopment Project Area 2a, 0% due 7/15/2023 (Insured: AMBAC) | Aaa/AAA | 2,060,000 | 982,064 | |||||
San Diego County Water Authority Revenue & Refunding Series 1993-A, 5.98% due 4/25/2007 (Insured: FGIC) | Aaa/AAA | 500,000 | 512,050 | |||||
San Jose California Unified School District COP, 5.00% due 6/1/2021 (Insured: FGIC) | Aaa/AAA | 1,580,000 | 1,705,405 | |||||
COLORADO — 5.56% | ||||||||
Adams County Communication Center COP Series A, 5.75% due 12/1/2016 | Baa1/NR | 1,265,000 | 1,336,814 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 2/1/2014 (Insured: FHA 242; MBIA) | NR/AAA | 1,455,000 | 1,567,763 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 8/1/2014 (Insured: FHA 242; MBIA) | NR/AAA | 1,000,000 | 1,082,050 | |||||
Arvada Industrial Development Revenue, 5.60% due 12/1/2012 (Wanco Inc. Project; LOC: US Bank, N.A.) | NR/NR | 450,000 | 454,986 | |||||
Central Platte Valley Metropolitan District, 5.15% due 12/1/2013 pre-refunded 12/1/2009 | NR/AAA | 1,000,000 | 1,056,810 | |||||
Central Platte Valley Metropolitan District Refunding Series A, 5.00% due 12/1/2031 put 12/1/2009 (LOC: US Bank) | NR/AA | 4,000,000 | 4,112,080 |
16 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Colorado Educational & Cultural Facilities Refunding, 5.25% due 8/15/2019 (Charter School Project; Insured: XLCA) | Aaa/AAA | $ | 1,475,000 | $ | 1,599,918 | |||
Colorado Educational & Cultural Facilities Refunding, 6.00% due 4/1/2021 (Cherry Creek Charter School Project) | Baa2/NR | 500,000 | 519,540 | |||||
Colorado Student Obligation Bond Student Loan Senior Subordinated Series B, 6.20% due 12/1/2008 | A2/A | 1,570,000 | 1,575,228 | |||||
Denver City & County COP Series B Roslyn Fire Station, 5.00% due 12/1/2011 | Aa2/AA | 2,465,000 | 2,613,639 | |||||
Denver Convention Center Hotel Authority Refunding Series, 5.125% due 12/1/2017 (Insured: XLCA) | Aaa/AAA | 4,215,000 | 4,624,403 | |||||
El Paso County GO School District 11, 7.10% due 12/1/2013 (State Aid Withholding) | Aa3/AA- | 500,000 | 607,250 | |||||
Murphy Creek Metro District 3 Refunding & Improvement, 6.00% due 12/1/2026 | NR/NR | 2,000,000 | 2,121,360 | |||||
Northwest Parkway Public Highway Authority Senior Convertible C, 0% due 6/15/2014 (Insured: FSA) | Aaa/AAA | 1,005,000 | 869,325 | |||||
Plaza Metropolitan District 1 Colorado Public Improvement Fee/Tax Increment, 7.70% due 12/1/2017 | NR/NR | 2,500,000 | 2,768,975 | |||||
Southlands Metropolitan District Number 1 GO, 7.00% due 12/1/2024 | NR/NR | 1,370,000 | 1,513,151 | |||||
Thornton County SFMR Series 1992-A, 8.05% due 8/1/2009 | A3/NR | 5,000 | 5,016 | |||||
DELAWARE — 0.31% | ||||||||
Delaware State Health Facilities Authority Revenue Series A, 5.25% due 5/1/2016 (Nanticoke Memorial Hospital Project; Insured: Radian) | NR/AA | 1,500,000 | 1,588,635 | |||||
DISTRICT OF COLUMBIA — 1.96% | ||||||||
District of Columbia COP, 5.25% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | 2,000,000 | 2,180,940 | |||||
District of Columbia COP, 5.00% due 1/1/2020 (Insured: FGIC) | Aaa/AAA | 2,500,000 | 2,673,675 | |||||
District of Columbia COP, 5.00% due 1/1/2023 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,061,550 | |||||
District of Columbia Hospital Revenue, 5.375% due 8/15/2015 (ETM) | Aaa/AAA | 600,000 | 620,142 | |||||
District of Columbia Refunding Series B, 6.00% due 6/1/2015 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,474,420 | |||||
FLORIDA — 11.95% | ||||||||
Broward County HFA Multi Family Housing Revenue, 5.40% due 10/1/2011 (Pembroke Park Apts Project; Guaranty: Florida Housing Finance Corp.) (AMT) | NR/NR | 635,000 | 650,081 | |||||
Broward County Resource Recovery Revenue Refunding, 5.00% due 12/1/2007 (Wheelabrator South Project) | A3/AA | 1,775,000 | 1,798,750 | |||||
Broward County Resource Recovery Revenue Refunding, 5.375% due 12/1/2009 (Wheelabrator South Project) | A3/AA | 1,240,000 | 1,291,262 | |||||
Broward County Resource Recovery Revenue Refunding Series A, 5.50% due 12/1/2008 (Wheelabrator South Project) | A3/AA | 500,000 | 517,850 | |||||
Broward County School Board Series A, 5.00% due 7/1/2020 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,077,540 | |||||
Capital Trust Agency Multi Family Housing Revenue Series A, 5.15% due 11/1/2030 put 11/1/2010 (Shadow Run Project; Collateralized: FNMA) | Aaa/NR | 1,000,000 | 1,035,010 | |||||
Collier County HFA Multi Family Revenue A-1, 4.90% due 2/15/2032 put 2/15/2012 (Goodlette Arms Project; Collateralized: FNMA) | Aaa/NR | 800,000 | 829,984 | |||||
Cooper City Utility Systems Refunding Series A, 0% due 10/1/2013 (Insured: AMBAC) | Aaa/AAA | 3,000,000 | 1,854,030 | |||||
Crossings at Fleming Island Community Development Refunding Series A, 5.60% due 5/1/2012 (Insured: MBIA) | Aaa/AAA | 310,000 | 333,523 | |||||
Dade County School District GO, 4.75% due 7/15/2010 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,010,850 | |||||
Deltona Utility Systems Revenue, 5.25% due 10/1/2015 (Insured: MBIA) | Aaa/AAA | 2,185,000 | 2,386,697 | |||||
Enterprise Community Development District Assessment Bonds, 6.00% due 5/1/2010 (Insured: MBIA) | Aaa/AAA | 1,135,000 | 1,137,157 | |||||
Escambia County HFA Revenue, 5.95% due 7/1/2020 (Florida Health Care Facility Loan Project; Insured: AMBAC) | Aaa/NR | 560,000 | 585,082 | |||||
Escambia County HFA Revenue Series C, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB+ | 1,000,000 | 1,026,420 | |||||
Escambia County Pollution Control, 6.40% due 9/1/2030 (Champion International Corp. Project) (AMT) | Baa3/NR | 1,500,000 | 1,531,320 | |||||
Flagler County School Board COP Series A, 5.00% due 8/1/2020 (Insured: FSA) | Aaa/AAA | 2,560,000 | 2,735,130 | |||||
Florida Board of Education Capital Outlay, 9.125% due 6/1/2014 | Aa1/AAA | 905,000 | 1,110,173 | |||||
Florida Board of Education GO Capital Outlay Refunding Public Education Series D, 5.75% due 6/1/2018 | Aa1/AAA | 1,460,000 | 1,571,953 | |||||
Florida Housing Finance Agency, 3.90% due 12/1/2007 (Multi Family Guaranteed Mortgage; LOC:Wachovia Bank) | NR/NR | 1,000,000 | 1,001,440 |
Certified Annual Report | 17 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Florida Housing Finance Corp. Revenue Homeowner Mortgage Series 1, 4.80% due 1/1/2016 | Aa2/AA | $ | 360,000 | $ | 370,436 | |||
Florida Housing Finance Corp. Revenue Housing D 1, 5.10% due 10/1/2011 (Augustine Club Apartments Project; Insured: MBIA) | Aaa/NR | 200,000 | 204,032 | |||||
Florida Housing Finance Corp. Revenue Housing D 1, 5.40% due 4/1/2014 (Augustine Club Apartments Project; Insured: MBIA) | Aaa/NR | 415,000 | 428,533 | |||||
Florida State Board of Education Series C, 6.00% due 5/1/2007 (ETM) | NR/NR | 300,000 | 300,501 | |||||
Florida State Board of Education Series D, 6.20% due 5/1/2007 (Insured: MBIA) (ETM) | Aaa/AAA | 220,000 | 220,405 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2018 (South Florida Evaluation Treatment) | NR/AA+ | 2,090,000 | 2,240,689 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2019 (South Florida Evaluation Treatment) | NR/AA+ | 2,255,000 | 2,408,633 | |||||
Florida State Department of Environmental Protection Revenue Series A, 5.00% due 7/1/2017 (Florida Forever Project; Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,076,740 | |||||
Grand Haven Community Development District Florida Special Assessment Series A, 6.90% due 5/1/2019 | NR/NR | 275,000 | 275,440 | |||||
Gulf Breeze Revenue, 4.70% due 12/1/2015 put 12/1/2010 (Insured: FGIC) | Aaa/AAA | 375,000 | 385,189 | |||||
Highlands County Health Facilities Authority Refunding Series A, 5.00% due 11/15/2019 (Adventist Health Hospital Project) | A2/A+ | 1,100,000 | 1,158,421 | |||||
Highlands County Health Facilities Refunding Series A, 5.00% due 11/15/2019 put 11/15/15 (Adventist Health Hospital Project) | A2/A+ | 1,000,000 | 1,053,110 | |||||
Hillsborough County Assessment Capacity, 5.00% due 3/1/2017 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,079,300 | |||||
Hillsborough County Aviation Authority Revenue Tampa International Airport Series A, 5.25% due 10/1/2009 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,044,860 | |||||
Hillsborough County Industrial Development Authority, 5.10% due 10/1/2013 (Tampa Electric Co. Project) | Baa2/BBB- | 1,000,000 | 1,034,880 | |||||
Jacksonville HFA Hospital Revenue, 5.75% due 8/15/2014 pre-refunded 8/15/2011 | Aa2/NR | 1,000,000 | 1,067,540 | |||||
Jacksonville Water & Sewer District COP, 5.00% due 10/1/2020 pre-refunded 10/1/2008 | Aaa/AAA | 1,000,000 | 1,021,080 | |||||
Lee County COP, 4.90% due 10/1/2006 (Master Lease Project; Insured: AMBAC) | Aaa/AAA | 500,000 | 500,035 | |||||
Manatee County Florida Revenue Refunding, 5.00% due 10/1/2016 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,081,950 | |||||
Miami Dade County Special Housing Revenue Refunding, 5.80% due 10/1/2012 (HUD Section 8) | Baa3/NR | 795,000 | 797,790 | |||||
Miami Refunding, 5.375% due 9/1/2015 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,089,990 | |||||
North Miami HFA Revenue, 6.00% due 8/15/2024 (Catholic Health Services Obligation Group Project; LOC: Suntrust Bank) | AA2/NR | 300,000 | 306,468 | |||||
Northern Palm Beach County Water Control & Improvement Unit Development 5A, 6.00% due 8/1/2010 | NR/NR | 440,000 | 455,470 | |||||
Orange County HFA Revenue Refunding, 5.125% due 6/1/2014 (Mayflower Retirement Project; Insured: Radian) | NR/AA | 1,000,000 | 1,038,730 | |||||
Orange County HFA Revenue Refunding, 6.375% due 11/15/2020 pre-refunded 11/15/10 (Adventist Health Systems Project) | A2/NR | 1,000,000 | 1,111,090 | |||||
Orange County HFA Revenue Unrefunded Balance 2006 Series A, 6.25% due 10/1/2016 (Insured: MBIA) | Aaa/AAA | 280,000 | 327,796 | |||||
Orange County HFA Revenue Unrefunded Balance Series A, 6.25% due 10/1/2013 (Orlando Regional Hospital Project; Insured: MBIA) | Aaa/AAA | 440,000 | 504,882 | |||||
Orange County School Board COP Series A, 6.00% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 1,580,000 | 1,646,518 | |||||
Orange County School Board COP Series A, 5.50% due 8/1/2017 pre-refunded 8/01/2012 (Insured: MBIA) | Aaa/AAA | 735,000 | 807,912 | |||||
Orlando & Orange County Expressway Revenue, 8.25% due 7/1/2014 (Insured: FGIC) | Aaa/AAA | 500,000 | 648,670 | |||||
Palm Beach County IDRB Series 1996, 6.10% due 12/1/2007 pre-refunded 12/1/2006 (Lourdes-Noreen McKeen-Geriatric Care Project; LOC: Allied Irish Bank) | NR/NR | 515,000 | 527,375 | |||||
Palm Beach County IDRB Series 1996, 6.20% due 12/1/2008 pre-refunded 12/1/2006 (Lourdes-Noreen McKeen-Geriatric Care Project; LOC: Allied Irish Bank) | NR/NR | 270,000 | 276,534 | |||||
Port Everglades Authority Revenue Refunding Series A, 5.00% due 9/1/2016 (Insured: FSA) | Aaa/AAA | 5,635,000 | 5,653,483 | |||||
St. John’s County Industrial Development Authority Series A, 5.50% due 8/1/20140 (Presbyterian Retirement Project) | NR/NR | 1,000,000 | 1,066,740 |
18 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Tampa Revenue, 5.50% due 11/15/2013 (Catholic Health Systems Project; Insured: MBIA) | Aaa/AAA | $ | 1,050,000 | $ | 1,160,838 | |||
Turtle Run Community Development District Water Management Special Assessment, 5.00% due 5/1/2011 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,033,190 | |||||
University of Central Florida COP Convocation Corp. Series A, 5.00% due 10/1/2019 (Insured: FGIC) | Aaa/AAA | 1,135,000 | 1,219,410 | |||||
USF Financing Corp. COP Master Lease Program Series A, 5.00% due 7/1/2018 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,070,520 | |||||
GEORGIA — 0.05% | ||||||||
Georgia Municipal Electric Authority Power Revenue Unrefunded Balance 2005 Series Y, | ||||||||
10.00% due 1/1/2010 | A1/A+ | 230,000 | 273,723 | |||||
HAWAII — 0.45% | ||||||||
Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,310,980 | |||||
IDAHO — 0.40% | ||||||||
Boise City IDRB Corp., 5.00% due 5/15/2020 (Western Trailer Co. Project; LOC:Wells Fargo) | Aaa/NR | 2,000,000 | 2,022,040 | |||||
ILLINOIS — 8.24% | ||||||||
Champaign County Community School District GO Series C, 0% due 1/1/2011 pre-refunded 1/1/2010 | Aaa/AAA | 800,000 | 671,520 | |||||
Chicago Housing Authority, 5.00% due 7/1/2008 (ETM) | Aa3/NR | 3,020,000 | 3,093,205 | |||||
Chicago Midway Airport Revenue Refunding Second Lien Series A, 5.00% due 1/1/2019 (Insured: AMBAC) | Aaa/AAA | 1,210,000 | 1,269,121 | |||||
Chicago Tax Increment Allocation, 5.30% due 1/1/2014 (Lincoln Belmont Project; Insured: ACA) | NR/A | 2,285,000 | 2,361,205 | |||||
Chicago Wastewater Transmission Revenue Refunding Second Lien, 5.50% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | 650,000 | 714,005 | |||||
Cook County Capital Improvement GO, 5.50% due 11/15/2008 (Insured: FGIC) | Aaa/AAA | 500,000 | 506,125 | |||||
Cook County School District GO Series D, 0% due 12/1/2022 | NR/NR | 2,000,000 | 940,520 | |||||
Du Page County School District GO, 0% due 2/1/2010 (Insured: FGIC) | Aaa/NR | 655,000 | 577,638 | |||||
Freeport Illinois GO, 5.375% due 1/1/2018 (Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,627,740 | |||||
Illinois Development Finance Authority Revenue, 6.00% due 11/15/2012 (Adventist Health Group; Insured: MBIA) | Aaa/AAA | 2,860,000 | 3,126,066 | |||||
Illinois Development Finance Authority Revenue Refunding Community Rehab Providers A, 5.90% due 7/1/2009 | NR/BBB | 820,000 | 834,514 | |||||
Illinois Educational Facilities Authority, 4.75% due 11/1/2036 put 11/1/2016 (Field Museum Project) | A2/A | 1,160,000 | 1,194,661 | |||||
Illinois Educational Facilities Authority Series B, 5.50% due 5/15/2018 (Midwestern Univ. Revenue; Insured: ACA) | NR/A | 1,500,000 | 1,538,580 | |||||
Illinois HFA, 5.50% due 10/1/2009 (Decatur Memorial Hospital Project) | A2/A | 1,055,000 | 1,099,489 | |||||
Illinois HFA, 6.00% due 7/1/2011 (Loyola Univ. Health Systems; Insured: MBIA) | Aaa/AAA | 770,000 | 848,294 | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola Univ. Health Systems; Insured: MBIA) (ETM) | Aaa/AAA | 230,000 | 257,816 | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola Univ. Health Systems; Insured: MBIA) | Aaa/AAA | 1,080,000 | 1,201,727 | |||||
Illinois HFA, 6.25% due 11/15/2019 pre-refunded 11/15/2009 (OSF Healthcare Project) | A2/A | 1,250,000 | 1,358,275 | |||||
Illinois HFA, 5.70% due 2/20/2021 (Midwest Care Center Project; Collateralized: GNMA) | Aaa/NR | 990,000 | 1,061,389 | |||||
Illinois HFA Series A, 5.75% due 8/15/2013 pre-refunded 8/15/2009 (Children’s Memorial Hospital Project; Insured: AMBAC) | Aaa/AAA | 1,900,000 | 2,028,326 | |||||
Illinois University Revenues, 5.25% due 1/15/2018 (UIC South Campus Development Project; Insured: FGIC) | Aaa/AAA | 1,205,000 | 1,306,545 | |||||
Marion Refunding, 5.00% due 9/15/2012 (Insured: FGIC) | Aaa/AAA | 755,000 | 806,672 | |||||
Melrose Park Tax Increment Series B, 6.50% due 12/15/2015 (Insured: FSA) | Aaa/AAA | 1,015,000 | 1,126,061 | |||||
Sangamon County Property Tax Lease Receipts, 7.45% due 11/15/2006 | Aa3/NR | 295,000 | 296,389 | |||||
Sangamon County School District Series A, 5.875% due 8/15/2018 (Hay Edwards Project; Insured: ACA) | NR/A | 2,400,000 | 2,587,896 | |||||
Sherman Revenue Refunding Mortgage, 6.10% due 10/1/2014 (Villa Vianney Health Care; Collateralized: GNMA) | NR/AAA | 1,170,000 | 1,246,120 | |||||
Sherman Revenue Refunding Mortgage, 6.20% due 10/1/2019 (Villa Vianney Health Care; Collateralized: GNMA) | NR/AAA | 1,600,000 | 1,704,864 | |||||
Southern Illinois University Revenues, 0% due 4/1/2014 (Insured: MBIA) | Aaa/AAA | 1,425,000 | 1,064,817 |
Certified Annual Report | 19 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
University of Illinois Revenue, 0% due 4/1/2014 (Insured: MBIA) | Aaa/AAA | $ | 1,590,000 | $ | 1,189,861 | |||
West Chicago IDRB, 6.90% due 9/1/2024 (Leggett & Platt Inc. Project) | NR/A+ | 1,000,000 | 1,002,430 | |||||
Will & Kendall Counties Community Series B, 5.125% due 1/1/2014 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,054,770 | |||||
Will County Community School District 365-U, 0% due 11/1/2011 (Insured: FSA) | Aaa/AAA | 3,000,000 | 2,473,290 | |||||
INDIANA — 7.17% | ||||||||
Allen County Economic Development, 5.80% due 12/30/2012 (Indiana Institute of Technology Project) | NR/NR | 895,000 | 930,299 | |||||
Allen County Economic Development, 5.75% due 12/30/2015 (Indiana Institute of Technology Project) | NR/NR | 1,355,000 | 1,453,508 | |||||
Allen County Jail Building Corp. GO, 5.00% due 4/1/2018 (Insured: XLCA) | Aaa/NR | 2,495,000 | 2,682,100 | |||||
Allen County Redevelopment District Tax Series A, 5.00% due 11/15/2018 | A3/NR | 1,560,000 | 1,644,880 | |||||
Allen County War Memorial Series A, 5.25% due 11/1/2013 (Insured: AMBAC) | Aaa/NR | 1,000,000 | 1,076,040 | |||||
Boone County Hospital Association, 5.625% due 1/15/2015 pre-refunded 7/15/2011 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,087,830 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2016 (Performing Arts Center) | Aa2/AA | 1,730,000 | 1,172,162 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2021 (Performing Arts Center) | Aa2/AA | 2,000,000 | 1,040,420 | |||||
Dyer Redevelopment Authority, 6.40% due 7/15/2015 pre-refunded 7/15/2009 | NR/A- | 1,515,000 | 1,640,169 | |||||
Dyer Redevelopment Authority, 6.50% due 7/15/2016 pre-refunded 7/15/2009 | NR/A- | 1,910,000 | 2,072,636 | |||||
East Chicago Elementary School Building First Mortgage Series A, 6.25% due 7/5/2008 (State Aid Withholding) | NR/A | 350,000 | 359,139 | |||||
Fishers Redevelopment Authority, 5.25% due 2/1/2018 (Insured: XLCA) | Aaa/AAA | 1,500,000 | 1,650,855 | |||||
Fishers Redevelopment Authority, 5.25% due 2/1/2020 (Insured: XLCA) | Aaa/AAA | 1,025,000 | 1,124,815 | |||||
Gary Indiana Building Corp. - Lake County First Mortgage Series 1994-B, 8.25% due 7/1/2010 (Sears Building Project) | NR/NR | 715,000 | 721,721 | |||||
Goshen Chandler School Building, 0% due 1/15/2011 (Insured: MBIA) | Aaa/AAA | 1,020,000 | 866,653 | |||||
Huntington Economic Development Revenue, 6.40% due 5/1/2015 (United Methodist Memorial Project) | NR/NR | 1,000,000 | 1,040,890 | |||||
Indiana Bond Bank Special Program Hendrick’s Redevelopment Series B, 6.20% due 2/1/2023 pre-refunded 2/1/2007 | NR/NR | 1,500,000 | 1,542,945 | |||||
Indiana Health Facility Hospital Revenue, 5.75% due 9/1/2015 (ETM) | A3/AAA | 575,000 | 581,578 | |||||
Indiana Health Facility Hospital Revenue, 5.40% due 2/15/2016 pre-refunded 8/15/2010 (Clarian Health Obligation Group Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,077,810 | |||||
Indiana State Educational Facilities Authority Revenue, 5.65% due 10/1/2015 (University of Indianapolis Project) | NR/A- | 1,065,000 | 1,125,268 | |||||
Indiana State Educational Facilities Authority Revenue, 5.70% due 10/1/2016 (University of Indianapolis Project) | NR/A- | 1,025,000 | 1,083,015 | |||||
Indianapolis Local Public Improvement Bond Bank, 0% due 7/1/2009 (ETM) | Aa2/NR | 740,000 | 669,256 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2017 (146th Street Extension Project) | NR/A+ | 1,000,000 | 1,057,270 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2020 (146th Street Extension Project) | NR/A+ | 1,000,000 | 1,048,250 | |||||
Portage Township Multi School Building Corp., 5.50% due 7/15/2015 (Insured: FGIC) | Aaa/AAA | 500,000 | 547,890 | |||||
Rockport PCR Series A, 4.90% due 6/1/2025 put 6/1/2007 (Indiana Michigan Power Co. Project) | Baa2/BBB | 3,165,000 | 3,193,960 | |||||
Vanderburgh County Redevelopment District Tax Increment, 5.00% due 2/1/2020 | NR/A- | 1,000,000 | 1,039,340 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2012 pre-refunded 1/15/2012 | NR/AA | 1,200,000 | 1,319,976 | |||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2017 (Insured: FGIC) | Aaa/AAA | 1,685,000 | 1,859,650 | |||||
IOWA — 1.58% | ||||||||
Coralville COP Series D, 5.25% due 6/1/2022 | A2/NR | 1,250,000 | 1,320,775 | |||||
Iowa Finance Authority Health Care Facilities, 6.00% due 7/1/2013 (Genesis Medical Center Project) | A1/NR | 1,000,000 | 1,064,010 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.00% due 7/1/2012 (Trinity Regional Hospital Project; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,085,600 | |||||
Iowa Finance Authority Hospital Facility Revenue, 6.75% due 2/15/2016 pre-refunded 2/15/2010 (Iowa Health Services Project) | Aa3/NR | 1,000,000 | 1,107,820 | |||||
Iowa Finance Authority Revenue, 6.00% due 12/1/2018 (Catholic Health Initiatives Project) | Aa2/AA | 2,000,000 | 2,164,640 | |||||
Iowa Finance Authority Revenue Refunding Trinity Health Series B, 5.75% due 12/1/2015 | Aa3/AA- | 1,250,000 | 1,340,825 |
20 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
KANSAS — 1.11% | ||||||||
Wichita Hospital Revenue Refunding Improvement Series XI, 6.75% due 11/15/2019 (Christi Health System Project) | NR/A+ | $ | 4,200,000 | $ | 4,552,632 | |||
Wyandotte County Kansas School District 204 Refunding & Improvement Series A, 5.00% due 9/1/2014 (Insured: FGIC) | Aaa/NR | 1,030,000 | 1,120,228 | |||||
KENTUCKY — 1.00% | ||||||||
Kentucky Economic Development Finance Authority Series C, 5.85% due 10/1/2015 (Norton Healthcare Project; Insured: MBIA) | Aaa/AAA | 4,000,000 | 4,503,320 | |||||
Wilmore Housing Facilities Revenue, 5.55% due 7/1/2013 (LOC: Allied Irish Bank plc) | NR/NR | 595,000 | 617,164 | |||||
LOUISIANA — 1.81% | ||||||||
Jefferson Sales Tax District Revenue Series B, 5.50% due 12/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,595,000 | 1,656,344 | |||||
Louisiana Local Govt. Environment Series A, 4.10% due 9/1/2007 (Bellemont Apartment Housing Project) | Baa1/NR | 175,000 | 175,404 | |||||
Morehouse Parish Pollution Revenue Refunding Series A, 5.25% due 11/15/2013 (International Paper Co. Project) | Baa3/BBB | 3,000,000 | 3,188,340 | |||||
New Orleans Sewer Service Revenue, 5.50% due 6/1/2017 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,056,600 | |||||
Orleans Levee District Trust Receipts Series A, 5.95% due 11/1/2007 (Insured: FSA) | Aaa/AAA | 690,000 | 706,615 | |||||
St.Tammany Parish Sales Tax District No. 03 Sales & Use Tax Revenue, 5.00% due 6/1/2019 (Insured: CIFG) | NR/AAA | 1,300,000 | 1,408,511 | |||||
St.Tammany Parish Sales Tax District No. 03 Sales & Use Tax Revenue, 5.00% due 6/1/2020 (Insured: CIFG) | NR/AAA | 1,000,000 | 1,082,130 | |||||
MAINE — 0.21% | ||||||||
Jay Solid Waste Disposal Revenue Series B, 6.20% due 9/1/2019 (International Paper Co. Project) | Baa3/BBB | 1,000,000 | 1,059,170 | |||||
MASSACHUSETTS — 0.32% | ||||||||
Massachusetts HFA Housing Development Series A, 5.05% due 6/1/2010 (Insured: MBIA) (AMT) | Aaa/AAA | 515,000 | 515,587 | |||||
Massachusetts HFA Refunding Series A, 6.125% due 12/1/2011 pre-refunded 12/1/2006 (Insured: MBIA) (AMT) | Aaa/AAA | 150,000 | 153,512 | |||||
Massachusetts HFA Unrefunded Balance Series A, 6.125% due 12/1/2011 (Insured: MBIA) (AMT) | Aaa/AAA | 950,000 | 968,050 | |||||
MICHIGAN — 1.33% | ||||||||
Kalamazoo Hospital Finance Authority Revenue Series 1994-A, 6.25% due 6/1/2014 (Borgess Medical Center Project) (ETM) | Aaa/AAA | 650,000 | 756,490 | |||||
Kent Hospital Finance Authority Michigan Hospital, 7.25% due 1/15/2013 (Spectrum Health Project: Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,121,060 | |||||
Michigan Public Educational Facilities Authority Revenue, 5.50% due 9/1/2022 (Black River School Project) | NR/NR | 1,110,000 | 1,122,643 | |||||
Michigan State Building Authority Revenue Refunding Facilities Program Series I, 5.25% due 10/15/2017 (Insured: FSA) | Aaa/AAA | 2,450,000 | 2,661,410 | |||||
Southfield Economic Development Corp. Refunding Revenue, 7.25% due 12/1/2010 (N.W. 12 Limited Partnership) | NR/NR | 1,165,000 | 1,165,128 | |||||
MINNESOTA — 1.04% | ||||||||
Minneapolis St. Paul Health, 6.00% due 12/1/2018 (Healthpartners Obligation Group Project) | Baa1/BBB+ | 1,000,000 | 1,102,600 | |||||
Minneapolis St. Paul Housing & Redevelopment Authority, 4.75% due 11/15/2018 (Healthspan Project; Insured: AMBAC) | Aaa/AAA | 3,500,000 | 3,502,065 | |||||
Southern Minnesota Municipal Power Agency Supply Series A, 5.75% due 1/1/2018 pre-refunded to various dates (Insured: MBIA) | Aaa/AAA | 700,000 | 738,913 |
Certified Annual Report | 21 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
MISSISSIPPI — 0.70% | ||||||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply Series A, 5.00% due 3/1/2018 (Insured: XLCA) | Aaa/AAA | $ | 920,000 | $ | 991,456 | |||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply Series A, 5.00% due 3/1/2020 (Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,070,530 | |||||
Mississippi Higher Educational Authority Series C, 7.50% due 9/1/2009 | A2/NR | 1,500,000 | 1,503,600 | |||||
MISSOURI — 0.83% | ||||||||
Missouri Development Finance Board Healthcare Series A, 5.40% due 11/1/2018 (Lutheran Home for the aged Project; LOC: Commerce Bank) | Aa3/NR | 2,025,000 | 2,091,542 | |||||
Springfield Public Utilities Revenue Series A, 5.00% due 12/1/2013 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,166,700 | |||||
NEBRASKA — 0.18% | ||||||||
Madison County Hospital Authority 1 Hospital Revenue, 5.50% due 7/1/2014 (Faith Regional Health Services Project; Insured: Radian) | NR/AA | 845,000 | 906,144 | |||||
NEVADA — 0.86% | ||||||||
Las Vegas Special Improvement District Refunding Senior Local Improvement Series A, 5.375% due 6/1/2013 (Insured: FSA) | Aaa/AAA | 1,155,000 | 1,204,677 | |||||
Reno Sparks Indian Colony, 5.00% due 6/1/2021 (LOC: U.S. Bank NA) | NR/NR | 1,000,000 | 1,050,010 | |||||
Washoe County Reno Sparks Series B, 0% due 7/1/2011 (Insured: FSA) | Aaa/AAA | 2,600,000 | 2,169,778 | |||||
NEW HAMPSHIRE — 1.26% | ||||||||
Manchester Housing & Redevelopment Authority Series B, 0% due 1/1/2016 (Insured: Radian) | NR/A | 4,990,000 | 3,282,721 | |||||
New Hampshire Pollution Refunding Central Maine Power Co., 5.375% due 5/1/2014 | A3/BBB+ | 3,000,000 | 3,167,640 | |||||
NEW JERSEY — 0.31% | ||||||||
New Jersey EDA Refunding Revenue, 7.50% due 12/1/2019 (Spectrum for Living Development Project; LOC: PNC Bank) | NR/NR | 220,000 | 220,651 | |||||
New Jersey EDA School Facilities Construction Series O, 5.00% due 3/1/2019 | A1/AA- | 1,280,000 | 1,364,877 | |||||
NEW MEXICO — 1.94% | ||||||||
Albuquerque Airport Revenue Refunding, 5.00% due 7/1/2008 (Insured: AMBAC) (AMT) | Aaa/AAA | 2,380,000 | 2,434,431 | |||||
Farmington PCR, 3.85% due 9/1/2024 put 10/2/2006 (LOC: Barclays Bank) (daily demand notes) | P1/A-1+ | 3,340,000 | 3,340,000 | |||||
Farmington PCR Series A, 3.86% due 5/1/2024 put 10/2/2006 (LOC: Barclays Bank) (daily demand notes) | P1/A-1+ | 500,000 | 500,000 | |||||
Sandoval County Incentive Payment Revenue Refunding, 5.00% due 6/1/2020 | NR/A+ | 2,000,000 | 2,127,140 | |||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation Project) | NR/NR | 1,515,000 | 1,526,362 | |||||
NEW YORK — 2.09% | ||||||||
Long Island Power Authority Electric Systems Revenue General Series B, 5.00% due 12/1/2006 | A3/A- | 2,000,000 | 2,004,480 | |||||
Nassau Health Care Corp., 6.00% due 8/1/2011 pre-refunded 8/1/2009 | Aaa/AAA | 1,000,000 | 1,085,360 | |||||
New York City Industrial Development Agency Series A, 5.00% due 6/1/2010 (Lycee Francais De New York Project; Insured: ACA) | NR/A | 1,175,000 | 1,218,028 | |||||
New York City Transitional Finance Authority Facilities Refunding Series A 1, 5.00% due 11/1/2020 | Aa1/AAA | 3,000,000 | 3,236,100 | |||||
New York City Trust Cultural Resources, 5.75% due 7/1/2015 (Museum of American Folk Art Project; Insured: ACA) | NR/A | 875,000 | 932,549 | |||||
New York Housing Finance Service Series A, 6.375% due 9/15/2015 pre-refunded 9/15/2007 | A1/AAA | 220,000 | 225,854 | |||||
New York State Dorm Authority Bishop Henry B Hucles Nursing, 5.00% due 7/1/2017 (Insured: SONYMA) | Aa1/NR | 850,000 | 919,836 | |||||
New York State Dormitory Authority School Districts Financing Program Series E, 9.00% due 10/1/2007 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,052,350 |
22 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
NORTH CAROLINA — 0.67% | ||||||||
North Carolina Eastern Municipal Power Refunding Series A, 5.70% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | $ | 1,200,000 | $ | 1,229,784 | |||
North Carolina Housing Finance Agency Single Family Revenue Bond Series BB, 6.50% due 9/1/2026 | Aa2/AA | 1,070,000 | 1,093,979 | |||||
North Carolina Medical Care, 5.00% due 9/1/2013 (Rowan Regional Medical Center Project; Insured: FSA & FHA 242) | Aaa/AAA | 1,000,000 | 1,078,280 | |||||
NORTH DAKOTA — 0.15% | ||||||||
North Dakota State Housing Finance Agency Home Mortgage Series A, 5.70% due 7/1/2030 | Aa1/NR | 745,000 | 747,041 | |||||
OHIO — 2.78% | ||||||||
Butler County Transportation Improvement, 6.00% due 4/1/2010 pre-refunded 4/1/2008 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,055,180 | |||||
Central Ohio Solid Waste Authority Series B, 5.00% due 12/1/2008 | Aa2/AA+ | 2,530,000 | 2,605,394 | |||||
Cleveland Cuyahoga County Development Bond Fund A, 6.25% due 5/15/2016 (LOC: FifthThird Bank) | NR/NR | 1,330,000 | 1,420,706 | |||||
Cuyahoga County Hospital Revenue Refunding Series A, 4.75% due 2/15/2008 (Metrohealth Systems Project; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,015,280 | |||||
Franklin County Health Care Revenue Series 1995-A, 6.00% due 11/1/2010 (Heinzerling Foundation Project; LOC: Banc One) | Aa2/NR | 945,000 | 965,384 | |||||
Hamilton Wastewater Systems Revenue Refunding, 5.25% due 10/1/2017 (Insured: FSA) | Aaa/AAA | 1,500,000 | 1,656,735 | |||||
Marysville School District COP, 5.25% due 12/1/2017 pre-refunded 6/1/2015 (School Facilities Project; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,207,780 | |||||
North Ridgeville Economic Development, 0% due 2/1/2015 (Collateralized: FHA) | NR/AAA | 380,000 | 191,793 | |||||
Ohio State Higher Educational Facilities Revenue, 5.05% due 7/1/2037 put 7/1/2016 (Kenyon College Project) | A2/A+ | 2,200,000 | 2,342,824 | |||||
Reynoldsburg Health Care Facilities Revenue Bonds Series 1997, 5.70% due 10/20/2012 (Collateralized: GNMA) | Aaa/NR | 760,000 | 789,777 | |||||
OKLAHOMA — 3.66% | ||||||||
Alva Hospital Authority Hospital Revenue Sales Tax, 5.25% due 6/1/2025 (Insured: Radian) | Aa3/AA | 1,505,000 | 1,613,119 | |||||
Comanche County Oklahoma Hospital Authority Revenue, 5.25% due 7/1/2019 (Insured: Radian) | Aa3/AA | 3,345,000 | 3,606,245 | |||||
Oklahoma City Municipal Improvement Authority, 0% due 7/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,020,000 | 957,902 | |||||
Oklahoma City Municipal Water & Sewer Series C, 0% due 7/1/2011 (Insured: AMBAC) | Aaa/AAA | 1,125,000 | 941,040 | |||||
Oklahoma City Municipal Water & Sewer Series C, 0% due 7/1/2013 (Insured: AMBAC) | Aaa/AAA | 1,485,000 | 1,149,271 | |||||
Oklahoma Development Finance Authority Hospital Association Pooled Hospital A, 5.40% due 6/1/2013 (Insured: AMBAC) | Aaa/AAA | 825,000 | 883,814 | |||||
Oklahoma Industrial Authority Revenue Refunding, 6.00% due 8/15/2010 (Integris Baptist Project; Insured: AMBAC) | Aaa/AAA | 750,000 | 811,688 | |||||
Tulsa County Independent School District Combined Purpose, 4.50% due 8/1/2007 | Aa3/AA- | 2,800,000 | 2,822,540 | |||||
Tulsa Industrial Authority Hospital Revenue Refunding, 5.375% due 2/15/2017 (St. John Medical Center Project) | Aa3/AA | 4,000,000 | 4,044,240 | |||||
Tulsa Industrial Authority Revenue Refunding University of Tulsa Series A, 6.00% due 10/1/2016 (Insured: MBIA) | Aaa/AAA | 1,250,000 | 1,424,438 | |||||
Tulsa Public Facilities Authority Solid Waste Revenue, 5.65% due 11/1/2006 (Ogden Martin Project; Insured: AMBAC) | Aaa/AAA | 500,000 | 500,840 | |||||
OREGON — 0.33% | ||||||||
Forest Grove Campus Improvement & Refunding Pacific University, 6.00% due 5/1/2015 pre-refunded 5/1/2010 (Insured: Radian) | NR/AA | 800,000 | 865,472 | |||||
Oregon State Housing & Community Services Department Single Family Mortgage Program Series B, 5.35% due 7/1/2018 (AMT) | Aa2/NR | 810,000 | 816,739 | |||||
PENNSYLVANIA — 1.97% | ||||||||
Allegheny County Hospital Development Health Series B, 6.50% due 5/1/2012 (South Hills Health Systems Project) | Baa1/NR | 1,400,000 | 1,510,670 |
Certified Annual Report | 23 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Carbon County Industrial Development Authority Refunding, 6.65% due 5/1/2010 (Panther Creek Partners Project) | NR/BBB- | $ | 1,370,000 | $ | 1,445,186 | |||
Chartiers Valley Industrial & Community Development Authority, 5.75% due 12/1/2022 (Asbury Health Center Project) | NR/NR | 900,000 | 928,593 | |||||
Chester County School Authority, 5.00% due 4/1/2020 (Intermediate Unit Project; Insured: AMBAC) | NR/AAA | 2,310,000 | 2,477,821 | |||||
Lancaster County Series B, 0% due 5/1/2014 (Insured: FGIC) | Aaa/NR | 795,000 | 587,982 | |||||
Lancaster County Series B, 0% due 5/1/2015 (Insured: FGIC) | Aaa/NR | 800,000 | 558,160 | |||||
Lehigh County General Purpose Shepard Rehab. Hospital, 6.00% due 11/15/2007 (Insured: AMBAC) | Aaa/AAA | 785,000 | 805,952 | |||||
Pennsylvania Higher Education University Series 14, 0% due 7/1/2020 (Insured: AMBAC) | Aaa/AAA | 2,032,839 | 738,347 | |||||
Pennsylvania State Higher Educational Facility Allegheny Delaware Valley Obligation A, 5.60% due 11/15/2009 (Insured: MBIA) | Aaa/AAA | 500,000 | 526,885 | |||||
Pennsylvania State Higher Educational Facility Allegheny Delaware Valley Obligation A, 5.60% due 11/15/2010 (Insured: MBIA) | Aaa/AAA | 480,000 | 513,322 | |||||
RHODE ISLAND — 0.70% | ||||||||
Rhode Island Health & Education Building Hospital Financing, 5.25% due 7/1/2015 (Memorial Hospital Project; LOC: Fleet Bank) | NR/AA | 1,325,000 | 1,401,214 | |||||
Rhode Island Health & Education Building Refunding, 6.00% due 8/1/2014 (Credit Support: FHA) | NR/AA | 1,000,000 | 1,058,210 | |||||
Rhode Island Health & Education Building Refunding Higher Education State University, 5.00% due 3/15/2014 (Insured: Radian) | NR/AA | 1,065,000 | 1,128,037 | |||||
SOUTH CAROLINA — 2.80% | ||||||||
Berkeley County School District Installment Lease, 5.00% due 12/1/2019 | A3/A- | 2,000,000 | 2,110,880 | |||||
Charleston Educational Excellence Financing Corp., 5.25% due 12/1/2020 (Charleston County School District Project) | A1/AA- | 1,855,000 | 2,012,174 | |||||
Darlington County Industrial Development, 6.00% due 4/1/2026 (Sonoco Products Co. Project) (AMT) | Baa1/BBB+ | 3,255,000 | 3,315,803 | |||||
Lexington One School Facilities Corp. School District No 1, 5.00% due 12/1/2019 | A1/NR | 1,000,000 | 1,069,120 | |||||
Lexington One School Facilities Corp. School District No 1, 5.25% due 12/1/2021 | A1/NR | 1,700,000 | 1,821,244 | |||||
Scago Educational Facilities Corp. School District No 5 Spartanburg County, 5.00% due 4/1/2019 (Insured: FSA) | Aaa/AAA | 2,740,000 | 2,938,623 | |||||
Scago Educational Facilities Corp. School District No 5 Spartanburg County, 5.00% due 4/1/2021 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,065,650 | |||||
TENNESSEE — 0.40% | ||||||||
Knox County Health, 4.90% due 6/1/2031 put 6/1/2011 (Collateralized: FNMA) | NR/AAA | 2,000,000 | 2,026,680 | |||||
TEXAS — 15.23% | ||||||||
Bexar County Health Facilities Development Corp., 6.125% due 7/1/2022 (Army Retirement Residence Project) | NR/BBB- | 1,250,000 | 1,347,387 | |||||
Bexar County Housing Finance Corp., 5.50% due 1/1/2016 (Insured: MBIA) | Aaa/NR | 600,000 | 636,492 | |||||
Bexar County Housing Finance Corp., 5.70% due 1/1/2021 (Insured: MBIA) | Aaa/NR | 1,035,000 | 1,098,342 | |||||
Bexar County Housing Finance Corp., 6.50% due 12/1/2021 | Baa1/NR | 2,000,000 | 2,124,320 | |||||
Bexar County Housing Finance Corp. Multi Family Housing, 5.40% due 8/1/2012 (Dymaxion & Marrach Park Apts. Project; Insured: MBIA) | Aaa/NR | 885,000 | 915,656 | |||||
Bexar County Housing Finance Corp. Multi Family Housing, 5.95% due 8/1/2020 (Dymaxion & Marrach Park Apts. Project; Insured: MBIA) | Aaa/NR | 1,270,000 | 1,356,982 | |||||
Bexar County Housing Finance Corp. Series A, 5.875% due 4/1/2014 (Honey Creek Apartments Project; Insured: MBIA) | Aaa/NR | 975,000 | 1,023,643 | |||||
Bexar County Housing Finance Corp. Series A, 6.125% due 4/1/2020 (Honey Creek Apartments Project; Insured: MBIA) | Aaa/NR | 800,000 | 839,520 | |||||
Birdville Independent School District Refunding, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 2,800,000 | 2,282,028 | |||||
Carroll Independent School District Refunding, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 1,130,000 | 933,527 | |||||
Cedar Park Texas Refunding & Improvement, 5.00% due 2/15/2016 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,070,420 |
24 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Central Texas Regional Mobility Authority Revenue Anticipation Notes, 5.00% due 1/1/2008 | Aa3/AA | $ | 1,100,000 | $ | 1,118,546 | |||
Coppell Independent School District Refunding, 0% due 8/15/2013 (Guaranty: PSF) | NR/AAA | 5,000,000 | 3,560,050 | |||||
Donna Independent School District Refunding, 5.00% due 2/15/2015 (Guaranty: PSF) | Aaa/AAA | 980,000 | 1,062,790 | |||||
Duncanville Independent School District Series B, 0% due 2/15/2016 pre-refunded 2/15/2012 (Insured: PSF) | Aaa/AAA | 2,985,000 | 1,938,817 | |||||
Duncanville Independent School District Series B, 0% due 2/15/2016 (Insured: PSF) | Aaa/AAA | 15,000 | 9,534 | |||||
El Paso Independent School District Refunding, 0% due 8/15/2010 (Guaranty: PSF) | Aaa/AAA | 3,750,000 | 3,150,037 | |||||
El Paso Independent School District Refunding, 0% due 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 2,500,000 | 1,985,250 | |||||
Ennis Texas Independent School District, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/NR | 835,000 | 646,524 | |||||
Ennis Texas Independent School District, 0% due 8/15/2013 (Guaranty: PSF) | Aaa/NR | 845,000 | 614,028 | |||||
Ennis Texas Independent School District, 0% due 8/15/2014 (Guaranty: PSF) | Aaa/NR | 855,000 | 582,512 | |||||
Ennis Texas Independent School District Refunding, 0% due 8/15/2012 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,625,000 | 1,276,031 | |||||
Ennis Texas Independent School District Refunding, 0% due 8/15/2013 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,645,000 | 1,212,299 | |||||
Ennis Texas Independent School District Refunding, 0% due 8/15/2014 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,670,000 | 1,153,886 | |||||
Fort Worth Water & Sewer Revenue, 5.25% due 2/15/2009 | Aa2/AA | 1,000,000 | 1,038,160 | |||||
Gulf Coast Center Revenue, 6.75% due 9/1/2020 (Mental Health Retardation Center Project) | NR/BBB | 1,320,000 | 1,423,990 | |||||
Hays Consolidated Independent School District, 0% due 8/15/2013 pre-refunded 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 6,245,000 | 4,676,381 | |||||
Irving Water Works & Sewer Revenue, 5.375% due 8/15/2014 | Aa2/AA | 350,000 | 370,983 | |||||
Irving Water Works & Sewer Revenue, 5.375% due 8/15/2014 pre-refunded 8/15/2010 | Aa2/AA | 1,150,000 | 1,224,290 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2018 (Insured: AMBAC) | Aaa/AAA | 2,040,000 | 2,181,862 | |||||
Lewisville Combination Contract Revenue Refunding Special Assessment District 2, 4.75% due 9/1/2012 (Insured: ACA) | NR/A | 2,055,000 | 2,110,732 | |||||
Mesquite Independent School District Refunding, 0% due 8/15/2012 (Guaranty: PSF) | NR/AAA | 1,420,000 | 1,102,715 | |||||
Midlothian Texas Independent School District, 0% due 2/15/2012 (ETM) | Aaa/NR | 500,000 | 408,370 | |||||
Midlothian Texas Independent School District, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/NR | 500,000 | 407,505 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2012 (Insured: Radian) | Aa3/AA | 735,000 | 793,734 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2013 (Insured: Radian) | Aa3/AA | 500,000 | 538,940 | |||||
Pharr San Juan Alamo Independent Building, 5.75% due 2/1/2013 (Guaranty: PSF) | Aaa/AAA | 1,000,000 | 1,063,450 | |||||
Port Arthur Refunding, 5.00% due 2/15/2019 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,061,700 | |||||
Richardson Refunding & Improvement, 5.00% due 2/15/2019 (Insured: MBIA) | Aaa/AAA | 2,145,000 | 2,305,875 | |||||
Sabine River Authority Texas Pollution Refunding Series A, 5.80% due 7/1/2022 (TXU Energy Co. Project) | Baa2/BBB- | 1,000,000 | 1,075,370 | |||||
Sam Rayburn Municipal Power Agency Refunding, 6.00% due 10/1/2016 | Baa2/BBB | 3,000,000 | 3,184,290 | |||||
Sam Rayburn Municipal Power Agency Refunding Series A, 6.00% due 10/1/2021 | Baa2/BBB | 675,000 | 715,743 | |||||
San Antonio Hotel Occupancy Revenue Refunding Series B, 5.00% due 8/15/2034 put 8/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,350,000 | 1,381,252 | |||||
Stafford Economic Development, 6.00% due 9/1/2017 (Insured: FGIC) | Aaa/AAA | 1,775,000 | 2,060,367 | |||||
Tarrant County Health Facilities, 6.625% due 11/15/2020 pre-refunded 11/15/2010 (Adventist/Sunbelt Project) | A2/NR | 3,500,000 | 3,921,330 | |||||
Texarkana Health Facilities Hospital Refunding Series A, 5.75% due 10/1/2009 (Wadley Regional Medical Center Project; Insured: MBIA) | Aaa/AAA | 500,000 | 528,610 | |||||
Texarkana Health Facilities Hospital Refunding Series A, 5.75% due 10/1/2011 (Insured: MBIA) | Aaa/AAA | 2,500,000 | 2,725,075 | |||||
Travis County GO, 5.25% due 3/1/2021 | Aaa/AAA | 1,000,000 | 1,106,550 | |||||
Travis County Health Facilities Development Corp., 6.25% due 11/15/2014 pre-refunded 11/15/2009 (Ascension Health Project; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,257,070 | |||||
Travis County Health Facilities Development Corp. Revenue, 5.75% due 11/15/2010 (Ascension Health Project; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,136,140 | |||||
Upper Trinity Regional Water District Regional Treated Water Supply Systems Series A, 7.125% due 8/1/2008 (Insured: FGIC) | Aaa/AAA | 600,000 | 627,402 |
Certified Annual Report | 25 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Waco Health Facilities Development Corp. Series A, 6.00% due 11/15/2015 pre-refunded 11/15/2009 (Ascension Health Project) | Aa2/AA | $ | 870,000 | $ | 939,522 | |||
Waco Health Facilities Development Corp. Series A, 6.00% due 11/15/2016 pre-refunded 11/15/2009 (Ascension Health Project) | Aa2/AA | 1,050,000 | 1,133,906 | |||||
West Harris County Municipal Utility Refunding, 6.00% due 3/1/2017 (Insured: Radian) | NR/AA | 500,000 | 513,535 | |||||
UTAH — 0.85% | ||||||||
Salt Lake City Municipal Building Series B, 5.30% due 10/15/2012 pre-refunded 10/15/2009 (Insured: AMBAC) | Aaa/AAA | 1,085,000 | 1,149,384 | |||||
Utah County Municipal Building Authority, 5.50% due 11/1/2016 pre-refunded 11/1/2011 (Insured: AMBAC) | Aaa/NR | 1,000,000 | 1,087,110 | |||||
Utah HFA, 6.05% due 7/1/2016 (Credit Support: FHA) | NR/AAA | 405,000 | 414,671 | |||||
Utah HFA SFMR D-2 Class I, 5.85% due 7/1/2015 (Credit Support: FHA) | Aa2/AA | 60,000 | 60,986 | |||||
Utah State Board of Regents Auxiliary Refunding Series A, 5.25% due 5/1/2013 | NR/AA | 595,000 | 639,078 | |||||
Utah Water Finance Agency Revenue Pooled Loan Financing Program Series A, 5.00% due 10/1/2012 (Insured: AMBAC) | Aaa/NR | 940,000 | 1,005,528 | |||||
VIRGINIA — 2.24% | ||||||||
Alexandria Industrial Development Authority Institute for Defense Analysis, 5.90% due 10/1/2020 pre-refunded 10/1/2010 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,193,300 | |||||
Alexandria Industrial Development Authority Institute for Defense Analysis Series A, 6.00% due 10/1/2014 pre-refunded 10/1/2010 (Insured: AMBAC) | Aaa/AAA | 1,500,000 | 1,650,300 | |||||
Alexandria Industrial Development Authority Institute for Defense Analysis Series A, 6.00% due 10/1/2015 pre-refunded 10/1/2010 (Insured: AMBAC) | Aaa/AAA | 1,590,000 | 1,749,318 | |||||
Fauquier County Industrial Development Authority, 5.50% due 10/1/2016 (Insured: Radian) | NR/AA | 1,000,000 | 1,096,550 | |||||
Hanover County Industrial Development Authority Medical Facilities Revenue, 6.00% due 10/1/2021 (ETM) | Aaa/AAA | 795,000 | 796,248 | |||||
Norton Industrial Development Authority Hospital Refunding, 6.00% due 12/1/2014 (Norton Community Hospital Project; Insured: ACA) | NR/A | 1,635,000 | 1,786,254 | |||||
Spotsylvania County IDRB, 6.00% due 9/1/2019 put 9/1/2008 (Walter Grinders Project; LOC: Deutsche Bank) (AMT) | NR/NR | 2,210,000 | 2,209,956 | |||||
WASHINGTON — 5.23% | ||||||||
Benton County Public Utility District Refunding Series A, 5.625% due 11/1/2012 (Insured: FSA) | Aaa/AAA | 1,500,000 | 1,638,585 | |||||
Energy Northwest Washington Series A, 5.60% due 7/1/2015 pre-refunded 1/1/2007 (Wind Project) | A3/A- | 1,000,000 | 1,034,800 | |||||
Energy Northwest Washington Series B, 5.10% due 7/1/2009 pre-refunded 1/1/2007 (Wind Project) | A3/A- | 745,000 | 769,987 | |||||
Port Longview Industrial Development Corp. Solid Waste Disposal Revenue, 6.875% due 10/1/2008 | NR/BBB | 1,500,000 | 1,577,730 | |||||
Tacoma Electric Systems Revenue Series A, 5.50% due 1/1/2012 (Insured: FSA) | Aaa/AAA | 750,000 | 811,545 | |||||
Vancouver Downtown Redevelopment Senior Series A, 5.50% due 1/1/2018 (Conference Center Project; Insured: ACA) | NR/A | 3,500,000 | 3,712,135 | |||||
Washington Health Care Facilities, 5.50% due 12/1/2010 (Providence Services Project; Insured: MBIA) | Aaa/AAA | 2,690,000 | 2,866,625 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2014 (Catholic Health Services Project; Insured: MBIA) | Aaa/AAA | 1,735,000 | 1,879,057 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2015 (Catholic Health Services Project; Insured: MBIA) | Aaa/AAA | 1,945,000 | 2,098,169 | |||||
Washington Health Care Facilities, 5.60% due 1/1/2018 (Sea Mar Community Center Project; LOC: U.S. Bancorp) | Aa1/NR | 1,025,000 | 1,089,964 | |||||
Washington Health Care Facilities Refunding, 6.375% due 10/1/2010 (Insured: FGIC) | Aaa/AAA | 1,500,000 | 1,653,090 | |||||
Washington Nonprofit Housing, 5.60% due 7/1/2011 (Kline Galland Center Project; Insured: Radian) | NR/AA | 500,000 | 527,405 | |||||
Washington Nonprofit Housing, 5.875% due 7/1/2019 (Kline Galland Center Project; Insured: Radian) | NR/AA | 1,000,000 | 1,057,490 | |||||
Washington Public Power Supply Refunding Series B, 0% due 7/1/2010 | Aaa/AA- | 960,000 | 832,829 | |||||
Washington Public Power Supply Refunding Series B, 0% due 7/1/2011 | Aaa/AA- | 1,000,000 | 834,140 | |||||
Washington State Health Care Facilities Series A, 4.50% due 12/1/2008 (Kadlec Medical Center Project; Insured: Assured Guaranty) | Aa1/AAA | 1,200,000 | 1,221,060 |
26 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Washington State Public Power Supply Systems Revenue Refunding Series A, 5.00% due 7/1/2011 (Insured: FSA) | Aaa/AAA | $ | 3,030,000 | $ | 3,155,109 | |||
WEST VIRGINIA — 0.32% | ||||||||
West Virginia State Hospital Finance Authority Series A, 5.00% due 6/1/2020 (United Hospital Center Project; Insured: AMBAC) | Aaa/AAA | 1,530,000 | 1,642,746 | |||||
WISCONSIN — 1.21% | ||||||||
Wisconsin Health & Educational Facilities, 5.75% due 8/15/2020 (Eagle River Memorial Hospital Inc. Project; Insured: Radian) | NR/AA | 1,000,000 | 1,067,359 | |||||
Wisconsin Housing & Economic Development Series A, 5.875% due 11/1/2016 (Insured: AMBAC) | Aaa/AAA | 1,980,000 | 2,075,614 | |||||
Wisconsin State Health & Educational Facilities, 4.50% due 12/1/2023 put 12/1/2007 (Hospital Sisters Services, Inc.; Insured: FSA) | Aaa/NR | 3,000,000 | 3,025,770 | |||||
TOTAL INVESTMENTS — 98.36% (Cost $ 484,004,905) | $ | 503,374,209 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.64% | 8,413,305 | |||||||
NET ASSETS — 100.00% | $ | 511,787,514 | ||||||
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. See notes to financial statements. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
AMT | Alternative Minimum Tax | |
CIFG | CIFG Assurance North America Inc. | |
COP | Certificates of Participation | |
EDA | Economic Development Authority | |
ETM | Escrowed to Maturity | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FHA | Insured by Federal Housing Administration | |
FNMA | Collateralized by Federal National Mortgage Association | |
FSA | Insured by Financial Security Assurance Co. | |
GNMA | Insured by Government National Mortgage Co. | |
GO | General Obligation | |
HFA | Health Facilities Authority | |
IDRB | Industrial Development Revenue Bond | |
MBIA | Insured by Municipal Bond Investors Assurance | |
PCR | Pollution Control Revenue Bond | |
PSF | Guaranteed by Permanent School Fund | |
RADIAN | Insured by Radian Asset Assurance | |
SFMR | Single Family Mortgage Revenue Bond | |
SONYMA | State of New York Mortgage Authority | |
XLCA | Insured by XL Capital Assurance |
SUMMARY OF SECURITY CREDIT RATINGS†
Ratings are a blend of Moody’s and Standard & Poor’s, using the higher rating. Some bonds are rated by only one service.
Certified Annual Report | 27 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
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 (one of the Portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP |
New York, New York |
November 16, 2006 |
28 | Certified Annual Report |
EXPENSE EXAMPLE | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur ongoing costs, including management and administration fees and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06-9/30/06 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000 | $ | 1,029.30 | $ | 3.40 | |||
Hypothetical* | $ | 1,000 | $ | 1,021.71 | $ | 3.39 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.67%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Certified Annual Report | 29 |
INDEX COMPARISON | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Intermediate Municipal Fund Class I Total Returns, versus
Merrill Lynch 7-12 Year Municipal Bond Index and Consumer Price Index
(July 31, 1996 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
I Shares (Incep: 7/5/96) | 3.90 | % | 4.32 | % | 4.76 | % | 4.96 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 7/5/96) | 4.09 | % | 3.43 | % | $ | 13.28 | $ | 13.28 |
Performance data reflect past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains. There is no up front sales charge for this class of shares.
The Consumer Price Index (“CPI”) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
The Merrill Lynch 7-12 Year Municipal Bond Index represents 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.
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 Funds’ 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 Net Asset Value (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.
30 | Certified Annual Report |
TRUSTEES AND OFFICERS | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP,Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report | 31 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
32 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds.Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report | 33 |
OTHER INFORMATION | ||
Thornburg Intermediate Municipal Fund | September 30, 2006(Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, 100% of dividends paid by the Fund are tax exempt dividends for Federal Income Tax purposes. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006.
For the Thornburg Florida Intermediate Municipal Fund shareholders who received in exchange on September 15, 2006, Class A shares of the Thornburg Intermediate Municipal Fund, 100% of the dividends paid by the Florida Fund for the fiscal year up to the merger date of September 15, 2006 are tax exempt dividends for Federal Income Tax purposes. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
SHAREHOLDER MEETING INFORMATION
On September 7, 2006, Thornburg Florida Intermediate Municipal Fund (the “Florida Fund”), a separate series of the Trust, held a special meeting of shareholders to approve a Plan of Reorganization under which the Fund would acquire substantially all of the assets of the Florida Fund in exchange for shares of beneficial interest issued by the Fund. The Florida Fund had 3,713,057.30 shares issued and outstanding on the record date for the special meeting, and the following votes were cast at the meeting with respect to the Plan of Reorganization:
For: | 1,912,518.511 | |
Against: | 10,013.000 | |
Abstain: | 10,996.953 |
Having been approved by the affirmative vote of a majority of the outstanding shares of the Florida Fund, the reorganization was consummated on September 15, 2006. As a result, all of the Florida Fund’s assets were transferred to the Fund, and the shareholders of the Florida Fund became shareholders of the Fund.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Intermediate Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
34 | Certified Annual Report |
OTHER INFORMATION, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time relative to different categories of mutual funds sharing certain comparable characteristics and selected by independent firms, and relative to a broad based securities index; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories, and in particular to broad based securities indices, may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully and competently pursue and achieve the Fund’s stated objectives, as reflected particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluation the Fund’s above average or better investment returns over most periods, and in particular the most recent three years, relative to two categories of mutual funds sharing characteristics comparable to the Fund and selected by independent mutual fund analyst firms, and the Fund’s relative performance against comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of intermediate municipal debt mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and compared the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the overall expenses for the Fund were slightly higher than average and median expenses for the grouping of mutual funds assembled by the mutual fund analyst firm, and that the management fee was somewhat higher than the average for the same group of funds, but that the differences were not notable in view of the other factors considered. The Trustees further noted in this regard that the management fee charged to the Fund was comparable to the median management fees for the same group of mutual funds. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Certified Annual Report | 35 |
OTHER INFORMATION, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
36 | Certified Annual Report |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report. | 37 |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
38 | This page is not part of the Annual Report. |
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This page is not part of the Annual Report. | 39 |
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses.We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
![]() | ![]() | |
119 East Marcy Street | 119 East Marcy Street | |
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |
800.847.0200 | 800.847.0200 |
Thornburg New Mexico Intermediate Municipal Fund
Laddering – an All Weather Strategy
The Fund’s investment objective is to obtain as high a level of current income exempt from Federal and New Mexico state individual income tax as is consistent, in the view of the investment advisor, with preservation of capital. The secondary goal of the Fund is to reduce expected changes in its share price compared to long-term bond portfolios.
This Fund offers New Mexico investors double tax-free yields (may be subject to Alternative Minimum Tax) in a laddered municipal bond portfolio with an average maturity of ten years or less. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year; cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. The strategy is a good compromise for managing different types of risk.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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2 | This page is not part of the Annual Report. |
Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We aspire to accomplish this through a family of laddered bond funds that focus on quality, stability, and minimization of risk over time, and through a range of equity funds that redefine traditional measures of value and growth.
Our bond funds have always been managed using the highly disciplined approach of laddering short and intermediate bond maturities, seeking to provide both an attractive return and stability of principal. Laddering is an all-weather strategy, designed to perform in uncertain markets like the ones we have seen in the last two years. Moreover, all of the bond funds focus on buying investment-grade securities. We have found this strategy to be the best at managing both interest-rate risk and credit risk, and we believe this approach has served our shareholders well over time.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Our bond fund portfolio managers have many years of experience. We are proud of this consistency and experience and look forward to many more successful years with them at the helm.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely, |
Garrett Thornburg Chairman & CEO |
This page is not part of the Annual Report. | 3 |
2006
Certified Annual Report
Thornburg New Mexico Intermediate Municipal Fund
September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 | Certified Annual Report |
Important Information
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
The maximum sales charge for Class A shares is 2.00%. There is no up front sales charge for Class D shares and no contingent deferred sales charge (CDSC).
Performance data given at net asset value (NAV) does not take into account these sales charges. If the sales charges had been included, the performance would have been lower.
Shares in the Fund carry risks, including possible loss of principal. As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Glossary
The Merrill Lynch 7-12 Year Municipal Bond Index – A widely-accepted unmanaged market-weighted index comprised of fixed-rate, coupon bearing bonds issued within five years of the most recent month-end with greater than $50 million principal amount having a Moody’s investment grade rating and maturities of seven to twelve years.
Duration – The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.
Weighted Average Maturity – A weighted average of all the effective maturities of the bonds in a portfolio. Effective maturity takes into consideration mortgage prepayments, puts, sinking funds, adjustable coupons, and other features of individual bonds and is thus a more accurate measure of interest-rate sensitivity. Longer-maturity funds are generally considered more interest-rate sensitive than their shorter counterparts.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Treasury Notes – a debt obligation of the US government backed by the “full faith and credit” of the government. Notes are intermediate to long term investments typically issued in maturities of two, five and ten years. Interest is paid semi-annually.
Certified Annual Report | 5 |
George Strickland
Portfolio Manager
October 16, 2006
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg New Mexico Intermediate Municipal Fund. The net asset value of the A shares decreased by 2 cents to $13.20 during the twelve months ended September 30, 2006. If you were with us for the entire period, you received dividends of 44.7 cents per share. If you reinvested dividends, you received 45.4 cents per share. Investors who owned Class D shares received dividends of 41.4 and 41.9 cents per share, respectively.
Over the last twelve months, interest rates on bonds that mature in ten years or less have risen, while interest rates on long-term bonds have fallen. Since bond prices move in the opposite direction as yields, the longest bonds in the portfolio generally appreciated, while bonds at the short end of the Fund’s ladder generally depreciated in value. The A shares of your Fund produced a total return of 3.31% over the twelve month period ended September 30, 2006, compared to a 4.44% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Unlike the Fund, the index does not have exposure to short-term bonds. Since the short-term bonds in the Fund underperformed the index, the Fund’s return lagged the index.
After rising for most of the year, bond yields fell in the third quarter of 2006 because the bond market started to anticipate a slower economy, reduced inflation, and a lower Fed Funds rate. While such an outcome is certainly possible, we believe the preponderance of evidence points to continued economic growth and a Federal Reserve that must stay on high alert to avoid inflationary acceleration.
The current case for a weak economy revolves around the detrimental effects of a declining housing market. However, slackness in residential housing is being countered with strength in commercial real estate, capital spending, state and federal government spending, and exports. Some consumers are feeling pinched by higher rates on adjustable rate mortgages, but many more are enjoying higher incomes in an economy that has produced 1.8 million new jobs over the last twelve months. So consumer spending should continue growing, and may accelerate if oil and gas prices hold in their current ranges. This should drive the economy to solid, but not spectacular, growth.
No matter how you measure it, inflation has doubled over the last three years. The current levels are not terribly alarming, but they are significantly above the Federal Reserve’s comfort zone. Fed Chairman Bernanke has stated that he thinks inflation should moderate next year, but there are reasons to think that it might not. U.S. hourly earnings are rising at a 4% rate, up from 1.6% in early 2004, and import prices have been rising steadily. These and other pressures could keep inflation stubbornly in the Fed’s discomfort zone.
So, when we look at current yield curves – inverted for Treasury notes and bonds, and very flat for municipal bonds – it appears to us that the optimistic inflation scenario is already priced into the market. In order to justify today’s 4.8% 10-year Treasury note, one must assume the Federal Reserve will begin easing monetary policy fairly soon. That implies that inflation will drop back down below 2%. If all that unfolds as expected, then
6 | Certified Annual Report |
current levels are justified. If it does not, then interest rates should rise on intermediate and long-term bonds. Clearly, it seems that risks are somewhat skewed toward higher interest rates.
Your Thornburg New Mexico Intermediate Municipal Fund is a laddered portfolio of over 140 municipal obligations from all over New Mexico. Today, your Fund’s weighted average maturity is 7.80 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 chart below describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
We took advantage of rising rates to extend the duration of the Fund over the last year. We are now firmly in neutral territory and the ladder is fairly evenly distributed (just a little light in the last three years). We are planning to gradually shorten portfolio duration over time unless new opportunities open up to us over the next few months. If interest rates on long-term bonds rise, the Fund should outperform more aggressive bond strategies. If interest rates hold steady or decline, then the Fund should produce compelling risk-adjusted returns.
% of portfolio maturing | Cumulative % maturing | |||||||||
2 years | = | 12.9% | Year 2 | = | 12.9% | |||||
2 to 4 years | = | 11.3% | Year 4 | = | 24.2% | |||||
4 to 6 years | = | 15.7% | Year 6 | = | 39.9% | |||||
6 to 8 years | = | 12.9% | Year 8 | = | 52.8% | |||||
8 to 10 years | = | 8.6% | Year 10 | = | 61.4% | |||||
10 to 12 years | = | 15.4% | Year 12 | = | 76.8% | |||||
12 to 14 years | = | 11.4% | Year 14 | = | 88.2% | |||||
14 to 16 years | = | 5.6% | Year 16 | = | 93.8% | |||||
16 to 18 years | = | 1.6% | Year 18 | = | 95.4% | |||||
Over 18 years | = | 4.6% | Over 18 years | = | 100.0% |
Percentages can and do vary. Data as of 9/30/06.
The New Mexico economy has benefited lately from increased federal defense spending, a booming housing market, and surging prices for oil, gas, and other commodities. 2006 fiscal year tax revenues increased 12.4% over 2005 levels. Though state spending levels have also increased rapidly, New Mexico has been able to build up healthy reserve balances that currently total approximately $700 million. If oil and gas prices fall further, the state may find it harder to balance the budget and may have to dip into reserve balances.
Other types of bonds, such as school district, utility, and health care bonds, are also generally showing solid credit characteristics. All the good news has, in our opinion, led market participants to take a very relaxed stance toward taking on credit risk. Yield spreads for lower investment grade and speculative grade bonds are well below long-term averages. While we are not anticipating impending doom for low quality bonds, we do believe it is prudent to keep credit quality high in the current environment. Your Fund is broadly diversified and 92% invested in bonds rated A or above by at least one of the major rating agencies.
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, |
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George Strickland Portfolio Manager |
Certified Annual Report | 7 |
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 |
ASSETS | ||||
Investments at value (cost $ 201,697,731) | $ | 207,463,333 | ||
Cash | 350,194 | |||
Receivable for fund shares sold | 317,944 | |||
Interest receivable | 2,775,690 | |||
Prepaid expenses and other assets | 687 | |||
Total Assets | 210,907,848 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 199,907 | |||
Payable to investment advisor and other affiliates (Note 3) | 152,595 | |||
Accounts payable and accrued expenses | 46,964 | |||
Dividends payable | 232,487 | |||
Total Liabilities | 631,953 | |||
NET ASSETS | $ | 210,275,895 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (14,662 | ) | |
Net unrealized appreciation on investments | 5,765,602 | |||
Accumulated net realized gain (loss) | (1,310,865 | ) | ||
Net capital paid in on shares of beneficial interest | 205,835,820 | |||
$ | 210,275,895 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($196,162,903 applicable to 14,862,280 shares of beneficial interest outstanding - Note 4) | $ | 13.20 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
Maximum offering price per share | $ | 13.47 | ||
Class D Shares: | ||||
Net asset value, offering and redemption price per share ($14,112,992 applicable to 1,068,714 shares of beneficial interest outstanding - Note 4) | $ | 13.21 | ||
See notes to financial statements.
8 | Certified Annual Report |
STATEMENT OF OPERATIONS | ||
Thornburg New Mexico Intermediate Municipal Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $ 1,194,192) | $ | 9,680,017 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,101,991 | |||
Administration fees (Note 3) | ||||
Class A Shares | 256,486 | |||
Class D Shares | 19,012 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 512,972 | |||
Class D Shares | 151,630 | |||
Transfer agent fees | ||||
Class A Shares | 84,229 | |||
Class D Shares | 19,100 | |||
Registration and filing fees | ||||
Class A Shares | 525 | |||
Class D Shares | 525 | |||
Custodian fees (Note 3) | 80,462 | |||
Professional fees | 27,150 | |||
Accounting fees | 17,925 | |||
Trustee fees | 5,281 | |||
Other expenses | 25,990 | |||
Total Expenses | 2,303,278 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (12,231 | ) | ||
Distribution and service fees waived (Note 3) | (75,815 | ) | ||
Fees paid indirectly (Note 3) | (8,847 | ) | ||
Net Expenses | 2,206,385 | |||
Net Investment Income | 7,473,632 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on Investments | (175,714 | ) | ||
Net change in unrealized appreciation (depreciation) of Investments | (409,024 | ) | ||
Net Realized and Unrealized Gain (Loss) on Investments | (584,738 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 6,888,894 | ||
See notes to financial statements.
Certified Annual Report | 9 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg New Mexico Intermediate Municipal Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 7,473,632 | $ | 7,336,311 | ||||
Net realized loss on investments | (175,714 | ) | (38,616 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (409,024 | ) | (3,097,649 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 6,888,894 | 4,200,046 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (6,995,117 | ) | (6,841,095 | ) | ||||
Class D Shares | (478,515 | ) | (495,216 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (15,627,535 | ) | 6,800,512 | |||||
Class D Shares | (4,424,114 | ) | 4,761,448 | |||||
Net Increase (Decrease) in Net Assets | (20,636,387 | ) | 8,425,695 | |||||
NET ASSETS: | ||||||||
Beginning of year | 230,912,282 | 222,486,587 | ||||||
End of year | $ | 210,275,895 | $ | 230,912,282 | ||||
See notes to financial statements.
10 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 |
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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term 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, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 and New Mexico state individual income tax as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The secondary goal of the Fund is to reduce expected changes in its share price compared to long-term bond portfolios.
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, 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 may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent applicable 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 Trust are as follows:
Valuation of Investments: The Trust determines the value of investments utilizing an independent pricing service approved by the Board of 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 p.m. EST. When quotations are not readily available, securities are valued at evaluated prices 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; and indications as to value from dealers and general market conditions. In any case where a price is not available from a pricing service for an investment, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the Trustees. 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 Board of Trustees. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable (if any) and tax exempt income of the Fund to the shareholders. Therefore, no provision for Federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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 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 capital shares activity of the respective class). Expenses
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 |
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, 2006, these fees were payable at annual rates ranging from .50 of 1% to .275 of 1% per annum of the average daily net assets of the Fund. The Trust 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $12,231 for Class D shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of Fund shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned net commissions aggregating $1,710 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted a distribution plan pursuant to Rule 12b-1, applicable only to the Fund’s Class 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% per annum 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, 2006, are set forth in the Statement of Operations. Distribution fees in the amount of $75,815 were waived for Class D shares.
The Trust 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, 2006, fees paid indirectly were $8,847. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
12 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 1,491,269 | $ | 19,550,483 | 2,916,830 | $ | 38,880,406 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 309,029 | 4,047,693 | 306,539 | 4,079,149 | ||||||||||
Shares repurchased | (2,999,545 | ) | (39,225,711 | ) | (2,715,515 | ) | (36,159,043 | ) | ||||||
Net Increase (Decrease) | (1,199,247 | ) | $ | (15,627,535 | ) | 507,854 | $ | 6,800,512 | ||||||
Class D Shares | ||||||||||||||
Shares sold | 227,791 | $ | 2,980,463 | 599,941 | $ | 8,004,279 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 27,090 | 355,077 | 27,198 | 362,058 | ||||||||||
Shares repurchased | (590,696 | ) | (7,759,654 | ) | (270,603 | ) | (3,604,889 | ) | ||||||
Net Increase (Decrease) | (335,815 | ) | $ | (4,424,114 | ) | 356,536 | $ | 4,761,448 | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $25,151,060 and $40,596,236, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 201,697,390 | ||
Gross unrealized appreciation on a tax basis | $ | 5,869,551 | ||
Gross unrealized depreciation on a tax basis | (103,608 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 5,765,943 | ||
At September 30, 2006, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2006, the Fund had tax basis capital losses, which may be carried over to offset future capital gains. To the extent such carry forwards are used, capital gains distributions may be reduced to the extent provided by regulations.
Such capital loss carryovers expire as follows:
2007 | $ | 33,677 | |
2008 | 595,638 | ||
2009 | 320,666 | ||
2011 | 145,437 | ||
2013 | 255 | ||
2014 | 49,136 | ||
$ | 1,144,809 | ||
During the year ended September 30, 2006, $7,178 of capital loss carryforwards from prior years expired.
In order to account for book/tax differences, the Fund decreased accumulated net realized loss by $7,283, increased over-distributed net investment income by $5,117 and decreased net paid in capital paid in on shares of beneficial interest by $2,166. Reclassifications result primarily from an expired capital loss carry forward and taxable market discount.
All dividends paid by the Fund for the years ended September 30, 2006 and September 30, 2005, represent tax exempt interest dividends, which are excludable by shareholders from gross income for Federal income tax purposes.
Certified Annual Report | 13 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 |
At September 30, 2006, the Fund had deferred capital losses occurring subsequent to October 31, 2005 of $166,397. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
14 | Certified Annual Report |
Thornburg New Mexico Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.22 | $ | 13.40 | $ | 13.46 | $ | 13.42 | $ | 13.16 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.45 | 0.43 | 0.45 | 0.48 | 0.53 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | (0.18 | ) | (0.06 | ) | 0.04 | 0.26 | ||||||||||||
Total from investment operations | 0.43 | 0.25 | 0.39 | 0.52 | 0.79 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.45 | ) | (0.43 | ) | (0.45 | ) | (0.48 | ) | (0.53 | ) | ||||||||||
Change in net asset value | (0.02 | ) | (0.18 | ) | (0.06 | ) | 0.04 | 0.26 | ||||||||||||
NET ASSET VALUE, end of year | $ | 13.20 | $ | 13.22 | $ | 13.40 | $ | 13.46 | $ | 13.42 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 3.31 | % | 1.88 | % | 3.00 | % | 3.93 | % | 6.16 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.41 | % | 3.22 | % | 3.40 | % | 3.55 | % | 4.01 | % | ||||||||||
Expenses, after expense reductions | 0.99 | % | 0.99 | % | 0.96 | % | 0.97 | % | 0.98 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.98 | % | 0.98 | % | 0.96 | % | 0.97 | % | 0.98 | % | ||||||||||
Expenses, before expense reductions | 0.99 | % | 0.99 | % | 0.96 | % | 0.97 | % | 1.00 | % | ||||||||||
Portfolio turnover rate | 11.59 | % | 16.63 | % | 14.66 | % | 16.53 | % | 21.35 | % | ||||||||||
Net assets at end of year (000) | $ | 196,163 | $ | 212,335 | $ | 208,435 | $ | 216,766 | $ | 192,749 |
(a) | Sales loads are not reflected in computing total return. |
Certified Annual Report | 15 |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class D Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.23 | $ | 13.41 | $ | 13.47 | $ | 13.43 | $ | 13.16 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.41 | 0.39 | 0.42 | 0.44 | 0.49 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | (0.18 | ) | (0.06 | ) | 0.04 | 0.27 | ||||||||||||
Total from investment operations | 0.39 | 0.21 | 0.36 | 0.48 | 0.76 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.41 | ) | (0.39 | ) | (0.42 | ) | (0.44 | ) | (0.49 | ) | ||||||||||
Change in net asset value | (0.02 | ) | (0.18 | ) | (0.06 | ) | 0.04 | 0.27 | ||||||||||||
NET ASSET VALUE, end of year | $ | 13.21 | $ | 13.23 | $ | 13.41 | $ | 13.47 | $ | 13.43 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 3.04 | % | 1.62 | % | 2.70 | % | 3.63 | % | 5.94 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.15 | % | 2.96 | % | 3.11 | % | 3.24 | % | 3.64 | % | ||||||||||
Expenses, after expense reductions | 1.24 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.24 | % | 1.24 | % | 1.24 | % | 1.25 | % | 1.25 | % | ||||||||||
Expenses, before expense reductions | 1.82 | % | 1.83 | % | 1.83 | % | 1.88 | % | 2.00 | % | ||||||||||
Portfolio turnover rate | 11.59 | % | 16.63 | % | 14.66 | % | 16.53 | % | 21.35 | % | ||||||||||
Net assets at end of year (000) | $ | 14,113 | $ | 18,577 | $ | 14,051 | $ | 14,658 | $ | 9,719 |
16 | Certified Annual Report |
SCHEDULE OF INVESTMENTS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-301, CLASS D - 885-215-624 | ||||||||
NASDAQ SYMBOLS: CLASS A - THNMX, CLASS D - THNDX | ||||||||
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Alamogordo Hospital Revenue, 5.30% due 1/1/2013 (Insured: Radian) | NR/AA | $ | 3,000,000 | $ | 3,048,210 | |||
Albuquerque Airport Revenue Senior Lien Improvement Series B, 5.00% due 7/1/2012 (Insured: MBIA) | Aaa/AAA | 1,670,000 | 1,764,672 | |||||
Albuquerque Gross Receipts Series B, 0% due 7/1/2012 pre-refunded 7/1/2011 | Aaa/AAA | 1,775,000 | 1,430,295 | |||||
Albuquerque Gross Receipts Series B, 0% due 7/1/2012 (Insured: FSA) | Aaa/AAA | 225,000 | 180,965 | |||||
Albuquerque Industrial Revenue Refunding, 5.15% due 4/1/2016 (MCT Industries Inc. Project; LOC: Bank of the West) | Aa3/NR | 1,170,000 | 1,222,404 | |||||
Albuquerque Industrial Revenue Refunding, 5.25% due 4/1/2017 (MCT Industries Inc. Project; LOC: Bank of the West) | Aa3/NR | 2,140,000 | 2,243,169 | |||||
Albuquerque Joint Water & Sewage Revenue Series A, 0% due 7/1/2008 (Insured: FGIC) | Aaa/AAA | 1,600,000 | 1,501,552 | |||||
Albuquerque Joint Water & Sewage Systems Revenue, 4.75% due 7/1/2008 | Aa3/AA | 60,000 | 60,053 | |||||
Albuquerque Municipal School District Number 12 Refunding, 5.10% due 8/1/2014 | Aa2/AA | 760,000 | 778,301 | |||||
Albuquerque Municipal School District Number 12 Refunding, 5.00% due 8/1/2015 | Aa2/AA | 1,175,000 | 1,228,709 | |||||
Albuquerque Refuse Removal & Disposal Revenue Refunding Series B, 5.00% due 7/1/2010 (Insured: FSA) | Aaa/AAA | 415,000 | 436,111 | |||||
Artesia Hospital District, 4.50% due 8/1/2008 (Insured:AMBAC) | Aaa/NR | 810,000 | 823,794 | |||||
Belen Consolidated School District No 2 Ref Series A, 4.00% due 8/1/2007 (Insured: MBIA) | Aaa/NR | 1,000,000 | 1,004,120 | |||||
Belen Consolidated School District No 2 Ref Series A, 4.00% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 1,000,000 | 1,008,740 | |||||
Belen Gasoline Tax Revenue Refunding & Improvement, 5.40% due 1/1/2011 | NR/NR | 585,000 | 595,530 | |||||
Bernalillo County Government, 7.00% due 2/1/2007 | Aa1/AA+ | 410,000 | 414,690 | |||||
Bernalillo County Gross Receipts, 5.10% due 10/1/2010 pre-refunded 10/01/2009 | Aa3/AA+ | 525,000 | 548,158 | |||||
Bernalillo County Gross Receipts Series B, 5.00% due 4/1/2021 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,331,260 | |||||
Bernalillo County Gross Receipts Tax Revenue, 5.50% due 10/1/2011 pre-refunded 10/01/2009 | Aa3/AA+ | 495,000 | 522,433 | |||||
Bernalillo County Gross Receipts Tax Revenue, 5.25% due 10/1/2012 | Aa3/AA+ | 1,000,000 | 1,086,990 | |||||
Bernalillo County Gross Receipts Tax Revenue, 5.75% due 10/1/2015 pre-refunded 10/01/2009 | Aa3/AA+ | 2,000,000 | 2,124,980 | |||||
Bernalillo County Multi Family Housing Revenue Series 1988, 4.60% due 11/1/2025 put 11/1/2006 (Sunchase Apartments Project; Insured:AXA Reinsurance Co.) | NR/AA- | 2,300,000 | 2,301,679 | |||||
Chaves County Gross Receipts Tax Revenue, 5.00% due 7/1/2017 (Insured: FGIC) | Aaa/NR | 1,000,000 | 1,042,640 | |||||
Chaves County Gross Receipts Tax Revenue, 5.05% due 7/1/2019 (Insured: FGIC) | Aaa/NR | 1,030,000 | 1,074,970 | |||||
Chaves County Gross Receipts Tax Revenue, 5.00% due 7/1/2021 (Insured: FGIC) | Aaa/NR | 455,000 | 474,078 | |||||
Cibola County Gross Receipts Tax Revenue, 5.875% due 11/1/2008 (Insured:AMBAC) (ETM) | Aaa/AAA | 495,000 | 518,107 | |||||
Cibola County Gross Receipts Tax Revenue, 6.00% due 11/1/2010 (Insured:AMBAC) (ETM) | Aaa/AAA | 555,000 | 606,088 | |||||
Farmington Hospital Revenue Series A, 5.125% due 6/1/2018 (San Juan Regional Medical Center Project) | A3/NR | 570,000 | 597,383 | |||||
Farmington Hospital Revenue Series A, 5.125% due 6/1/2019 (San Juan Regional Medical Center Project) | A3/NR | 645,000 | 674,277 | |||||
Farmington PCR, 3.85% due 9/1/2024 put 10/2/2006 (LOC: Barclays Bank) (daily demand notes) | P1/A-1+ | 1,600,000 | 1,600,000 | |||||
Farmington Utility Systems Revenue Refunding Series A, 5.00% due 5/15/2012 (Insured: FSA) | Aaa/AAA | 6,095,000 | 6,451,009 | |||||
Gallup PCR Refunding Tri-State Generation, 5.00% due 8/15/2013 (Insured:AMBAC) | Aaa/AAA | 2,060,000 | 2,207,661 | |||||
Gallup PCR Refunding Tri-State Generation, 5.00% due 8/15/2017 (Insured:AMBAC) | Aaa/AAA | 3,540,000 | 3,801,641 | |||||
Grant County Hospital Facility Revenue, 5.50% due 8/1/2009 (Gila Regional Medical Center Project; Insured: Radian) | NR/AA | 1,310,000 | 1,367,417 | |||||
Grant County Hospital Facility Revenue, 5.50% due 8/1/2010 (Gila Regional Medical Center Project; Insured: Radian) | NR/AA | 1,385,000 | 1,465,150 | |||||
Las Cruces Joint Utility Refunding & Improvement Revenue, 6.50% due 7/1/2007 (ETM) | A1/A | 120,000 | 121,459 | |||||
Las Cruces School District 2, 5.50% due 8/1/2010 | Aa3/NR | 1,000,000 | 1,051,060 | |||||
New Mexico Educational Assistance Foundation Revenue (Guaranteed Student Loans), 6.65% due 3/1/2007 | NR/NR | 975,000 | 982,449 | |||||
New Mexico Educational Assistance Foundation Series A 3 (Guaranteed Student Loans), 4.95% due 3/1/2009 | Aaa/NR | 2,000,000 | 2,043,380 | |||||
New Mexico Finance Authority Revenue Court Facilities Fee Revenue Series A, 5.50% due 6/15/2020 pre-refunded 6/15/2011 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,162,300 |
Certified Annual Report | 17 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
New Mexico Finance Authority Revenue Refunding, 5.00% due 6/1/2014 (Public Project; Insured: MBIA) | Aaa/AAA | $ | 2,660,000 | $ | 2,855,031 | |||
New Mexico Finance Authority Revenue Refunding, 5.00% due 6/15/2018 (Public Project; Insured: AMBAC) | Aaa/NR | 2,915,000 | 3,144,148 | |||||
New Mexico Finance Authority Revenue Refunding, 5.00% due 6/15/2019 (Public Project; Insured: MBIA) | Aaa/NR | 1,215,000 | 1,305,870 | |||||
New Mexico Finance Authority Revenue Refunding Senior Subordinated Lien, 5.00% due 6/1/2020 (Public Project; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,077,840 | |||||
New Mexico Finance Authority Revenue Refunding Series C, 5.00% due 6/15/2013 (Insured: AMBAC) | Aaa/NR | 2,280,000 | 2,456,153 | |||||
New Mexico Finance Authority Revenue Refunding Series C, 5.00% due 6/15/2015 (Insured: AMBAC) | Aaa/NR | 2,360,000 | 2,568,412 | |||||
New Mexico Finance Authority Revenue Series B, 5.00% due 6/1/2020 (Insured: MBIA) | Aaa/AAA | 1,625,000 | 1,758,266 | |||||
New Mexico Finance Authority Revenue Series B-1, 5.25% due 6/1/2015 (Public Project; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,095,800 | |||||
New Mexico Finance Authority Revenue Series C, 5.15% due 6/1/2012 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 255,000 | 264,840 | |||||
New Mexico Finance Authority Revenue Series C, 5.25% due 6/1/2013 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 130,000 | 135,177 | |||||
New Mexico Finance Authority Revenue Series C, 5.35% due 6/1/2014 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 130,000 | 135,363 | |||||
New Mexico Finance Authority Revenue Series C, 5.45% due 6/1/2015 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 145,000 | 151,377 | |||||
New Mexico Finance Authority Revenue State Office Building Tax Series A, 5.00% due 6/1/2012 | Aa1/AAA | 1,725,000 | 1,830,967 | |||||
New Mexico Finance Authority Revenue State Office Building Tax Series A, 5.00% due 6/1/2013 | Aa1/AAA | 1,325,000 | 1,406,395 | |||||
New Mexico Finance Authority Revenue State Office Building Tax Series A, 5.00% due 6/1/2014 | Aa1/AAA | 1,875,000 | 1,990,181 | |||||
New Mexico Finance Authority Revenue Subordinated Lien, 5.00% due 6/15/2020 (Public Project Revolving Fund F; Insured: MBIA) | Aaa/NR | 1,395,000 | 1,494,561 | |||||
New Mexico Finance Authority State Transportation Series A, 5.00% due 6/15/2014 (Insured: MBIA) | Aaa/AAA | 2,100,000 | 2,281,881 | |||||
New Mexico Highway Commission Revenue Senior Subordinated Lien Tax Series A, 5.50% due 6/15/2013 pre-refunded 6/15/2011 | Aa2/AAA | 2,000,000 | 2,162,300 | |||||
New Mexico Highway Commission Revenue Senior Subordinated Lien Tax Series A, 5.50% due 6/15/2014 | Aa2/AAA | 2,000,000 | 2,156,000 | |||||
New Mexico Highway Commission Tax Revenue, 5.125% due 6/15/2010 | Aa2/AAA | 4,355,000 | 4,464,746 | |||||
New Mexico Highway Commission Tax Senior Subordinated Lien, 6.00% due 6/15/2011 pre-refunded 6/15/2009 | Aa2/AAA | 5,000,000 | 5,307,000 | |||||
New Mexico Hospital Equipment Loan, 5.20% due 12/1/2010 pre-refunded 12/1/2007 (Catholic Health Initiatives Project) | Aa2/NR | 1,140,000 | 1,172,330 | |||||
New Mexico Hospital Equipment Loan Series A, 5.75% due 8/1/2016 pre-refunded 8/1/2011 (Presbyterian Healthcare Project) | Aa3/AA- | 5,205,000 | 5,723,626 | |||||
New Mexico Housing Authority Region III Multi Family Housing Revenue Series A, 5.30% due 12/1/2022 (Senior El Paseo Apartments Project; Insured: AMBAC) | Aaa/AAA | 1,140,000 | 1,183,377 | |||||
New Mexico MFA Forward Mortgage Series C, 6.50% due 7/1/2025 (Collateralized: FNMA/GNMA) | NR/AAA | 195,000 | 199,715 | |||||
New Mexico MFA General, 5.80% due 9/1/2019 pre-refunded 9/1/2009 | NR/AAA | 775,000 | 822,042 | |||||
New Mexico MFA Multi Family Refunding Series B, 5.00% due 7/1/2031 put 7/1/2011 (Sombra Del Oso Apartments Project; Collateralized: FNMA) | Aaa/NR | 1,000,000 | 1,027,150 | |||||
New Mexico MFA Multi Family Refunding Series C, 5.00% due 7/1/2031 put 7/1/2011 (Riverwalk Apartments Project; Collateralized: FNMA) | Aaa/NR | 1,910,000 | 1,961,856 | |||||
New Mexico MFA Multi Family Refunding Series D, 5.00% due 7/1/2031 put 7/1/2011 (Tierra Pointe I Apartments Project; Collateralized: FNMA) | Aaa/NR | 2,785,000 | 2,860,613 | |||||
New Mexico MFA Multi Family Series A, 6.05% due 7/1/2028 (Sandpiper Apartments Project; Insured: FHA) | NR/AAA | 2,335,000 | 2,517,083 | |||||
New Mexico MFA SFMR, 5.70% due 9/1/2014 (Collateralized: FNMA/GNMA) | NR/AAA | 95,000 | 95,744 | |||||
New Mexico MFA SFMR, 5.75% due 3/1/2017 (Collateralized: FNMA/GNMA) | NR/AAA | 245,000 | 246,960 | |||||
New Mexico MFA SFMR, 0% due 9/1/2019 (GIC: Bayerisch Landesbank) | NR/AAA | 300,000 | 252,762 | |||||
New Mexico MFA SFMR Series A3, 6.15% due 9/1/2017 (Collateralized: FNMA/GNMA) | NR/AAA | 70,000 | 70,701 | |||||
New Mexico MFA SFMR Series B2, 5.80% due 7/1/2009 (Collateralized: FNMA/GNMA) | NR/AAA | 15,000 | 15,102 |
18 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
New Mexico MFA SFMR Series B3, 5.80% due 9/1/2016 (Collateralized: FNMA/GNMA) | NR/AAA | $ | 210,000 | $ | 219,958 | |||
New Mexico MFA SFMR Series C2, 6.05% due 9/1/2021 (Collateralized: FNMA/GNMA) | NR/AAA | 315,000 | 326,768 | |||||
New Mexico MFA SFMR Series D2, 5.875% due 9/1/2021 (Collateralized: FNMA/GNMA) | NR/AAA | 505,000 | 509,358 | |||||
New Mexico MFA SFMR Series E2, 5.875% due 9/1/2020 (AMT) | NR/AAA | 300,000 | 309,174 | |||||
New Mexico State Highway Commission Revenue Infrastructure Senior Subordinated Lien C, 5.00% due 6/15/2012 (ETM) | Aa2/AAA | 1,000,000 | 1,069,610 | |||||
New Mexico State Highway Commission Tax Series A, 5.00% due 6/15/2010 (ETM) | Aa2/AAA | 255,000 | 267,826 | |||||
New Mexico State Highway Commission Tax Series A, 5.00% due 6/15/2010 | Aa2/AAA | 245,000 | 257,412 | |||||
New Mexico State Hospital Equipment Loan Council Hospital Revenue Series A, 4.80% due 8/1/2010 (Presbyterian Healthcare Project) | Aa3/AA- | 500,000 | 515,280 | |||||
New Mexico State Hospital Equipment Loan St.Vincent Hospital Series A, 5.00% due 7/1/2017 (Insured: Radian) | Aa3/NR | 1,730,000 | 1,842,156 | |||||
New Mexico State Hospital Equipment Loan St.Vincent Hospital Series A, 5.00% due 7/1/2019 (Insured: Radian) | Aa3/NR | 1,000,000 | 1,058,420 | |||||
New Mexico State Hospital Equipment Loan St.Vincent Hospital Series A, 5.00% due 7/1/2021 (Insured: Radian) | Aa3/NR | 1,185,000 | 1,247,568 | |||||
New Mexico State Hospital Equipment Loan St.Vincent Hospital Series A, 5.25% due 7/1/2025 (Insured: Radian) | Aa3/NR | 1,000,000 | 1,070,900 | |||||
New Mexico State Severance Tax, 5.00% due 7/1/2007 | Aa2/AA | 1,475,000 | 1,491,063 | |||||
New Mexico State Severance Tax Refunding Series A, 5.00% due 7/1/2007 | Aa2/AA | 1,645,000 | 1,662,914 | |||||
New Mexico State Severance Tax Refunding Series A, 5.00% due 7/1/2008 | Aa2/AA | 675,000 | 682,297 | |||||
New Mexico State Supplemental Severance Series A, 5.00% due 7/1/2011 pre-refunded 7/1/2007 | Aa3/A+ | 1,000,000 | 1,011,180 | |||||
New Mexico State University Revenues Refunding & Improvement, 5.00% due 4/1/2013 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,077,250 | |||||
New Mexico Supplemental Severance Series A, 5.00% due 7/1/2008 | Aa3/A+ | 5,000,000 | 5,050,700 | |||||
Puerto Rico Public Buildings Authority Revenue Refunding Government Facilities Series F, 5.25% due 7/1/2019 (Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,128,150 | |||||
Rio Rancho Gross Receipts Tax, 5.00% due 6/1/2014 (Insured: FGIC) | Aaa/AAA | 955,000 | 1,034,103 | |||||
Rio Rancho Gross Receipts Tax, 5.00% due 6/1/2016 (Insured: FGIC) | Aaa/AAA | 555,000 | 601,737 | |||||
Rio Rancho Gross Receipts Tax, 5.00% due 6/1/2017 (Insured: FGIC) | Aaa/AAA | 1,110,000 | 1,200,065 | |||||
Rio Rancho Gross Receipts Tax, 5.00% due 6/1/2022 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,067,330 | |||||
Rio Rancho Water & Wastewater System, 5.25% due 5/15/2007 (Insured:AMBAC) | NR/AAA | 1,695,000 | 1,713,289 | |||||
San Juan County Gasoline Tax/Motor Vehicle Revenue Refunding & Improvement, 5.25% due 5/15/2014 | A1/NR | 400,000 | 431,304 | |||||
San Juan County Gasoline Tax/Motor Vehicle Revenue Refunding & Improvement, 5.25% due 5/15/2022 | A1/NR | 1,725,000 | 1,834,762 | |||||
San Juan County Gross Receipts, 5.30% due 9/15/2009 | A1/NR | 315,000 | 323,870 | |||||
San Juan County Gross Receipts Refunding, 5.00% due 6/15/2014 (Insured: MBIA) | Aaa/AAA | 1,225,000 | 1,326,822 | |||||
San Juan County Gross Receipts Refunding, 5.00% due 6/15/2017 (Insured: MBIA) | Aaa/AAA | 1,370,000 | 1,481,477 | |||||
San Juan County Gross Receipts Tax Revenue Senior Series B, 5.50% due 9/15/2016 (Insured:AMBAC) | Aaa/AAA | 1,180,000 | 1,287,522 | |||||
San Juan County Gross Receipts Tax Revenue Subordinated Series A, 5.75% due 9/15/2021 (Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,098,070 | |||||
Sandoval County Incentive Payment Revenue Refunding, 5.00% due 6/1/2020 | NR/A+ | 4,390,000 | 4,669,072 | |||||
Sandoval County Landfill Revenue Refunding & Improvement, 5.50% due 8/15/2015 | Baa2/NR | 1,420,000 | 1,498,583 | |||||
Sandoval County Landfill Revenue Refunding & Improvement, 5.75% due 8/15/2018 | Baa2/NR | 1,335,000 | 1,421,802 | |||||
Sandoval County Revenue Refunding Series B, 5.75% due 2/1/2010 (Intel Project) | NR/A+ | 690,000 | 697,514 | |||||
Santa Fe County, 5.00% due 7/1/2007 (Insured: MBIA) | Aaa/NR | 640,000 | 640,691 | |||||
Santa Fe County, 5.00% due 7/1/2008 (Insured: MBIA) | Aaa/NR | 785,000 | 785,848 | |||||
Santa Fe County, 7.25% due 7/1/2029 (Rancho Viejo Improvement District Project) | NR/NR | 1,815,000 | 1,926,532 | |||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation Project) | NR/NR | 1,000,000 | 1,007,500 | |||||
Santa Fe County Charter School Foundation, 6.625% due 1/15/2036 | NR/NR | 1,030,000 | 1,038,384 | |||||
Santa Fe County Correctional Systems Revenue, 5.20% due 2/1/2012 (Insured: FSA) | Aaa/AAA | 515,000 | 553,069 | |||||
Santa Fe County Correctional Systems Revenue, 5.00% due 2/1/2018 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,092,300 | |||||
Santa Fe County Correctional Systems Revenue, 6.00% due 2/1/2027 (Insured: FSA) | Aaa/AAA | 1,520,000 | 1,819,759 | |||||
Santa Fe County Revenue Series 1990, 9.00% due 1/1/2008 (Office & Training Facilities Project) (ETM) | Aaa/NR | 626,000 | 667,072 | |||||
Santa Fe County Revenue Series A, 5.50% due 5/15/2015 (El Castillo Retirement Project) | NR/BBB- | 1,250,000 | 1,269,550 |
Certified Annual Report | 19 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Santa Fe County Revenue Series A, 5.80% due 5/15/2018 (El Castillo Retirement Project) | NR/BBB- | $ | 1,835,000 | $ | 1,835,826 | |||
Santa Fe Educational Facilities Revenue, 5.00% due 3/1/2007 (St. John’s College Project) | NR/BBB- | 200,000 | 200,572 | |||||
Santa Fe Educational Facilities Revenue, 5.10% due 3/1/2008 (St. John’s College Project) | NR/BBB- | 210,000 | 212,201 | |||||
Santa Fe Educational Facilities Revenue, 5.40% due 3/1/2017 (St. John’s College Project) | NR/BBB- | 1,215,000 | 1,229,519 | |||||
Santa Fe SFMR, 6.00% due 11/1/2010 (Collateralized: FNMA/GNMA) | Aaa/NR | 70,000 | 71,549 | |||||
Santa Fe SFMR, 6.10% due 11/1/2011 (Collateralized: FNMA/GNMA) | Aaa/NR | 130,000 | 131,875 | |||||
Santa Fe SFMR, 6.20% due 11/1/2016 (Collateralized: FNMA/GNMA) | NR/NR | 115,000 | 116,352 | |||||
Santa Fe Solid Waste Management Agency Facility Revenue, 6.10% due 6/1/2007 | NR/NR | 875,000 | 886,935 | |||||
Taos County Gross Receipts County Education Improvement, 4.75% due 10/1/2012 | Baa1/NR | 1,500,000 | 1,550,625 | |||||
Taos Municipal School District 1 Refunding, 5.00% due 9/1/2008 (Insured: FSA) | Aaa/NR | 450,000 | 461,839 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 1/1/2012 (Insured: FSA & FHA) | Aaa/AAA | 500,000 | 531,740 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 7/1/2012 (Insured: FSA & FHA) | Aaa/AAA | 1,500,000 | 1,602,585 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 1/1/2016 (Insured: FSA & FHA) | Aaa/AAA | 2,920,000 | 3,139,088 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 1/1/2017 (Insured: FSA & FHA) | Aaa/AAA | 2,000,000 | 2,144,520 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 1/1/2018 (Insured: FSA & FHA) | Aaa/AAA | 2,000,000 | 2,139,000 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 1/1/2019 (Insured: FSA & FHA) | Aaa/AAA | 3,000,000 | 3,198,180 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 7/1/2019 (Insured: FSA & FHA) | Aaa/AAA | 3,000,000 | 3,197,130 | |||||
University of New Mexico Hospital Mortgage Revenue Bonds, 5.00% due 1/1/2020 (Insured: FSA & FHA) | Aaa/AAA | 2,310,000 | 2,457,840 | |||||
University of New Mexico Revenue Refunding & Improvement Subordinated Lien Systems Series A, 5.25% due 6/1/2017 | Aa3/AA | 1,730,000 | 1,856,827 | |||||
University of New Mexico Revenue Refunding & Improvement Subordinated Lien Systems Series A, 5.25% due 6/1/2021 | Aa3/AA | 1,000,000 | 1,073,310 | |||||
University of New Mexico Revenue Refunding & Systems Improvement Subordinated Lien, 5.00% due 6/1/2015 (Insured:AMBAC) | Aaa/AAA | 1,590,000 | 1,727,551 | |||||
University of New Mexico Revenue Refunding Subordinated Lien, 5.25% due 6/1/2016 | Aa3/AA | 645,000 | 694,671 | |||||
University of New Mexico Revenue Refunding Subordinated Lien A, 5.25% due 6/1/2018 | Aa3/AA | 1,825,000 | 1,958,791 | |||||
University of New Mexico Revenue Refunding Subordinated Lien Systems Series A, 5.25% due 6/1/2015 | Aa3/AA | 1,195,000 | 1,301,355 | |||||
University of New Mexico Revenue Refunding Subordinated Lien Systems Series A, 5.25% due 6/1/2018 | Aa3/AA | 1,200,000 | 1,301,640 | |||||
University of New Mexico Revenue Series A, 5.25% due 6/1/2013 | Aa3/AA | 665,000 | 718,326 | |||||
University of New Mexico Revenue Series A, 5.25% due 6/1/2014 | Aa3/AA | 335,000 | 361,509 | |||||
University of New Mexico Revenue Series A, 6.00% due 6/1/2021 | Aa3/AA | 610,000 | 712,144 | |||||
Ventana West Public Improvement District Special Tax, 6.625% due 8/1/2023 | NR/NR | 2,000,000 | 2,140,220 | |||||
Villa Hermosa Multi Family Housing Revenue, 5.85% due 11/20/2016 (Collateralized: GNMA) | NR/AAA | 1,105,000 | 1,134,349 | |||||
TOTAL INVESTMENTS — 98.66%(Cost $ 201,697,731) | $ | 207,463,333 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.34% | 2,812,562 | |||||||
NET ASSETS — 100.00% | $ | 210,275,895 | ||||||
20 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 |
Footnote Legend
See notes to financial statements.
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
AMBAC | Insured by American Municipal Bond Assurance Corp. |
AMT | Alternative Minimum Tax |
ETM | Escrowed to Maturity |
FGIC | Insured by Financial Guaranty Insurance Co. |
FHA | Insured by Federal Housing Administration |
FNMA | Collateralized by Federal National Mortgage Association |
FSA | Insured by Financial Security Assurance Co. |
GNMA | Insured by Government National Mortgage Co. |
MBIA | Insured by Municipal Bond Investors Assurance |
MFA | Mortgage Finance Authority |
PCR | Pollution Control Revenue Bond |
RADIAN | Insured by Radian Asset Assurance |
SFMR | Single Family Mortgage Revenue Bond |
XLCA | Insured by XL Capital Assurance |
SUMMARY OF SECURITY CREDIT RATINGS†
Ratings are a blend of Moody’s and Standard & Poor’s, using the higher rating. Some bonds are rated by only one service.
Certified Annual Report | 21 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg New Mexico Intermediate Municipal Fund
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 (one of the Portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
22 | Certified Annual Report |
EXPENSE EXAMPLE | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including
(a) sales charges (loads) on purchase payments, for Class A Shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(2) | ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. |
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06-9/30/06 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000 | $ | 1,029.10 | $ | 5.02 | |||
Hypothetical* | $ | 1,000 | $ | 1,020.12 | $ | 5.00 | |||
Class D Shares | |||||||||
Actual | $ | 1,000 | $ | 1,027.80 | $ | 6.31 | |||
Hypothetical* | $ | 1,000 | $ | 1,018.85 | $ | 6.28 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.99% and D: 1.24%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report | 23 |
INDEX COMPARISON | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg New Mexico Intermediate Municipal Fund Class A Total Returns, versus
Merrill Lynch 7-12 Year Municipal Bond Index and Consumer Price Index
(June 30, 1991 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 6/18/91) | 1.24 | % | 3.23 | % | 4.06 | % | 5.02 | % | ||||
D Shares (Incep: 6/1/99) | 3.04 | % | 3.38 | % | N/A | 3.68 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 6/18/91) | 3.51 | % | 2.94 | % | $ | 13.20 | $ | 13.47 | ||||
D Shares (Incep: 6/1/99) | 3.26 | % | 2.75 | % | $ | 13.21 | $ | 13.21 |
Performance data reflect past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 2.00%. There is no up front sales charge for Class D shares and no contingent deferred sales charge (CDSC).
The Consumer Price Index (“CPI”) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
The Merrill Lynch 7-12 Year Municipal Bond Index represents 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.
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 Funds’ 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 Net Asset Value (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.
24 | Certified Annual Report |
TRUSTEES AND OFFICERS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP,Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report | 25 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
26 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds.Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report | 27 |
OTHER INFORMATION | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, 100% of dividends paid by the Fund are tax exempt dividends for Federal Income Tax purposes. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg New Mexico Intermediate Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time relative to categories of mutual funds sharing certain comparable characteristics and selected by independent mutual fund analyst firms, and relative to a broad based securities index; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s
28 | Certified Annual Report |
OTHER INFORMATION, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to single state municipal bond mutual fund categories, and in particular to broad based securities indices, is limited because the Fund’s investment objectives and strategies, as defined in its prospectus, are unique and may vary from the parameters for selecting investments for other funds and indices, the Fund invests in a relatively small and unique market, and the largely theoretical character of fixed income security indices.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully and competently pursue and achieve the Fund’s stated objectives, as reflected particularly by the Advisor’s selection of investments in a small single state market in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluation the Fund’s above average or better investment returns over most periods relative to a category of single state municipal bond mutual funds selected by an independent mutual fund analyst firm, and the Fund’s performance relative to comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a group of mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other, specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and compared the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the quantitative fee and expense data demonstrated that the overall expenses for the Fund were comparable to the average and median expenses for the grouping of single state fixed income mutual funds assembled by an independent mutual fund analyst firm, and that the management fee similarly was comparable to the median fee and average fee levels for the same group of funds. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectus, and prevailing fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
Certified Annual Report | 29 |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
30 | This page is not part of the Annual Report. |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. | 31 |
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses.We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 | 119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 |
Thornburg New York Intermediate Municipal Fund
Laddering – an All Weather Strategy
The Fund’s primary investment objective is to obtain as high a level of current income exempt from Federal, New York State and New York City individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital. The secondary goal of the Fund is to reduce expected changes in its share price compared to long-term bond portfolios.
The Fund offers New York investors double (or for New York City residents triple) tax-free yields (may be subject to Alternative Minimum Tax) in a laddered municipal bond portfolio with an average maturity of ten years or less. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year; cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. The strategy is a good compromise for managing different types of risk.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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2 | This page is not part of the Annual Report. |
Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We aspire to accomplish this through a family of laddered bond funds that focus on quality, stability, and minimization of risk over time, and through a range of equity funds that redefine traditional measures of value and growth.
Our bond funds have always been managed using the highly disciplined approach of laddering short and intermediate bond maturities, seeking to provide both an attractive return and stability of principal. This strategy is an all-weather strategy, designed to perform in uncertain markets like the ones we have seen in the last two years. Moreover, all of the bond funds focus on buying investment-grade securities. We have found this strategy to be the best at managing both interest-rate risk and credit risk, and we believe this strategy has served our shareholders well over time.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Portfolio managers who have many years of experience manage the bond funds. We are proud of this consistency and experience and look forward to many more successful years with them at the helm.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely, |
![]() |
Garrett Thornburg Chairman & CEO |
This page is not part of the Annual Report. | 3 |
2006
Certified Annual Report
Thornburg New York Intermediate Municipal Fund
September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 | Certified Annual Report |
Important Information
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
The maximum sales charge for Class A shares is 2.00%.
Performance data given at net asset value (NAV) does not take into account these sales charges. If the sales charges had been included, the performance would have been lower.
Shares in the Fund carry risks, including possible loss of principal. As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each Fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Glossary
The Merrill Lynch 7-12 Year Municipal Bond Index – A widely-accepted unmanaged market-weighted index comprised of fixed-rate, coupon bearing bonds issued within five years of the most recent month-end with greater than $50 million principal amount having a Moody's investment grade rating and maturities of seven to twelve years.
Duration – The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.
Weighted Average Maturity – A weighted average of all the effective maturities of the bonds in a portfolio. Effective maturity takes into consideration mortgage prepayments, puts, sinking funds, adjustable coupons, and other features of individual bonds and is thus a more accurate measure of interest-rate sensitivity. Longer-maturity funds are generally considered more interest-rate sensitive than their shorter counterparts.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Treasury Notes – a debt obligation of the US government backed by the “full faith and credit” of the government. Notes are intermediate to long term investments typically issued in maturities of two, five and ten years. Interest is paid semi-annually.
Certified Annual Report | 5 |
George Strickland
Portfolio Manager
October 19, 2006
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg New York Intermediate Municipal Fund. The net asset value of the Class A shares decreased by 6 cents to $12.38 during the twelve months ended September 30, 2006. If you were with us for the entire period, you received dividends of 45.2 cents per share. If you reinvested dividends, you received 46.0 cents per share.
Over the last twelve months, interest rates on bonds that mature in ten years or less have risen, while interest rates on long-term bonds have fallen. Since bond prices move in the opposite direction as yields, the longest bonds in the portfolio generally appreciated, while bonds at the short end of the Fund’s ladder generally depreciated in value. The Class A shares of your Fund produced a total return of 3.23% over the twelve month period ended September 30, 2006, compared to a 4.44% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Unlike the Fund, the index does not have exposure to short-term bonds. Since the short-term bonds in the Fund underperformed the index, the Fund’s return lagged the index.
After rising for most of the year, bond yields fell in the third quarter of 2006 because the bond market started to anticipate a slower economy, reduced inflation, and a lower Fed Funds rate. While such an outcome is certainly possible, we believe the preponderance of evidence points to continued economic growth and a Federal Reserve that must stay on high alert to avoid inflationary acceleration.
The current case for a weak economy revolves around the detrimental effects of a declining housing market. However, slackness in residential housing is being countered with strength in commercial real estate, capital spending, state and federal government spending, and exports. Some consumers are feeling pinched by higher rates on adjustable rate mortgages, but many more are enjoying higher incomes in an economy that has produced 1.8 million new jobs over the last twelve months. So, consumer spending should continue growing, and may accelerate if oil and gas prices hold in their current ranges. This should drive the economy to solid, but not spectacular, growth.
No matter how you measure it, inflation has doubled over the last three years. The current levels are not terribly alarming, but they are significantly above the Federal Reserve’s comfort zone. Fed Chairman Bernanke has stated that he thinks inflation should moderate next year, but there are reasons to think that it might not. U.S. hourly earnings are rising at a 4% rate, up from 1.6% in early 2004, and import prices have been rising steadily. These and other pressures could keep inflation stubbornly in the Fed’s discomfort zone.
So, when we look at current yield curves – inverted for Treasury notes and bonds, and very flat for municipal bonds – it appears to us that the optimistic inflation scenario is already priced into the market. In order to justify today’s 4.8% 10-year Treasury note, one must assume the Federal Reserve will begin easing monetary policy fairly soon. That implies that inflation will drop back down below 2%. If all that unfolds as expected, then current levels are justified. If it does not, then interest rates should rise on intermediate and long-term bonds. Clearly, it seems that risks are somewhat skewed toward higher interest rates.
6 | Certified Annual Report |
Your Thornburg New York Intermediate Municipal Fund is a laddered portfolio of 40 municipal obligations from all over New York. Today, your Fund’s weighted average maturity is 7.24 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 chart below describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
We took advantage of rising rates to extend the duration of the Fund over the last year. We are now firmly in neutral territory and the ladder is fairly evenly distributed (just a little light in the last three years). We are planning to gradually shorten portfolio duration over time unless new opportunities open up to us over the next few months. If interest rates on long-term bonds rise, the Fund should outperform more aggressive bond strategies. If interest rates hold steady or decline, then the Fund should produce compelling risk-adjusted returns.
% of portfolio maturing | Cumulative % maturing | |||||||||
2 years | = | 15.8% | Year 2 | = | 15.8% | |||||
2 to 4 years | = | 10.0% | Year 4 | = | 25.8% | |||||
4 to 6 years | = | 10.0% | Year 6 | = | 35.8% | |||||
6 to 8 years | = | 15.7% | Year 8 | = | 51.5% | |||||
8 to 10 years | = | 13.6% | Year 10 | = | 65.1% | |||||
10 to 12 years | = | 16.9% | Year 12 | = | 82.0% | |||||
12 to 14 years | = | 7.7% | Year 14 | = | 89.7% | |||||
14 to 16 years | = | 3.1% | Year 16 | = | 92.8% | |||||
16 to 18 years | = | 0.0% | Year 18 | = | 92.8% | |||||
Over 18 years | = | 7.2% | Over 18 years | = | 100.0% |
Percentages can and do vary. Data as of 9/30/06.
New York State has enjoyed two years in a row of tax revenue growth over 10%, thanks largely to robust personal income and business tax receipts. Fiscal 2006 ended with a $2 billion surplus. New York City ended fiscal 2006 with a record $6.1 billion surplus. While the budget news has been all good lately, the city and state are still challenged with above average debt levels and large capital spending requirements for schools, transportation, and future retirement benefits for government workers.
Other types of bonds, such as school district, utility, and health care bonds, are also generally showing solid credit characteristics. All the good news has, in our opinion, led market participants to take a very relaxed stance toward taking on credit risk. Yield spreads for lower investment grade and speculative grade bonds are well below long-term averages. While we are not anticipating impending doom for low quality bonds, we do believe it is prudent to keep credit quality high in the current environment. Your Fund is broadly diversified and 97% invested in bonds rated A or above by at least one of the major rating agencies.
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 York Intermediate Municipal Fund.
Sincerely, |
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George Strickland |
Portfolio Manager |
Certified Annual Report | 7 |
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 |
ASSETS | ||||
Investments at value (cost $ 33,448,359) | $ | 34,398,528 | ||
Cash | 151,073 | |||
Receivable for fund shares sold | 2,024 | |||
Interest receivable | 412,589 | |||
Prepaid expenses and other assets | 862 | |||
Total Assets | 34,965,076 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 32,717 | |||
Payable to investment advisor and other affiliates (Note 3) | 17,066 | |||
Accounts payable and accrued expenses | 29,791 | |||
Dividends payable | 36,443 | |||
Total Liabilities | 116,017 | |||
NET ASSETS | $ | 34,849,059 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (11,530 | ) | |
Net unrealized appreciation on investments | 950,169 | |||
Accumulated net realized gain (loss) | (73,043 | ) | ||
Net capital paid in on shares of beneficial interest | 33,983,463 | |||
$ | 34,849,059 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($34,849,059 applicable to 2,815,350 shares of beneficial interest outstanding - Note 4) | $ | 12.38 | ||
Maximum sales charge, 2.00% of offering price | 0.25 | |||
Maximum offering price per share | $ | 12.63 | ||
See notes to financial statements.
8 | Certified Annual Report |
STATEMENT OF OPERATIONS | ||
Thornburg New York Intermediate Municipal Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $ 195,758) | $ | 1,762,062 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 189,306 | |||
Administration fees (Note 3) | 47,327 | |||
Distribution and service fees (Note 3) | 94,653 | |||
Transfer agent fees | 36,269 | |||
Registration and filing fees | 303 | |||
Custodian fees (Note 3) | 19,372 | |||
Professional fees | 27,006 | |||
Accounting fees | 3,367 | |||
Trustee fees | 539 | |||
Other expenses | 6,864 | |||
Total Expenses | 425,006 | |||
Less: | ||||
Management fees waived by investment advisor (Note 3) | (44,374 | ) | ||
Fees paid indirectly (Note 3) | (5,806 | ) | ||
Net Expenses | 374,826 | |||
Net Investment Income | 1,387,236 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on Investments | (3,826 | ) | ||
Net change in unrealized appreciation (depreciation) of Investments | (221,552 | ) | ||
Net Realized and Unrealized Loss on Investments | (225,378 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 1,161,858 | ||
See notes to financial statements.
Certified Annual Report | 9 |
STATEMENTS OF CHANGES IN NET ASSETS |
Thornburg New York Intermediate Municipal Fund |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,387,236 | $ | 1,448,110 | ||||
Net realized loss on investments | (3,826 | ) | (50,108 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (221,552 | ) | (668,668 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,161,858 | 729,334 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (1,387,236 | ) | (1,448,110 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (6,301,037 | ) | (3,448,315 | ) | ||||
Net Decrease in Net Assets | (6,526,415 | ) | (4,167,091 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 41,375,474 | 45,542,565 | ||||||
End of year | $ | 34,849,059 | $ | 41,375,474 | ||||
See notes to financial statements.
10 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 |
NOTE 1 – ORGANIZATION
Thornburg New York 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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg California Limited Term Municipal Fund, Thornburg Limited Term Municipal Fund, Thornburg New Mexico 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, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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, New York State, and New York City individual income tax as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The secondary goal of the Fund is to reduce expected changes in its share price compared to long-term bond portfolios. 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 Trust are as follows:
Valuation of Investments: The Trust determines the value of investments utilizing an independent pricing service approved by the Board of 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 p.m. EST. When quotations are not readily available, securities are valued at evaluated prices 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; and indications as to value from dealers and general market conditions. In any case where a price is not available from a pricing service for an investment, the Trust's valuation and pricing committee determines a fair value for the investment using factors approved by the Trustees. 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 Board of Trustees. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable (if any) and tax exempt income of the Fund to the shareholders. Therefore, no provision for Federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund's investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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.
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 |
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, 2006, these fees were payable at annual rates ranging from .50 of 1% to .275 of 1% per annum of the average daily net assets of the Fund. For the year ended September 30, 2006, the Advisor voluntarily waived investment advisory fees of $44,374. The Trust entered into an Administrative Services Agreement with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the distributor of Fund shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned no commissions from the sale of Class A shares.
Pursuant to a Service Plan, under Rule 12b-1 of the Investment Company Act of 1940, the Trust may reimburse to the Advisor an amount not to exceed .25 of 1% per annum of the Fund’s average daily net assets for payments made by the Advisor to securities dealers and other persons for distribution of the Fund’s shares and to obtain various shareholder and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust 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, 2006, fees paid indirectly were $5,806. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 249,857 | $ | 3,077,469 | 413,556 | $ | 5,190,988 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 74,036 | 911,749 | 73,108 | 916,743 | ||||||||||
Shares repurchased | (835,675 | ) | (10,290,255 | ) | (762,664 | ) | (9,556,046 | ) | ||||||
Net Increase (Decrease) | (511,782 | ) | $ | (6,301,037 | ) | (276,000 | ) | $ | (3,448,315 | ) | ||||
12 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $5,677,120 and $10,552,254, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 33,447,336 | ||
Gross unrealized appreciation on a tax basis | $ | 951,951 | ||
Gross unrealized depreciation on a tax basis | (759 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 951,192 | ||
At September 30, 2006, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2006, the Fund had tax basis capital losses, which may be carried over to offset future capital gains. To the extent such carry forwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryovers expire as follows:
2011 | $ | 20,132 | |
2014 | 50,108 | ||
$ | 70,240 | ||
As of September 30, 2006, the Fund had deferred capital losses occurring subsequent to October 31, 2005 of $3,826. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
All dividends paid by the Fund for the year ended September 30, 2006 and September 30, 2005, represent exempt interest dividends, which are excludable by shareholders from gross income for Federal income tax purposes.
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized loss by $508, increased net capital paid in on shares of beneficial interest by $2,438, and increased over-distributed net investment income by $2,946. Reclassifications result primarily from market discount amortization.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
Certified Annual Report | 13 |
Thornburg New York Intermediate Municipal Fund
Year Ended Sept. 30, | 3 Months 2004(c) | Year Ended June 30, | ||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||
Class A Shares: | ||||||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.44 | $ | 12.64 | $ | 12.46 | $ | 12.86 | $ | 12.63 | $ | 12.55 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.45 | 0.42 | 0.10 | 0.45 | 0.51 | 0.54 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.06 | ) | (0.20 | ) | 0.18 | (0.40 | ) | 0.25 | 0.08 | |||||||||||||||
Total from investment operations | 0.39 | 0.22 | 0.28 | 0.05 | 0.76 | 0.62 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.45 | ) | (0.42 | ) | (0.10 | ) | (0.45 | ) | (0.51 | ) | (0.54 | ) | ||||||||||||
Realized capital gains | — | — | — | — | (0.02 | ) | — | |||||||||||||||||
Total distributions | (0.45 | ) | (0.42 | ) | (0.10 | ) | (0.45 | ) | (0.53 | ) | (0.54 | ) | ||||||||||||
Change in net asset value | (0.06 | ) | (0.20 | ) | 0.18 | (0.40 | ) | 0.23 | 0.08 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 12.38 | $ | 12.44 | $ | 12.64 | $ | 12.46 | $ | 12.86 | $ | 12.63 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.23 | % | 1.73 | % | 2.26 | % | 0.36 | % | 6.16 | % | 5.05 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.66 | % | 3.31 | % | 3.19 | %(b) | 3.51 | % | 4.02 | % | 4.29 | % | ||||||||||||
Expenses, after expense reductions | 1.01 | % | 1.00 | % | 0.99 | %(b) | 0.99 | % | 0.93 | % | 0.87 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.99 | % | 0.99 | %(b) | 0.99 | % | 0.93 | % | 0.87 | % | ||||||||||||
Expenses, before expense reductions | 1.11 | % | 1.12 | % | 1.18 | %(b) | 1.11 | % | 1.10 | % | 1.09 | % | ||||||||||||
Portfolio turnover rate | �� | 15.38 | % | 28.70 | % | 4.27 | % | 13.46 | % | 15.57 | % | 17.66 | % | |||||||||||
Net assets at end of period (000) | $ | 34,849 | $ | 41,375 | $ | 45,543 | $ | 42,551 | $ | 39,764 | $ | 32,076 |
(a) | Sales loads are not reflected in computing total return, which is not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
14 | Certified Annual Report |
SCHEDULE OF INVESTMENTS | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-665
NASDAQ SYMBOLS: CLASS A - THNYX
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Amherst Industrial Development Agency Civic Facility Revenue, 5.75% due 4/1/2015 (Insured: ACA) | NR/A | $ | 465,000 | $ | 501,400 | |||
Bethlehem Central School District GO, 7.10% due 11/1/2006 (Insured:AMBAC) | Aaa/AAA | 700,000 | 702,107 | |||||
Brookhaven Industrial Development Agency Revenue, 4.375% due 11/1/2031 put 11/1/2006 (Methodist Retirement Community Project; LOC: Northfork Bank) | A1/A- | 560,000 | 560,190 | |||||
Canastota Central School District GO, 7.10% due 6/15/2007 (ETM) | A2/NR | 215,000 | 220,513 | |||||
Canastota Central School District GO, 7.10% due 6/15/2008 (ETM) | A2/NR | 205,000 | 217,245 | |||||
Hempstead Industrial Development Agency Resource Recovery Revenue, 5.00% due 12/1/2010 put 6/1/2010 (American Ref-Fuel Project) | Ba1/BB+ | 1,000,000 | 1,025,430 | |||||
Monroe County Industrial Development Agency Revenue, 6.45% due 2/1/2014 (DePaul Community Facility Project; Insured: SONYMA) | Aa1/NR | 805,000 | 811,778 | |||||
Nassau Health Care Corp., 6.00% due 8/1/2011 pre-refunded 8/1/2009 | Aaa/AAA | 530,000 | 575,241 | |||||
New York City Municipal Water Finance Authority Series B, 5.75% due 6/15/2013 (ETM) | Aaa/AAA | 1,000,000 | 1,047,830 | |||||
New York City Transitional Finance Authority Facilities Refunding Series A 1, 5.00% due 11/1/2020 | Aa1/AAA | 1,000,000 | 1,078,700 | |||||
New York City Transitional Finance Authority Refunding Future Tax Secured C, 5.25% due 8/1/2016 (Insured:AMBAC) | Aaa/AAA | 1,365,000 | 1,474,377 | |||||
New York City Trust Cultural Resources Revenue, 5.75% due 7/1/2014 (Museum of American Folk Art Project; Insured: ACA) | NR/A | 920,000 | 981,502 | |||||
New York Convention Center Development Corp. Hotel Unit Fee, 5.00% due 11/15/2017 (Insured:AMBAC) | Aaa/AAA | 1,000,000 | 1,086,240 | |||||
New York Dormitory Authority Lease Revenue Series A, 5.25% due 8/15/2013 (Master Boces Project; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,066,710 | |||||
New York Dormitory Authority Revenue, 5.25% due 7/1/2010 (D’Youville College; Insured: Radian) | NR/AA | 350,000 | 368,715 | |||||
New York Dormitory Authority Revenue, 5.25% due 7/1/2011 (D’Youville College; Insured: Radian) | NR/AA | 370,000 | 394,113 | |||||
New York Dormitory Authority Revenue Mental Health Services A, 5.50% due 2/15/2019 pre-refunded 8/15/2011 (Insured: MBIA) | Aaa/AAA | 1,085,000 | 1,181,739 | |||||
New York Dormitory Authority Revenue Mental Health Services Facilities Improvement A, 5.00% due 2/15/2015 (Insured:AMBAC) | Aaa/AAA | 1,900,000 | 2,064,768 | |||||
New York Dormitory Authority Revenue Refunding, 6.10% due 7/1/2019 (Ryan Clinton Community Health Center Project; Insured: SONYMA) | Aa1/NR | 1,000,000 | 1,077,180 | |||||
New York Environmental Facilities Corp. PCRB Water Series E, 6.875% due 6/15/2014 (State Revolving Fund) | Aaa/AAA | 400,000 | 401,036 | |||||
New York Housing Finance Service Series A, 6.375% due 9/15/2015 pre-refunded 9/15/2007 | A1/AAA | 665,000 | 682,696 | |||||
New York Refunded Series G, 6.75% due 2/1/2009 (ETM) | Aaa/AAA | 50,000 | 53,613 | |||||
New York Refunding Series H, 5.00% due 8/1/2018 | A1/AA- | 1,000,000 | 1,064,590 | |||||
New York Series A, 7.00% due 8/1/2007 (Insured: FSA) | Aaa/AAA | 480,000 | 488,496 | |||||
New York State Dormitory Authority, 5.00% due 7/1/2016 (Bishop Henry B Hucles Nursing Home Project; Insured: SONYMA) | Aa1/NR | 400,000 | 434,044 | |||||
New York State Dormitory Authority, 5.00% due 7/1/2024 (Bishop Henry B Hucles Nursing Home Project; Insured: SONYMA) | Aa1/NR | 1,000,000 | 1,060,140 | |||||
New York State Dormitory Authority Revenue Personal Income Tax, 5.50% due 3/15/2012 | Aa3/AAA | 1,000,000 | 1,091,660 | |||||
New York State Dormitory Authority State Personal Income Tax Revenue Education Series F, 5.00% due 3/15/2019 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,075,480 | |||||
New York State Mortgage Agency Revenue Series 70, 5.375% due 10/1/2017 | Aa1/NR | 300,000 | 305,529 | |||||
New York State Thruway Authority General Revenue Series F, 5.00% due 1/1/2018 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,158,300 | |||||
New York State Thruway Authority Service Contract Revenue Refunding, 5.50% due 4/1/2013 (Local Highway & Bridge Project; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,091,520 | |||||
New York Unrefunded Series G, 6.75% due 2/1/2009 (Insured: MBIA-IBC) | Aaa/AAA | 950,000 | 1,017,592 | |||||
New York Urban Development Corp. Correctional Facilities Revenue, 0% due 1/1/2008 | A1/AA- | 2,000,000 | 1,909,560 | |||||
Newark Wayne Community Hospital Revenue Series B, 5.875% due 1/15/2033 (Insured: AMBAC) | Aaa/AAA | 1,420,000 | 1,422,613 | |||||
Oneida County Industrial Development Agency Revenue, 6.00% due 1/1/2010 (Insured: Radian) | NR/AA | 375,000 | 399,896 |
Certified Annual Report | 15 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Oneida County Industrial Development Agency Revenue, 6.10% due 6/1/2020 (Civic Facility Presbyterian Home Project; LOC: HSBC Bank USA) | Aa2/NR | $ | 450,000 | $ | 483,763 | |||
Port Chester Industrial Development Agency Refunding, 4.75% due 7/1/2031 put 7/1/2011 (American Foundation Project; Collateralized: FNMA) | NR/AAA | 750,000 | 777,382 | |||||
Puerto Rico Electric Power Authority Revenue Refunding Series J, 5.375% due 7/1/2017 (Insured: XLCA) | Aaa/AAA | 1,045,000 | 1,179,283 | |||||
Utica Industrial Development Agency Civic Facility Revenue, 5.25% due 7/15/2016 (Munson Williams Proctor Institute Project) | A1/NR | 210,000 | 225,145 | |||||
Valley Central School District Montgomery, 7.15% due 6/15/2007 (Insured:AMBAC) | Aaa/AAA | 625,000 | 640,412 | |||||
TOTAL INVESTMENTS — 98.71% (Cost $ 33,448,359) | $ | 34,398,528 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.29% | 450,531 | |||||||
NET ASSETS — 100.00% | $ | 34,849,059 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. See notes to financial statements. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
ETM | Escrowed to Maturity | |
FNMA | Collateralized by Federal National Mortgage Association | |
FSA | Insured by Financial Security Assurance Co. | |
GO | General Obligation | |
MBIA | Insured by Municipal Bond Investors Assurance | |
MBIA-IBC | Insured by Municipal Bond Investors Assurance - Insured Bond Certificates | |
PCRB | Pollution Control Revenue Bond | |
RADIAN | Insured by Radian Asset Assurance | |
SONYMA | State of New York Mortgage Authority | |
XLCA | Insured by XL Capital Assurance |
SUMMARY OF SECURITY CREDIT RATINGS†
Ratings are a blend of Moody’s and Standard & Poor’s, using the higher rating. Some bonds are rated by only one service.
16 | Certified Annual Report |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg New York Intermediate Municipal Fund
To the Trustees and Shareholders of
Thornburg New York 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 York Intermediate Municipal Fund (one of the Portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
Certified Annual Report | 17 |
EXPENSE EXAMPLE | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including
(a) sales charges (loads) on purchase payments, for Class A shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06-9/30/06 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000 | $ | 1,027.20 | $ | 5.03 | |||
Hypothetical* | $ | 1,000 | $ | 1,020.11 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for class A shares (0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
18 | Certified Annual Report |
INDEX COMPARISON | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg New York Intermediate Municipal Fund Class A Total Returns, versus
Merrill Lynch 7-12 Year Municipal Bond Index and Consumer Price Index
(September 30, 1997 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | ||||||||
A Shares (Incep: 9/5/97) | 1.20 | % | 2.84 | % | N/A | 4.06 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 9/5/97) | 3.79 | % | 2.90 | % | $ | 12.38 | $ | 12.63 |
Performance data reflect past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charge. Class A shares are sold with a maximum sales charge of 2.00%
The Consumer Price Index (“CPI”) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
The Merrill Lynch 7-12 Year Municipal Bond Index represents 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.
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 Net Asset Value (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.
Certified Annual Report | 19 |
TRUSTEES AND OFFICERS | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
20 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report | 21 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
22 | Certified Annual Report |
OTHER INFORMATION | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, 100% of dividends paid by the Fund are tax exempt dividends for Federal Income Tax purposes. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg New York Intermediate Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor on a range of matters, including (among other things) information respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time relative to different categories of mutual funds sharing certain comparable characteristics and selected by independent firms, and relative to a broad based securities index; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of
Certified Annual Report | 23 |
OTHER INFORMATION, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 (Unaudited) |
administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories, and in particular to broad based securities indices, may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectus, are unique or may vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully and competently pursue and achieve the Fund’s stated objectives, as indicated particularly by the Advisor’s selection of investments and the Fund’s investment returns. The Trustees also observed in conducting their evaluation the average or better performance of the Fund in recent years (and the improvement in the Fund’s investment performance from the preceding year) relative to two categories of mutual funds sharing characteristics comparable to the Fund and selected by independent mutual fund analyst firms, and measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectus. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, the Advisor’s waiver of fees, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of New York municipal debt mutual funds assembled by an independent mutual fun analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and compared the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted that while the Fund’s stated management fee was comparable to the median and average fee rates for the grouping of mutual funds assembled by an independent mutual fund analyst firm, the Advisor was waiving a portion of its management fee to the Fund, with the result that the actual management fee charged to the Fund was somewhat lower than the average and median fee rates for the same grouping of funds. The Trustees noted in this regard that the overall expense ratio of the Fund was higher to a small degree than the median expense ratio for the same grouping of funds, but lower to the same extent than the average of the same grouping of funds. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
24 | Certified Annual Report |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report. | 25 |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund Q Thornburg Value Fund Q Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
26 | This page is not part of the Annual Report. |
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This page is not part of the Annual Report. | 27 |
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’ re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
![]() | ![]() | |
119 East Marcy Street | 119 East Marcy Street | |
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |
800.847.0200 | 800.847.0200 |
Thornburg Limited Term Income Funds
Laddering – an All Weather Strategy
The Funds’ primary objectives are to obtain as high a level of current income as is consistent, in the view of the Funds’ investment advisor, with the safety of capital.As a secondary goal, the Funds seek to reduce changes in their share prices compared to longer term portfolios.
Thornburg Limited Term U.S. Government Fund – This Fund is a laddered portfolio of short/ intermediate obligations issued by the U.S. Government, its agencies or instrumentalities with an average maturity of five years or less.
Thornburg Limited Term Income Fund – This Fund is a laddered portfolio of short/intermediate investment grade obligations with an average maturity of five years or less.
Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year; cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder.The strategy is a good compromise for managing different types of risk.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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2 This page is not part of the Annual Report.
Message from the Chairman
Garrett Thornburg Chairman & CEO | November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We aspire to accomplish this through a family of laddered bond funds that focus on quality, stability, and minimization of risk over time, and through a range of equity funds that redefine traditional measures of value and growth.
Our bond funds have always been managed using the highly disciplined approach of laddering short and intermediate bond maturities, seeking to provide both an attractive return and stability of principal. This strategy is an all-weather strategy, designed to perform in uncertain markets like the ones we have seen in the last two years. Moreover, all of the bond funds focus on buying investment-grade securities. We have found this strategy to be the best at managing both interest-rate risk and credit risk, and we believe this strategy has served our shareholders well over time. | |
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers. | ||
Portfolio managers who have many years of experience manage the bond funds. We are proud of this consistency and experience and look forward to many more successful years with them at the helm. | ||
Thank you for investing with us. We will do our best to continue to earn your trust every day. | ||
Sincerely, | ||
![]() | ||
Garrett Thornburg | ||
Chairman & CEO |
This page is not part of the Annual Report. 3
Thornburg Limited Term Income Funds
September 30, 2006
Table of Contents
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 Certified Annual Report
Important Information
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
The maximum sales charge for Class A shares is 1.50%. Class B shares are sold with a contingent deferred sales charge (CDSC) that declines from 5.00% to 0% depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares include a 0.50% CDSC for the first year only. There is no up-front sales charge for Class R1 shares.
Performance data given at net asset value (NAV) does not take into account these sales charges. If the sales charges had been included, the performance would have been lower.
Shares in the Funds carry risks, including possible loss of principal. As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Shares in the Funds are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each Fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Glossary
The Lehman Brothers Intermediate Government/Credit Bond Index – An unmanaged, market-weighted index generally representative of intermediate government and investment-grade corporate debt securities having maturities of up to ten years.
The Lehman Brothers Intermediate Government Bond Index – 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.
Consumer Price Index (CPI) – Measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
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.
Duration – The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.
Basis Point – A unit for measuring a bond yield that is equal to 1/100th of a 1% yield.A 1% change =100 basis points (bps)
Certified Annual Report 5
Steve Bohlin Portfolio Manager | October 12, 2006
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund for the period ended September 30, 2006. The net asset value of a Class A shares of the Thornburg Limited Term U.S. Government Fund decreased 1 cent in the period to $12.75. If you were invested for the entire period, you received dividends of 36.9 cents per share. If you reinvested your dividends, you received 37.4 cents per share. Investors who owned Class C shares received 33.7 and 34.1 cents per share, respectively. The net asset value of a Class A shares of the Thornburg Limited Term Income Fund decreased 14 cents in the period to $12.37. If you were invested for the entire period, you received dividends of 50.0 cents per share. If you reinvested your dividends, you received 51.0 cents per share. Investors who owned Class C shares received 46.9 and 47.7 cents per share, respectively. Please read the accompanying exhibits for more detailed information and history. |
Interest rates on U.S. Treasuries were higher across the yield curve on September 30, 2006 than at September 30, 2005. There was a sustained rise in interest rates that started in January and continued through the end of June. Interest rates then generally declined from the end of June through the end of September. For example, the yield on a 5-year U.S. Treasury started at a low of 4.18% and reached a high of 5.23% before ending the period at 4.59% and the yield on a 10-year U.S. Treasury started at a low of 4.34% and reached a high of 5.25% before ending the period at 4.64%. Quality spreads (the additional yield on a corporate bond) rose through July before starting to fall in the last two months. Quality spreads on lower rated credits contracted through May before rising back to the original levels of September 2005.
Putting income and the change in price together, the Class A shares of the Thornburg Limited Term U.S. Government Fund produced a total return of 2.87% over the twelve-month period, assuming a beginning-of-the-period investment at the net asset value. The Lehman Intermediate Government Index produced a 3.54% total return over the same time period. The Class A shares of the Thornburg Limited Term Income Fund produced a total return of 2.96% over the twelve-month period, assuming a beginning-of-the-period investment at the net asset value. The Lehman Intermediate Government/Credit Index produced a 3.55% total return over the same time period. The Funds kept their durations shorter than the Indices during the period. Because the Funds kept their durations shorter and allocated a larger portion of their portfolios to short-term bonds, their returns fell short of the Indices in the fourth quarter of 2005, outperformed the Indices in the first and second quarter of 2006 when interest rates rose across the yield curve and underperformed the Indices in the third quarter of 2006 when interest rates fell. The Thornburg Limited Term Income Fund also had a lower percentage of Baa/BBB and lower rated bonds than the Lehman Intermediate Government/Credit Index (the Thornburg Limited Term Income Fund does not purchase bonds rated below investment grade). The Indices reflect no deductions for fees, expenses or taxes. We have kept our durations shorter than the Indices thus far in 2006, because we believe doing so will improve the Funds’ return relative to the Indices if interest rates rise further.
The Federal Open Market Committee has held the Fed Funds Rate steady at 5.25% for the last two meetings. While most of the talk from members of the Fed has focused on a greater worry of rising inflation rather than slower economic growth, the bond market has focused on the real estate market. The slowdown and pricing contraction of residential real estate have drawn headlines; the rest of the economy has grown steadily. The housing contraction is bound to subtract from GDP growth – maybe as much as 1% over the next few quarters –as construction jobs and sales of durable goods slow or contract. However, if people feel that the housing contraction affects them personally, they might save significantly more and spend significantly less. The question is whether it was personal income growth or mortgage equity withdrawal that fueled past personal spending. The
6 Certified Annual Report
growth in jobs and in wages goes a long way to explain the recent resilience of the U.S. consumer. With the U.S. consumer accounting for about two-thirds of GDP, a slowdown in consumption will be felt by the economy even though U.S. corporations are finally opening up their purse strings. Corporations are finally starting to make some capital outlays for plants and equipment, and, even though they have not been on a huge hiring binge, they have not been laying people off as much as some have expected. All of these things combined give the Fed hope that the economy will move along at somewhere near trend – not too fast, not too slow. The longer the economy stays at trend, the less likely an upsurge in inflation will happen. But with all aspects of the economy growing steadily (ex-housing) and wage growth accelerating, the Fed has rightly (in my opinion) focused on making sure that inflation drops lower and does not accelerate from its already higher than comfortable recent readings.
Part of the reason I feel the Fed needs to focus on inflation rather than the housing market is that the interest rate environment has not been restrictive. This housing contraction has been caused primarily by the pricing of housing rather than a contraction of credit availability. It is not a collapse in incomes and credit making housing unaffordable; the rapid rise in prices did the trick this time around. Even with the Fed raising short term rates 425 basis points, mortgage rates, corporate borrowing rates and personal borrowing rates have not become expensive. The combination of foreign purchases of U.S. dollar denominated debt and the increasing risk appetite from leveraged accounts have kept credit spreads and longer term rates lower than one would normally expect. While it is still possible for the housing slowdown to bleed into other parts of the economy, it still looks like corporate spending and, albeit slightly lower, consumer spending should keep GDP in positive territory. Hence, the Fed needs to focus on price stability (i.e. inflation). It is very possible that longer term rates need to rise from their current low levels.
Regardless of the direction of interest rates, we believe your Funds are well positioned. The Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund are laddered portfolios of short-to-intermediate bonds. 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.
Thank you for investing in our Funds. We feel 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.
Sincerely,
Steven J. Bohlin
Portfolio Manager
Certified Annual Report 7
STATEMENTS OF ASSETS AND LIABILITIES
| ||
Thornburg Limited Term Income Funds | September 30, 2006 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||||
ASSETS | ||||||||
Investments at value (cost $155,053,417 and $352,291,117, respectively) | $ | 151,082,258 | $ | 348,104,459 | ||||
Cash | 783,343 | 607,430 | ||||||
Receivable for investments sold | 0 | 110,000 | ||||||
Principal receivable | 4,186 | 0 | ||||||
Receivable for fund shares sold | 100,915 | 453,463 | ||||||
Interest receivable | 1,530,314 | 3,344,095 | ||||||
Prepaid expenses and other assets | 40,722 | 38,253 | ||||||
Total Assets | 153,541,738 | 352,657,700 | ||||||
LIABILITIES | ||||||||
Payable for fund shares redeemed | 290,343 | 2,230,793 | ||||||
Payable to investment advisor and other affiliates (Note 3) | 94,681 | 201,271 | ||||||
Accounts payable and accrued expenses | 55,244 | 69,070 | ||||||
Dividends payable | 89,706 | 258,813 | ||||||
Total Liabilities | 529,974 | 2,759,947 | ||||||
NET ASSETS | $ | 153,011,764 | $ | 349,897,753 | ||||
NET ASSETS CONSIST OF: | ||||||||
Undistributed net investment income | $ | 110,307 | $ | 111,720 | ||||
Net unrealized depreciation on investments | (3,971,159 | ) | (4,186,658 | ) | ||||
Accumulated net realized gain (loss) | (797,491 | ) | (3,844,831 | ) | ||||
Net capital paid in on shares of beneficial interest | 157,670,107 | 357,817,522 | ||||||
$ | 153,011,764 | $ | 349,897,753 | |||||
NET ASSET VALUE: | ||||||||
Class A Shares: | ||||||||
Net asset value and redemption price per share | $ | 12.75 | $ | 12.37 | ||||
Maximum sales charge, 1.50% of offering price | 0.19 | 0.19 | ||||||
Maximum offering price per share | $ | 12.94 | $ | 12.56 | ||||
Class B Shares: | ||||||||
Net asset value and offering price per share * | $ | 12.72 | $ | — | ||||
Class C Shares: | ||||||||
Net asset value and offering price per share * | $ | 12.83 | $ | 12.35 | ||||
8 Certified Annual Report
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||
Class I Shares: | ||||||
Net asset value, offering and redemption price per share | $ | 12.75 | $ | 12.37 | ||
Class R1 Shares: | ||||||
Net asset value, offering and redemption price per share | $ | 12.76 | $ | 12.38 | ||
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 9
STATEMENTS OF OPERATIONS | ||
Thornburg Limited Term Income Funds | Year Ended September 30, 2006 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||||
INVESTMENT INCOME: | ||||||||
Interest income (net of premium amortized of $1,443,765 and $1,073,273, respectively) | $ | 6,514,084 | $ | 17,953,667 | ||||
EXPENSES: | ||||||||
Investment advisory fees (Note 3) | 632,729 | 1,780,980 | ||||||
Administration fees (Note 3) | ||||||||
Class A Shares | 150,921 | 248,454 | ||||||
Class B Shares | 2,434 | 0 | ||||||
Class C Shares | 35,060 | 64,535 | ||||||
Class I Shares | 7,241 | 51,435 | ||||||
Class R1 Shares | 4,392 | 3,669 | ||||||
Distribution and service fees (Note 3) | ||||||||
Class A Shares | 301,842 | 496,908 | ||||||
Class B Shares | 19,539 | 0 | ||||||
Class C Shares | 279,192 | 514,410 | ||||||
Class R1 Shares | 17,589 | 14,706 | ||||||
Transfer agent fees | ||||||||
Class A Shares | 160,858 | 249,800 | ||||||
Class B Shares | 16,803 | 0 | ||||||
Class C Shares | 41,033 | 70,798 | ||||||
Class I Shares | 22,527 | 76,265 | ||||||
Class R1 Shares | 1,668 | 2,180 | ||||||
Registration and filing fees | ||||||||
Class A Shares | 18,178 | 26,352 | ||||||
Class B Shares | 14,493 | 0 | ||||||
Class C Shares | 14,243 | 16,914 | ||||||
Class I Shares | 14,714 | 17,459 | ||||||
Class R1 Shares | 14,285 | 15,026 | ||||||
Custodian fees (Note 3) | 78,390 | 112,183 | ||||||
Professional fees | 34,343 | 43,545 | ||||||
Accounting fees | 14,198 | 28,820 | ||||||
Trustee fees | 2,460 | 8,738 | ||||||
Other expenses | 33,151 | 72,787 | ||||||
Total Expenses | 1,932,283 | 3,915,964 | ||||||
Less: | ||||||||
Expenses reimbursed by investment advisor (Note 3) | (60,770 | ) | (305,743 | ) | ||||
Distribution and service fees waived (Note 3) | (139,596 | ) | (257,205 | ) | ||||
Fees paid indirectly (Note 3) | (55,074 | ) | (31,148 | ) | ||||
Net Expenses | 1,676,843 | 3,321,868 | ||||||
Net Investment Income | $ | 4,837,241 | $ | 14,631,799 | ||||
10 Certified Annual Report
STATEMENTS OF OPERATIONS, CONTINUED | ||
Thornburg Limited Term Income Funds | Year Ended September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||
Net realized gain (loss) on Investments sold | $ | (50,733 | ) | $ | (113,993 | ) | ||
Net change in unrealized appreciation (depreciation) on Investments | (360,311 | ) | (4,147,964 | ) | ||||
Net Realized and Unrealized Loss on Investments | (411,044 | ) | (4,261,957 | ) | ||||
Net Increase in Net Assets Resulting From Operations | $ | 4,426,197 | $ | 10,369,842 | ||||
See notes to financial statements.
Certified Annual Report 11
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,837,241 | $ | 5,154,187 | ||||
Net realized gain (loss) on investments | (50,733 | ) | 120,345 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (360,311 | ) | (4,003,893 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 4,426,197 | 1,270,639 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (3,504,156 | ) | (3,952,925 | ) | ||||
Class B Shares | (27,495 | ) | (25,128 | ) | ||||
Class C Shares | (737,598 | ) | (900,979 | ) | ||||
Class I Shares | (465,896 | ) | (443,663 | ) | ||||
Class R1 Shares | (102,096 | ) | (26,599 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (31,185,601 | ) | (22,152,201 | ) | ||||
Class B Shares | 594,525 | (476,721 | ) | |||||
Class C Shares | (7,610,351 | ) | (9,829,652 | ) | ||||
Class I Shares | (1,162,905 | ) | 3,482,340 | |||||
Class R1 Shares | 586,260 | 2,598,892 | ||||||
Net Decrease in Net Assets | (39,189,116 | ) | (30,455,997 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 192,200,880 | 222,656,877 | ||||||
End of year | $ | 153,011,764 | $ | 192,200,880 | ||||
Undistributed net investment income | $ | 110,307 | $ | 52,033 |
See notes to financial statements.
12 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Limited Term Income Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 14,631,799 | $ | 13,814,830 | ||||
Net realized gain (loss) on investments | (113,993 | ) | 33,259 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (4,147,964 | ) | (8,194,449 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 10,369,842 | 5,653,640 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (8,047,005 | ) | (8,546,058 | ) | ||||
Class C Shares | (1,957,921 | ) | (2,192,018 | ) | ||||
Class I Shares | (4,507,364 | ) | (3,797,631 | ) | ||||
Class R1 Shares | (119,509 | ) | (48,598 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (19,776,336 | ) | (12,086,746 | ) | ||||
Class C Shares | (14,283,087 | ) | (4,598,144 | ) | ||||
Class I Shares | 13,217,562 | 11,548,065 | ||||||
Class R1 Shares | 1,198,886 | 1,280,382 | ||||||
Net Decrease in Net Assets | (23,904,932 | ) | (12,787,108 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 373,802,685 | 386,589,793 | ||||||
End of year | $ | 349,897,753 | $ | 373,802,685 | ||||
Undistributed net investment income | $ | 111,720 | $ | 70,784 |
See notes to financial statements.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
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 ten series of shares of beneficial interest in addition to those of the Funds: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg New York Intermediate Municipal Fund, Thornburg Value Fund, Thornburg International Value Fund, Thornburg Core Growth Fund, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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’ primary objectives are to obtain as high a level of current income as is consistent, in the view of the Funds’ investment advisor, with the safety of capital. As a secondary goal, the Funds seek to reduce changes in their share price compared to longer term portfolios.
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 R1) 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 R1) shares. Each class of shares of a fund represents an interest in the same portfolio of investments, 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 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 R1 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 may have different reinvestment privileges and conversion rights. Additionally, each fund may allocate among its classes certain expenses, to the extent applicable 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. Class B shares of the Government Fund outstanding for eight years will convert to Class A shares of the Government Fund.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: The Trust determines the value of investments utilizing an independent pricing service approved by the Board of 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 p.m. EST. When quotations are not readily available, securities are valued at evaluated prices as determined by the pricing service using methods which include consideration of yields or prices of debt obligations of comparable quality, type of issue, coupon, maturity, and rating; and indications as to value from dealers and general market conditions. In any case where a price is not available from a pricing service for an investment, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the Trustees. 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 Board of Trustees. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Funds to the shareholders. Therefore, no provision for Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Funds’ investment objectives and not for the purpose of investment leverage or to speculate on interest rate and/or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Funds will record the transaction and reflect the value in determining each Fund’s net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the each 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 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
14 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
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. Paydown gains and losses on these securities are included in interest income. 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.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
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, 2006, these fees were payable at annual rates ranging from .375 of 1% to .275 of 1% per annum of the average daily net assets of the Government Fund and .50 of 1% to .275 of 1% per annum of the average daily net assets of the Income Fund depending on each Fund’s asset size. The Trust also has 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% per annum of the average daily net assets attributable to Class A, Class B, Class C, and Class R1 shares, and up to .05 of 1% per annum of the average daily net assets attributable to Class I shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $5,826, $13,533, $8,297, $13,881, and $19,233 for the Class A, B, C, I, and R1 shares, respectively, of the Government Fund and $178,700, $61,940, $41,972, and $23,131 for the Class A, C, I, and R1 shares, respectively, of the Income Fund.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the distributor of each Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Funds that they earned net commissions aggregating $1,667 from the sale of Class A shares of the Income Fund, and collected contingent deferred sales charges aggregating $1,678 and $2,956 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 R1 shares of the Funds for payments made by the Advisor to securities dealers and other financial institutions to obtain various shareholder and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of each Fund’s shares.
The Trust has also adopted Distribution Plans pursuant to Rule 12b-1, applicable to each Fund’s Class B, Class C, and Class R1 shares under which the Funds compensate the Distributor for services in promoting the sale of Class B, C, and R1 shares of the
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
Funds at an annual rate of up to .75 of 1% per annum 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, 2006, are set forth in the Statements of Operations. Distribution fees of $139,596 and $257,205, respectively, for Class C shares of the Government Fund and Income Fund were waived.
The Trust has 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 Statement of Operations. For the year ended September 30, 2006, fees paid indirectly were $55,074 for the Government Fund and $31,148 for the Income Fund. These figures may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
GOVERNMENT FUND
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 1,127,442 | $ | 14,273,031 | 2,243,592 | $ | 28,913,349 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 210,223 | 2,662,638 | 230,485 | 2,966,058 | ||||||||||
Shares repurchased | (3,799,025 | ) | (48,121,270 | ) | (4,195,950 | ) | (54,031,608 | ) | ||||||
Net Increase (Decrease) | (2,461,360 | ) | $ | (31,185,601 | ) | (1,721,873 | ) | $ | (22,152,201 | ) | ||||
Class B Shares | ||||||||||||||
Shares sold | 85,374 | $ | 1,076,317 | 36,434 | $ | 470,166 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,620 | 20,478 | 1,423 | 18,270 | ||||||||||
Shares repurchased | (39,667 | ) | (502,270 | ) | (75,180 | ) | (965,157 | ) | ||||||
Net Increase (Decrease) | 47,327 | $ | 594,525 | (37,323 | ) | $ | (476,721 | ) | ||||||
Class C Shares | ||||||||||||||
Shares sold | 435,047 | $ | 5,539,917 | 353,641 | $ | 4,581,667 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 44,361 | 565,288 | 51,902 | 671,957 | ||||||||||
Shares repurchased | (1,076,447 | ) | (13,715,556 | ) | (1,165,115 | ) | (15,083,276 | ) | ||||||
Net Increase (Decrease) | (597,039 | ) | $ | (7,610,351 | ) | (759,572 | ) | $ | (9,829,652 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 284,094 | $ | 3,589,619 | 560,384 | $ | 7,250,216 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 31,981 | 405,096 | 30,104 | 387,218 | ||||||||||
Shares repurchased | (407,147 | ) | (5,157,620 | ) | (322,906 | ) | (4,155,094 | ) | ||||||
Net Increase (Decrease) | (91,072 | ) | $ | (1,162,905 | ) | 267,582 | $ | 3,482,340 | ||||||
Class R1 Shares | ||||||||||||||
Shares sold | 146,432 | $ | 1,860,958 | 225,835 | $ | 2,890,863 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 7,844 | 99,399 | 1,901 | 24,425 | ||||||||||
Shares repurchased | (108,414 | ) | (1,374,097 | ) | (24,563 | ) | (316,396 | ) | ||||||
Net Increase (Decrease) | 45,862 | $ | 586,260 | 203,173 | $ | 2,598,892 | ||||||||
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
INCOME FUND
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 3,250,026 | $ | 40,085,247 | 4,512,773 | $ | 57,228,284 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 494,039 | 6,098,155 | 493,348 | 6,244,437 | ||||||||||
Shares repurchased | (5,340,874 | ) | (65,959,738 | ) | (5,976,128 | ) | (75,559,467 | ) | ||||||
Net Increase (Decrease) | (1,596,809 | ) | $ | (19,776,336 | ) | (970,007 | ) | $ | (12,086,746 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 563,413 | $ | 6,944,987 | 996,231 | $ | 12,608,384 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 108,235 | 1,333,999 | 119,269 | 1,507,204 | ||||||||||
Shares repurchased | (1,830,119 | ) | (22,562,073 | ) | (1,480,457 | ) | (18,713,732 | ) | ||||||
Net Increase (Decrease) | (1,158,471 | ) | $ | (14,283,087 | ) | (364,957 | ) | $ | (4,598,144 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 2,696,403 | $ | 33,258,881 | 2,722,997 | $ | 34,485,958 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 334,633 | 4,129,810 | 272,125 | 3,443,839 | ||||||||||
Shares repurchased | (1,956,476 | ) | (24,171,129 | ) | (2,083,269 | ) | (26,381,732 | ) | ||||||
Net Increase (Decrease) | 1,074,560 | $ | 13,217,562 | 911,853 | $ | 11,548,065 | ||||||||
Class R1 Shares | ||||||||||||||
Shares sold | 143,837 | $ | 1,782,628 | 117,357 | $ | 1,481,761 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 7,699 | 95,044 | 2,363 | 29,836 | ||||||||||
Shares repurchased | (54,991 | ) | (678,786 | ) | (18,214 | ) | (231,215 | ) | ||||||
Net Increase (Decrease) | 96,545 | $ | 1,198,886 | 101,506 | $ | 1,280,382 | ||||||||
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Government Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $12,133,966 and $40,493,528, respectively, while the Income Fund had purchase and sale transactions of investment securities (excluding short-term investments and U.S. Government obligations) of $22,786,354 and $33,278,245, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Government Fund | Income Fund | |||||||
Cost of investments for tax purpose | $ | 155,053,417 | $ | 352,297,916 | ||||
Gross unrealized appreciation on a tax basis | $ | 218,879 | $ | 1,955,726 | ||||
Gross unrealized depreciation on a tax basis | (4,190,038 | ) | (6,149,183 | ) | ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (3,971,159 | ) | $ | (4,193,457 | ) | ||
Distributable earnings ordinary income | $ | 110,307 | $ | 111,720 | ||||
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
At September 30, 2006, the Government Fund had tax basis losses, which may be carried over to offset future capital gains. Such capital loss carryovers expire as follows:
2009 | $ | 674,873 | |
2010 | 13,611 | ||
2014 | 3,770 | ||
$ | 692,254 | ||
At September 30, 2006, the Income Fund had tax basis capital losses, which may be carried over to offset future capital gains. Such capital loss carryovers expire as follows:
2008 | $ | 497,824 | |
2009 | 650,941 | ||
2010 | 308,333 | ||
2013 | 1,625,980 | ||
2014 | 601,391 | ||
$ | 3,684,469 | ||
As of September 30, 2006, the Government Fund had deferred capital losses occurring subsequent to October 31, 2005 of $105,237. For tax purposes, such losses will be reflected in the year ending September 30, 2007. 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.
As of September 30, 2006, the Income Fund had deferred capital losses occurring subsequent to October 31, 2005 of $153,563. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
In order to account for book/tax differences, the Government Fund increased undistributed net investment income (loss) by $58,274 and increased accumulated net realized (loss) by $58,274. The Income Fund increased undistributed net investment income by $40,936 and increased accumulated net realized loss by $40,936. This reclass has no impact on the net asset value of the Fund. Reclassifications result primarily from paydown gains and losses, which are recorded as an adjustment to interest income in the financial statements and as realized gains in the tax returns.
For tax purposes, distributions for the year ended September 30, 2006 and September 30, 2005, were paid from ordinary income.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including each of the Funds, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Funds and is not in a position at this time to estimate the significance of its impact, if any, on the Funds’ financial statements.
18 Certified Annual Report
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.76 | $ | 13.01 | $ | 13.23 | $ | 13.27 | $ | 12.77 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.37 | 0.32 | 0.35 | 0.47 | 0.58 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.01 | ) | (0.24 | ) | (0.22 | ) | (0.04 | ) | 0.50 | |||||||||||
Total from investment operations | 0.36 | 0.08 | 0.13 | 0.43 | 1.08 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.37 | ) | (0.33 | ) | (0.35 | ) | (0.47 | ) | (0.58 | ) | ||||||||||
Change in net asset value | (0.01 | ) | (0.25 | ) | (0.22 | ) | (0.04 | ) | 0.50 | |||||||||||
NET ASSET VALUE, end of year | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.23 | $ | 13.27 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 2.87 | % | 0.66 | % | 1.04 | % | 3.29 | % | 8.75 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 2.90 | % | 2.50 | % | 2.72 | % | 3.53 | % | 4.53 | % | ||||||||||
Expenses, after expense reductions | 0.99 | % | 0.99 | % | 0.92 | % | 0.92 | % | 0.93 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.96 | % | 0.98 | % | 0.91 | % | 0.90 | % | 0.92 | % | ||||||||||
Expenses, before expense reductions | 0.99 | % | 0.99 | % | 0.92 | % | 0.92 | % | 0.93 | % | ||||||||||
Portfolio turnover rate | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | 4.34 | % | ||||||||||
Net assets at end of year (000) | $ | 106,913 | $ | 138,422 | $ | 163,530 | $ | 176,876 | $ | 155,864 |
(a) | Sales loads are not reflected in computing total return. |
Certified Annual Report 19
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, | Period Ended September 30, 2003(c) | |||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||
Class B Shares: | ||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period) | ||||||||||||||||
Net asset value, beginning of period | $ | 12.73 | $ | 12.98 | $ | 13.22 | $ | 13.12 | ||||||||
Income from investment operations | ||||||||||||||||
Net investment income | 0.18 | 0.13 | 0.21 | 0.37 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.01 | ) | (0.24 | ) | (0.24 | ) | 0.10 | |||||||||
Total from investment operations | 0.17 | (0.11 | ) | (0.03 | ) | 0.47 | ||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.18 | ) | (0.14 | ) | (0.21 | ) | (0.37 | ) | ||||||||
Change in net asset value | (0.01 | ) | (0.25 | ) | (0.24 | ) | 0.10 | |||||||||
NET ASSET VALUE, end of period | $ | 12.72 | $ | 12.73 | $ | 12.98 | $ | 13.22 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 1.32 | % | (0.82 | )% | (0.24 | )% | 3.60 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income | 1.41 | % | 1.03 | % | 1.65 | % | 2.93 | %(b) | ||||||||
Expenses, after expense reductions | 2.51 | % | 2.46 | % | 1.99 | % | 1.35 | %(b) | ||||||||
Expenses, after expense reductions and net of custody credits | 2.48 | % | 2.45 | % | 1.99 | % | 1.33 | %(b) | ||||||||
Expenses, before expense reductions | 3.21 | % | 2.86 | % | 2.74 | % | 3.32 | %(b) | ||||||||
Portfolio turnover rate | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | ||||||||
Net assets at end of period (000) | $ | 2,476 | $ | 1,875 | $ | 2,396 | $ | 3,073 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class B Shares was November 1, 2002. |
20 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.84 | $ | 13.09 | $ | 13.31 | $ | 13.35 | $ | 12.85 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.34 | 0.29 | 0.31 | 0.43 | 0.54 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.01 | ) | (0.24 | ) | (0.22 | ) | (0.04 | ) | 0.50 | |||||||||||
Total from investment operations | 0.33 | 0.05 | 0.09 | 0.39 | 1.04 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.34 | ) | (0.30 | ) | (0.31 | ) | (0.43 | ) | (0.54 | ) | ||||||||||
Change in net asset value | (0.01 | ) | (0.25 | ) | (0.22 | ) | (0.04 | ) | 0.50 | |||||||||||
NET ASSET VALUE, end of year | $ | 12.83 | $ | 12.84 | $ | 13.09 | $ | 13.31 | $ | 13.35 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 2.60 | % | 0.41 | % | 0.73 | % | 2.96 | % | 8.33 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 2.63 | % | 2.24 | % | 2.40 | % | 3.14 | % | 4.13 | % | ||||||||||
Expenses, after expense reductions | 1.26 | % | 1.25 | % | 1.24 | % | 1.24 | % | 1.28 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.23 | % | 1.24 | % | 1.24 | % | 1.22 | % | 1.27 | % | ||||||||||
Expenses, before expense reductions | 1.79 | % | 1.79 | % | 1.76 | % | 1.76 | % | 1.78 | % | ||||||||||
Portfolio turnover rate | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | 4.34 | % | ||||||||||
Net assets at end of year (000) | $ | 25,132 | $ | 32,821 | $ | 43,404 | $ | 56,166 | $ | 30,587 |
Certified Annual Report 21
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.76 | $ | 13.01 | $ | 13.22 | $ | 13.27 | $ | 12.77 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.41 | 0.36 | 0.39 | 0.51 | 0.62 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.01 | ) | (0.24 | ) | (0.21 | ) | (0.05 | ) | 0.50 | |||||||||||
Total from investment operations | 0.40 | 0.12 | 0.18 | 0.46 | 1.12 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.41 | ) | (0.37 | ) | (0.39 | ) | (0.51 | ) | (0.62 | ) | ||||||||||
Change in net asset value | (0.01 | ) | (0.25 | ) | (0.21 | ) | (0.05 | ) | 0.50 | |||||||||||
NET ASSET VALUE, end of year | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.22 | $ | 13.27 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 3.19 | % | 0.95 | % | 1.37 | % | 3.51 | % | 9.11 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.22 | % | 2.82 | % | 2.95 | % | 3.77 | % | 4.86 | % | ||||||||||
Expenses, after expense reductions | 0.68 | % | 0.68 | % | 0.67 | % | 0.64 | % | 0.61 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.65 | % | 0.67 | % | 0.67 | % | 0.62 | % | 0.60 | % | ||||||||||
Expenses, before expense reductions | 0.78 | % | 0.80 | % | 0.77 | % | 0.82 | % | 1.04 | % | ||||||||||
Portfolio turnover rate | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | 4.34 | % | ||||||||||
Net assets at end of year (000) | $ | 14,900 | $ | 16,075 | $ | 12,905 | $ | 13,085 | $ | 6,960 |
22 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, | Period Ended September 30, 2003(c) | |||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||
Class R1 Shares: | ||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period) | ||||||||||||||||
Net asset value, beginning of period | $ | 12.77 | $ | 13.02 | $ | 13.23 | $ | 13.38 | ||||||||
Income from investment operations | ||||||||||||||||
Net investment income | 0.37 | 0.34 | 0.37 | 0.17 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.01 | ) | (0.25 | ) | (0.21 | ) | (0.15 | ) | ||||||||
Total from investment operations | 0.36 | 0.09 | 0.16 | 0.02 | ||||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.37 | ) | (0.34 | ) | (0.37 | ) | (0.17 | ) | ||||||||
Change in net asset value | (0.01 | ) | (0.25 | ) | (0.21 | ) | (0.15 | ) | ||||||||
NET ASSET VALUE, end of period | $ | 12.76 | $ | 12.77 | $ | 13.02 | $ | 13.23 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 2.86 | % | 0.72 | % | 1.26 | % | 0.19 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income | 2.90 | % | 2.66 | % | 2.62 | % | 5.07 | %(b) | ||||||||
Expenses, after expense reductions | 1.00 | % | 0.93 | % | 0.91 | % | 1.15 | %(b) | ||||||||
Expenses, after expense reductions and net of custody credits | 0.97 | % | 0.91 | % | 0.91 | % | 1.15 | %(b) | ||||||||
Expenses, before expense reductions | 1.55 | % | 3.55 | % | 13.56 | % | 41,652.81 | %(b)* | ||||||||
Portfolio turnover rate | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | ||||||||
Net assets at end of period (000) | $ | 3,591 | $ | 3,008 | $ | 422 | $ | — | (d) |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R1 Shares was July 1, 2003. |
(d) | Net assets at end of period were less than $1,000. |
* | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
Certified Annual Report 23
FINANCIAL HIGHLIGHTS
Thornburg Limited Term Income Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.51 | $ | 12.80 | $ | 12.99 | $ | 12.79 | $ | 12.55 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.50 | 0.46 | 0.43 | 0.51 | 0.61 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.28 | ) | (0.19 | ) | 0.20 | 0.24 | ||||||||||||
Total from investment operations | 0.36 | 0.18 | 0.24 | 0.71 | 0.85 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.50 | ) | (0.47 | ) | (0.43 | ) | (0.51 | ) | (0.61 | ) | ||||||||||
Change in net asset value | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | 0.24 | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | $ | 12.79 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 2.96 | % | 1.44 | % | 1.96 | % | 5.56 | % | 7.05 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.05 | % | 3.52 | % | 3.33 | % | 3.91 | % | 4.88 | % | ||||||||||
Expenses, after expense reductions | 1.00 | % | 1.00 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, before expense reductions | 1.09 | % | 1.09 | % | 1.07 | % | 1.04 | % | 1.10 | % | ||||||||||
Portfolio turnover rate | 6.77 | % | 23.16 | % | 22.73 | % | 18.86 | % | 21.63 | % | ||||||||||
Net assets at end of year (000) | $ | 190,670 | $ | 212,881 | $ | 230,256 | $ | 184,497 | $ | 104,710 |
(a) | Sales loads are not reflected in computing total return. |
24 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term Income Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.49 | $ | 12.78 | $ | 12.97 | $ | 12.77 | $ | 12.53 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.47 | 0.43 | 0.40 | 0.46 | 0.56 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.28 | ) | (0.19 | ) | 0.20 | 0.24 | ||||||||||||
Total from investment operations | 0.33 | 0.15 | 0.21 | 0.66 | 0.80 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.47 | ) | (0.44 | ) | (0.40 | ) | (0.46 | ) | (0.56 | ) | ||||||||||
Change in net asset value | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | 0.24 | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.35 | $ | 12.49 | $ | 12.78 | $ | 12.97 | $ | 12.77 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 2.71 | % | 1.19 | % | 1.70 | % | 5.20 | % | 6.63 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.79 | % | 3.27 | % | 3.07 | % | 3.56 | % | 4.45 | % | ||||||||||
Expenses, after expense reductions | 1.25 | % | 1.25 | % | 1.25 | % | 1.33 | % | 1.39 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.24 | % | 1.24 | % | 1.24 | % | 1.33 | % | 1.39 | % | ||||||||||
Expenses, before expense reductions | 1.87 | % | 1.88 | % | 1.87 | % | 1.92 | % | 1.93 | % | ||||||||||
Portfolio turnover rate | 6.77 | % | 23.16 | % | 22.73 | % | 18.86 | % | 21.63 | % | ||||||||||
Net assets at end of year (000) | $ | 44,361 | $ | 59,355 | $ | 65,398 | $ | 54,926 | $ | 30,258 |
Certified Annual Report 25
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term Income Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.51 | $ | 12.80 | $ | 12.99 | $ | 12.79 | $ | 12.55 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.54 | 0.51 | 0.47 | 0.55 | 0.65 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | 0.24 | ||||||||||||
Total from investment operations | 0.40 | 0.22 | 0.28 | 0.75 | 0.89 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.54 | ) | (0.51 | ) | (0.47 | ) | (0.55 | ) | (0.65 | ) | ||||||||||
Change in net asset value | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | 0.24 | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | $ | 12.79 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 3.30 | % | 1.77 | % | 2.29 | % | 5.89 | % | 7.38 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.38 | % | 3.85 | % | 3.64 | % | 4.23 | % | 5.19 | % | ||||||||||
Expenses, after expense reductions | 0.68 | % | 0.67 | % | 0.67 | % | 0.69 | % | 0.69 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.67 | % | 0.67 | % | 0.67 | % | 0.69 | % | 0.69 | % | ||||||||||
Expenses, before expense reductions | 0.72 | % | 0.72 | % | 0.72 | % | 0.76 | % | 0.78 | % | ||||||||||
Portfolio turnover rate | 6.77 | % | 23.16 | % | 22.73 | % | 18.86 | % | 21.63 | % | ||||||||||
Net assets at end of year (000) | $ | 111,535 | $ | 99,396 | $ | 90,025 | $ | 59,473 | $ | 39,281 |
26 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term Income Fund
Year Ended September 30, | Period Ended September 30, 2003(c) | |||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||
Class R1 Shares: | ||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period) | ||||||||||||||||
Net asset value, beginning of period | $ | 12.52 | $ | 12.81 | $ | 12.99 | $ | 13.10 | ||||||||
Income from investment operations | ||||||||||||||||
Net investment income | 0.50 | 0.48 | 0.45 | 0.17 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.30 | ) | (0.18 | ) | (0.11 | ) | ||||||||
Total from investment operations | 0.36 | 0.18 | 0.27 | 0.06 | ||||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.50 | ) | (0.47 | ) | (0.45 | ) | (0.17 | ) | ||||||||
Change in net asset value | (0.14 | ) | (0.29 | ) | (0.18 | ) | (0.11 | ) | ||||||||
NET ASSET VALUE, end of period | $ | 12.38 | $ | 12.52 | $ | 12.81 | $ | 12.99 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 2.97 | % | 1.43 | % | 2.14 | % | 0.48 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income | 4.07 | % | 3.57 | % | 3.41 | % | 5.19 | %(b) | ||||||||
Expenses, after expense reductions | 1.00 | % | 1.00 | % | 0.98 | % | 1.25 | %(b) | ||||||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.99 | % | 0.98 | % | 1.25 | %(b) | ||||||||
Expenses, before expense reductions | 1.79 | % | 3.15 | % | 7.63 | % | 41,534.94 | %(b)* | ||||||||
Portfolio turnover rate | 6.77 | % | 23.16 | % | 22.73 | % | 18.86 | % | ||||||||
Net assets at end of period (000) | $ | 3,331 | $ | 2,162 | $ | 911 | $ | — | (d) |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R1 Shares was July 1, 2003. |
(d) | Net assets at end of period were less than $1,000. |
* | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2006 |
CUSIPS: Class A - 885-215-103, CLASS B - 885-215-848, CLASS C - 885-215-830, CLASS I - 885-215-699, CLASS R1 - 885-215-491
NASDAQ SYMBOLS: CLASS A - LTUSX, CLASS B - LTUBX, CLASS C - LTUCX, CLASS I - LTUIX, CLASS R1 - LTURX
Issuer-Description | Principal Amount | Value | ||||
U.S.Treasury Securities — 44.59% | ||||||
United States Treasury Notes, 4.375% due 5/15/2007 | $ | 9,000,000 | $ | 8,966,250 | ||
United States Treasury Notes, 6.125% due 8/15/2007 | 4,000,000 | 4,038,750 | ||||
United States Treasury Notes, 2.625% due 5/15/2008 | 9,000,000 | 8,704,688 | ||||
United States Treasury Notes, 5.50% due 5/15/2009 | 10,000,000 | 10,217,188 | ||||
United States Treasury Notes, 6.50% due 2/15/2010 | 15,000,000 | 15,874,218 | ||||
United States Treasury Notes, 5.75% due 8/15/2010 | 6,000,000 | 6,242,813 | ||||
United States Treasury Notes, 3.625% due 5/15/2013 | 15,000,000 | 14,177,343 | ||||
TOTAL U.S.TREASURY SECURITIES (Cost $ 71,173,027) | 68,221,250 | |||||
U.S. Government Agencies — 50.56% | ||||||
Federal Agricultural Mtg Corp., 6.71% due 7/28/2014 | 200,000 | 221,637 | ||||
Federal Farm Credit Bank, 1.875% due 1/16/2007 | 4,650,000 | 4,602,613 | ||||
Federal Farm Credit Bank, 5.875% due 7/28/2008 | 1,900,000 | 1,927,312 | ||||
Federal Farm Credit Bank, 5.87% due 9/2/2008 | 1,300,000 | 1,319,530 | ||||
Federal Farm Credit Bank, 5.35% due 12/11/2008 | 200,000 | 201,398 | ||||
Federal Farm Credit Bank, 5.80% due 3/19/2009 | 300,000 | 305,509 | ||||
Federal Farm Credit Bank, 6.75% due 7/7/2009 | 350,000 | 365,536 | ||||
Federal Farm Credit Bank, 6.06% due 5/28/2013 | 240,000 | 254,366 | ||||
Federal Home Loan Bank, 3.05% due 10/12/2006 | 3,975,000 | 3,972,114 | ||||
Federal Home Loan Bank, 7.76% due 11/21/2006 | 200,000 | 200,695 | ||||
Federal Home Loan Bank, 7.00% due 2/15/2008 | 150,000 | 153,610 | ||||
Federal Home Loan Bank, 5.48% due 1/8/2009 | 1,250,000 | 1,262,313 | ||||
Federal Home Loan Bank, 5.985% due 4/9/2009 | 1,000,000 | 1,022,972 | ||||
Federal Home Loan Bank, 5.79% due 4/27/2009 | 200,000 | 203,747 | ||||
Federal Home Loan Bank, 5.125% due 4/29/2009 | 1,750,000 | 1,755,028 | ||||
Federal Home Loan Bank, 3.40% due 11/12/2010 | 2,750,000 | 2,689,392 | ||||
Federal Home Loan Bank Floating Rate Note, 4.58% due 2/22/2007 | 5,000,000 | 4,994,505 | ||||
Federal Home Loan Mtg Corp., 6.80% due 3/19/2007 | 300,000 | 302,037 | ||||
Federal Home Loan Mtg Corp. CMO Series 1616 Class E, 6.50% due 11/15/2008 | 1,098,652 | 1,104,529 | ||||
Federal Home Loan Mtg Corp. CMO Series 2592 Class PD, 5.00% due 7/15/2014 | 1,000,000 | 997,230 | ||||
Federal Home Loan Mtg Corp. CMO Series 2814 Class GB, 5.00% due 6/15/2019 | 1,327,829 | 1,298,136 | ||||
Federal Home Loan Mtg Corp. CMO Series 2821 Class YI, 5.50% due 9/15/2014 | 670,983 | 669,674 | ||||
Federal Home Loan Mtg Corp., Pool # 141016, 9.25% due 11/1/2016 | 21,852 | 23,850 | ||||
Federal Home Loan Mtg Corp., Pool # 141412, 8.50% due 4/1/2017 | 71,270 | 75,751 | ||||
Federal Home Loan Mtg Corp., Pool # 160043, 8.75% due 4/1/2008 | 4,586 | 4,613 | ||||
Federal Home Loan Mtg Corp., Pool # 181730, 8.50% due 5/1/2008 | 4,935 | 4,977 | ||||
Federal Home Loan Mtg Corp., Pool # 252986, 10.75% due 4/1/2010 | 20,102 | 21,265 | ||||
Federal Home Loan Mtg Corp., Pool # 256764, 8.75% due 10/1/2014 | 2,453 | 2,459 | ||||
Federal Home Loan Mtg Corp., Pool # 273822, 8.50% due 4/1/2009 | 2,265 | 2,267 | ||||
Federal Home Loan Mtg Corp., Pool # 298107, 10.25% due 8/1/2017 | 26,407 | 29,821 | ||||
Federal Home Loan Mtg Corp., Pool # C90041, 6.50% due 11/1/2013 | 40,421 | 41,316 | ||||
Federal Home Loan Mtg Corp., Pool # D06908, 9.50% due 9/1/2017 | 5,327 | 5,481 | ||||
Federal Home Loan Mtg Corp., Pool # D37120, 7.00% due 7/1/2023 | 47,282 | 48,979 | ||||
Federal Home Loan Mtg Corp., Pool # E00170, 8.00% due 7/1/2007 | 12,051 | 12,118 | ||||
Federal Home Loan Mtg Corp., Pool # E49074, 6.50% due 7/1/2008 | 12,407 | 12,659 | ||||
Federal Home Loan Mtg Corp., Pool # E61778, 6.50% due 4/1/2008 | 14,516 | 14,811 | ||||
Federal National Mtg Assoc, 5.125% due 12/8/2008 | 3,665,000 | 3,673,609 |
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2006 |
Issuer-Description | Principal Amount | Value | ||||
Federal National Mtg Assoc, 4.25% due 6/29/2012 | $ | 3,250,000 | $ | 3,210,805 | ||
Federal National Mtg Assoc CMO Series 1992-22 Class HC, 7.00% due 3/25/2007 | 20,184 | 20,190 | ||||
Federal National Mtg Assoc CMO Series 1993-101 Class PJ, 7.00% due 6/25/2008 | 246,404 | 247,596 | ||||
Federal National Mtg Assoc CMO Series 1993-122 Class D, 6.50% due 6/25/2023 | 96,289 | 96,761 | ||||
Federal National Mtg Assoc CMO Series 1993-32 Class H, 6.00% due 3/25/2023 | 135,149 | 136,060 | ||||
Federal National Mtg Assoc CPI Floating Rate Note, 5.459% due 2/17/2009 | 3,000,000 | 2,910,180 | ||||
Federal National Mtg Assoc Remic Series 2006-B1 Class AB, 6.00% due 6/25/2016 | 4,710,884 | 4,737,596 | ||||
Federal National Mtg Assoc, Pool # 008307, 8.00% due 5/1/2008 | 26,275 | 26,489 | ||||
Federal National Mtg Assoc, Pool # 044003, 8.00% due 6/1/2017 | 43,930 | 46,346 | ||||
Federal National Mtg Assoc, Pool # 050811, 7.50% due 12/1/2012 | 38,579 | 40,007 | ||||
Federal National Mtg Assoc, Pool # 050832, 7.50% due 6/1/2013 | 50,263 | 52,008 | ||||
Federal National Mtg Assoc, Pool # 076388, 9.25% due 9/1/2018 | 73,674 | 80,229 | ||||
Federal National Mtg Assoc, Pool # 077725, 9.75% due 10/1/2018 | 16,610 | 17,168 | ||||
Federal National Mtg Assoc, Pool # 100286, 7.50% due 8/1/2009 | 87,563 | 88,735 | ||||
Federal National Mtg Assoc, Pool # 112067, 9.50% due 10/1/2016 | 51,387 | 56,277 | ||||
Federal National Mtg Assoc, Pool # 156156, 8.50% due 4/1/2021 | 36,559 | 37,856 | ||||
Federal National Mtg Assoc, Pool # 190555, 7.00% due 1/1/2014 | 34,920 | 36,062 | ||||
Federal National Mtg Assoc, Pool # 190703, 7.00% due 3/1/2009 | 18,659 | 18,817 | ||||
Federal National Mtg Assoc, Pool # 190836, 7.00% due 6/1/2009 | 47,583 | 48,085 | ||||
Federal National Mtg Assoc, Pool # 250387, 7.00% due 11/1/2010 | 49,050 | 50,039 | ||||
Federal National Mtg Assoc, Pool # 250481, 6.50% due 11/1/2015 | 5,330 | 5,412 | ||||
Federal National Mtg Assoc, Pool # 251258, 7.00% due 9/1/2007 | 11,274 | 11,291 | ||||
Federal National Mtg Assoc, Pool # 251759, 6.00% due 5/1/2013 | 80,467 | 81,696 | ||||
Federal National Mtg Assoc, Pool # 252648, 6.50% due 5/1/2022 | 162,188 | 166,243 | ||||
Federal National Mtg Assoc, Pool # 303383, 7.00% due 12/1/2009 | 28,907 | 29,106 | ||||
Federal National Mtg Assoc, Pool # 312663, 7.50% due 6/1/2010 | 46,456 | 47,500 | ||||
Federal National Mtg Assoc, Pool # 323706, 7.00% due 2/1/2009 | 51,243 | 51,568 | ||||
Federal National Mtg Assoc, Pool # 334996, 7.00% due 2/1/2011 | 53,827 | 54,937 | ||||
Federal National Mtg Assoc, Pool # 342947, 7.25% due 4/1/2024 | 336,144 | 349,229 | ||||
Federal National Mtg Assoc, Pool # 345775, 8.50% due 12/1/2024 | 32,886 | 33,759 | ||||
Federal National Mtg Assoc, Pool # 373942, 6.50% due 12/1/2008 | 24,658 | 25,189 | ||||
Federal National Mtg Assoc, Pool # 382926, 7.37% due 12/1/2010 | 333,129 | 346,950 | ||||
Federal National Mtg Assoc, Pool # 384243, 6.10% due 10/1/2011 | 609,522 | 621,394 | ||||
Federal National Mtg Assoc, Pool # 384746, 5.86% due 2/1/2009 | 1,041,825 | 1,056,567 | ||||
Federal National Mtg Assoc, Pool # 385714, 4.70% due 1/1/2010 | 3,131,355 | 3,092,250 | ||||
Federal National Mtg Assoc, Pool # 406384, 8.25% due 12/1/2024 | 178,363 | 188,302 | ||||
Federal National Mtg Assoc, Pool # 443909, 6.50% due 9/1/2018 | 196,366 | 202,455 | ||||
Federal National Mtg Assoc, Pool # 460568, 5.20% due 12/1/2006 | 3,500,000 | 3,486,366 | ||||
Federal National Mtg Assoc, Pool # 516363, 5.00% due 3/1/2014 | 168,214 | 166,243 | ||||
Federal National Mtg Assoc, Pool # 555207, 7.00% due 11/1/2017 | 82,558 | 84,458 | ||||
Government National Mtg Assoc CMO Series 2001-65 Class PG, 6.00% due 7/20/2028 | 602,370 | 600,240 | ||||
Government National Mtg Assoc CMO Series 2002-67 Class VA, 6.00% due 3/20/2013 | 261,981 | 260,351 | ||||
Government National Mtg Assoc, Pool # 000623, 8.00% due 9/20/2016 | 58,388 | 61,329 | ||||
Government National Mtg Assoc, Pool # 016944, 7.50% due 5/15/2007 | 12,641 | 12,653 | ||||
Government National Mtg Assoc, Pool # 369693, 7.00% due 1/15/2009 | 60,706 | 61,312 | ||||
Government National Mtg Assoc, Pool # 409921, 7.50% due 8/15/2010 | 28,504 | 29,160 | ||||
Government National Mtg Assoc, Pool # 410240, 7.00% due 12/15/2010 | 37,859 | 38,575 | ||||
Government National Mtg Assoc, Pool # 410271, 7.50% due 8/15/2010 | 34,661 | 35,527 | ||||
Government National Mtg Assoc, Pool # 410846, 7.00% due 12/15/2010 | 56,518 | 57,628 | ||||
Government National Mtg Assoc, Pool # 430150, 7.25% due 12/15/2026 | 31,154 | 32,522 | ||||
Government National Mtg Assoc, Pool # 453928, 7.00% due 7/15/2017 | 79,860 | 83,044 | ||||
Government National Mtg Assoc, Pool # 780063, 7.00% due 9/15/2008 | 11,897 | 11,972 | ||||
Government National Mtg Assoc, Pool # 780448, 6.50% due 8/15/2011 | 106,299 | 108,786 |
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2006 |
Issuer-Description | Principal Amount | Value | ||||
Overseas Private Investment Corp., 4.10% due 11/15/2014 | $ | 2,126,400 | $ | 2,048,319 | ||
Private Export Funding Corp., 5.685% due 5/15/2012 | 5,000,000 | 5,173,100 | ||||
Private Export Funding Corp., 4.974% due 8/15/2013 | 2,700,000 | 2,708,446 | ||||
Tennessee Valley Authority, 4.75% due 8/1/2013 | 3,000,000 | 2,966,946 | ||||
Tennessee Valley Authority Principal Inflation Indexed, 3.375% due 1/15/2007 | 6,422,150 | 6,389,204 | ||||
United States Department of Housing & Urban Development, 3.51% due 8/1/2008 | 850,000 | 827,360 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $ 78,381,936) | 77,362,554 | |||||
Short Term Investments — 3.59% | ||||||
Federal Home Loan Bank - Discount Notes, 5.06% due 10/3/2006 | 5,500,000 | 5,498,454 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $5,498,454) | 5,498,454 | |||||
TOTAL INVESTMENTS — 98.74% (Cost $ 155,053,417) | $ | 151,082,258 | ||||
OTHER ASSETS LESS LIABILITIES — 1.26% | 1,929,506 | |||||
NET ASSETS — 100.00% | $ | 153,011,764 | ||||
Footnote Legend
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
REMIC Real Estate Mortgage Investment Conduit
30 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
CUSIPS: Class A - 885-215-509, CLASS C - 885-215-764, CLASS I - 885-215-681, CLASS R1 - 885-215-483
NASDAQ SYMBOLS: CLASS A - THIFX, CLASS C - THICX, CLASS I - THIIX, CLASS RI - THIRX
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
U.S.Treasury Securities — 3.64% | ||||||||
United States Treasury Notes, 3.00% due 2/15/2008 | Aaa/AAA | $ | 4,000,000 | $ | 3,905,313 | |||
United States Treasury Notes, 4.75% due 11/15/2008 | Aaa/AAA | 1,500,000 | 1,502,109 | |||||
United States Treasury Notes, 5.75% due 8/15/2010 | Aaa/AAA | 2,500,000 | 2,601,172 | |||||
United States Treasury Notes, 3.625% due 5/15/2013 | Aaa/AAA | 5,000,000 | 4,725,781 | |||||
TOTAL U.S.TREASURY SECURITIES (Cost $ 13,042,120) | 12,734,375 | |||||||
U.S. Government Agencies — 5.51% | ||||||||
Federal Home Loan Bank, 4.875% due 5/15/2007 | Aaa/AAA | 150,000 | 149,590 | |||||
Federal Home Loan Bank, 5.833% due 1/23/2008 | Aaa/AAA | 500,000 | 504,141 | |||||
Federal Home Loan Bank, 5.785% due 4/14/2008 | Aaa/AAA | 75,000 | 75,737 | |||||
Federal Home Loan Bank, 5.835% due 7/15/2008 | Aaa/AAA | 300,000 | 303,985 | |||||
Federal Home Loan Bank, 5.085% due 10/7/2008 | Aaa/AAA | 250,000 | 250,335 | |||||
Federal Home Loan Bank, 5.038% due 10/14/2008 | Aaa/AAA | 200,000 | 200,062 | |||||
Federal Home Loan Bank, 5.365% due 12/11/2008 | Aaa/AAA | 75,000 | 75,547 | |||||
Federal Home Loan Bank, 4.50% due 12/15/2008 | Aaa/AAA | 3,000,000 | 2,968,482 | |||||
Federal Home Loan Bank, 5.985% due 4/9/2009 | Aaa/AAA | 85,000 | 86,953 | |||||
Federal Home Loan Bank, 5.00% due 9/22/2009 | Aaa/AAA | 1,500,000 | 1,494,211 | |||||
Federal Home Loan Bank Floating Rate Note, 4.58% due 2/22/2007 | Aaa/AAA | 1,370,000 | 1,368,494 | |||||
Federal Home Loan Mtg Corp. CMO Series 2814 Class GB, 5.00% due 6/15/2019 | Aaa/AAA | 1,327,829 | 1,298,135 | |||||
Federal Home Loan Mtg Corp. CMO Series 2821 Class YI, 5.50% due 9/15/2014 | Aaa/AAA | 671,205 | 669,895 | |||||
Federal National Mtg Assoc, 3.50% due 12/28/2006 | Aaa/AAA | 325,000 | 323,583 | |||||
Federal National Mtg Assoc, 5.185% due 11/1/2008 | Aaa/AAA | 451,591 | 450,413 | |||||
Federal National Mtg Assoc, 6.00% due 12/1/2008 | Aaa/AAA | 46,278 | 46,985 | |||||
Federal National Mtg Assoc, 8.00% due 12/1/2009 | Aaa/AAA | 24,821 | 25,553 | |||||
Federal National Mtg Assoc, 7.00% due 3/1/2011 | Aaa/AAA | 30,782 | 31,373 | |||||
Federal National Mtg Assoc, 6.42% due 4/1/2011 | Aaa/AAA | 2,348,809 | 2,375,127 | |||||
Federal National Mtg Assoc, 5.095% due 12/1/2011 | Aaa/AAA | 124,852 | 124,520 | |||||
Federal National Mtg Assoc, 7.491% due 8/1/2014 | Aaa/AAA | 34,125 | 35,000 | |||||
Federal National Mtg Assoc CMO Series 2003-64 Class EC, 5.50% due 5/25/2030 | Aaa/AAA | 715,909 | 714,674 | |||||
Federal National Mtg Assoc CPI Floating Rate Note, 5.459% due 2/17/2009 | Aaa/AAA | 5,000,000 | 4,850,300 | |||||
Federal National Mtg Assoc, Pool # 460568, 5.20% due 12/1/2006 | Aaa/AAA | 800,000 | 796,884 | |||||
Government National Mtg Assoc, Pool # 003007, 8.50% due 11/20/2015 | Aaa/AAA | 26,381 | 27,747 | |||||
Government National Mtg Assoc, Pool # 827148, 5.375% due 2/20/2024 | Aaa/AAA | 39,086 | 39,734 | |||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $ 19,562,014) | 19,287,460 | |||||||
Asset Back Securities — 3.66% | ||||||||
Associates Manufactured Housing Trust 1996-1 A5, 7.60% due 3/15/2027 | Aaa/AAA | 78,572 | 78,831 | |||||
GSR Mtg Loan Trust Series 2004-3F Class 2-A10, 3.218% due 2/25/2034 | NR/AAA | 840,071 | 791,934 | |||||
Small Business Administration, 4.638% due 2/10/2015 | NR/NR | 3,067,561 | 2,981,829 | |||||
Washington Mutual Series 02-AR10, Class-A6, 4.816% due 10/25/2032 | Aaa/AAA | 33,631 | 33,414 | |||||
Washington Mutual Series 03-AR10, Class-A4, 4.062% due 10/25/2033 | Aaa/AAA | 1,583,274 | 1,567,804 | |||||
Washington Mutual Series 03-AR12, Class-A4, 3.743% due 2/25/2034 | Aaa/AAA | 1,041,933 | 1,032,684 | |||||
Washington Mutual Series 03-AR5, Class-A6, 3.695% due 6/25/2033 | Aaa/AAA | 3,200,000 | 3,119,829 |
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Washington Mutual Series 05-AR4, Class-A4b, 4.674% due 4/25/2035 | Aaa/AAA | $ | 830,000 | $ | 815,367 | |||
Wells Fargo Mortgage Backed Securities Series 2005-3 Class-A10, 5.50% due 5/25/2035 | Aaa/NR | 2,404,822 | 2,394,000 | |||||
TOTAL ASSET BACK SECURITIES (Cost $ 13,090,624) | 12,815,692 | |||||||
Corporate Bonds — 67.69% | ||||||||
BANKS — 3.01% | ||||||||
COMMERCIAL BANKS — 3.01% | ||||||||
Bank of America Corp., 4.375% due 12/1/2010 | Aa2/AA- | 1,675,000 | 1,627,783 | |||||
Capital One Bank, 6.70% due 5/15/2008 | A3/BBB | 1,665,000 | 1,699,439 | |||||
Capital One Bank, 6.15% due 9/1/2016 | Baa2/BBB- | 2,000,000 | 2,023,726 | |||||
Fifth Third Bank, Cincinnati Ohio, 3.375% due 8/15/2008 | Aa2/AA- | 2,500,000 | 2,420,878 | |||||
HSBC USA, Inc., 8.375% due 2/15/2007 | Aa3/AA- | 700,000 | 706,677 | |||||
National Westminster Bank, 7.375% due 10/1/2009 | Aa2/AA- | 715,000 | 761,322 | |||||
Nations Bank Corp., 7.23% due 8/15/2012 | Aa2/AA- | 250,000 | 270,378 | |||||
Northern Trust Co., 6.25% due 6/2/2008 | A1/A+ | 500,000 | 509,331 | |||||
PNC Funding Corp., 6.875% due 7/15/2007 | A3/A- | 95,000 | 96,010 | |||||
US Bank, 6.30% due 7/15/2008 | Aa2/AA- | 400,000 | 407,619 | |||||
10,523,163 | ||||||||
CAPITAL GOODS — 4.76% | ||||||||
MACHINERY — 4.76% | ||||||||
Caterpillar Financial Services Corp., 6.40% due 2/15/2008 | A2/A | 250,000 | 251,918 | |||||
Emerson Electric Co., 5.75% due 11/1/2011 | A2/A | 800,000 | 821,225 | |||||
General American Railcar Corp., 6.69% due 9/20/2016 | A3/AA- | 201,444 | 215,233 | |||||
Hubbell Inc., 6.375% due 5/15/2012 | A3/A+ | 1,000,000 | 1,057,627 | |||||
Illinois Tool Works, Inc., 5.75% due 3/1/2009 | Aa3/AA | 4,595,000 | 4,665,846 | |||||
John Deere Capital Corp., 5.125% due 10/19/2006 | A3/A- | 450,000 | 449,942 | |||||
John Deere Capital Corp. Floating Rate Note, 5.515% due 6/10/2008 | A3/A- | 4,415,000 | 4,423,146 | |||||
Johnson Controls, Inc., 5.00% due 11/15/2006 | Baa1/A- | 1,000,000 | 998,984 | |||||
Pentair, Inc., 7.85% due 10/15/2009 | Baa3/BBB | 1,000,000 | 1,064,651 | |||||
Pitney Bowes, Inc., 4.625% due 10/1/2012 | Aa3/A+ | 900,000 | 870,490 | |||||
Pitney Bowes, Inc., 3.875% due 6/15/2013 | Aa3/A+ | 2,000,000 | 1,836,568 | |||||
16,655,630 | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 2.52% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 2.52% | ||||||||
Science Applications International Corp., 6.75% due 2/1/2008 | A3/A- | 250,000 | 254,080 | |||||
Science Applications International Corp., 6.25% due 7/1/2012 | A3/A- | 1,000,000 | 1,025,280 | |||||
Valassis Communications, 6.625% due 1/15/2009 | Baa3/BB | 4,700,000 | 4,687,686 | |||||
Waste Management, Inc., 6.875% due 5/15/2009 | Baa3/BBB | 725,000 | 753,239 | |||||
Waste Management, Inc., 7.375% due 8/1/2010 | Baa3/BBB | 500,000 | 535,921 | |||||
Waste Management, Inc., 6.50% due 11/15/2008 | Baa3/BBB | 1,000,000 | 1,023,940 | |||||
WMX Technologies, Inc., 7.00% due 10/15/2006 | Baa3/BBB | 550,000 | 550,227 | |||||
8,830,373 | ||||||||
32 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
DIVERSIFIED FINANCIALS — 25.17% | ||||||||
CAPITAL MARKETS — 7.23% | ||||||||
Bear Stearns Co., Inc., 4.50% due 10/28/2010 | A1/A | $ | 1,500,000 | $ | 1,459,791 | |||
Jefferies Group, Inc. Senior Note Series B, 7.50% due 8/15/2007 | Baa1/BBB+ | 2,600,000 | 2,630,225 | |||||
Legg Mason Mortgage Capital Corp., 7.161% due 6/1/2009 | NR/NR | 1,714,286 | 1,714,286 | |||||
Lehman Brothers Holdings, Inc., 3.50% due 8/7/2008 | A1/A+ | 700,000 | 679,301 | |||||
Lehman Brothers Holdings, Inc. CPI Floating Rate Note, 6.32% due 5/12/2014 | A1/A+ | 5,190,000 | 4,973,681 | |||||
Merrill Lynch & Co. CPI Floating Rate Note, 5.48% due 3/2/2009 | Aa3/A+ | 3,000,000 | 2,914,050 | |||||
Merrill Lynch & Co. CPI Floating Rate Note, 6.37% due 5/5/2014 | Aa3/A+ | 1,000,000 | 961,610 | |||||
Merrill Lynch & Co. CPI Floating Rate Note, 5.12% due 3/12/2007 | Aa3/A+ | 5,000,000 | 4,961,100 | |||||
Morgan Stanley Group, Inc., 5.623% due 1/18/2008 | Aa3/A+ | 5,000,000 | 5,008,500 | |||||
CONSUMER FINANCE — 4.77% | ||||||||
SLM Corp. CPI Floating Rate Note, 6.44% due 1/31/2014 | A2/A | 9,500,000 | 9,100,905 | |||||
SLM Corp. CPI Floating Rate Note, 5.52% due 3/2/2009 | A2/A | 3,000,000 | 2,900,100 | |||||
SLM Corp. Floating Rate Note, 5.495% due 9/15/2008 | A2/A | 1,675,000 | 1,675,340 | |||||
SLM Corp. Floating Rate Note, 5.695% due 7/25/2008 | A2/A | 3,000,000 | 3,010,083 | |||||
DIVERSIFIED FINANCIAL SERVICES — 13.17% | ||||||||
American General Finance Corp., 4.625% due 9/1/2010 | A1/A+ | 200,000 | 195,181 | |||||
Berkshire Hathaway Finance Corp. Senior Note, 4.625% due 10/15/2013 | Aaa/AAA | 1,000,000 | 962,911 | |||||
General Electric Capital Corp., 7.75% due 6/9/2009 | Aaa/AAA | 200,000 | 211,907 | |||||
General Electric Capital Corp., 4.25% due 12/1/2010 | Aaa/AAA | 2,000,000 | 1,937,530 | |||||
General Electric Capital Corp., 7.375% due 1/19/2010 | Aaa/AAA | 400,000 | 426,713 | |||||
General Electric Capital Corp., 5.00% due 2/15/2007 | Aaa/AAA | 2,900,000 | 2,896,416 | |||||
General Electric Capital Corp., 4.375% due 11/21/2011 | Aaa/AAA | 1,500,000 | 1,445,744 | |||||
General Electric Capital Corp. Floating Rate Note, 4.80% due 5/30/2008 | Aaa/AAA | 494,000 | 484,582 | |||||
General Electric Capital Corp. Floating Rate Note, 5.51% due 12/15/2009 | Aaa/AAA | 1,000,000 | 1,002,817 | |||||
General Electric Capital Corp. Floating Rate Note, 4.564% due 3/2/2009 | Aaa/AAA | 5,000,000 | 4,900,000 | |||||
Household Finance Corp., 5.75% due 1/30/2007 | Aa3/AA- | 400,000 | 400,488 | |||||
Household Finance Corp., 6.40% due 9/15/2009 | Aa3/AA- | 400,000 | 406,138 | |||||
Household Finance Corp. CPI Floating Rate Note, 5.52% due 8/10/2009 | Aa3/AA- | 5,000,000 | 4,769,550 | |||||
International Lease Finance Corp., 4.55% due 10/15/2009 | A1/AA- | 2,500,000 | 2,450,082 | |||||
International Lease Finance Corp., 5.00% due 9/15/2012 | A1/AA- | 4,000,000 | 3,928,472 | |||||
International Lease Finance Corp. Floating Rate Note, 5.907% due 1/15/2010 | A1/AA- | 4,050,000 | 4,079,205 | |||||
JP Morgan Chase Co., 4.50% due 11/15/2010 | Aa3/A+ | 1,465,000 | 1,428,898 | |||||
JP Morgan Chase Co. CPI Floating Rate Note, 5.88% due 6/28/2009 | Aa3/A+ | 5,000,000 | 4,869,950 | |||||
Principal Financial Group Australia, 8.20% due 8/15/2009 | A2/A | 700,000 | 752,932 | |||||
Toyota Motor Credit Corp., 2.875% due 8/1/2008 | Aaa/AAA | 800,000 | 768,530 | |||||
Toyota Motor Credit Corp., 4.35% due 12/15/2010 | Aaa/AAA | 800,000 | 779,095 | |||||
Toyota Motor Credit Corp., 2.70% due 1/30/2007 | Aaa/AAA | 3,300,000 | 3,271,613 | |||||
Toyota Motor Credit Corp., 4.25% due 3/15/2010 | Aaa/AAA | 3,450,000 | 3,351,758 | |||||
US Central Credit Union, 2.75% due 5/30/2008 | Aa1/AAA | 375,000 | 360,039 | |||||
88,069,523 | ||||||||
ENERGY — 2.74% | ||||||||
ENERGY EQUIPMENT & SERVICES — 2.58% | ||||||||
Central Power & Light Co., 7.125% due 2/1/2008 | Baa1/BBB | 2,000,000 | 2,044,902 | |||||
Commonwealth Edison Co., 4.74% due 8/15/2010 | Baa2/A- | 975,000 | 955,455 | |||||
El Paso Corp., 7.00% due 5/15/2011 | B2/B | 700,000 | 704,375 | |||||
Enterprise Products Participating LP, 7.50% due 2/1/2011 | Baa3/BB+ | 250,000 | 266,612 | |||||
Louis Dreyfus Natural Gas Corp., 6.875% due 12/1/2007 | Baa1/BBB | 290,000 | 294,525 | |||||
Murphy Oil Corp., 6.375% due 5/1/2012 | Baa2/BBB | 750,000 | 774,272 |
Certified Annual Report 33
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Panenergy Corp., 7.00% due 10/15/2006 | Baa3/BBB- | $ | 1,100,000 | $ | 1,100,189 | |||
Phillips Petroleum Co., 9.375% due 2/15/2011 | A1/A- | 900,000 | 1,040,362 | |||||
Phillips Petroleum Co., 8.75% due 5/25/2010 | A1/A- | 250,000 | 279,188 | |||||
Questar Pipeline Co., 6.05% due 12/1/2008 | A2/A- | 425,000 | 431,189 | |||||
Smith International Inc. Senior Note, 7.00% due 9/15/2007 | Baa1/BBB+ | 600,000 | 608,975 | |||||
Sonat, Inc., 7.625% due 7/15/2011 | B2/B | 500,000 | 512,500 | |||||
OIL, GAS & CONSUMABLE FUELS — 0.16% | ||||||||
Occidental Petroleum Corp., 10.125% due 9/15/2009 | A3/A- | 315,000 | 356,716 | |||||
Union Oil Co. California, 7.90% due 4/18/2008 | A1/BBB+ | 200,000 | 209,118 | |||||
9,578,378 | ||||||||
FOOD & DRUG RETAILING — 0.09% | ||||||||
FOOD & STAPLES RETAILING — 0.09% | ||||||||
General Mills, 5.50% due 1/12/2009 | Baa1/BBB+ | 300,000 | 301,247 | |||||
301,247 | ||||||||
FOOD BEVERAGE & TOBACCO — 1.79% | ||||||||
BEVERAGES — 0.97% | ||||||||
Anheuser Busch Co., Inc., 4.375% due 1/15/2013 | A1/A+ | 2,000,000 | 1,910,458 | |||||
Anheuser Busch Co., Inc., 5.625% due 10/1/2010 | A1/A+ | 1,150,000 | 1,173,206 | |||||
Coca Cola Co., 5.75% due 3/15/2011 | Aa3/A+ | 200,000 | 204,948 | |||||
Conagra, Inc., 7.875% due 9/15/2010 | Baa2/BBB+ | 100,000 | 108,760 | |||||
FOOD PRODUCTS — 0.82% | ||||||||
Diageo Finance BV, 3.00% due 12/15/2006 | A3/A- | 925,000 | 920,641 | |||||
Sara Lee Corp., 6.00% due 1/15/2008 | Baa1/BBB+ | 900,000 | 902,948 | |||||
Sysco International Co., 6.10% due 6/1/2012 | A1/A+ | 1,000,000 | 1,040,404 | |||||
6,261,365 | ||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.66% | ||||||||
PERSONAL PRODUCTS — 0.66% | ||||||||
Procter & Gamble Co., 4.75% due 6/15/2007 | Aa3/AA- | 350,000 | 348,909 | |||||
Procter & Gamble Co., 4.30% due 8/15/2008 | Aa3/AA- | 2,000,000 | 1,972,754 | |||||
2,321,663 | ||||||||
INSURANCE — 8.46% | ||||||||
INSURANCE — 8.46% | ||||||||
AIG Sunamerica Global Financing, 5.10% due 1/17/2007 | Aa2/AA+ | 800,000 | 799,291 | |||||
Allstate Corp., 5.375% due 12/1/2006 | A1/A+ | 900,000 | 899,779 | |||||
Allstate Life Global Funding, CPI Floating Rate Note, 5.17% due 4/2/2007 | Aa2/AA | 5,000,000 | 4,961,450 | |||||
Hartford Financial Services Group, Inc. Senior Note, 4.625% due 7/15/2013 | A2/A | 1,000,000 | 956,239 | |||||
Hartford Life, Inc., 7.10% due 6/15/2007 | A2/A | 300,000 | 303,451 | |||||
Liberty Mutual Group, Inc., 5.75% due 3/15/2014 | Baa3/BBB | 1,000,000 | 983,408 | |||||
Lincoln National Corp., 4.75% due 2/15/2014 | A3/A+ | 1,000,000 | 950,898 | |||||
Metlife, Inc., 5.25% due 12/1/2006 | A2/A | 450,000 | 449,795 | |||||
Old Republic International Corp., 7.00% due 6/15/2007 | Aa3/A+ | 1,800,000 | 1,811,464 | |||||
Pacific Life Global Funding CPI Floating Rate Note, 6.33% due 2/6/2016 | Aa3/AA | 8,000,000 | 7,625,440 | |||||
Principal Life Global Funding, 4.40% due 10/1/2010 | Aa2/AA | 4,000,000 | 3,866,396 |
34 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Principal Life Income Funding Floating Rate Note, 6.20% due 4/1/2016 | Aa2/AA | $ | 5,000,000 | $ | 4,648,450 | |||
Unumprovident Corp., 7.625% due 3/1/2011 | Ba1/BB+ | 1,257,000 | 1,341,048 | |||||
29,597,109 | ||||||||
MATERIALS — 1.27% | ||||||||
CHEMICALS — 1.27% | ||||||||
Chevron Phillips Chemical, 7.00% due 3/15/2011 | Baa1/BBB+ | 500,000 | 528,205 | |||||
Chevron Phillips Chemical, 5.375% due 6/15/2007 | Baa1/BBB+ | 75,000 | 74,908 | |||||
Chevrontexaco Capital Co., 3.50% due 9/17/2007 | Aa2/AA | 1,400,000 | 1,378,252 | |||||
Dow Chemical Co., 5.75% due 12/15/2008 | A3/A- | 350,000 | 354,030 | |||||
E.I. du Pont de Nemours & Co., 4.75% due 11/15/2012 | A2/A | 1,000,000 | 968,808 | |||||
E.I. du Pont de Nemours & Co., 4.125% due 3/6/2013 | A2/A | 325,000 | 303,370 | |||||
Hoechst Celanese Corp., 7.125% due 3/15/2009 | B3/NR | 200,000 | 202,844 | |||||
Lubrizol Corp. Senior Note, 5.875% due 12/1/2008 | Baa3/BBB- | 635,000 | 640,511 | |||||
4,450,928 | ||||||||
MEDIA — 1.45% | ||||||||
MEDIA — 1.45% | ||||||||
AOL Time Warner, Inc., 6.75% due 4/15/2011 | Baa2/BBB+ | 750,000 | 784,411 | |||||
E W Scripps Co. Ohio, 5.75% due 7/15/2012 | A2/A | 80,000 | 80,562 | |||||
New York Times Co., 4.625% due 6/25/2007 | Baa1/A- | 300,000 | 298,630 | |||||
Scholastic Corp., 5.75% due 1/15/2007 | Ba2/BB | 762,000 | 760,935 | |||||
Thomson Corp., 4.25% due 8/15/2009 | A3/A- | 2,900,000 | 2,814,896 | |||||
Time Warner, Inc., 8.05% due 1/15/2016 | Baa2/BBB+ | 200,000 | 224,538 | |||||
Tribune Co., 6.875% due 11/1/2006 | Ba1/BB+ | 125,000 | 125,068 | |||||
5,089,040 | ||||||||
MISCELLANEOUS — 1.38% | ||||||||
MISCELLANEOUS — 1.02% | ||||||||
Stanford University, 5.85% due 3/15/2009 | Aaa/NR | 3,500,000 | 3,566,608 | |||||
YANKEE — 0.36% | ||||||||
Kreditanstalt Fur Wiederaufbau, 3.25% due 7/16/2007 | Aaa/AAA | 435,000 | 427,281 | |||||
Nova Scotia Province Canada, 5.75% due 2/27/2012 | A1/A+ | 500,000 | 515,541 | |||||
Ontario Province Canada, 3.282% due 3/28/2008 | Aa2/AA | 335,000 | 325,804 | |||||
4,835,234 | ||||||||
PHARMACEUTICALS & BIOTECHNOLOGY — 1.85% | ||||||||
BIOTECHNOLOGY — 1.85% | ||||||||
Abbott Labs, 6.40% due 12/1/2006 | A1/AA | 1,000,000 | 1,001,286 | |||||
Abbott Labs, 3.75% due 3/15/2011 | A1/AA | 500,000 | 472,289 | |||||
Tiers Inflation Linked Trust Series Wyeth 2004 21 Trust Certificate CPI Floating Rate Note, 6.017% due 2/1/2014 | ||||||||
Baa1/A | 5,450,000 | 5,010,512 | ||||||
6,484,087 | ||||||||
Certified Annual Report 35
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
RETAILING — 2.18% | ||||||||
DISTRIBUTORS — 0.03% | ||||||||
Dayton Hudson Corp., 9.625% due 2/1/2008 | A1/A+ | $ | 100,000 | $ | 104,915 | |||
MULTILINE RETAIL — 1.55% | ||||||||
Costco Wholesale Corp., 5.50% due 3/15/2007 | A2/A | 500,000 | 499,594 | |||||
Wal-Mart Stores, Inc., 6.875% due 8/10/2009 | Aa2/AA | 900,000 | 942,506 | |||||
Wal-Mart Stores, Inc., 4.125% due 2/15/2011 | Aa2/AA | 3,735,000 | 3,595,670 | |||||
Wal-Mart Stores, Inc., 1992-A1 Pass Through Certificate, 7.49% due 6/21/2007 | Aa2/AA | 115,697 | 117,060 | |||||
Wal-Mart Stores, Inc., Pass Through Certificate, 8.57% due 1/2/2010 | Aa2/AA | 250,573 | 257,961 | |||||
SPECIALTY RETAIL — 0.60% | ||||||||
Home Depot, Inc., 4.625% due 8/15/2010 | Aa3/AA | 2,135,000 | 2,095,142 | |||||
7,612,848 | ||||||||
SOFTWARE & SERVICES — 1.72% | ||||||||
INTERNET SOFTWARE & SERVICES — 1.27% | ||||||||
Electronic Data Systems Corp., 7.125% due 10/15/2009 | Ba1/BBB- | 2,500,000 | 2,614,823 | |||||
Electronic Data Systems Corp., 6.50% due 8/1/2013 | Ba1/BBB- | 1,000,000 | 1,014,426 | |||||
Reynolds & Reynolds, 7.00% due 12/15/2006 | A3/BBB | 800,000 | 798,737 | |||||
IT SERVICES — 0.45% | ||||||||
First Data Corp., 4.95% due 6/15/2015 | A2/A | 1,640,000 | 1,583,669 | |||||
6,011,655 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 4.80% | ||||||||
COMPUTERS & PERIPHERALS — 4.51% | ||||||||
Computer Sciences Corp., 6.25% due 3/15/2009 | A3/A- | 300,000 | 304,288 | |||||
Computer Sciences Corp., 7.375% due 6/15/2011 | A3/A- | 1,317,000 | 1,409,987 | |||||
Computer Sciences Corp., 3.50% due 4/15/2008 | A3/A- | 2,000,000 | 1,941,650 | |||||
First Data Corp., 5.625% due 11/1/2011 | A2/A | 5,900,000 | 6,018,702 | |||||
First Data Corp., 6.375% due 12/15/2007 | A2/A | 110,000 | 110,912 | |||||
International Business Machines, 4.875% due 10/1/2006 | A1/A+ | 500,000 | 500,000 | |||||
International Business Machines, 4.25% due 9/15/2009 | A1/A+ | 1,000,000 | 978,674 | |||||
International Business Machines, 2.375% due 11/1/2006 | A1/A+ | 2,825,000 | 2,818,751 | |||||
Jabil Circuit, Inc., 5.875% due 7/15/2010 | Baa3/BBB- | 500,000 | 504,507 | |||||
Oracle Corp., 6.91% due 2/15/2007 | A3/A- | 1,200,000 | 1,205,684 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.29% | ||||||||
Cisco Systems, Inc., 5.25% due 2/22/2011 | A1/A+ | 1,000,000 | 1,004,209 | |||||
16,797,364 | ||||||||
TELECOMMUNICATION SERVICES — 0.69% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.69% | ||||||||
Cingular Wireless, 5.625% due 12/15/2006 | Baa1/A | 900,000 | 900,021 | |||||
Verizon Wireless Capital LLC, 5.375% due 12/15/2006 | A2/A | 1,500,000 | 1,499,464 | |||||
2,399,485 | ||||||||
36 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
TRANSPORTATION — 0.47% | ||||||||
AIRLINES — 0.41% | ||||||||
Continental Airlines Pass Through Certificate Series 1997 4 Class-4A, 6.90% due 1/2/2018 | Baa3/BBB+ | $ | 178,655 | $ | 183,905 | |||
Delta Air Lines, Inc. EETC Series 2001-1 Class-A, 6.619% due 3/18/2011 | Ba2/BB+ | 216,629 | 216,368 | |||||
Southwest Airlines Co., 7.875% due 9/1/2007 | Baa1/A | 1,012,000 | 1,032,104 | |||||
ROAD & RAIL — 0.06% | ||||||||
CSX Corp., 7.45% due 5/1/2007 | Baa2/BBB | 225,000 | 227,500 | |||||
1,659,877 | ||||||||
UTILITIES — 2.68% | ||||||||
ELECTRIC UTILITIES — 2.12% | ||||||||
Appalachian Power Co., 6.60% due 5/1/2009 (Insured: MBIA) | Aaa/AAA | 175,000 | 180,880 | |||||
Gulf Power Co., 4.35% due 7/15/2013 | A2/A | 925,000 | 872,755 | |||||
Minnesota Power & Light Co., 7.00% due 2/15/2007 | Baa1/A | 900,000 | 903,574 | |||||
Northern Border Pipeline Co., 6.25% due 5/1/2007 | A3/A- | 120,000 | 120,517 | |||||
Northern States Power Co., 4.75% due 8/1/2010 | A2/A- | 2,825,000 | 2,776,520 | |||||
PSI Energy, Inc., 7.85% due 10/15/2007 | Baa1/BBB | 500,000 | 512,010 | |||||
Texas Eastern Transmission Corp. Senior Note, 5.25% due 7/15/2007 | Baa1/BBB | 525,000 | 523,015 | |||||
Wisconsin Energy Corp., 5.50% due 12/1/2008 | A3/BBB+ | 350,000 | 351,957 | |||||
Wisconsin Public Service Corp., 6.125% due 8/1/2011 | Aa2/A+ | 1,150,000 | 1,194,829 | |||||
GAS UTILITIES — 0.28% | ||||||||
Southern California Gas Co., 4.375% due 1/15/2011 | A1/A+ | 225,000 | 217,783 | |||||
Texas Municipal Gas Corp., 2.60% due 7/1/2007 (Insured: FSA) | Aaa/AAA | 770,000 | 762,423 | |||||
MULTI-UTILITIES — 0.28% | ||||||||
Madison Gas & Electric Co., 6.02% due 9/15/2008 | Aa3/AA- | 950,000 | 962,940 | |||||
9,379,203 | ||||||||
TOTAL CORPORATE BONDS (Cost $ 239,976,220) | 236,858,172 | |||||||
Taxable Municipal Bonds — 12.13% | ||||||||
American Campus Properties Student Housing, 7.38% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 3,515,000 | 3,758,906 | |||||
American Fork City Utah Sales, 4.89% due 3/1/2012 (Insured: FSA) | Aaa/AAA | 300,000 | 296,994 | |||||
American Fork City Utah Sales, 5.07% due 3/1/2013 (Insured: FSA) | Aaa/AAA | 120,000 | 119,540 | |||||
Arkansas Electric Coop Corp., 7.33% due 6/30/2008 | A2/AA- | 78,000 | 78,667 | |||||
Bessemer Alabama Water Revenue Taxable Warrants Series B, 7.375% due 7/1/2008 (Insured: FSA) | Aaa/AAA | 430,000 | 439,094 | |||||
Brockton MA Taxable Economic Development Series A, 6.45% due 5/1/2017 (Insured: FGIC) | Aaa/AAA | 150,000 | 159,725 | |||||
Burbank California Waste Disposal Revenue, 5.29% due 5/1/2007 (Insured: FSA) | Aaa/AAA | 370,000 | 369,623 | |||||
Burbank California Waste Disposal Revenue, 5.48% due 5/1/2008 (Insured: FSA) | Aaa/AAA | 310,000 | 311,293 | |||||
Cleveland Cuyahoga County Ohio, 6.10% due 5/15/2013 | NR/BBB+ | 1,650,000 | 1,595,236 | |||||
Cook County Illinois School District 083, 4.625% due 12/1/2010 (Insured: FSA) | Aaa/NR | 250,000 | 244,910 | |||||
Cook County Illinois School District 083, 4.875% due 12/1/2011 (Insured: FSA) | Aaa/NR | 150,000 | 147,803 | |||||
Denver City & County Special Facilities Taxable Refunding & Improvement Series B, | ||||||||
7.15% due 1/1/2008 (Insured: MBIA) | Aaa/AAA | 900,000 | 920,088 | |||||
Elkhart Indiana Redevelopment District Revenue, 4.80% due 6/15/2011 | NR/NR | 240,000 | 229,258 | |||||
Elkhart Indiana Redevelopment District Revenue, 4.80% due 12/15/2011 | NR/NR | 245,000 | 233,039 | |||||
Elkhart Indiana Redevelopment District Revenue, 5.05% due 12/15/2012 | NR/NR | 515,000 | 491,974 | |||||
Elkhart Indiana Redevelopment District Revenue, 5.25% due 12/15/2013 | NR/NR | 540,000 | 514,096 |
Certified Annual Report 37
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Grant County Washington Water Public Utility District 2 Series Z, 5.14% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | $ | 1,015,000 | $ | 1,011,884 | |||
Green Bay Wisconsin Series B, 4.875% due 4/1/2011 (Insured: MBIA) | Aaa/NR | 365,000 | 361,007 | |||||
Hancock County Mississippi, 4.20% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 305,000 | 299,595 | |||||
Hancock County Mississippi, 4.80% due 8/1/2010 (Insured: MBIA) | Aaa/NR | 245,000 | 241,795 | |||||
Hancock County Mississippi, 4.90% due 8/1/2011 (Insured: MBIA) | Aaa/NR | 315,000 | 311,642 | |||||
Hanover Pennsylvania Area School District Taxable Notes Series B, 4.47% due 3/15/2013 (Insured: FSA) | Aaa/AAA | 1,385,000 | 1,340,417 | |||||
Jefferson County Texas Navigation Taxable Refunding, 5.50% due 5/1/2010 (Insured: FSA) | Aaa/NR | 500,000 | 503,500 | |||||
Jefferson Franklin, Etc. Counties Illinois Community College District 521, 3.625% due 1/1/2007 (Insured: FSA) | Aaa/NR | 300,000 | 298,788 | |||||
Jersey City New Jersey Municipal Utilities Authority, 3.72% due 5/15/2009 (Insured: MBIA) | Aaa/AAA | 575,000 | 556,088 | |||||
Kendall Kane County Illinois School 308, 5.50% due 10/1/2011 (Insured: FGIC) | Aaa/NR | 365,000 | 371,377 | |||||
Los Angeles County California Metropolitan Transport, 4.56% due 7/1/2010 (Insured:AMBAC) | Aaa/AAA | 2,775,000 | 2,726,021 | |||||
Los Angeles County California Pension Series C, 0% due 6/30/2008 (Insured: MBIA) | Aaa/AAA | 300,000 | 273,342 | |||||
Maryland State Economic Development Corp., 7.25% due 6/1/2008 (Maryland Tech Development Center Project) | NR/NR | 195,000 | 197,781 | |||||
Missouri State Development Finance Board Series A, 5.45% due 3/1/2011 (Crackerneck Creek Project) | NR/A+ | 1,090,000 | 1,094,186 | |||||
Montgomery County Maryland Revenue Authority, 5.00% due 2/15/2012 | Aa2/AA+ | 100,000 | 99,288 | |||||
Multnomah County Oregon School District 1J Refunding Taxable, 4.191% due 6/15/2008 | A2/A- | 650,000 | 637,429 | |||||
New Jersey Health Care Facilities Financing, 10.75% due 7/1/2010 (ETM) | NR/NR | 375,000 | 420,836 | |||||
New Jersey Health Care Facilities Financing, 7.70% due 7/1/2011 (Insured: Connie Lee) | NR/AAA | 110,000 | 115,315 | |||||
New Rochelle New York Industrial Development Agency, 7.15% due 10/1/2014 | Aa2/A+ | 140,000 | 149,265 | |||||
New York Environmental Facilities, 5.85% due 3/15/2011 | NR/AA- | 3,500,000 | 3,610,495 | |||||
New York State Housing Finance, 4.46% due 8/15/2009 | Aa1/NR | 345,000 | 337,986 | |||||
New York State Urban Development Corp., 4.75% due 12/15/2011 | NR/AAA | 1,400,000 | 1,380,862 | |||||
Newark New Jersey, 4.70% due 4/1/2011 (Insured: MBIA) | Aaa/NR | 845,000 | 829,883 | |||||
Newark New Jersey, 4.90% due 4/1/2012 (Insured: MBIA) | Aaa/NR | 1,225,000 | 1,210,190 | |||||
Niagara Falls New York Public Water, 4.30% due 7/15/2010 (Insured: MBIA) | Aaa/AAA | 360,000 | 351,014 | |||||
Northwest Open Access Network Washington Revenue, 6.18% due 12/1/2008 (Insured:AMBAC) | Aaa/AAA | 1,600,000 | 1,632,656 | |||||
Ohio State Petroleum Underground Storage, 6.75% due 8/15/2008 (Insured: MBIA) | Aaa/AAA | 445,000 | 445,392 | |||||
Ohio State Taxable Development Assistance Series A, 4.88% due 10/1/2011 (Insured: MBIA) | Aaa/AAA | 550,000 | 544,709 | |||||
Port Walla Walla Revenue, 5.30% due 12/1/2009 | NR/NR | 235,000 | 230,615 | |||||
Providence Rhode Island, 5.59% due 1/15/2008 (Insured: FGIC) | Aaa/AAA | 340,000 | 341,965 | |||||
Santa Fe County NM Charter School Taxable Series B, 7.55% due 1/15/2010 (ATC Foundation Project) | NR/NR | 190,000 | 190,186 | |||||
Short Pump Town Center Community Development, 6.26% due 2/1/2009 | NR/NR | 1,000,000 | 1,007,960 | |||||
Sisters Providence Obligation Group Direct Obligation Notes Series 1997, 7.47% due 10/1/2007 | Aa2/AA | 1,805,000 | 1,835,721 | |||||
Springfield City School District Tax Anticipation Notes, 6.35% due 12/1/2010 (Insured:AMBAC) | Aaa/NR | 1,400,000 | 1,434,692 | |||||
Springfield City School District Tax Anticipation Notes, 6.40% due 12/1/2011 (Insured:AMBAC) | Aaa/NR | 1,500,000 | 1,546,320 | |||||
Tazewell County Illinois Community High School, 5.20% due 12/1/2011 (Insured: FSA) | Aaa/NR | 355,000 | 356,569 | |||||
Tennessee State Taxable Series B, 6.00% due 2/1/2013 | Aa2/AA | 500,000 | 518,165 | |||||
Texas State Public Finance Authority Revenue, 3.125% due 6/15/2007 | Aa2/AA | 400,000 | 394,124 | |||||
Texas Tech University Revenue, 6.00% due 8/15/2011 (Insured: MBIA) | Aaa/AAA | 245,000 | 254,401 | |||||
University of Illinois Revenue, 6.35% due 4/1/2011 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,049,750 | |||||
Victor New York, 9.20% due 5/1/2014 | NR/NR | 1,250,000 | 1,291,700 | |||||
Virginia Housing Development Authority Taxable Rental Housing Series I, 7.30% due 2/1/2008 | Aa1/AA+ | 505,000 | 516,201 | |||||
Wisconsin State General Revenue, 4.80% due 5/1/2013 (Insured: FSA) | Aaa/AAA | 200,000 | 196,230 | |||||
TOTAL TAXABLE MUNICIPAL BONDS (Cost $42,638,968) | 42,427,588 | |||||||
38 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Short Term Investments — 6.86% | ||||||||
Abbey National, 5.16% due 10/10/2006 | Prim1/A-1+ | $ | 9,000,000 | $ | 8,988,390 | |||
UBS Finance, 5.19% due 10/5/2006 | Prim1/A-1+ | 10,000,000 | 9,994,234 | |||||
UBS Finance, 5.23% due 10/3/2006 | Prim1/A-1+ | 5,000,000 | 4,998,548 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $ 23,981,171) | 23,981,172 | |||||||
TOTAL INVESTMENTS — 99.49% (Cost $ 352,291,117) | $ | 348,104,459 | ||||||
OTHER ASSETS LESS LIABILITIES — 0.51% | 1,793,294 | |||||||
NET ASSETS — 100.00% | $ | 349,897,753 | ||||||
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. See notes to financial statements. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
ETM | Escrowed to Maturity | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FSA | Insured by Financial Security Assurance Co. | |
MBIA | Insured by Municipal Bond Investors Assurance |
Ratings are a blend of Moody’s and Standard & Poor’s, using the higher rating. Some bonds are rated by only one service.
Certified Annual Report 39
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Limited Term Income Funds
To the Trustees and Shareholders of
Thornburg Limited Term U.S. Government Fund
Thornburg Limited Term Income Fund
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 (separate portfolios of Thornburg Investment Trust, hereafter referred to as the “Funds”) at September 30, 2006, 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 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 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
40 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) | transaction costs, including |
(a) sales charges (loads) on purchase payments, for Class A Shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(c) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(2) | ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. |
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
U.S. Government Fund | |||||||||
Class A Shares | |||||||||
Actual | $ | 1,000 | $ | 1,026.00 | $ | 4.96 | |||
Hypothetical* | $ | 1,000 | $ | 1,020.17 | $ | 4.95 | |||
Class B Shares | |||||||||
Actual | $ | 1,000 | $ | 1,017.40 | $ | 12.67 | |||
Hypothetical* | $ | 1,000 | $ | 1,012.51 | $ | 12.64 | |||
Class C Shares | |||||||||
Actual | $ | 1,000 | $ | 1,024.50 | $ | 6.39 | |||
Hypothetical* | $ | 1,000 | $ | 1,018.76 | $ | 6.37 | |||
Class I Shares | |||||||||
Actual | $ | 1,000 | $ | 1,027.60 | $ | 3.40 | |||
Hypothetical* | $ | 1,000 | $ | 1,021.71 | $ | 3.39 | |||
Class R1 Shares | |||||||||
Actual | $ | 1,000 | $ | 1,025.90 | $ | 5.03 | |||
Hypothetical* | $ | 1,000 | $ | 1,020.11 | $ | 5.01 | |||
Income Fund | |||||||||
Class A Shares | |||||||||
Actual | $ | 1,000 | $ | 1,026.00 | $ | 5.03 | |||
Hypothetical* | $ | 1,000 | $ | 1,020.10 | $ | 5.01 | |||
Class C Shares | |||||||||
Actual | $ | 1,000 | $ | 1,024.80 | $ | 6.29 | |||
Hypothetical* | $ | 1,000 | $ | 1,018.86 | $ | 6.27 | |||
Class I Shares | |||||||||
Actual | $ | 1,000 | $ | 1,027.70 | $ | 3.37 | |||
Hypothetical* | $ | 1,000 | $ | 1,021.74 | $ | 3.36 | |||
Class RI Shares | |||||||||
Actual | $ | 1,000 | $ | 1,026.00 | $ | 5.03 | |||
Hypothetical* | $ | 1,000 | $ | 1,020.11 | $ | 5.01 |
† | Thornburg Limited Term U.S. Government Fund expenses are equal to the annualized expense ratio for each class (A: 0.98%; B: 2.51%; C: 1.26%; I: 0.67%; and R1: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. Thornburg Limited Term Income Fund expenses are equal to the annualized expense ratio for each class (A: 0.99%; C: 1.24%; I: 0.66%; and R1: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
change fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 41
INDEX COMPARISON | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Limited Term U.S. Government Fund Class A Total Returns, versus
Lehman Brothers Intermediate Government Bond Index and Consumer Price Index
(November 30, 1987 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006 (with sales charge)
1Yr | 5Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 11/16/87) | 1.37 | % | 2.98 | % | 4.80 | % | 5.96 | % | ||||
B Shares (Incep: 11/1/02) | (3.67 | )% | N/A | N/A | 0.30 | % | ||||||
C Shares (Incep: 9/1/94) | 2.10 | % | 2.97 | % | 4.60 | % | 4.88 | % | ||||
R1 Shares (Incep: 7/1/03) | 2.86 | % | N/A | N/A | 1.54 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 11/16/87) | 3.09 | % | 3.69 | % | $ | 12.75 | $ | 12.94 | ||||
B Shares (Incep: 11/1/02) | 1.55 | % | 2.20 | % | $ | 12.72 | $ | 12.72 | ||||
C Shares (Incep: 9/1/94) | 2.71 | % | 3.33 | % | $ | 12.83 | $ | 12.83 | ||||
R1 Shares (Incep: 7/1/03) | 3.04 | % | 3.69 | % | $ | 12.76 | $ | 12.76 |
Performance data reflect past performance, which is no guarantee of future results. 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.
For the U.S. Government Fund, returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 1.50%. Class B shares are sold with a contingent deferred sales charge (CDSC) that declines from 5.00% to 0% depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares include a 0.50% CDSC for the first year only. There is no up front sales charge for Class R1 shares.
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.
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 Funds’ 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 Net Asset Value (NAV) to arrive at the annualized distribution yield.The yield is calculated on a periodic basis and is subject to change depending on the Funds’ NAV and current distributions.
Shares are not guaranteed by the U.S. Government.
42 Certified Annual Report
INDEX COMPARISON | ||
Thornburg Limited Term Income Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Limited Term Income Fund Class A Total Returns versus
Lehman Brothers Intermediate Government/Credit Index and Consumer Price Index
(October 1, 1992 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006 (with sales charge)
1Yr | 5Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 10/1/92) | 1.42 | % | 3.46 | % | 5.06 | % | 5.45 | % | ||||
C Shares (Incep: 9/1/94) | 2.21 | % | 3.46 | % | 4.86 | % | 5.27 | % | ||||
R1 Shares (Incep: 7/1/03) | 2.97 | % | N/A | N/A | 2.16 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 10/1/92) | 4.31 | % | 4.34 | % | $ | 12.37 | $ | 12.56 | ||||
C Shares (Incep: 9/1/94) | 4.06 | % | 4.17 | % | $ | 12.35 | $ | 12.35 | ||||
R1 Shares (Incep: 7/1/03) | 4.31 | % | 4.41 | % | $ | 12.38 | $ | 12.38 |
Performance data reflect past performance, which is no guarantee of future results. 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.
For the Limited Term Income Fund, returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares is 1.50%. Class C shares include a 0.50% contingent deferred sales charge (CDSC) for the first year only. There is no up front sales charge for Class R1 shares.
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.
The Consumer Price Index (“CPI”) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items.The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets.The CPI is also known as the cost-of-living index.
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.
Certified Annual Report 43
TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP,Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
44 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable |
Certified Annual Report 45
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Funds are two of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds.Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
46 Certified Annual Report
OTHER INFORMATION | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 atWWW.SEC.GOV.
Commencing August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Funds file with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also make this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT FOR THE THORNBURG LIMITED TERM U.S. GOVERNMENT FUND
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Limited Term U.S. Government Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor on a range of matters, including (among other things) information respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s services and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time relative to different categories of mutual funds sharing certain comparable characteristics and selected by independent mutual fund analyst firms, and relative to a broad based securities index; |
(v) | comparative measures of portfolio versatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories, and in particular to broad based securities indices, may be limited in some degree because the
Certified Annual Report 47
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the parameters for selecting the investments for other funds and the largely theoretical character of securities indices.
In conducting their evaluation, the Trustees determined that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s average or better investment performance over different periods relative to two categories of mutual funds sharing certain comparable characteristics with the Fund and selected by independent mutual fund analyst firms.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of short-intermediate U.S. government mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the management fee for the Fund was somewhat lower than average and median fees for the grouping of mutual funds assembled by the mutual fund analyst firm. The Trustees further noted in this regard that the overall expenses charged to the Fund were somewhat lower than the average and median management fees for the grouping of mutual funds. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT FOR THE THORNBURG LIMITED TERM INCOME FUND
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Limited Term Income Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their
48 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time, relative to categories of mutual funds sharing certain comparable characteristics and selected by independent mutual fund analyst firms, and relative to a broad based securities index; |
(v) | comparative measures of portfolio volatility risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories, and in particular to broad based securities indices, may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
In conducting their evaluation, the Trustees determined that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluation the Fund’s above average or better investment performance in most years relative to the performance of a category of fixed income mutual funds having certain characteristics comparable to the Fund and selected by an independent mutual fund analyst firm, and the Fund’s relative performance against comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of short-intermediate investment grade fixed income mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted in their review that the management fee and overall expenses for the Fund were comparable to average and median management fees and expenses for the grouping of mutual funds assembled by the mutual fund analyst firm. The Trustees also observed in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Certified Annual Report 49
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
50 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report. 51
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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This page is not part of the Annual Report. 55
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses.We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |||||
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119 East Marcy Street | 119 East Marcy Street | |||||
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |||||
800.847.0200 | 800.847.0200 |
Thornburg Limited Term Income Funds
Laddering – an All Weather Strategy
The Funds’ primary objectives are to obtain as high a level of current income as is consistent, in the view of the Funds’ investment advisor, with the safety of capital. As a secondary goal, the Funds seek to reduce changes in their share prices compared to longer term portfolios.
Thornburg Limited Term U.S.Government Fund – This Fund is a laddered portfolio of short/ intermediate obligations issued by the U.S.Government,its agencies or instrumentalities with an average maturity of five years or less.
Thornburg Limited Term Income Fund – This Fund is a laddered portfolio of short/intermediate investment grade obligations with an average maturity of five years or less.
Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year; cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. The strategy is a good compromise for managing different types of risk.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S.Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-terminvestment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburgequity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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Sign up at www.thornburg.com/edelivery |
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Message from the Chairman
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Garrett Thornburg Chairman & CEO | November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We aspire to accomplish this through a family of laddered bond funds that focus on quality, stability, and minimization of risk over time, and through a range of equity funds that redefine traditional measures of value and growth.
Our bond funds have always been managed using the highly disciplined approach of lad-dering short and intermediate bond maturities, seeking to provide both an attractive return and stability of principal. This strategy is an all-weather strategy, designed to perform in uncertain markets like the ones we have seen in the last two years. Moreover, all of the bond funds focus on buying investment-grade securities. We have found this strategy to be the best at managing both interest-rate risk and credit risk, and we believe this strategy has served our shareholders well over time.
An exciting event occurred recently, Thornburg Investment Management is the first U.S.investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Portfolio managers who have many years of experience manage the bond funds. We are proud of this consistency and experience and look forward to many more successful years with them at the helm.
Thank you for investing with us. We will do our best to continue to earn your trust everyday. | |
Sincerely, | ||
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Garrett Thornburg Chairman & CEO |
This page is not part of the Annual Report. 3
Thornburg Limited Term Income Funds
I Shares – September 30, 2006
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10 | ||
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19 | ||
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33 | ||
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40 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 Certified Annual Report
Important Information
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
Minimum investments for Class I shares are higher than those for other classes. Returns reflect the reinvestment of dividends and capital gains. There is no up front sales charge for this class of shares.
Shares in the Funds carry risks, including possible loss of principal. As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Shares in the Funds are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each Fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Glossary
The Lehman Brothers Intermediate Government/Credit Bond Index – An unmanaged, market-weighted index generally representative of intermediate government and investment-grade corporate debt securities having maturities of up to ten years.
The Lehman Brothers Intermediate Government Bond Index – 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.
Duration – The measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.
Basis Point – A unit for measuring a bond yield that is equal to 1/100th of a 1% yield. A 1% change =100 basis points (bps)
Consumer Price Index (CPI) – Measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
Certified Annual Report 5
Steve Bohlin Portfolio Manager | October 12, 2006
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund for the period ended September 30, 2006. The net asset value of a Class I shares of the Thornburg Limited Term U.S. Government Fund decreased 1 cent in the period to $12.75. If you were invested for the entire period, you received dividends of 40.8 cents per share. If you reinvested your dividends, you received 41.4 cents per share. The net asset value of a Class I shares of the Thornburg Limited Term Income Fund decreased 14 cents in the period to $12.37. If you were invested for the entire period, you received dividends of 54.0 cents per share. If you reinvested your dividends, you received 55.1 cents per share. Please read the accompany- ing exhibits for more detailed information and history. | |
Interest rates on U.S. Treasuries were higher across the yield curve on September 30, 2006 than at September 30, 2005. There was a sustained rise in interest rates that started in January and continued through the end of June. Interest rates then generally declined from the end of June through the end of September. For example, the yield on a 5-year U.S. Treasury started at a low of 4.18% and reached a high of 5.23% before ending the period at 4.59% and the yield on a 10-year U.S. Treasury started at a low of 4.34% and reached a high of 5.25% before ending the period at 4.64%. Quality spreads (the additional yield on a corporate bond) rose through July before starting to fall in the last two months. Quality spreads on lower rated credits contracted through May before rising back to the original levels of September 2005.
Putting income and the change in price together, the Class I shares of the Thornburg Limited Term U.S. Government Fund produced a total return of 3.19% over the twelve-month period, assuming a beginning-of-the-period investment. The Lehman Intermediate Government Index produced a 3.54% total return over the same time period. The Class I shares of the Thornburg Limited Term Income Fund produced a total return of 3.30% over the twelve-month period, assuming a beginning-of-the-period investment. The Lehman Intermediate Government/Credit Index produced a 3.55% total return over the same time period. The Funds kept their durations shorter than the Indices during the period. Because the Funds kept their durations shorter and allocated a larger portion of their portfolios to short-term bonds, their returns fell short of the Indices in the fourth quarter of 2005, outperformed the Indices in the first and second quarter of 2006 when interest rates rose across the yield curve and underperformed the Indices in the third quarter of 2006 when interest rates fell. The Thornburg Limited Term Income Fund also had a lower percentage of Baa/BBB and lower rated bonds than the Lehman Intermediate Government/Credit Index (the Thornburg Limited Term Income Fund does not purchase bonds rated below investment grade). The Indices reflect no deductions for fees, expenses or taxes. We have kept our durations shorter than the Indices thus far in 2006, because we believe doing so will improve the Funds’ return relative to the Indices if interest rates rise further.
The Federal Open Market Committee has held the Fed Funds Rate steady at 5.25% for the last two meetings. While most of the talk from members of the Fed has focused on a greater worry of rising inflation rather than slower economic growth, the bond market has focused on the real estate market. The slowdown and pricing contraction of residential real estate have drawn headlines; the rest of the economy has grown steadily. The housing contraction is bound to subtract from GDP growth – maybe as much as 1% over the next few quarters –as construction jobs and sales of durable goods slow or contract. However, if people feel that the housing contraction affects them personally, they might save significantly more and spend significantly less. The question is whether it was personal income growth or mortgage equity withdrawal that fueled past personal spending. The growth in jobs and in wages goes a long way to explain the recent resilience of the U.S. consumer. With the U.S. consumer accounting for about two-thirds of GDP, a slowdown in consumption will be felt by the economy even
6 Certified Annual Report
though U.S. corporations are finally opening up their purse strings. Corporations are finally starting to make some capital outlays for plants and equipment, and, even though they have not been on a huge hiring binge, they have not been laying people off as much as some have expected. All of these things combined give the Fed hope that the economy will move along at somewhere near trend – not too fast, not too slow. The longer the economy stays at trend, the less likely an upsurge in inflation will happen. But with all aspects of the economy growing steadily (ex-housing) and wage growth accelerating, the Fed has rightly (in my opinion) focused on making sure that inflation drops lower and does not accelerate from its already higher than comfortable recent readings.
Part of the reason I feel the Fed needs to focus on inflation rather than the housing market is that the interest rate environment has not been restrictive. This housing contraction has been caused primarily by the pricing of housing rather than a contraction of credit availability. It is not a collapse in incomes and credit making housing unaffordable; the rapid rise in prices did the trick this time around. Even with the Fed raising short term rates 425 basis points, mortgage rates, corporate borrowing rates and personal borrowing rates have not become expensive. The combination of foreign purchases of U.S. dollar denominated debt and the increasing risk appetite from leveraged accounts have kept credit spreads and longer term rates lower than one would normally expect. While it is still possible for the housing slowdown to bleed into other parts of the economy, it still looks like corporate spending and, albeit slightly lower, consumer spending should keep GDP in positive territory. Hence, the Fed needs to focus on price stability (i.e. inflation). It is very possible that longer term rates need to rise from their current low levels.
Regardless of the direction of interest rates, we believe your Funds are well positioned. The Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund are laddered portfolios of short-to-intermediate bonds. 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.
Thank you for investing in our Funds. We feel 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.
Sincerely,
Steven J. Bohlin
Portfolio Manager
Certified Annual Report 7
Thornburg Limited Term Income Funds | September 30, 2006 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||||
ASSETS | ||||||||
Investments at value (cost $155,053,417 and $352,291,117, respectively) | $ | 151,082,258 | $ | 348,104,459 | ||||
Cash | 783,343 | 607,430 | ||||||
Receivable for investments sold | 0 | 110,000 | ||||||
Principal receivable | 4,186 | 0 | ||||||
Receivable for fund shares sold | 100,915 | 453,463 | ||||||
Interest receivable | 1,530,314 | 3,344,095 | ||||||
Prepaid expenses and other assets | 40,722 | 38,253 | ||||||
Total Assets | 153,541,738 | 352,657,700 | ||||||
LIABILITIES | ||||||||
Payable for fund shares redeemed | 290,343 | 2,230,793 | ||||||
Payable to investment advisor and other affiliates (Note 3) | 94,681 | 201,271 | ||||||
Accounts payable and accrued expenses | 55,244 | 69,070 | ||||||
Dividends payable | 89,706 | 258,813 | ||||||
Total Liabilities | 529,974 | 2,759,947 | ||||||
NET ASSETS | $ | 153,011,764 | $ | 349,897,753 | ||||
NET ASSETS CONSIST OF: | ||||||||
Undistributed net investment income | $ | 110,307 | $ | 111,720 | ||||
Net unrealized depreciation on investments | (3,971,159 | ) | (4,186,658 | ) | ||||
Accumulated net realized gain (loss) | (797,491 | ) | (3,844,831 | ) | ||||
Net capital paid in on shares of beneficial interest | 157,670,107 | 357,817,522 | ||||||
$ | 153,011,764 | $ | 349,897,753 | |||||
NET ASSET VALUE: | ||||||||
Class A Shares: | ||||||||
Net asset value and redemption price per share | ||||||||
($106,912,960 and $190,670,833 applicable to 8,385,213 and 15,416,935 shares of beneficial interest outstanding - Note 4) | $ | 12.75 | $ | 12.37 | ||||
Maximum sales charge, 1.50% of offering price | 0.19 | 0.19 | ||||||
Maximum offering price per share | $ | 12.94 | $ | 12.56 | ||||
Class B Shares: | ||||||||
Net asset value and offering price per share * ($2,475,628 applicable to 194,580 shares of beneficial interest outstanding - Note 4) | $ | 12.72 | $ | — | ||||
Class C Shares: | ||||||||
Net asset value and offering price per share * | ||||||||
($25,132,447 and $ 44,361,052 applicable to 1,959,048 and 3,592,625 shares of beneficial interest outstanding - Note 4) | $ | 12.83 | $ | 12.35 | ||||
8 Certified Annual Report
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||
Class I Shares: | ||||||
Net asset value, offering and redemption price per share | $ | 12.75 | $ | 12.37 | ||
Class R1 Shares: | ||||||
Net asset value, offering and redemption price per share | $ | 12.76 | $ | 12.38 | ||
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See | notes to financial statements. |
Certified Annual Report 9
STATEMENTS OF OPERATIONS | ||
Thornburg Limited Term Income Funds | Year Ended September 30, 2006 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||||
INVESTMENT INCOME: | ||||||||
Interest income (net of premium amortized of $1,443,765 and $1,073,273, respectively) | $ | 6,514,084 | $ | 17,953,667 | ||||
EXPENSES: | ||||||||
Investment advisory fees (Note 3) | 632,729 | 1,780,980 | ||||||
Administration fees (Note 3) | ||||||||
Class A Shares | 150,921 | 248,454 | ||||||
Class B Shares | 2,434 | 0 | ||||||
Class C Shares | 35,060 | 64,535 | ||||||
Class I Shares | 7,241 | 51,435 | ||||||
Class R1 Shares | 4,392 | 3,669 | ||||||
Distribution and service fees (Note 3) | ||||||||
Class A Shares | 301,842 | 496,908 | ||||||
Class B Shares | 19,539 | 0 | ||||||
Class C Shares | 279,192 | 514,410 | ||||||
Class R1 Shares | 17,589 | 14,706 | ||||||
Transfer agent fees | ||||||||
Class A Shares | 160,858 | 249,800 | ||||||
Class B Shares | 16,803 | 0 | ||||||
Class C Shares | 41,033 | 70,798 | ||||||
Class I Shares | 22,527 | 76,265 | ||||||
Class R1 Shares | 1,668 | 2,180 | ||||||
Registration and filing fees | ||||||||
Class A Shares | 18,178 | 26,352 | ||||||
Class B Shares | 14,493 | 0 | ||||||
Class C Shares | 14,243 | 16,914 | ||||||
Class I Shares | 14,714 | 17,459 | ||||||
Class R1 Shares | 14,285 | 15,026 | ||||||
Custodian fees (Note 3) | 78,390 | 112,183 | ||||||
Professional fees | 34,343 | 43,545 | ||||||
Accounting fees | 14,198 | 28,820 | ||||||
Trustee fees | 2,460 | 8,738 | ||||||
Other expenses | 33,151 | 72,787 | ||||||
Total Expenses | 1,932,283 | 3,915,964 | ||||||
Less: | ||||||||
Expenses reimbursed by investment advisor (Note 3) | (60,770 | ) | (305,743 | ) | ||||
Distribution and service fees waived (Note 3) | (139,596 | ) | (257,205 | ) | ||||
Fees paid indirectly (Note 3) | (55,074 | ) | (31,148 | ) | ||||
Net Expenses | 1,676,843 | 3,321,868 | ||||||
Net Investment Income | $ | 4,837,241 | $ | 14,631,799 | ||||
10 Certified Annual Report
STATEMENTS OF OPERATIONS, CONTINUED | ||
Thornburg Limited Term Income Funds | Year Ended September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||
Net realized gain (loss) on Investments sold | $ | (50,733 | ) | $ | (113,993 | ) | ||
Net change in unrealized appreciation (depreciation) on Investments | (360,311 | ) | (4,147,964 | ) | ||||
Net Realized and Unrealized Loss on Investments | (411,044 | ) | (4,261,957 | ) | ||||
Net Increase in Net Assets Resulting From Operations | $ | 4,426,197 | $ | 10,369,842 | ||||
See notes to financial statements.
Certified Annual Report 11
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,837,241 | $ | 5,154,187 | ||||
Net realized gain (loss) on investments | (50,733 | ) | 120,345 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (360,311 | ) | (4,003,893 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 4,426,197 | 1,270,639 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (3,504,156 | ) | (3,952,925 | ) | ||||
Class B Shares | (27,495 | ) | (25,128 | ) | ||||
Class C Shares | (737,598 | ) | (900,979 | ) | ||||
Class I Shares | (465,896 | ) | (443,663 | ) | ||||
Class R1 Shares | (102,096 | ) | (26,599 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (31,185,601 | ) | (22,152,201 | ) | ||||
Class B Shares | 594,525 | (476,721 | ) | |||||
Class C Shares | (7,610,351 | ) | (9,829,652 | ) | ||||
Class I Shares | (1,162,905 | ) | 3,482,340 | |||||
Class R1 Shares | 586,260 | 2,598,892 | ||||||
Net Decrease in Net Assets | (39,189,116 | ) | (30,455,997 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 192,200,880 | 222,656,877 | ||||||
End of year | $ | 153,011,764 | $ | 192,200,880 | ||||
Undistributed net investment income | $ | 110,307 | $ | 52,033 |
See notes to financial statements.
12 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Limited Term Income Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 14,631,799 | $ | 13,814,830 | ||||
Net realized gain (loss) on investments | (113,993 | ) | 33,259 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (4,147,964 | ) | (8,194,449 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 10,369,842 | 5,653,640 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (8,047,005 | ) | (8,546,058 | ) | ||||
Class C Shares | (1,957,921 | ) | (2,192,018 | ) | ||||
Class I Shares | (4,507,364 | ) | (3,797,631 | ) | ||||
Class R1 Shares | (119,509 | ) | (48,598 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (19,776,336 | ) | (12,086,746 | ) | ||||
Class C Shares | (14,283,087 | ) | (4,598,144 | ) | ||||
Class I Shares | 13,217,562 | 11,548,065 | ||||||
Class R1 Shares | 1,198,886 | 1,280,382 | ||||||
Net Decrease in Net Assets | (23,904,932 | ) | (12,787,108 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 373,802,685 | 386,589,793 | ||||||
End of year | $ | 349,897,753 | $ | 373,802,685 | ||||
Undistributed net investment income | $ | 111,720 | $ | 70,784 |
See notes to financial statements.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
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 ten series of shares of beneficial interest in addition to those of the Funds: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg New York Intermediate Municipal Fund, Thornburg Value Fund, Thornburg International Value Fund, Thornburg Core Growth Fund, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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’ primary objectives are to obtain as high a level of current income as is consistent, in the view of the Funds’ investment advisor, with the safety of capital. As a secondary goal, the Funds seek to reduce changes in their share price compared to longer term portfolios.
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 R1) 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 R1) shares. Each class of shares of a fund represents an interest in the same portfolio of investments, 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 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 R1 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 may have different reinvestment privileges and conversion rights. Additionally, each fund may allocate among its classes certain expenses, to the extent applicable 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. Class B shares of the Government Fund outstanding for eight years will convert to Class A shares of the Government Fund.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: The Trust determines the value of investments utilizing an independent pricing service approved by the Board of 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 p.m. EST. When quotations are not readily available, securities are valued at evaluated prices as determined by the pricing service using methods which include consideration of yields or prices of debt obligations of comparable quality, type of issue, coupon, maturity, and rating; and indications as to value from dealers and general market conditions. In any case where a price is not available from a pricing service for an investment, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the Trustees. 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 Board of Trustees. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Funds to the shareholders. Therefore, no provision for Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Funds’ investment objectives and not for the purpose of investment leverage or to speculate on interest rate and/or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Funds will record the transaction and reflect the value in determining each Fund’s net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the each 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 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 dis-
14 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
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. Paydown gains and losses on these securities are included in interest income. 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.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
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, 2006, these fees were payable at annual rates ranging from .375 of 1% to .275 of 1% per annum of the average daily net assets of the Government Fund and .50 of 1% to .275 of 1% per annum of the average daily net assets of the Income Fund depending on each Fund’s asset size. The Trust also has 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% per annum of the average daily net assets attributable to Class A, Class B, Class C, and Class R1 shares, and up to .05 of 1% per annum of the average daily net assets attributable to Class I shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $5,826, $13,533, $8,297, $13,881, and $19,233 for the Class A, B, C, I, and R1 shares, respectively, of the Government Fund and $178,700, $61,940, $41,972, and $23,131 for the Class A, C, I, and R1 shares, respectively, of the Income Fund.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the distributor of each Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Funds that they earned net commissions aggregating $1,667 from the sale of Class A shares of the Income Fund, and collected contingent deferred sales charges aggregating $1,678 and $2,956 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 R1 shares of the Funds for payments made by the Advisor to securities dealers and other financial institutions to obtain various shareholder and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of each Fund’s shares.
The Trust has also adopted Distribution Plans pursuant to Rule 12b-1, applicable to each Fund’s Class B, Class C, and Class R1 shares under which the Funds compensate the Distributor for services in promoting the sale of Class B, C, and R1 shares of the
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
Funds at an annual rate of up to .75 of 1% per annum 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, 2006, are set forth in the Statements of Operations. Distribution fees of $139,596 and $257,205, respectively, for Class C shares of the Government Fund and Income Fund were waived.
The Trust has 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 Statement of Operations. For the year ended September 30, 2006, fees paid indirectly were $55,074 for the Government Fund and $31,148 for the Income Fund. These figures may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
GOVERNMENT FUND
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 1,127,442 | $ | 14,273,031 | 2,243,592 | $ | 28,913,349 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 210,223 | 2,662,638 | 230,485 | 2,966,058 | ||||||||||
Shares repurchased | (3,799,025 | ) | (48,121,270 | ) | (4,195,950 | ) | (54,031,608 | ) | ||||||
Net Increase (Decrease) | (2,461,360 | ) | $ | (31,185,601 | ) | (1,721,873 | ) | $ | (22,152,201 | ) | ||||
Class B Shares | ||||||||||||||
Shares sold | 85,374 | $ | 1,076,317 | 36,434 | $ | 470,166 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,620 | 20,478 | 1,423 | 18,270 | ||||||||||
Shares repurchased | (39,667 | ) | (502,270 | ) | (75,180 | ) | (965,157 | ) | ||||||
Net Increase (Decrease) | 47,327 | $ | 594,525 | (37,323 | ) | $ | (476,721 | ) | ||||||
Class C Shares | ||||||||||||||
Shares sold | 435,047 | $ | 5,539,917 | 353,641 | $ | 4,581,667 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 44,361 | 565,288 | 51,902 | 671,957 | ||||||||||
Shares repurchased | (1,076,447 | ) | (13,715,556 | ) | (1,165,115 | ) | (15,083,276 | ) | ||||||
Net Increase (Decrease) | (597,039 | ) | $ | (7,610,351 | ) | (759,572 | ) | $ | (9,829,652 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 284,094 | $ | 3,589,619 | 560,384 | $ | 7,250,216 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 31,981 | 405,096 | 30,104 | 387,218 | ||||||||||
Shares repurchased | (407,147 | ) | (5,157,620 | ) | (322,906 | ) | (4,155,094 | ) | ||||||
Net Increase (Decrease) | (91,072 | ) | $ | (1,162,905 | ) | 267,582 | $ | 3,482,340 | ||||||
Class R1 Shares | ||||||||||||||
Shares sold | 146,432 | $ | 1,860,958 | 225,835 | $ | 2,890,863 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 7,844 | 99,399 | 1,901 | 24,425 | ||||||||||
Shares repurchased | (108,414 | ) | (1,374,097 | ) | (24,563 | ) | (316,396 | ) | ||||||
Net Increase (Decrease) | 45,862 | $ | 586,260 | 203,173 | $ | 2,598,892 | ||||||||
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
INCOME FUND | Year Ended September 30, 2006 | Year Ended September 30, 2005 | ||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 3,250,026 | $ | 40,085,247 | 4,512,773 | $ | 57,228,284 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 494,039 | 6,098,155 | 493,348 | 6,244,437 | ||||||||||
Shares repurchased | (5,340,874 | ) | (65,959,738 | ) | (5,976,128 | ) | (75,559,467 | ) | ||||||
Net Increase (Decrease) | (1,596,809 | ) | $ | (19,776,336 | ) | (970,007 | ) | $ | (12,086,746 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 563,413 | $ | 6,944,987 | 996,231 | $ | 12,608,384 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 108,235 | 1,333,999 | 119,269 | 1,507,204 | ||||||||||
Shares repurchased | (1,830,119 | ) | (22,562,073 | ) | (1,480,457 | ) | (18,713,732 | ) | ||||||
Net Increase (Decrease) | (1,158,471 | ) | $ | (14,283,087 | ) | (364,957 | ) | $ | (4,598,144 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 2,696,403 | $ | 33,258,881 | 2,722,997 | $ | 34,485,958 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 334,633 | 4,129,810 | 272,125 | 3,443,839 | ||||||||||
Shares repurchased | (1,956,476 | ) | (24,171,129 | ) | (2,083,269 | ) | (26,381,732 | ) | ||||||
Net Increase (Decrease) | 1,074,560 | $ | 13,217,562 | 911,853 | $ | 11,548,065 | ||||||||
Class R1 Shares | ||||||||||||||
Shares sold | 143,837 | $ | 1,782,628 | 117,357 | $ | 1,481,761 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 7,699 | 95,044 | 2,363 | 29,836 | ||||||||||
Shares repurchased | (54,991 | ) | (678,786 | ) | (18,214 | ) | (231,215 | ) | ||||||
Net Increase (Decrease) | 96,545 | $ | 1,198,886 | 101,506 | $ | 1,280,382 | ||||||||
NOTE 5 - SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Government Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $12,133,966 and $40,493,528, respectively, while the Income Fund had purchase and sale transactions of investment securities (excluding short-term investments and U.S. Government obligations) of $22,786,354 and $33,278,245, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Government Fund | Income Fund | |||||||
Cost of investments for tax purpose | $ | 155,053,417 | $ | 352,297,916 | ||||
Gross unrealized appreciation on a tax basis | $ | 218,879 | $ | 1,955,726 | ||||
Gross unrealized depreciation on a tax basis | (4,190,038 | ) | (6,149,183 | ) | ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (3,971,159 | ) | $ | (4,193,457 | ) | ||
Distributable earnings ordinary income | $ | 110,307 | $ | 111,720 | ||||
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 |
At September 30, 2006, the Government Fund had tax basis losses, which may be carried over to offset future capital gains. Such capital loss carryovers expire as follows:
2009 | $ | 674,873 | |
2010 | 13,611 | ||
2014 | 3,770 | ||
$ | 692,254 | ||
At September 30, 2006, the Income Fund had tax basis capital losses, which may be carried over to offset future capital gains. Such capital loss carryovers expire as follows:
2008 | $ | 497,824 | |
2009 | 650,941 | ||
2010 | 308,333 | ||
2013 | 1,625,980 | ||
2014 | 601,391 | ||
$ | 3,684,469 | ||
As of September 30, 2006, the Government Fund had deferred capital losses occurring subsequent to October 31, 2005 of $105,237. For tax purposes, such losses will be reflected in the year ending September 30, 2007. 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.
As of September 30, 2006, the Income Fund had deferred capital losses occurring subsequent to October 31, 2005 of $153,563. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
In order to account for book/tax differences, the Government Fund increased undistributed net investment income (loss) by $58,274 and increased accumulated net realized (loss) by $58,274. The Income Fund increased undistributed net investment income by $40,936 and increased accumulated net realized loss by $40,936. This reclass has no impact on the net asset value of the Fund. Reclassifications result primarily from paydown gains and losses, which are recorded as an adjustment to interest income in the financial statements and as realized gains in the tax returns.
For tax purposes, distributions for the year ended September 30, 2006 and September 30, 2005, were paid from ordinary income.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including each of the Funds, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Funds and is not in a position at this time to estimate the significance of its impact, if any, on the Funds’ financial statements.
18 Certified Annual Report
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.76 | $ | 13.01 | $ | 13.22 | $ | 13.27 | $ | 12.77 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.41 | 0.36 | 0.39 | 0.51 | 0.62 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.01 | ) | (0.24 | ) | (0.21 | ) | (0.05 | ) | 0.50 | |||||||||||
Total from investment operations | 0.40 | 0.12 | 0.18 | 0.46 | 1.12 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.41 | ) | (0.37 | ) | (0.39 | ) | (0.51 | ) | (0.62 | ) | ||||||||||
Change in net asset value | (0.01 | ) | (0.25 | ) | (0.21 | ) | (0.05 | ) | 0.50 | |||||||||||
NET ASSET VALUE, end of year | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.22 | $ | 13.27 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 3.19 | % | 0.95 | % | 1.37 | % | 3.51 | % | 9.11 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.22 | % | 2.82 | % | 2.95 | % | 3.77 | % | 4.86 | % | ||||||||||
Expenses, after expense reductions | 0.68 | % | 0.68 | % | 0.67 | % | 0.64 | % | 0.61 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.65 | % | 0.67 | % | 0.67 | % | 0.62 | % | 0.60 | % | ||||||||||
Expenses, before expense reductions | 0.78 | % | 0.80 | % | 0.77 | % | 0.82 | % | 1.04 | % | ||||||||||
Portfolio turnover rate | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | 4.34 | % | ||||||||||
Net assets at end of year (000) | $ | 14,900 | $ | 16,075 | $ | 12,905 | $ | 13,085 | $ | 6,960 |
Certified Annual Report 19
FINANCIAL HIGHLIGHTS
Thornburg Limited Term Income Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.51 | $ | 12.80 | $ | 12.99 | $ | 12.79 | $ | 12.55 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.54 | 0.51 | 0.47 | 0.55 | 0.65 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | 0.24 | ||||||||||||
Total from investment operations | 0.40 | 0.22 | 0.28 | 0.75 | 0.89 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.54 | ) | (0.51 | ) | (0.47 | ) | (0.55 | ) | (0.65 | ) | ||||||||||
Change in net asset value | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | 0.24 | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | $ | 12.79 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 3.30 | % | 1.77 | % | 2.29 | % | 5.89 | % | 7.38 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.38 | % | 3.85 | % | 3.64 | % | 4.23 | % | 5.19 | % | ||||||||||
Expenses, after expense reductions | 0.68 | % | 0.67 | % | 0.67 | % | 0.69 | % | 0.69 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.67 | % | 0.67 | % | 0.67 | % | 0.69 | % | 0.69 | % | ||||||||||
Expenses, before expense reductions | 0.72 | % | 0.72 | % | 0.72 | % | 0.76 | % | 0.78 | % | ||||||||||
Portfolio turnover rate | 6.77 | % | 23.16 | % | 22.73 | % | 18.86 | % | 21.63 | % | ||||||||||
Net assets at end of year (000) | $ | 111,535 | $ | 99,396 | $ | 90,025 | $ | 59,473 | $ | 39,281 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2006 |
CUSIPS: Class A - 885-215-103, CLASS B - 885-215-848, CLASS C - 885-215-830, CLASS I - 885-215-699, CLASS R1 - 885-215-491
NASDAQ SYMBOLS: CLASS A - LTUSX, CLASS B - LTUBX, CLASS C - LTUCX, CLASS I - LTUIX, CLASS R1 - LTURX
Issuer-Description | Principal Amount | Value | ||||
U.S.Treasury Securities — 44.59% | ||||||
United States Treasury Notes, 4.375% due 5/15/2007 | $ | 9,000,000 | $ | 8,966,250 | ||
United States Treasury Notes, 6.125% due 8/15/2007 | 4,000,000 | 4,038,750 | ||||
United States Treasury Notes, 2.625% due 5/15/2008 | 9,000,000 | 8,704,688 | ||||
United States Treasury Notes, 5.50% due 5/15/2009 | 10,000,000 | 10,217,188 | ||||
United States Treasury Notes, 6.50% due 2/15/2010 | 15,000,000 | 15,874,218 | ||||
United States Treasury Notes, 5.75% due 8/15/2010 | 6,000,000 | 6,242,813 | ||||
United States Treasury Notes, 3.625% due 5/15/2013 | 15,000,000 | 14,177,343 | ||||
TOTAL U.S.TREASURY SECURITIES (Cost $ 71,173,027) | 68,221,250 | |||||
U.S. Government Agencies — 50.56% | ||||||
Federal Agricultural Mtg Corp., 6.71% due 7/28/2014 | 200,000 | 221,637 | ||||
Federal Farm Credit Bank, 1.875% due 1/16/2007 | 4,650,000 | 4,602,613 | ||||
Federal Farm Credit Bank, 5.875% due 7/28/2008 | 1,900,000 | 1,927,312 | ||||
Federal Farm Credit Bank, 5.87% due 9/2/2008 | 1,300,000 | 1,319,530 | ||||
Federal Farm Credit Bank, 5.35% due 12/11/2008 | 200,000 | 201,398 | ||||
Federal Farm Credit Bank, 5.80% due 3/19/2009 | 300,000 | 305,509 | ||||
Federal Farm Credit Bank, 6.75% due 7/7/2009 | 350,000 | 365,536 | ||||
Federal Farm Credit Bank, 6.06% due 5/28/2013 | 240,000 | 254,366 | ||||
Federal Home Loan Bank, 3.05% due 10/12/2006 | 3,975,000 | 3,972,114 | ||||
Federal Home Loan Bank, 7.76% due 11/21/2006 | 200,000 | 200,695 | ||||
Federal Home Loan Bank, 7.00% due 2/15/2008 | 150,000 | 153,610 | ||||
Federal Home Loan Bank, 5.48% due 1/8/2009 | 1,250,000 | 1,262,313 | ||||
Federal Home Loan Bank, 5.985% due 4/9/2009 | 1,000,000 | 1,022,972 | ||||
Federal Home Loan Bank, 5.79% due 4/27/2009 | 200,000 | 203,747 | ||||
Federal Home Loan Bank, 5.125% due 4/29/2009 | 1,750,000 | 1,755,028 | ||||
Federal Home Loan Bank, 3.40% due 11/12/2010 | 2,750,000 | 2,689,392 | ||||
Federal Home Loan Bank Floating Rate Note, 4.58% due 2/22/2007 | 5,000,000 | 4,994,505 | ||||
Federal Home Loan Mtg Corp., 6.80% due 3/19/2007 | 300,000 | 302,037 | ||||
Federal Home Loan Mtg Corp. CMO Series 1616 Class E, 6.50% due 11/15/2008 | 1,098,652 | 1,104,529 | ||||
Federal Home Loan Mtg Corp. CMO Series 2592 Class PD, 5.00% due 7/15/2014 | 1,000,000 | 997,230 | ||||
Federal Home Loan Mtg Corp. CMO Series 2814 Class GB, 5.00% due 6/15/2019 | 1,327,829 | 1,298,136 | ||||
Federal Home Loan Mtg Corp. CMO Series 2821 Class YI, 5.50% due 9/15/2014 | 670,983 | 669,674 | ||||
Federal Home Loan Mtg Corp., Pool # 141016, 9.25% due 11/1/2016 | 21,852 | 23,850 | ||||
Federal Home Loan Mtg Corp., Pool # 141412, 8.50% due 4/1/2017 | 71,270 | 75,751 | ||||
Federal Home Loan Mtg Corp., Pool # 160043, 8.75% due 4/1/2008 | 4,586 | 4,613 | ||||
Federal Home Loan Mtg Corp., Pool # 181730, 8.50% due 5/1/2008 | 4,935 | 4,977 | ||||
Federal Home Loan Mtg Corp., Pool # 252986, 10.75% due 4/1/2010 | 20,102 | 21,265 | ||||
Federal Home Loan Mtg Corp., Pool # 256764, 8.75% due 10/1/2014 | 2,453 | 2,459 | ||||
Federal Home Loan Mtg Corp., Pool # 273822, 8.50% due 4/1/2009 | 2,265 | 2,267 | ||||
Federal Home Loan Mtg Corp., Pool # 298107, 10.25% due 8/1/2017 | 26,407 | 29,821 | ||||
Federal Home Loan Mtg Corp., Pool # C90041, 6.50% due 11/1/2013 | 40,421 | 41,316 | ||||
Federal Home Loan Mtg Corp., Pool # D06908, 9.50% due 9/1/2017 | 5,327 | 5,481 | ||||
Federal Home Loan Mtg Corp., Pool # D37120, 7.00% due 7/1/2023 | 47,282 | 48,979 | ||||
Federal Home Loan Mtg Corp., Pool # E00170, 8.00% due 7/1/2007 | 12,051 | 12,118 | ||||
Federal Home Loan Mtg Corp., Pool # E49074, 6.50% due 7/1/2008 | 12,407 | 12,659 | ||||
Federal Home Loan Mtg Corp., Pool # E61778, 6.50% due 4/1/2008 | 14,516 | 14,811 | ||||
Federal National Mtg Assoc, 5.125% due 12/8/2008 | 3,665,000 | 3,673,609 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2006 |
Issuer-Description | Principal Amount | Value | ||||
Federal National Mtg Assoc, 4.25% due 6/29/2012 | $ | 3,250,000 | $ | 3,210,805 | ||
Federal National Mtg Assoc CMO Series 1992-22 Class HC, 7.00% due 3/25/2007 | 20,184 | 20,190 | ||||
Federal National Mtg Assoc CMO Series 1993-101 Class PJ, 7.00% due 6/25/2008 | 246,404 | 247,596 | ||||
Federal National Mtg Assoc CMO Series 1993-122 Class D, 6.50% due 6/25/2023 | 96,289 | 96,761 | ||||
Federal National Mtg Assoc CMO Series 1993-32 Class H, 6.00% due 3/25/2023 | 135,149 | 136,060 | ||||
Federal National Mtg Assoc CPI Floating Rate Note, 5.459% due 2/17/2009 | 3,000,000 | 2,910,180 | ||||
Federal National Mtg Assoc Remic Series 2006-B1 Class AB, 6.00% due 6/25/2016 | 4,710,884 | 4,737,596 | ||||
Federal National Mtg Assoc, Pool # 008307, 8.00% due 5/1/2008 | 26,275 | 26,489 | ||||
Federal National Mtg Assoc, Pool # 044003, 8.00% due 6/1/2017 | 43,930 | 46,346 | ||||
Federal National Mtg Assoc, Pool # 050811, 7.50% due 12/1/2012 | 38,579 | 40,007 | ||||
Federal National Mtg Assoc, Pool # 050832, 7.50% due 6/1/2013 | 50,263 | 52,008 | ||||
Federal National Mtg Assoc, Pool # 076388, 9.25% due 9/1/2018 | 73,674 | 80,229 | ||||
Federal National Mtg Assoc, Pool # 077725, 9.75% due 10/1/2018 | 16,610 | 17,168 | ||||
Federal National Mtg Assoc, Pool # 100286, 7.50% due 8/1/2009 | 87,563 | 88,735 | ||||
Federal National Mtg Assoc, Pool # 112067, 9.50% due 10/1/2016 | 51,387 | 56,277 | ||||
Federal National Mtg Assoc, Pool # 156156, 8.50% due 4/1/2021 | 36,559 | 37,856 | ||||
Federal National Mtg Assoc, Pool # 190555, 7.00% due 1/1/2014 | 34,920 | 36,062 | ||||
Federal National Mtg Assoc, Pool # 190703, 7.00% due 3/1/2009 | 18,659 | 18,817 | ||||
Federal National Mtg Assoc, Pool # 190836, 7.00% due 6/1/2009 | 47,583 | 48,085 | ||||
Federal National Mtg Assoc, Pool # 250387, 7.00% due 11/1/2010 | 49,050 | 50,039 | ||||
Federal National Mtg Assoc, Pool # 250481, 6.50% due 11/1/2015 | 5,330 | 5,412 | ||||
Federal National Mtg Assoc, Pool # 251258, 7.00% due 9/1/2007 | 11,274 | 11,291 | ||||
Federal National Mtg Assoc, Pool # 251759, 6.00% due 5/1/2013 | 80,467 | 81,696 | ||||
Federal National Mtg Assoc, Pool # 252648, 6.50% due 5/1/2022 | 162,188 | 166,243 | ||||
Federal National Mtg Assoc, Pool # 303383, 7.00% due 12/1/2009 | 28,907 | 29,106 | ||||
Federal National Mtg Assoc, Pool # 312663, 7.50% due 6/1/2010 | 46,456 | 47,500 | ||||
Federal National Mtg Assoc, Pool # 323706, 7.00% due 2/1/2009 | 51,243 | 51,568 | ||||
Federal National Mtg Assoc, Pool # 334996, 7.00% due 2/1/2011 | 53,827 | 54,937 | ||||
Federal National Mtg Assoc, Pool # 342947, 7.25% due 4/1/2024 | 336,144 | 349,229 | ||||
Federal National Mtg Assoc, Pool # 345775, 8.50% due 12/1/2024 | 32,886 | 33,759 | ||||
Federal National Mtg Assoc, Pool # 373942, 6.50% due 12/1/2008 | 24,658 | 25,189 | ||||
Federal National Mtg Assoc, Pool # 382926, 7.37% due 12/1/2010 | 333,129 | 346,950 | ||||
Federal National Mtg Assoc, Pool # 384243, 6.10% due 10/1/2011 | 609,522 | 621,394 | ||||
Federal National Mtg Assoc, Pool # 384746, 5.86% due 2/1/2009 | 1,041,825 | 1,056,567 | ||||
Federal National Mtg Assoc, Pool # 385714, 4.70% due 1/1/2010 | 3,131,355 | 3,092,250 | ||||
Federal National Mtg Assoc, Pool # 406384, 8.25% due 12/1/2024 | 178,363 | 188,302 | ||||
Federal National Mtg Assoc, Pool # 443909, 6.50% due 9/1/2018 | 196,366 | 202,455 | ||||
Federal National Mtg Assoc, Pool # 460568, 5.20% due 12/1/2006 | 3,500,000 | 3,486,366 | ||||
Federal National Mtg Assoc, Pool # 516363, 5.00% due 3/1/2014 | 168,214 | 166,243 | ||||
Federal National Mtg Assoc, Pool # 555207, 7.00% due 11/1/2017 | 82,558 | 84,458 | ||||
Government National Mtg Assoc CMO Series 2001-65 Class PG, 6.00% due 7/20/2028 | 602,370 | 600,240 | ||||
Government National Mtg Assoc CMO Series 2002-67 Class VA, 6.00% due 3/20/2013 | 261,981 | 260,351 | ||||
Government National Mtg Assoc, Pool # 000623, 8.00% due 9/20/2016 | 58,388 | 61,329 | ||||
Government National Mtg Assoc, Pool # 016944, 7.50% due 5/15/2007 | 12,641 | 12,653 | ||||
Government National Mtg Assoc, Pool # 369693, 7.00% due 1/15/2009 | 60,706 | 61,312 | ||||
Government National Mtg Assoc, Pool # 409921, 7.50% due 8/15/2010 | 28,504 | 29,160 | ||||
Government National Mtg Assoc, Pool # 410240, 7.00% due 12/15/2010 | 37,859 | 38,575 | ||||
Government National Mtg Assoc, Pool # 410271, 7.50% due 8/15/2010 | 34,661 | 35,527 | ||||
Government National Mtg Assoc, Pool # 410846, 7.00% due 12/15/2010 | 56,518 | 57,628 | ||||
Government National Mtg Assoc, Pool # 430150, 7.25% due 12/15/2026 | 31,154 | 32,522 | ||||
Government National Mtg Assoc, Pool # 453928, 7.00% due 7/15/2017 | 79,860 | 83,044 | ||||
Government National Mtg Assoc, Pool # 780063, 7.00% due 9/15/2008 | 11,897 | 11,972 | ||||
Government National Mtg Assoc, Pool # 780448, 6.50% due 8/15/2011 | 106,299 | 108,786 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2006 |
Issuer-Description | Principal Amount | Value | ||||
Overseas Private Investment Corp., 4.10% due 11/15/2014 | $ | 2,126,400 | $ | 2,048,319 | ||
Private Export Funding Corp., 5.685% due 5/15/2012 | 5,000,000 | 5,173,100 | ||||
Private Export Funding Corp., 4.974% due 8/15/2013 | 2,700,000 | 2,708,446 | ||||
Tennessee Valley Authority, 4.75% due 8/1/2013 | 3,000,000 | 2,966,946 | ||||
Tennessee Valley Authority Principal Inflation Indexed, 3.375% due 1/15/2007 | 6,422,150 | 6,389,204 | ||||
United States Department of Housing & Urban Development, 3.51% due 8/1/2008 | 850,000 | 827,360 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $ 78,381,936) | 77,362,554 | |||||
Short Term Investments — 3.59% | ||||||
Federal Home Loan Bank - Discount Notes, 5.06% due 10/3/2006 | 5,500,000 | 5,498,454 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $5,498,454) | 5,498,454 | |||||
TOTAL INVESTMENTS — 98.74% (Cost $ 155,053,417) | $ | 151,082,258 | ||||
OTHER ASSETS LESS LIABILITIES — 1.26% | 1,929,506 | |||||
NET ASSETS — 100.00% | $ | 153,011,764 | ||||
Footnote Legend
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
REMIC Real Estate Mortgage Investment Conduit
SUMMARY OF TYPES OF HOLDINGS
Certified Annual Report 23
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
CUSIPS: Class A - 885-215-509, CLASS C - 885-215-764, CLASS I - 885-215-681, CLASS RI - 885-215-483
NASDAQ SYMBOLS: CLASS A - THIFX, CLASS C - THICX, CLASS I - THIIX, CLASS RI - THIRX
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
U.S.Treasury Securities — 3.64% | ||||||||
United States Treasury Notes, 3.00% due 2/15/2008 | Aaa/AAA | $ | 4,000,000 | $ | 3,905,313 | |||
United States Treasury Notes, 4.75% due 11/15/2008 | Aaa/AAA | 1,500,000 | 1,502,109 | |||||
United States Treasury Notes, 5.75% due 8/15/2010 | Aaa/AAA | 2,500,000 | 2,601,172 | |||||
United States Treasury Notes, 3.625% due 5/15/2013 | Aaa/AAA | 5,000,000 | 4,725,781 | |||||
TOTAL U.S.TREASURY SECURITIES (Cost $ 13,042,120) | 12,734,375 | |||||||
U.S. Government Agencies — 5.51% | ||||||||
Federal Home Loan Bank, 4.875% due 5/15/2007 | Aaa/AAA | 150,000 | 149,590 | |||||
Federal Home Loan Bank, 5.833% due 1/23/2008 | Aaa/AAA | 500,000 | 504,141 | |||||
Federal Home Loan Bank, 5.785% due 4/14/2008 | Aaa/AAA | 75,000 | 75,737 | |||||
Federal Home Loan Bank, 5.835% due 7/15/2008 | Aaa/AAA | 300,000 | 303,985 | |||||
Federal Home Loan Bank, 5.085% due 10/7/2008 | Aaa/AAA | 250,000 | 250,335 | |||||
Federal Home Loan Bank, 5.038% due 10/14/2008 | Aaa/AAA | 200,000 | 200,062 | |||||
Federal Home Loan Bank, 5.365% due 12/11/2008 | Aaa/AAA | 75,000 | 75,547 | |||||
Federal Home Loan Bank, 4.50% due 12/15/2008 | Aaa/AAA | 3,000,000 | 2,968,482 | |||||
Federal Home Loan Bank, 5.985% due 4/9/2009 | Aaa/AAA | 85,000 | 86,953 | |||||
Federal Home Loan Bank, 5.00% due 9/22/2009 | Aaa/AAA | 1,500,000 | 1,494,211 | |||||
Federal Home Loan Bank Floating Rate Note, 4.58% due 2/22/2007 | Aaa/AAA | 1,370,000 | 1,368,494 | |||||
Federal Home Loan Mtg Corp. CMO Series 2814 Class GB, 5.00% due 6/15/2019 | Aaa/AAA | 1,327,829 | 1,298,135 | |||||
Federal Home Loan Mtg Corp. CMO Series 2821 Class YI, 5.50% due 9/15/2014 | Aaa/AAA | 671,205 | 669,895 | |||||
Federal National Mtg Assoc, 3.50% due 12/28/2006 | Aaa/AAA | 325,000 | 323,583 | |||||
Federal National Mtg Assoc, 5.185% due 11/1/2008 | Aaa/AAA | 451,591 | 450,413 | |||||
Federal National Mtg Assoc, 6.00% due 12/1/2008 | Aaa/AAA | 46,278 | 46,985 | |||||
Federal National Mtg Assoc, 8.00% due 12/1/2009 | Aaa/AAA | 24,821 | 25,553 | |||||
Federal National Mtg Assoc, 7.00% due 3/1/2011 | Aaa/AAA | 30,782 | 31,373 | |||||
Federal National Mtg Assoc, 6.42% due 4/1/2011 | Aaa/AAA | 2,348,809 | 2,375,127 | |||||
Federal National Mtg Assoc, 5.095% due 12/1/2011 | Aaa/AAA | 124,852 | 124,520 | |||||
Federal National Mtg Assoc, 7.491% due 8/1/2014 | Aaa/AAA | 34,125 | 35,000 | |||||
Federal National Mtg Assoc CMO Series 2003-64 Class EC, 5.50% due 5/25/2030 | Aaa/AAA | 715,909 | 714,674 | |||||
Federal National Mtg Assoc CPI Floating Rate Note, 5.459% due 2/17/2009 | Aaa/AAA | 5,000,000 | 4,850,300 | |||||
Federal National Mtg Assoc, Pool # 460568, 5.20% due 12/1/2006 | Aaa/AAA | 800,000 | 796,884 | |||||
Government National Mtg Assoc, Pool # 003007, 8.50% due 11/20/2015 | Aaa/AAA | 26,381 | 27,747 | |||||
Government National Mtg Assoc, Pool # 827148, 5.375% due 2/20/2024 | Aaa/AAA | 39,086 | 39,734 | |||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $ 19,562,014) | 19,287,460 | |||||||
Asset Back Securities — 3.66% | ||||||||
Associates Manufactured Housing Trust 1996-1 A5, 7.60% due 3/15/2027 | Aaa/AAA | 78,572 | 78,831 | |||||
GSR Mtg Loan Trust Series 2004-3F Class 2-A10, 3.218% due 2/25/2034 | NR/AAA | 840,071 | 791,934 | |||||
Small Business Administration, 4.638% due 2/10/2015 | NR/NR | 3,067,561 | 2,981,829 | |||||
Washington Mutual Series 02-AR10, Class-A6, 4.816% due 10/25/2032 | Aaa/AAA | 33,631 | 33,414 | |||||
Washington Mutual Series 03-AR10, Class-A4, 4.062% due 10/25/2033 | Aaa/AAA | 1,583,274 | 1,567,804 | |||||
Washington Mutual Series 03-AR12, Class-A4, 3.743% due 2/25/2034 | Aaa/AAA | 1,041,933 | 1,032,684 | |||||
Washington Mutual Series 03-AR5, Class-A6, 3.695% due 6/25/2033 | Aaa/AAA | 3,200,000 | 3,119,829 |
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Washington Mutual Series 05-AR4, Class-A4b, 4.674% due 4/25/2035 | Aaa/AAA | $ | 830,000 | $ | 815,367 | |||
Wells Fargo Mortgage Backed Securities Series 2005-3 Class-A10, 5.50% due 5/25/2035 | Aaa/NR | 2,404,822 | 2,394,000 | |||||
TOTAL ASSET BACK SECURITIES (Cost $ 13,090,624) | 12,815,692 | |||||||
Corporate Bonds — 67.69% | ||||||||
BANKS — 3.01% | ||||||||
COMMERCIAL BANKS — 3.01% | ||||||||
Bank of America Corp., 4.375% due 12/1/2010 | Aa2/AA- | 1,675,000 | 1,627,783 | |||||
Capital One Bank, 6.70% due 5/15/2008 | A3/BBB | 1,665,000 | 1,699,439 | |||||
Capital One Bank, 6.15% due 9/1/2016 | Baa2/BBB- | 2,000,000 | 2,023,726 | |||||
Fifth Third Bank, Cincinnati Ohio, 3.375% due 8/15/2008 | Aa2/AA- | 2,500,000 | 2,420,878 | |||||
HSBC USA, Inc., 8.375% due 2/15/2007 | Aa3/AA- | 700,000 | 706,677 | |||||
National Westminster Bank, 7.375% due 10/1/2009 | Aa2/AA- | 715,000 | 761,322 | |||||
Nations Bank Corp., 7.23% due 8/15/2012 | Aa2/AA- | 250,000 | 270,378 | |||||
Northern Trust Co., 6.25% due 6/2/2008 | A1/A+ | 500,000 | 509,331 | |||||
PNC Funding Corp., 6.875% due 7/15/2007 | A3/A- | 95,000 | 96,010 | |||||
US Bank, 6.30% due 7/15/2008 | Aa2/AA- | 400,000 | 407,619 | |||||
10,523,163 | ||||||||
CAPITAL GOODS — 4.76% | ||||||||
MACHINERY — 4.76% | ||||||||
Caterpillar Financial Services Corp., 6.40% due 2/15/2008 | A2/A | 250,000 | 251,918 | |||||
Emerson Electric Co., 5.75% due 11/1/2011 | A2/A | 800,000 | 821,225 | |||||
General American Railcar Corp., 6.69% due 9/20/2016 | A3/AA- | 201,444 | 215,233 | |||||
Hubbell Inc., 6.375% due 5/15/2012 | A3/A+ | 1,000,000 | 1,057,627 | |||||
Illinois Tool Works, Inc., 5.75% due 3/1/2009 | Aa3/AA | 4,595,000 | 4,665,846 | |||||
John Deere Capital Corp., 5.125% due 10/19/2006 | A3/A- | 450,000 | 449,942 | |||||
John Deere Capital Corp. Floating Rate Note, 5.515% due 6/10/2008 | A3/A- | 4,415,000 | 4,423,146 | |||||
Johnson Controls, Inc., 5.00% due 11/15/2006 | Baa1/A- | 1,000,000 | 998,984 | |||||
Pentair, Inc., 7.85% due 10/15/2009 | Baa3/BBB | 1,000,000 | 1,064,651 | |||||
Pitney Bowes, Inc., 4.625% due 10/1/2012 | Aa3/A+ | 900,000 | 870,490 | |||||
Pitney Bowes, Inc., 3.875% due 6/15/2013 | Aa3/A+ | 2,000,000 | 1,836,568 | |||||
16,655,630 | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 2.52% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 2.52% | ||||||||
Science Applications International Corp., 6.75% due 2/1/2008 | A3/A- | 250,000 | 254,080 | |||||
Science Applications International Corp., 6.25% due 7/1/2012 | A3/A- | 1,000,000 | 1,025,280 | |||||
Valassis Communications, 6.625% due 1/15/2009 | Baa3/BB | 4,700,000 | 4,687,686 | |||||
Waste Management, Inc., 6.875% due 5/15/2009 | Baa3/BBB | 725,000 | 753,239 | |||||
Waste Management, Inc., 7.375% due 8/1/2010 | Baa3/BBB | 500,000 | 535,921 | |||||
Waste Management, Inc., 6.50% due 11/15/2008 | Baa3/BBB | 1,000,000 | 1,023,940 | |||||
WMX Technologies, Inc., 7.00% due 10/15/2006 | Baa3/BBB | 550,000 | 550,227 | |||||
8,830,373 | ||||||||
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
DIVERSIFIED FINANCIALS — 25.17% | ||||||||
CAPITAL MARKETS — 7.23% | ||||||||
Bear Stearns Co., Inc., 4.50% due 10/28/2010 | A1/A | $ | 1,500,000 | $ | 1,459,791 | |||
Jefferies Group, Inc. Senior Note Series B, 7.50% due 8/15/2007 | Baa1/BBB+ | 2,600,000 | 2,630,225 | |||||
Legg Mason Mortgage Capital Corp., 7.161% due 6/1/2009 | NR/NR | 1,714,286 | 1,714,286 | |||||
Lehman Brothers Holdings, Inc., 3.50% due 8/7/2008 | A1/A+ | 700,000 | 679,301 | |||||
Lehman Brothers Holdings, Inc. CPI Floating Rate Note, 6.32% due 5/12/2014 | A1/A+ | 5,190,000 | 4,973,681 | |||||
Merrill Lynch & Co. CPI Floating Rate Note, 5.48% due 3/2/2009 | Aa3/A+ | 3,000,000 | 2,914,050 | |||||
Merrill Lynch & Co. CPI Floating Rate Note, 6.37% due 5/5/2014 | Aa3/A+ | 1,000,000 | 961,610 | |||||
Merrill Lynch & Co. CPI Floating Rate Note, 5.12% due 3/12/2007 | Aa3/A+ | 5,000,000 | 4,961,100 | |||||
Morgan Stanley Group, Inc., 5.623% due 1/18/2008 | Aa3/A+ | 5,000,000 | 5,008,500 | |||||
CONSUMER FINANCE — 4.77% | ||||||||
SLM Corp. CPI Floating Rate Note, 6.44% due 1/31/2014 | A2/A | 9,500,000 | 9,100,905 | |||||
SLM Corp. CPI Floating Rate Note, 5.52% due 3/2/2009 | A2/A | 3,000,000 | 2,900,100 | |||||
SLM Corp. Floating Rate Note, 5.495% due 9/15/2008 | A2/A | 1,675,000 | 1,675,340 | |||||
SLM Corp. Floating Rate Note, 5.695% due 7/25/2008 | A2/A | 3,000,000 | 3,010,083 | |||||
DIVERSIFIED FINANCIAL SERVICES — 13.17% | ||||||||
American General Finance Corp., 4.625% due 9/1/2010 | A1/A+ | 200,000 | 195,181 | |||||
Berkshire Hathaway Finance Corp. Senior Note, 4.625% due 10/15/2013 | Aaa/AAA | 1,000,000 | 962,911 | |||||
General Electric Capital Corp., 7.75% due 6/9/2009 | Aaa/AAA | 200,000 | 211,907 | |||||
General Electric Capital Corp., 4.25% due 12/1/2010 | Aaa/AAA | 2,000,000 | 1,937,530 | |||||
General Electric Capital Corp., 7.375% due 1/19/2010 | Aaa/AAA | 400,000 | 426,713 | |||||
General Electric Capital Corp., 5.00% due 2/15/2007 | Aaa/AAA | 2,900,000 | 2,896,416 | |||||
General Electric Capital Corp., 4.375% due 11/21/2011 | Aaa/AAA | 1,500,000 | 1,445,744 | |||||
General Electric Capital Corp. Floating Rate Note, 4.80% due 5/30/2008 | Aaa/AAA | 494,000 | 484,582 | |||||
General Electric Capital Corp. Floating Rate Note, 5.51% due 12/15/2009 | Aaa/AAA | 1,000,000 | 1,002,817 | |||||
General Electric Capital Corp. Floating Rate Note, 4.564% due 3/2/2009 | Aaa/AAA | 5,000,000 | 4,900,000 | |||||
Household Finance Corp., 5.75% due 1/30/2007 | Aa3/AA- | 400,000 | 400,488 | |||||
Household Finance Corp., 6.40% due 9/15/2009 | Aa3/AA- | 400,000 | 406,138 | |||||
Household Finance Corp. CPI Floating Rate Note, 5.52% due 8/10/2009 | Aa3/AA- | 5,000,000 | 4,769,550 | |||||
International Lease Finance Corp., 4.55% due 10/15/2009 | A1/AA- | 2,500,000 | 2,450,082 | |||||
International Lease Finance Corp., 5.00% due 9/15/2012 | A1/AA- | 4,000,000 | 3,928,472 | |||||
International Lease Finance Corp. Floating Rate Note, 5.907% due 1/15/2010 | A1/AA- | 4,050,000 | 4,079,205 | |||||
JP Morgan Chase Co., 4.50% due 11/15/2010 | Aa3/A+ | 1,465,000 | 1,428,898 | |||||
JP Morgan Chase Co. CPI Floating Rate Note, 5.88% due 6/28/2009 | Aa3/A+ | 5,000,000 | 4,869,950 | |||||
Principal Financial Group Australia, 8.20% due 8/15/2009 | A2/A | 700,000 | 752,932 | |||||
Toyota Motor Credit Corp., 2.875% due 8/1/2008 | Aaa/AAA | 800,000 | 768,530 | |||||
Toyota Motor Credit Corp., 4.35% due 12/15/2010 | Aaa/AAA | 800,000 | 779,095 | |||||
Toyota Motor Credit Corp., 2.70% due 1/30/2007 | Aaa/AAA | 3,300,000 | 3,271,613 | |||||
Toyota Motor Credit Corp., 4.25% due 3/15/2010 | Aaa/AAA | 3,450,000 | 3,351,758 | |||||
US Central Credit Union, 2.75% due 5/30/2008 | Aa1/AAA | 375,000 | 360,039 | |||||
88,069,523 | ||||||||
ENERGY — 2.74% | ||||||||
ENERGY EQUIPMENT & SERVICES — 2.58% | ||||||||
Central Power & Light Co., 7.125% due 2/1/2008 | Baa1/BBB | 2,000,000 | 2,044,902 | |||||
Commonwealth Edison Co., 4.74% due 8/15/2010 | Baa2/A- | 975,000 | 955,455 | |||||
El Paso Corp., 7.00% due 5/15/2011 | B2/B | 700,000 | 704,375 | |||||
Enterprise Products Participating LP, 7.50% due 2/1/2011 | Baa3/BB+ | 250,000 | 266,612 | |||||
Louis Dreyfus Natural Gas Corp., 6.875% due 12/1/2007 | Baa1/BBB | 290,000 | 294,525 | |||||
Murphy Oil Corp., 6.375% due 5/1/2012 | Baa2/BBB | 750,000 | 774,272 |
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Panenergy Corp., 7.00% due 10/15/2006 | Baa3/BBB- | $ | 1,100,000 | $ | 1,100,189 | |||
Phillips Petroleum Co., 9.375% due 2/15/2011 | A1/A- | 900,000 | 1,040,362 | |||||
Phillips Petroleum Co., 8.75% due 5/25/2010 | A1/A- | 250,000 | 279,188 | |||||
Questar Pipeline Co., 6.05% due 12/1/2008 | A2/A- | 425,000 | 431,189 | |||||
Smith International Inc. Senior Note, 7.00% due 9/15/2007 | Baa1/BBB+ | 600,000 | 608,975 | |||||
Sonat, Inc., 7.625% due 7/15/2011 | B2/B | 500,000 | 512,500 | |||||
OIL, GAS & CONSUMABLE FUELS — 0.16% | ||||||||
Occidental Petroleum Corp., 10.125% due 9/15/2009 | A3/A- | 315,000 | 356,716 | |||||
Union Oil Co. California, 7.90% due 4/18/2008 | A1/BBB+ | 200,000 | 209,118 | |||||
9,578,378 | ||||||||
FOOD & DRUG RETAILING — 0.09% | ||||||||
FOOD & STAPLES RETAILING — 0.09% | ||||||||
General Mills, 5.50% due 1/12/2009 | Baa1/BBB+ | 300,000 | 301,247 | |||||
301,247 | ||||||||
FOOD BEVERAGE & TOBACCO — 1.79% | ||||||||
BEVERAGES — 0.97% | ||||||||
Anheuser Busch Co., Inc., 4.375% due 1/15/2013 | A1/A+ | 2,000,000 | 1,910,458 | |||||
Anheuser Busch Co., Inc., 5.625% due 10/1/2010 | A1/A+ | 1,150,000 | 1,173,206 | |||||
Coca Cola Co., 5.75% due 3/15/2011 | Aa3/A+ | 200,000 | 204,948 | |||||
Conagra, Inc., 7.875% due 9/15/2010 | Baa2/BBB+ | 100,000 | 108,760 | |||||
FOOD PRODUCTS — 0.82% | ||||||||
Diageo Finance BV, 3.00% due 12/15/2006 | A3/A- | 925,000 | 920,641 | |||||
Sara Lee Corp., 6.00% due 1/15/2008 | Baa1/BBB+ | 900,000 | 902,948 | |||||
Sysco International Co., 6.10% due 6/1/2012 | A1/A+ | 1,000,000 | 1,040,404 | |||||
6,261,365 | ||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.66% | ||||||||
PERSONAL PRODUCTS — 0.66% | ||||||||
Procter & Gamble Co., 4.75% due 6/15/2007 | Aa3/AA- | 350,000 | 348,909 | |||||
Procter & Gamble Co., 4.30% due 8/15/2008 | Aa3/AA- | 2,000,000 | 1,972,754 | |||||
2,321,663 | ||||||||
INSURANCE — 8.46% | ||||||||
INSURANCE — 8.46% | ||||||||
AIG Sunamerica Global Financing, 5.10% due 1/17/2007 | Aa2/AA+ | 800,000 | 799,291 | |||||
Allstate Corp., 5.375% due 12/1/2006 | A1/A+ | 900,000 | 899,779 | |||||
Allstate Life Global Funding, CPI Floating Rate Note, 5.17% due 4/2/2007 | Aa2/AA | 5,000,000 | 4,961,450 | |||||
Hartford Financial Services Group, Inc. Senior Note, 4.625% due 7/15/2013 | A2/A | 1,000,000 | 956,239 | |||||
Hartford Life, Inc., 7.10% due 6/15/2007 | A2/A | 300,000 | 303,451 | |||||
Liberty Mutual Group, Inc., 5.75% due 3/15/2014 | Baa3/BBB | 1,000,000 | 983,408 | |||||
Lincoln National Corp., 4.75% due 2/15/2014 | A3/A+ | 1,000,000 | 950,898 | |||||
Metlife, Inc., 5.25% due 12/1/2006 | A2/A | 450,000 | 449,795 | |||||
Old Republic International Corp., 7.00% due 6/15/2007 | Aa3/A+ | 1,800,000 | 1,811,464 | |||||
Pacific Life Global Funding CPI Floating Rate Note, 6.33% due 2/6/2016 | Aa3/AA | 8,000,000 | 7,625,440 | |||||
Principal Life Global Funding, 4.40% due 10/1/2010 | Aa2/AA | 4,000,000 | 3,866,396 |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Principal Life Income Funding Floating Rate Note, 6.20% due 4/1/2016 | Aa2/AA | $ | 5,000,000 | $ | 4,648,450 | |||
Unumprovident Corp., 7.625% due 3/1/2011 | Ba1/BB+ | 1,257,000 | 1,341,048 | |||||
29,597,109 | ||||||||
MATERIALS — 1.27% | ||||||||
CHEMICALS — 1.27% | ||||||||
Chevron Phillips Chemical, 7.00% due 3/15/2011 | Baa1/BBB+ | 500,000 | 528,205 | |||||
Chevron Phillips Chemical, 5.375% due 6/15/2007 | Baa1/BBB+ | 75,000 | 74,908 | |||||
Chevrontexaco Capital Co., 3.50% due 9/17/2007 | Aa2/AA | 1,400,000 | 1,378,252 | |||||
Dow Chemical Co., 5.75% due 12/15/2008 | A3/A- | 350,000 | 354,030 | |||||
E.I. du Pont de Nemours & Co., 4.75% due 11/15/2012 | A2/A | 1,000,000 | 968,808 | |||||
E.I. du Pont de Nemours & Co., 4.125% due 3/6/2013 | A2/A | 325,000 | 303,370 | |||||
Hoechst Celanese Corp., 7.125% due 3/15/2009 | B3/NR | 200,000 | 202,844 | |||||
Lubrizol Corp. Senior Note, 5.875% due 12/1/2008 | Baa3/BBB- | 635,000 | 640,511 | |||||
4,450,928 | ||||||||
MEDIA — 1.45% | ||||||||
MEDIA — 1.45% | ||||||||
AOL Time Warner, Inc., 6.75% due 4/15/2011 | Baa2/BBB+ | 750,000 | 784,411 | |||||
E W Scripps Co. Ohio, 5.75% due 7/15/2012 | A2/A | 80,000 | 80,562 | |||||
New York Times Co., 4.625% due 6/25/2007 | Baa1/A- | 300,000 | 298,630 | |||||
Scholastic Corp., 5.75% due 1/15/2007 | Ba2/BB | 762,000 | 760,935 | |||||
Thomson Corp., 4.25% due 8/15/2009 | A3/A- | 2,900,000 | 2,814,896 | |||||
Time Warner, Inc., 8.05% due 1/15/2016 | Baa2/BBB+ | 200,000 | 224,538 | |||||
Tribune Co., 6.875% due 11/1/2006 | Ba1/BB+ | 125,000 | 125,068 | |||||
5,089,040 | ||||||||
MISCELLANEOUS — 1.38% | ||||||||
MISCELLANEOUS — 1.02% | ||||||||
Stanford University, 5.85% due 3/15/2009 | Aaa/NR | 3,500,000 | 3,566,608 | |||||
YANKEE — 0.36% | ||||||||
Kreditanstalt Fur Wiederaufbau, 3.25% due 7/16/2007 | Aaa/AAA | 435,000 | 427,281 | |||||
Nova Scotia Province Canada, 5.75% due 2/27/2012 | A1/A+ | 500,000 | 515,541 | |||||
Ontario Province Canada, 3.282% due 3/28/2008 | Aa2/AA | 335,000 | 325,804 | |||||
4,835,234 | ||||||||
PHARMACEUTICALS & BIOTECHNOLOGY — 1.85% | ||||||||
BIOTECHNOLOGY — 1.85% | ||||||||
Abbott Labs, 6.40% due 12/1/2006 | A1/AA | 1,000,000 | 1,001,286 | |||||
Abbott Labs, 3.75% due 3/15/2011 | A1/AA | 500,000 | 472,289 | |||||
Tiers Inflation Linked Trust Series Wyeth 2004 21 Trust Certificate CPI Floating Rate Note, 6.017% due 2/1/2014 | Baa1/A | 5,450,000 | 5,010,512 | |||||
6,484,087 | ||||||||
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
RETAILING — 2.18% | ||||||||
DISTRIBUTORS — 0.03% | ||||||||
Dayton Hudson Corp., 9.625% due 2/1/2008 | A1/A+ | $ | 100,000 | $ | 104,915 | |||
MULTILINE RETAIL — 1.55% | ||||||||
Costco Wholesale Corp., 5.50% due 3/15/2007 | A2/A | 500,000 | 499,594 | |||||
Wal-Mart Stores, Inc., 6.875% due 8/10/2009 | Aa2/AA | 900,000 | 942,506 | |||||
Wal-Mart Stores, Inc., 4.125% due 2/15/2011 | Aa2/AA | 3,735,000 | 3,595,670 | |||||
Wal-Mart Stores, Inc., 1992-A1 Pass Through Certificate, 7.49% due 6/21/2007 | Aa2/AA | 115,697 | 117,060 | |||||
Wal-Mart Stores, Inc., Pass Through Certificate, 8.57% due 1/2/2010 | Aa2/AA | 250,573 | 257,961 | |||||
SPECIALTY RETAIL — 0.60% | ||||||||
Home Depot, Inc., 4.625% due 8/15/2010 | Aa3/AA | 2,135,000 | 2,095,142 | |||||
7,612,848 | ||||||||
SOFTWARE & SERVICES — 1.72% | ||||||||
INTERNET SOFTWARE & SERVICES — 1.27% | ||||||||
Electronic Data Systems Corp., 7.125% due 10/15/2009 | Ba1/BBB- | 2,500,000 | 2,614,823 | |||||
Electronic Data Systems Corp., 6.50% due 8/1/2013 | Ba1/BBB- | 1,000,000 | 1,014,426 | |||||
Reynolds & Reynolds, 7.00% due 12/15/2006 | A3/BBB | 800,000 | 798,737 | |||||
IT SERVICES — 0.45% | ||||||||
First Data Corp., 4.95% due 6/15/2015 | A2/A | 1,640,000 | 1,583,669 | |||||
6,011,655 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 4.80% | ||||||||
COMPUTERS & PERIPHERALS — 4.51% | ||||||||
Computer Sciences Corp., 6.25% due 3/15/2009 | A3/A- | 300,000 | 304,288 | |||||
Computer Sciences Corp., 7.375% due 6/15/2011 | A3/A- | 1,317,000 | 1,409,987 | |||||
Computer Sciences Corp., 3.50% due 4/15/2008 | A3/A- | 2,000,000 | 1,941,650 | |||||
First Data Corp., 5.625% due 11/1/2011 | A2/A | 5,900,000 | 6,018,702 | |||||
First Data Corp., 6.375% due 12/15/2007 | A2/A | 110,000 | 110,912 | |||||
International Business Machines, 4.875% due 10/1/2006 | A1/A+ | 500,000 | 500,000 | |||||
International Business Machines, 4.25% due 9/15/2009 | A1/A+ | 1,000,000 | 978,674 | |||||
International Business Machines, 2.375% due 11/1/2006 | A1/A+ | 2,825,000 | 2,818,751 | |||||
Jabil Circuit, Inc., 5.875% due 7/15/2010 | Baa3/BBB- | 500,000 | 504,507 | |||||
Oracle Corp., 6.91% due 2/15/2007 | A3/A- | 1,200,000 | 1,205,684 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.29% | ||||||||
Cisco Systems, Inc., 5.25% due 2/22/2011 | A1/A+ | 1,000,000 | 1,004,209 | |||||
16,797,364 | ||||||||
TELECOMMUNICATION SERVICES — 0.69% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.69% | ||||||||
Cingular Wireless, 5.625% due 12/15/2006 | Baa1/A | 900,000 | 900,021 | |||||
Verizon Wireless Capital LLC, 5.375% due 12/15/2006 | A2/A | 1,500,000 | 1,499,464 | |||||
2,399,485 | ||||||||
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
TRANSPORTATION — 0.47% | ||||||||
AIRLINES — 0.41% | ||||||||
Continental Airlines Pass Through Certificate Series 1997 4 Class-4A, 6.90% due 1/2/2018 | Baa3/BBB+ | $ | 178,655 | $ | 183,905 | |||
Delta Air Lines, Inc. EETC Series 2001-1 Class-A, 6.619% due 3/18/2011 | Ba2/BB+ | 216,629 | 216,368 | |||||
Southwest Airlines Co., 7.875% due 9/1/2007 | Baa1/A | 1,012,000 | 1,032,104 | |||||
ROAD & RAIL — 0.06% | ||||||||
CSX Corp., 7.45% due 5/1/2007 | Baa2/BBB | 225,000 | 227,500 | |||||
1,659,877 | ||||||||
UTILITIES — 2.68% | ||||||||
ELECTRIC UTILITIES — 2.12% | ||||||||
Appalachian Power Co., 6.60% due 5/1/2009 (Insured: MBIA) | Aaa/AAA | 175,000 | 180,880 | |||||
Gulf Power Co., 4.35% due 7/15/2013 | A2/A | 925,000 | 872,755 | |||||
Minnesota Power & Light Co., 7.00% due 2/15/2007 | Baa1/A | 900,000 | 903,574 | |||||
Northern Border Pipeline Co., 6.25% due 5/1/2007 | A3/A- | 120,000 | 120,517 | |||||
Northern States Power Co., 4.75% due 8/1/2010 | A2/A- | 2,825,000 | 2,776,520 | |||||
PSI Energy, Inc., 7.85% due 10/15/2007 | Baa1/BBB | 500,000 | 512,010 | |||||
Texas Eastern Transmission Corp. Senior Note, 5.25% due 7/15/2007 | Baa1/BBB | 525,000 | 523,015 | |||||
Wisconsin Energy Corp., 5.50% due 12/1/2008 | A3/BBB+ | 350,000 | 351,957 | |||||
Wisconsin Public Service Corp., 6.125% due 8/1/2011 | Aa2/A+ | 1,150,000 | 1,194,829 | |||||
GAS UTILITIES — 0.28% | ||||||||
Southern California Gas Co., 4.375% due 1/15/2011 | A1/A+ | 225,000 | 217,783 | |||||
Texas Municipal Gas Corp., 2.60% due 7/1/2007 (Insured: FSA) | Aaa/AAA | 770,000 | 762,423 | |||||
MULTI-UTILITIES — 0.28% | ||||||||
Madison Gas & Electric Co., 6.02% due 9/15/2008 | Aa3/AA- | 950,000 | 962,940 | |||||
9,379,203 | ||||||||
TOTAL CORPORATE BONDS (Cost $ 239,976,220) | 236,858,172 | |||||||
Taxable Municipal Bonds — 12.13% | ||||||||
American Campus Properties Student Housing, 7.38% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 3,515,000 | 3,758,906 | |||||
American Fork City Utah Sales, 4.89% due 3/1/2012 (Insured: FSA) | Aaa/AAA | 300,000 | 296,994 | |||||
American Fork City Utah Sales, 5.07% due 3/1/2013 (Insured: FSA) | Aaa/AAA | 120,000 | 119,540 | |||||
Arkansas Electric Coop Corp., 7.33% due 6/30/2008 | A2/AA- | 78,000 | 78,667 | |||||
Bessemer Alabama Water Revenue Taxable Warrants Series B, 7.375% due 7/1/2008 (Insured: FSA) | Aaa/AAA | 430,000 | 439,094 | |||||
Brockton MA Taxable Economic Development Series A, 6.45% due 5/1/2017 (Insured: FGIC) | Aaa/AAA | 150,000 | 159,725 | |||||
Burbank California Waste Disposal Revenue, 5.29% due 5/1/2007 (Insured: FSA) | Aaa/AAA | 370,000 | 369,623 | |||||
Burbank California Waste Disposal Revenue, 5.48% due 5/1/2008 (Insured: FSA) | Aaa/AAA | 310,000 | 311,293 | |||||
Cleveland Cuyahoga County Ohio, 6.10% due 5/15/2013 | NR/BBB+ | 1,650,000 | 1,595,236 | |||||
Cook County Illinois School District 083, 4.625% due 12/1/2010 (Insured: FSA) | Aaa/NR | 250,000 | 244,910 | |||||
Cook County Illinois School District 083, 4.875% due 12/1/2011 (Insured: FSA) | Aaa/NR | 150,000 | 147,803 | |||||
Denver City & County Special Facilities Taxable Refunding & Improvement Series B, 7.15% due 1/1/2008 (Insured: MBIA) | Aaa/AAA | 900,000 | 920,088 | |||||
Elkhart Indiana Redevelopment District Revenue, 4.80% due 6/15/2011 | NR/NR | 240,000 | 229,258 | |||||
Elkhart Indiana Redevelopment District Revenue, 4.80% due 12/15/2011 | NR/NR | 245,000 | 233,039 | |||||
Elkhart Indiana Redevelopment District Revenue, 5.05% due 12/15/2012 | NR/NR | 515,000 | 491,974 | |||||
Elkhart Indiana Redevelopment District Revenue, 5.25% due 12/15/2013 | NR/NR | 540,000 | 514,096 |
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Grant County Washington Water Public Utility District 2 Series Z, 5.14% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | $ | 1,015,000 | $ | 1,011,884 | |||
Green Bay Wisconsin Series B, 4.875% due 4/1/2011 (Insured: MBIA) | Aaa/NR | 365,000 | 361,007 | |||||
Hancock County Mississippi, 4.20% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 305,000 | 299,595 | |||||
Hancock County Mississippi, 4.80% due 8/1/2010 (Insured: MBIA) | Aaa/NR | 245,000 | 241,795 | |||||
Hancock County Mississippi, 4.90% due 8/1/2011 (Insured: MBIA) | Aaa/NR | 315,000 | 311,642 | |||||
Hanover Pennsylvania Area School District Taxable Notes Series B, 4.47% due 3/15/2013 (Insured: FSA) | Aaa/AAA | 1,385,000 | 1,340,417 | |||||
Jefferson County Texas Navigation Taxable Refunding, 5.50% due 5/1/2010 (Insured: FSA) | Aaa/NR | 500,000 | 503,500 | |||||
Jefferson Franklin, Etc. Counties Illinois Community College District 521, 3.625% due 1/1/2007 (Insured: FSA) | Aaa/NR | 300,000 | 298,788 | |||||
Jersey City New Jersey Municipal Utilities Authority, 3.72% due 5/15/2009 (Insured: MBIA) | Aaa/AAA | 575,000 | 556,088 | |||||
Kendall Kane County Illinois School 308, 5.50% due 10/1/2011 (Insured: FGIC) | Aaa/NR | 365,000 | 371,377 | |||||
Los Angeles County California Metropolitan Transport, 4.56% due 7/1/2010 (Insured:AMBAC) | Aaa/AAA | 2,775,000 | 2,726,021 | |||||
Los Angeles County California Pension Series C, 0% due 6/30/2008 (Insured: MBIA) | Aaa/AAA | 300,000 | 273,342 | |||||
Maryland State Economic Development Corp., 7.25% due 6/1/2008 (Maryland Tech Development Center Project) | NR/NR | 195,000 | 197,781 | |||||
Missouri State Development Finance Board Series A, 5.45% due 3/1/2011 (Crackerneck Creek Project) | NR/A+ | 1,090,000 | 1,094,186 | |||||
Montgomery County Maryland Revenue Authority, 5.00% due 2/15/2012 | Aa2/AA+ | 100,000 | 99,288 | |||||
Multnomah County Oregon School District 1J Refunding Taxable, 4.191% due 6/15/2008 | A2/A- | 650,000 | 637,429 | |||||
New Jersey Health Care Facilities Financing, 10.75% due 7/1/2010 (ETM) | NR/NR | 375,000 | 420,836 | |||||
New Jersey Health Care Facilities Financing, 7.70% due 7/1/2011 (Insured: Connie Lee) | NR/AAA | 110,000 | 115,315 | |||||
New Rochelle New York Industrial Development Agency, 7.15% due 10/1/2014 | Aa2/A+ | 140,000 | 149,265 | |||||
New York Environmental Facilities, 5.85% due 3/15/2011 | NR/AA- | 3,500,000 | 3,610,495 | |||||
New York State Housing Finance, 4.46% due 8/15/2009 | Aa1/NR | 345,000 | 337,986 | |||||
New York State Urban Development Corp., 4.75% due 12/15/2011 | NR/AAA | 1,400,000 | 1,380,862 | |||||
Newark New Jersey, 4.70% due 4/1/2011 (Insured: MBIA) | Aaa/NR | 845,000 | 829,883 | |||||
Newark New Jersey, 4.90% due 4/1/2012 (Insured: MBIA) | Aaa/NR | 1,225,000 | 1,210,190 | |||||
Niagara Falls New York Public Water, 4.30% due 7/15/2010 (Insured: MBIA) | Aaa/AAA | 360,000 | 351,014 | |||||
Northwest Open Access Network Washington Revenue, 6.18% due 12/1/2008 (Insured:AMBAC) | Aaa/AAA | 1,600,000 | 1,632,656 | |||||
Ohio State Petroleum Underground Storage, 6.75% due 8/15/2008 (Insured: MBIA) | Aaa/AAA | 445,000 | 445,392 | |||||
Ohio State Taxable Development Assistance Series A, 4.88% due 10/1/2011 (Insured: MBIA) | Aaa/AAA | 550,000 | 544,709 | |||||
Port Walla Walla Revenue, 5.30% due 12/1/2009 | NR/NR | 235,000 | 230,615 | |||||
Providence Rhode Island, 5.59% due 1/15/2008 (Insured: FGIC) | Aaa/AAA | 340,000 | 341,965 | |||||
Santa Fe County NM Charter School Taxable Series B, 7.55% due 1/15/2010 (ATC Foundation Project) | NR/NR | 190,000 | 190,186 | |||||
Short Pump Town Center Community Development, 6.26% due 2/1/2009 | NR/NR | 1,000,000 | 1,007,960 | |||||
Sisters Providence Obligation Group Direct Obligation Notes Series 1997, 7.47% due 10/1/2007 | Aa2/AA | 1,805,000 | 1,835,721 | |||||
Springfield City School District Tax Anticipation Notes, 6.35% due 12/1/2010 (Insured:AMBAC) | Aaa/NR | 1,400,000 | 1,434,692 | |||||
Springfield City School District Tax Anticipation Notes, 6.40% due 12/1/2011 (Insured:AMBAC) | Aaa/NR | 1,500,000 | 1,546,320 | |||||
Tazewell County Illinois Community High School, 5.20% due 12/1/2011 (Insured: FSA) | Aaa/NR | 355,000 | 356,569 | |||||
Tennessee State Taxable Series B, 6.00% due 2/1/2013 | Aa2/AA | 500,000 | 518,165 | |||||
Texas State Public Finance Authority Revenue, 3.125% due 6/15/2007 | Aa2/AA | 400,000 | 394,124 | |||||
Texas Tech University Revenue, 6.00% due 8/15/2011 (Insured: MBIA) | Aaa/AAA | 245,000 | 254,401 | |||||
University of Illinois Revenue, 6.35% due 4/1/2011 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,049,750 | |||||
Victor New York, 9.20% due 5/1/2014 | NR/NR | 1,250,000 | 1,291,700 | |||||
Virginia Housing Development Authority Taxable Rental Housing Series I, 7.30% due 2/1/2008 | Aa1/AA+ | 505,000 | 516,201 | |||||
Wisconsin State General Revenue, 4.80% due 5/1/2013 (Insured: FSA) | Aaa/AAA | 200,000 | 196,230 | |||||
TOTAL TAXABLE MUNICIPAL BONDS (Cost $42,638,968) | 42,427,588 | |||||||
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2006 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Short Term Investments — 6.86% | ||||||||
Abbey National, 5.16% due 10/10/2006 | Prim1/A-1+ | $ | 9,000,000 | $ | 8,988,390 | |||
UBS Finance, 5.19% due 10/5/2006 | Prim1/A-1+ | 10,000,000 | 9,994,234 | |||||
UBS Finance, 5.23% due 10/3/2006 | Prim1/A-1+ | 5,000,000 | 4,998,548 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $ 23,981,171) | 23,981,172 | |||||||
TOTAL INVESTMENTS — 99.49% (Cost $ 352,291,117) | $ | 348,104,459 | ||||||
OTHER ASSETS LESS LIABILITIES — 0.51% | 1,793,294 | |||||||
NET ASSETS — 100.00% | $ | 349,897,753 | ||||||
Footnote Legend
† Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end.
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
ETM | Escrowed to Maturity | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FSA | Insured by Financial Security Assurance Co. | |
MBIA | Insured by Municipal Bond Investors Assurance |
Ratings are a blend of Moody’s and Standard & Poor’s, using the higher rating. Some bonds are rated by only one service.
32 Certified Annual Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Limited Term Income Funds
To the Trustees and Class I Shareholders of
Thornburg Limited Term U.S. Government Fund
Thornburg Limited Term Income Fund
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 (separate portfolios of Thornburg Investment Trust, hereafter referred to as the “Funds”) at September 30, 2006, 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 the 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 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
Certified Annual Report 33
EXPENSE EXAMPLE | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur ongoing costs, including management and administration fees and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
U.S. Government Fund | |||||||||
Class I Shares | |||||||||
Actual | $ | 1,000 | $ | 1,027.60 | $ | 3.40 | |||
Hypothetical* | $ | 1,000 | $ | 1,021.71 | $ | 3.39 | |||
Income Fund | |||||||||
Class I Shares | |||||||||
Actual | $ | 1,000 | $ | 1,027.70 | $ | 3.37 | |||
Hypothetical* | $ | 1,000 | $ | 1,021.74 | $ | 3.36 |
† | Thornburg Limited Term U.S. Government Fund expenses are equal to the annualized expense ratio for Class I shares (0.67%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. Thornburg Limited Term Income Fund expenses are equal to the annualized expense ratio for Class I shares (0.66%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
34 Certified Annual Report
INDEX COMPARISON | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Limited Term U.S. Government Fund Class I Total Returns, versus
Lehman Brothers Intermediate Government Bond Index and Consumer Price Index
(July 31, 1996 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
I Shares (Incep: 7/5/96) | 3.19 | % | 3.58 | % | 5.31 | % | 5.43 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 7/5/96) | 3.36 | % | 4.01 | % | $ | 12.75 | $ | 12.75 |
Performance data reflect past performance, which is no guarantee of future results. 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.
For the U.S. Government Fund, returns reflect the reinvestment of dividends and capital gains. There is no up front sales charge for this class of shares.
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.
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 Funds’ 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 Net Asset Value (NAV) to arrive at the annualized distribution yield. The yield is calculated on a periodic basis and is subject to change depending on the Funds’ NAV and current distributions.
Shares are not guaranteed by the U.S. Government.
Certified Annual Report 35
INDEX COMPARISON | ||
Thornburg Limited Term Income Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Limited Term Income Fund Class I Total Returns versus
Lehman Brothers Intermediate Government/Credit Index and Consumer Price Index
(July 31, 1992 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2006
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
I Shares (Incep: 7/5/96) | 3.30 | % | 4.10 | % | 5.55 | % | 5.81 | % |
FUND ATTRIBUTES
as of September 30, 2006
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 7/5/96) | 4.62 | % | 4.73 | % | $ | 12.37 | $ | 12.37 |
Performance data reflect past performance, which is no guarantee of future results. 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.
For the Limited Term Income Fund, returns reflect the reinvestment of dividends and capital gains. There is no up front sales charge for this class of shares.
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.
The Consumer Price Index (“CPI”) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
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.
36 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP,Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 37
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
Name, Age, Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable |
38 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Funds are two of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds.Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report 39
OTHER INFORMATION | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Funds file with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also make this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT FOR THE THORNBURG LIMITED TERM U.S. GOVERNMENT FUND
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Limited Term U.S. Government Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor on a range of matters, including (among other things) information respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s services and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time relative to different categories of mutual funds sharing certain comparable characteristics and selected by independent mutual fund analyst firms, and relative to a broad based securities index; |
(v) | comparative measures of portfolio versatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories, and in particular to broad based securities indices, may be limited in some degree because the
40 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the parameters for selecting the investments for other funds and the largely theoretical character of securities indices.
In conducting their evaluation, the Trustees determined that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s average or better investment performance over different periods relative to two categories of mutual funds sharing certain comparable characteristics with the Fund and selected by independent mutual fund analyst firms.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of short-intermediate U.S. government mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the management fee for the Fund was somewhat lower than average and median fees for the grouping of mutual funds assembled by the mutual fund analyst firm. The Trustees further noted in this regard that the overall expenses charged to the Fund were somewhat lower than the average and median management fees for the grouping of mutual funds. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT FOR THE THORNBURG LIMITED TERM INCOME FUND
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Limited Term Income Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their
Certified Annual Report 41
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, fiscal and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time, relative to categories of mutual funds sharing certain comparable characteristics and selected by independent mutual fund analyst firms, and relative to a broad based securities index; |
(v) | comparative measures of portfolio volatility risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories, and in particular to broad based securities indices, may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
In conducting their evaluation, the Trustees determined that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluation the Fund’s above average or better investment performance in most years relative to the performance of a category of fixed income mutual funds having certain characteristics comparable to the Fund and selected by an independent mutual fund analyst firm, and the Fund’s relative performance against comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of short-intermediate investment grade fixed income mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted in their review that the management fee and overall expenses for the Fund were comparable to average and median management fees and expenses for the grouping of mutual funds assembled by the mutual fund analyst firm. The Trustees also observed in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the per- formance of the Fund, and the fees and profitability of other investment management firms.
42 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2006 (Unaudited) |
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
Certified Annual Report 43
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
44 This page is not part of the Annual Report.
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses.We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street | 119 East Marcy Street | |
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |
800.847.0200 | 800.847.0200 |
Thornburg Value Fund
The Value of Experience
The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types. As a secondary consideration, the Fund also seeks some current income.
The portfolio is diversified to include basic value stocks, but also includes stocks of companies with consistent earnings characteristics and those of emerging franchises, when, in our opinion, these issues are value priced.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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Receive your shareholder reports and prospectus online instead of through traditional mail. | ||
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Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We seek to accomplish this through a range of equity funds that redefine traditional measures of value and growth and through a family of laddered bond funds that focus on quality, stability and minimizing risk over time.
Confirming our strategy, all Thornburg equity funds are highly ranked within their respective categories over the long term.
The Thornburg equity funds employ a comprehensive approach, which is more inclusive than the traditional deep value or high growth approach to stock selection. You can read much more about the stocks in your Fund’s portfolio, and all Thornburg equity funds, at our web site, www.thornburg.com/funds.
During this decade, the average dividend yield paid by equity and hybrid mutual funds has dipped well below 1%. We established Thornburg Investment Income Builder Fund in late 2002 to be clearly different from other equity/hybrid funds by paying attractive dividends today, with a further goal of increasing these in the future. Our record to date shows clear success in achieving each aspect of this mission.
On the bond side, we have always had a highly disciplined approach of laddering short-and intermediate-bond maturities, seeking to provide both an attractive return and relative stability of principal.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely, |
![]() |
Garrett Thornburg |
Chairman & CEO |
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Important Information
The information presented on the following pages was current as of September 30, 2006. The managers’ views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
Shares in the Fund carry risks including possible loss of principal. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Funds invested in a limited number of holdings may expose an investor to greater volatility. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any government agency. There is no guarantee that the Fund will meet its investment objectives.
Performance data given at net asset value (NAV) does not take into account the applicable sales charges. If the sales charges had been included, the performance would have been lower.
Glossary
Standard & Poor’s 500 Stock Index (S&P 500) – An index consisting of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large-cap universe. Unless otherwise noted, index returns do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
Beta – A measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price. The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median and half have values that are less. If there is an even number of companies, then the median is the average of the two companies in the middle.
Price to Book Value (P/B) – A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value (book value is simply assets minus liabilities).
Price to Cash Flow Ratio – A measure of the market’s expectations of a firm’s future financial health. It is calculated by dividing the price per share by cash flow per share.
Price to Earnings Ratio (P/E) – A valuation ratio of a company’s current share price compared to its per-share earnings. P/E equals a company’s market value per share divided by earnings per share.
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Thornburg Value Fund
Promising Companies at a Discount
Investing is an art. It is also a science. It requires vision and precision – the vision to recognize opportunity and the precision to use that opportunity to achieve a specific goal.
The greatest success comes to those who strike a balance between the two.
Thornburg Value Fund strikes such a balance.
The Fund seeks to find promising companies at a discount price. It differs from many other value funds in two key ways. First, it focuses on a limited number of stocks; and second, it takes a more comprehensive approach to value investing. This unique strategy has provided positive returns for shareholders who have been invested since the Fund’s inception in 1995, and earned co-portfolio manager Bill Fries many awards over the Fund’s eleven-year history.
Fries’ unassuming and quiet demeanor belies his fierce determination to recognize value and harness it for his shareholders. He brings more than thirty years of investment experience to the process. He also brings a commitment to fundamental, hands-on research. He and co-portfolio managers Connor Browne and Ed Maran are dedicated to a collaborative approach in identifying and analyzing investment ideas. They scour the U.S. to find the country’s most promising companies at a discount to intrinsic value. The investment team is, in Fries’ words, “in continuous session.” Everybody’s idea is important. Combining “promise and discount” is the team’s mantra for stock selection.
In managing the Thornburg Value Fund, the portfolio management team takes a conservative, bottom-up approach to stock selection. The Fund is not predisposed to a geographical region, industry, or industry sector. And, it recognizes no “false gods.” Fries, Browne, and Maran use a combination of proprietary screens, financial analysis, collaborative research, and on-site company visits to gauge the intrinsic value of a company and to estimate its potential for future earnings growth. Their current goal is to maintain a portfolio of 45–55 companies diversified by sector, industry, market capitalization, and economic sensitivity.
Because of the limited number of stocks in the portfolio, every holding counts. Once a company has survived the team’s initial screens, the managers then expand their analysis of what is behind its revenue and cash-generating model. And they take the time to get to know the company, its people and its corporate culture. At the time of purchase, the managers set 12–18 month price targets for each stock. They review those targets as the fundamentals of the stocks change during the course of ownership.
The bottom line? By engendering a wide-open, collegial environment, information flows freely and the Fund benefits from the best of the team’s thinking. And because the Fund’s advisor, Thornburg Investment Management®, is located in Santa Fe, New Mexico, we believe the portfolio team avoids the tendency to be trapped by Wall Street’s “pack” instinct. While they have access to the best of Wall Street’s analysis, they are not ruled by it. Their distance from the herd serves to fortify independent and objective thinking.
Being diversified in multiple ways, the Fund is able to take advantage of a broad array of opportunities in multiple sectors. These sectors do not all move in sync. When one is up, often another is down. Losses in one may be offset by gains in another. Limiting the number of companies in the portfolio and employing a rigorous sell discipline has enabled the Thornburg team to strike a balance between risk and reward.
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Portfolio Overview
Thornburg Value Fund
IMPORTANT PERFORMANCE
INFORMATION
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
The maximum sales charge for Class A shares is 4.50%. A shares are subject to a 1% 30-day redemption fee.
MANAGEMENT TEAM
Front row, L to R: Wendy Trevisani, Bill Fries, Brad Kinkelaar, and Brian McMahon. Back row, L to R: Lei Wang, Connor Browne, Ed Maran, Vin Walden, Thomas Garcia, and Lewis Kaufman.
KEY PORTFOLIO ATTRIBUTES
Portfolio P/E Trailing 12-months* | 15.5x | ||
Portfolio Price to Cash Flow* | 11.0x | ||
Portfolio Price to Book Value* | 2.9x | ||
Median Market Cap* | $ | 25.8 B | |
3-Year Beta (Thornburg vs. S&P 500)* | 1.05 | ||
Holdings | 46 |
* | Source: FactSet |
For the fiscal year ended September 30, 2006, the Class A shares of the Thornburg Value Fund (at NAV) returned 15.63%, compared to a return of 10.78% for the S&P 500 Index. Once again, holdings in a variety of industries contributed to performance. The Fund’s good performance was primarily attributable to contributions from individual stock selection as elaborated below.
For the second consecutive year, a number of telecommunications stocks held by the Fund were performance leaders. As in 2005, NII Holdings Inc. was a top performer. While headquartered in the U.S., NII’s business is primarily in Mexico, Brazil and other Latin American countries where it provides mobile telecommunications service with the same push-to-talk feature pioneered in the U.S. by Nextel. Cell phone penetration in the areas where NII operates is low, which would suggest further green pastures for the company. Another holding, American Tower Corp., is also benefiting from the growing demand for mobile communications services. As a leading provider of tower space for cellular antennas, the business has characteristics that are similar to the rental of real estate. In this case, it is space on the tower, rather than property, which is being rented. As American Tower adds new tenants at a tower location, revenues increase, but costs usually do not. Level 3 Communications Inc., a provider of network capacity for internet traffic, contributed both income and capital appreciation. The company’s long-held bonds have been a productive investment. Level 3’s equity was recently added to the portfolio as well.
Energy holdings were also significant contributors to performance. As energy companies invested in future production, our holding Schlumberger Ltd. was ideally positioned. A global leader in services used in both the exploration and production of oil, Schlumberger was one of the most obvious beneficiaries of oil industry affluence.
Despite the impact of higher energy prices on the overall economy, a number of consumer related stocks did very well. Among these were Abercrombie & Fitch Co., an apparel retailer that we purchased as the
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2006
YTD | 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | |||||||||||
A Shares (Incep: 10/2/95) | |||||||||||||||
Without Sales Charge | 12.68 | % | 15.63 | % | 13.56 | % | 8.17 | % | 12.28 | % | |||||
With Sales Charge | 7.62 | % | 10.41 | % | 11.83 | % | 7.17 | % | 11.77 | % | |||||
S&P 500 Index (Since: 10/2/95) | 8.52 | % | 10.78 | % | 12.29 | % | 6.96 | % | 8.56 | % |
* | Periods under one year are not annualized. |
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stock sold off during a period of anxiety last summer; Las Vegas Sands Corp., which operates the Venetian and other venues in Las Vegas, Nevada and is now being recognized for the potential value of its gaming property developments in Macau and Singapore; DIRECTV Group Inc. and Comcast Corp., both media and entertainment stocks that rebounded from modest valuations in prior periods and gained recognition for their attractive annuity-like subscription revenue streams.
Stocks from a number of other industries contributed to performance, including: Oracle Corp., a leading enterprise software provider, which rose sharply on signs that its acquisition spree of a few years ago is beginning to pay off; Southern Copper Corp., added to the Fund in late 2005, which benefited from a rise in copper prices; and Goldman Sachs, the highly reputed financial services leader.
As always, a few of our investments did not perform as expected. Among these were XM Satellite Radio Holdings Inc., which did not sustain subscriber growth at the levels we had anticipated. As the investment thesis was not unfolding as anticipated, XM was sold. Other stocks that detracted from performance and were sold from the portfolio include American Greetings Corp. and Juniper Networks. A few new additions to the Fund also hampered performance, including JetBlue Airways Corp., Dell Inc. and Chunghwa Telecom Co. Ltd. JetBlue sold off as revenue growth projections were below general expectations, Dell weakened on diminished effectiveness of its long standing direct sales model, and Chunghwa Telecom was temporarily depressed pending a sale of shares by the Taiwan government. We remain hopeful about the longer-term prospects for these companies.
While we continually tune our investment process to accommodate the evolving challenges in the investment environment, the philosophy underpinning the Fund remains unchanged – to provide superior, risk-adjusted investment returns by holding a diversified portfolio of what we believe to be fundamentally sound equity investments.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/06
Top Contributors | Top Detractors | |
NII Holdings, Inc. | XM Satellite Radio Holdings, Inc. | |
Oracle Corp. | American Greetings Corp. | |
Schlumberger Ltd. | Dell, Inc. | |
Las Vegas Sands Corp. | JetBlue Airways Corp. | |
American Tower Corp. | Juniper Networks |
Source: Thomson Portfolio Analytics
MARKET CAPITALIZATION EXPOSURE
As of 9/30/06
TOP TEN HOLDINGS
As of 9/30/06
Level 3 Communications, Inc. | 6.0 | % | |
NII Holdings, Inc. | 3.3 | % | |
Exxon Mobil Corp. | 3.2 | % | |
Microsoft Corp. | 3.2 | % | |
Oracle Corp. | 3.0 | % | |
American International Group, Inc. | 3.0 | % | |
General Electric Co. | 2.9 | % | |
Citigroup, Inc. | 2.9 | % | |
Pfizer, Inc. | 2.9 | % | |
American Tower Corp. | 2.8 | % |
TOP TEN INDUSTRIES
As of 9/30/06
Telecommunication Services | 14.6 | % | |
Energy | 10.5 | % | |
Software & Services | 9.5 | % | |
Health Care Equipment & Services | 9.4 | % | |
Diversified Financials | 7.7 | % | |
Technology Hardware & Equipment | 5.4 | % | |
Pharmaceuticals & Biotechnology | 4.9 | % | |
Banks | 4.7 | % | |
Retailing | 4.6 | % | |
Materials | 4.6 | % |
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2006
Certified Annual Report
Thornburg Value Fund
September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report | 9 |
William V. Fries, CFA
Co-Portfolio Manager
Connor Browne, CFA
Co-Portfolio Manager
Edward E. Maran, CFA
Co-Portfolio Manager
October 20, 2006
Dear Shareholder:
The fiscal year ended September 30, 2006 was another good year for our Fund. The net asset value of the Class A shares on September 30 was $37.59, a record high at the time. One year ago the net asset value per share was $32.79. For the current period, the Fund’s Class A shares had a total return of 15.63% (at NAV), compared with 10.78% for the S&P 500 Index. For details on performance by share class please refer to the performance summary on page 34.
We are pleased with the performance during the current fiscal year, as well as the longer-term record. On October 2, 2005, we celebrated the 10th anniversary of the Value Fund’s launch. For the period ended September 30th, the Fund returned 13.30% annually since inception to its original investors. This compares favorably to the 9.65% return of the S&P 500 over the same period. This performance includes a range of market cycles encompassing a technology bubble and subsequent contraction. While we have been fortunate to perform well in more ebullient markets, we are also satisfied with the performance we recorded during the challenging market periods.
The volatile price of crude oil has been among the most prominent economic issues of the past year. In the aftermath of hurricane Katrina and amidst continuing strife in the Middle East, oil prices have remained above $60 per barrel for a good part of the year, reaching an all-time high of $78 per barrel in July. As a result, oil company profits rose and consumers’ disposable income declined. Within our portfolio, this both contributed to performance and created opportunity. Our oil company holdings reported record earnings, modestly higher dividends, and continued share buybacks, yet still had the funding for necessary production investments. Energy prices have been moving lower, recently, which is an overall benefit for markets and most stocks. While energy company earnings and cash flows may be negatively impacted, we remain comfortable with the merits of our specific energy holdings and their valuations. At the same time, we are fully cognizant of the potential impact of lower oil prices on sentiment for these stocks. We do not expect oil prices to retrace the upward thrust of the last few years as long as global economic growth continues at a sustainable pace.
Generally speaking, technology stocks have been out of favor since the bubble period of 2000. Over the last year, some of these issues have begun to enjoy better business fundamentals, which has been reflected in their stock price performance. A portion of the Fund’s good performance in the current fiscal year has come from technology issues that have regained their footing and now appear to be enjoying a continued, strong operating environment.
10 | Certified Annual Report |
As we look to the year ahead, there is no less uncertainty than in past years. The War in Iraq drags on; nuclear proliferation is underway, despite treaty terms; and both recession and inflation remain legitimate worries. Nonetheless, the core drivers of stock prices – earnings progress and interest rates – remain positive. Improved corporate governance and discipline, relating to both capital allocation and cost containment, seem to be playing a supporting role. Economic expansion on a global basis continues unabated.
On February 1, 2006 Connor Browne and Ed Maran were promoted to co-portfolio managers of the Thornburg Value Fund. Both have contributed to the Fund’s past success and bring a range of experience to the Fund’s management. The promotions of Connor and Ed enhance our decision making process and improve the prospects of the Fund’s continued success.
Thank you for your trust and confidence over the past year. In the period ahead, each of us remains dedicated to finding investments that can help you achieve your goal of long-term capital appreciation. You can review descriptions of many of the stocks in your portfolio at your leisure by going to our web site, www.thornburg.com/funds.
Sincerely,
![]() | ![]() | ![]() | ||
William V. Fries, CFA Co-Portfolio Manager Managing Director | Connor Browne, CFA Co-Portfolio Manager Managing Director | Edward E. Maran, CFA Co-Portfolio Manager Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report | 11 |
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Value Fund | September 30, 2006 |
ASSETS | |||
Investments at value (cost $ 2,456,235,681) | $ | 2,843,079,062 | |
Cash | 1,291,185 | ||
Receivable for fund shares sold | 12,302,355 | ||
Dividends receivable | 2,637,282 | ||
Interest receivable | 477,717 | ||
Prepaid expenses and other assets | 56,166 | ||
Total Assets | 2,859,843,767 | ||
LIABILITIES | |||
Payable for securities purchased | 11,954,059 | ||
Payable for fund shares redeemed | 2,461,827 | ||
Payable to investment advisor and other affiliates (Note 3) | 2,639,585 | ||
Accounts payable and accrued expenses | 480,404 | ||
Total Liabilities | 17,535,875 | ||
NET ASSETS | $ | 2,842,307,892 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 3,003,948 | |
Net unrealized appreciation on investments | 386,817,974 | ||
Accumulated net realized gain (loss) | 93,192,697 | ||
Net capital paid in on shares of beneficial interest | 2,359,293,273 | ||
$ | 2,842,307,892 | ||
12 | Certified Annual Report |
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($1,121,719,914 applicable to 29,840,898 shares of beneficial interest outstanding - Note 4) | $ | 37.59 | |
Maximum sales charge, 4.50% of offering price | 1.77 | ||
Maximum offering price per share | $ | 39.36 | |
Class B Shares: | |||
Net asset value and offering price per share * ( $96,587,297 applicable to 2,670,135 shares of beneficial interest outstanding - Note 4) | $ | 36.17 | |
Class C Shares: | |||
Net asset value and offering price per share * ($490,399,436 applicable to 13,417,565 shares of beneficial interest outstanding - Note 4) | $ | 36.55 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($1,074,491,842 applicable to 28,196,213 shares of beneficial interest outstanding - Note 4) | $ | 38.11 | |
Class R1 Shares: | |||
Net asset value, offering and redemption price per share ($48,626,598 applicable to 1,299,181 shares of beneficial interest outstanding - Note 4) | $ | 37.43 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($10,482,805 applicable to 275,192 shares of beneficial interest outstanding Note 4) | $ | 38.09 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. |
Certified Annual Report | 13 |
STATEMENT OF OPERATIONS | ||
Thornburg Value Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $794,813) | $ | 37,099,767 | ||
Interest income | 17,968,341 | |||
Total Income | 55,068,108 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 18,077,940 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,274,374 | |||
Class B Shares | 116,169 | |||
Class C Shares | 576,485 | |||
Class I Shares | 354,335 | |||
Class R1 Shares | 31,016 | |||
Class R5 Shares | 648 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 2,546,531 | |||
Class B Shares | 929,665 | |||
Class C Shares | 4,610,819 | |||
Class R1 Shares | 124,768 | |||
Transfer agent fees | ||||
Class A Shares | 1,359,825 | |||
Class B Shares | 157,832 | |||
Class C Shares | 590,040 | |||
Class I Shares | 539,047 | |||
Class R1 Shares | 41,722 | |||
Class R5 Shares | 12,847 | |||
Registration and filing fees | ||||
Class A Shares | 36,778 | |||
Class B Shares | 15,680 | |||
Class C Shares | 17,516 | |||
Class I Shares | 113,062 | |||
Class R1 Shares | 14,726 | |||
Class R5 Shares | 17,924 | |||
Custodian fees (Note 3) | 487,236 | |||
Professional fees | 126,672 | |||
Accounting fees | 166,035 | |||
Trustee fees | 56,840 | |||
Other expenses | 362,328 | |||
Total Expenses | 32,758,860 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (111,506 | ) | ||
Fees paid indirectly (Note 3) | (122,036 | ) | ||
Net Expenses | 32,525,318 | |||
Net Investment Income | $ | 22,542,790 | ||
14 | Certified Annual Report |
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Value Fund | Year Ended September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 110,266,198 | ||
Foreign currency transactions | (219,350 | ) | ||
110,046,848 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 208,833,783 | |||
Foreign currency translations | (10,135 | ) | ||
208,823,648 | ||||
Net Realized and Unrealized Gain | 318,870,496 | |||
Net Increase in Net Assets Resulting From Operations | $ | 341,413,286 | ||
See notes to financial statements.
Certified Annual Report | 15 |
STATEMENTS OF CHANGES IN NET ASSETS |
Thornburg Value Fund |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 22,542,790 | $ | 19,094,717 | ||||
Net realized gain on investments and foreign currency transactions | 110,046,848 | 255,644,685 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 208,823,648 | 57,921,767 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 341,413,286 | 332,661,169 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (9,041,451 | ) | (9,628,160 | ) | ||||
Class B Shares | (208,210 | ) | (253,266 | ) | ||||
Class C Shares | (1,136,901 | ) | (1,270,882 | ) | ||||
Class I Shares | (10,091,399 | ) | (5,577,033 | ) | ||||
Class R1 Shares | (308,217 | ) | (76,812 | ) | ||||
Class R5 Shares | (49,565 | ) | (246 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 8,192,636 | (280,665,531 | ) | |||||
Class B Shares | (8,432,486 | ) | (15,317,740 | ) | ||||
Class C Shares | (19,010,765 | ) | (99,126,047 | ) | ||||
Class I Shares | 516,880,753 | 16,018,891 | ||||||
Class R1 Shares | 33,144,127 | 4,801,953 | ||||||
Class R5 Shares | 10,020,743 | 29,098 | ||||||
Net Increase (Decrease) in Net Assets | 861,372,551 | (58,404,606 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 1,980,935,341 | 2,039,339,947 | ||||||
End of year | $ | 2,842,307,892 | $ | 1,980,935,341 | ||||
Undistributed net investment income | $ | 3,003,948 | $ | 1,516,251 |
See notes to financial statements.
16 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Value Fund | September 30, 2006 |
NOTE 1 – ORGANIZATION
Thornburg Value Fund, hereinafter referred to as 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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg Limited Term Income Fund, Thornburg International Value Fund, Thornburg Core Growth Fund, Thornburg New York Intermediate Municipal Fund, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 six classes of shares of beneficial interest: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R1 and Class R5). 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 R1 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, (vi) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (vii) the respective classes may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Securities: 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. In any case where a market quotation is not readily available, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the 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 amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund to the shareholders. Therefore, no provision for Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset
Certified Annual Report | 17 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
value. When effecting such transactions, assets 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: 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, 2006, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $82,314 for Class R1 shares and $29,192 for Class R5 shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned net commissions aggregating $108,123 from the sale of Class A shares of the Fund, and collected contingent deferred sales charges aggregating $20,976 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class B, Class C, and Class R1 shares under which the Fund compensates the Distributor for services in promoting the sale of Class B, Class C, and Class R1 shares of the Fund at an annual rate of up to .75 of 1% per annum of the average daily net assets attributable to Class B, Class C, and Class R1 shares. Total fees incurred by the Distributor for each class of shares of the Fund under its respective service and distribution plans for the year ended September 30, 2006, are set forth in the Statement of Operations.
The Trust 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, 2006, fees paid indirectly were $122,036. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/ or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
18 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 5,364,547 | $ | 188,094,156 | 5,556,737 | $ | 169,738,087 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 225,438 | 8,058,294 | 279,894 | 8,715,714 | ||||||||||
Shares repurchased | (5,410,098 | ) | (187,983,831 | ) | (14,823,032 | ) | (459,171,181 | ) | ||||||
Redemption fees received** | — | 24,017 | — | 51,849 | ||||||||||
Net Increase (Decrease) | 179,887 | $ | 8,192,636 | (8,986,401 | ) | $ | (280,665,531 | ) | ||||||
Class B Shares | ||||||||||||||
Shares sold | 84,367 | $ | 2,870,375 | 77,850 | $ | 2,288,707 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 5,111 | 182,575 | 7,536 | 224,646 | ||||||||||
Shares repurchased | (343,699 | ) | (11,486,467 | ) | (607,159 | ) | (17,831,093 | ) | ||||||
Redemption fees received** | — | 1,031 | — | — | ||||||||||
Net Increase (Decrease) | (254,221 | ) | $ | (8,432,486 | ) | (521,773 | ) | $ | (15,317,740 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 1,293,511 | $ | 43,965,842 | 915,021 | $ | 27,095,236 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 27,097 | 974,298 | 35,972 | 1,085,438 | ||||||||||
Shares repurchased | (1,894,704 | ) | (63,956,086 | ) | (4,307,157 | ) | (127,306,721 | ) | ||||||
Redemption fees received** | — | 5,181 | — | — | ||||||||||
Net Increase (Decrease) | (574,096 | ) | $ | (19,010,765 | ) | (3,356,164 | ) | $ | (99,126,047 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 16,999,909 | $ | 608,478,099 | 3,589,202 | $ | 111,238,406 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 235,654 | 8,565,755 | 147,185 | 4,664,983 | ||||||||||
Shares repurchased | (2,814,649 | ) | (100,182,966 | ) | (3,238,887 | ) | (99,900,212 | ) | ||||||
Redemption fees received** | — | 19,865 | — | 15,714 | ||||||||||
Net Increase (Decrease) | 14,420,914 | $ | 516,880,753 | 497,500 | $ | 16,018,891 | ||||||||
Class R1 Shares | ||||||||||||||
Shares sold | 1,006,131 | $ | 35,300,994 | 239,052 | $ | 7,454,820 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 8,245 | 297,478 | 2,115 | 66,501 | ||||||||||
Shares repurchased | (72,017 | ) | (2,454,755 | ) | (89,436 | ) | (2,719,368 | ) | ||||||
Redemption fees received** | — | 410 | — | — | ||||||||||
Net Increase (Decrease) | 942,359 | $ | 33,144,127 | 151,731 | $ | 4,801,953 | ||||||||
Certified Annual Report | 19 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 276,338 | $ | 10,096,784 | 927 | $ | 28,852 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,309 | 49,565 | 8 | 246 | ||||||||||
Shares repurchased | (3,390 | ) | (125,667 | ) | (— | ) | (— | ) | ||||||
Redemption fees received** | — | 61 | — | — | ||||||||||
Net Increase (Decrease) | 274,257 | $ | 10,020,743 | 935 | $ | 29,098 | ||||||||
* | Effective date of Class R5 shares was February 1, 2005. |
** | The Fund charges a redemption fee of 1% of the Class A & Class I shares exchanged within 30 days of purchase. Prior to February 1, 2006, the Fund charged a redemption fee of 1% of the Class A & Class I shares exchanged within 90 days of purchase. Redemption fees charged to any Class are allocated to all Classes upon receipt of payment based on relative net asset values of each Class or other appropriate allocation methods. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $1,623,807,261 and $1,162,848,579, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 2,455,022,682 | ||
Gross unrealized appreciation on a tax basis | $ | 437,995,286 | ||
Gross unrealized depreciation on a tax basis | (49,938,906 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 388,056,380 | ||
Distributable earnings – ordinary income | $ | 3,003,948 | ||
Distributable – capital gains | $ | 93,192,697 |
The Fund utilized $17,073,502 of its capital loss carry forward during the year ended September 30, 2006.
At September 30, 2006, the Fund had deferred currency losses occurring subsequent to October 31, 2005 of $205,646. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $219,350 and increased net realized investment gain by $219,350. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from currency losses.
The tax character of distributions paid during the year ended September 30, 2006, and September 30, 2005, was as follows:
2006 | 2005 | |||||
Distributions from: | ||||||
Ordinary income | $ | 20,835,743 | $ | 16,806,399 |
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity.
20 | Certified Annual Report |
Thornburg Value Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 32.79 | $ | 28.11 | $ | 26.29 | $ | 20.73 | $ | 26.04 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.35 | 0.32 | 0.20 | 0.15 | — | (c) | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 4.76 | 4.64 | 1.81 | 5.45 | (5.31 | ) | ||||||||||||||
Total from investment operations | 5.11 | 4.96 | 2.01 | 5.60 | (5.31 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.31 | ) | (0.28 | ) | (0.19 | ) | (0.02 | ) | — | |||||||||||
Net realized gains | — | — | — | — | — | |||||||||||||||
Return of capital | — | — | — | (0.02 | ) | — | ||||||||||||||
Total dividends | (0.31 | ) | (0.28 | ) | (0.19 | ) | (0.04 | ) | — | |||||||||||
Change in net asset value | 4.80 | 4.68 | 1.82 | 5.56 | (5.31 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 37.59 | $ | 32.79 | $ | 28.11 | $ | 26.29 | $ | 20.73 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 15.63 | % | 17.70 | % | 7.61 | % | 27.02 | % | (20.39 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.02 | % | 1.05 | % | 0.69 | % | 0.66 | % | — | (b) | ||||||||||
Expenses, after expense reductions | 1.35 | % | 1.40 | % | 1.37 | % | 1.43 | % | 1.40 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.34 | % | 1.40 | % | 1.37 | % | 1.43 | % | 1.40 | % | ||||||||||
Expenses, before expense reductions | 1.35 | % | 1.40 | % | 1.37 | % | 1.43 | % | 1.40 | % | ||||||||||
Portfolio turnover rate | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | 76.37 | % | ||||||||||
Net assets at end of year (000) | $ | 1,121,720 | $ | 972,478 | $ | 1,086,448 | $ | 994,043 | $ | 809,229 |
(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. |
Certified Annual Report | 21 |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Value Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class B Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
Net asset value, beginning of year | $ | 31.60 | $ | 27.13 | $ | 25.47 | $ | 20.22 | $ | 25.61 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.07 | 0.08 | (0.03 | ) | (0.05 | ) | (0.22 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 4.58 | 4.47 | 1.74 | 5.30 | (5.17 | ) | ||||||||||||||
Total from investment operations | 4.65 | 4.55 | 1.71 | 5.25 | (5.39 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.08 | ) | (0.08 | ) | (0.05 | ) | — | — | ||||||||||||
Net realized gains | — | — | — | — | — | |||||||||||||||
Total dividends | (0.08 | ) | (0.08 | ) | (0.05 | ) | — | — | ||||||||||||
Change in net asset value | 4.57 | 4.47 | 1.66 | 5.25 | (5.39 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 36.17 | $ | 31.60 | $ | 27.13 | $ | 25.47 | $ | 20.22 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 14.71 | % | 16.78 | % | 6.71 | % | 25.96 | % | (21.05 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.21 | % | 0.27 | % | (0.12 | )% | (0.22 | )% | (0.85 | )% | ||||||||||
Expenses, after expense reductions | 2.15 | % | 2.17 | % | 2.18 | % | 2.31 | % | 2.25 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.14 | % | 2.17 | % | 2.18 | % | 2.31 | % | 2.25 | % | ||||||||||
Expenses, before expense reductions | 2.15 | % | 2.17 | % | 2.20 | % | 2.32 | % | 2.25 | % | ||||||||||
Portfolio turnover rate | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | 76.37 | % | ||||||||||
Net assets at end of year (000) | $ | 96,587 | $ | 92,410 | $ | 93,508 | $ | 89,661 | $ | 70,682 |
+ | Based on weighted average shares outstanding. |
22 | Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
Net asset value, beginning of year | $ | 31.92 | $ | 27.40 | $ | 25.70 | $ | 20.40 | $ | 25.82 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.09 | 0.09 | (0.02 | ) | (0.04 | ) | (0.20 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 4.62 | 4.51 | 1.77 | 5.34 | (5.22 | ) | ||||||||||||||
Total from investment operations | 4.71 | 4.60 | 1.75 | 5.30 | (5.42 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.08 | ) | (0.08 | ) | (0.05 | ) | — | — | ||||||||||||
Net realized gains | — | — | — | — | — | |||||||||||||||
Total dividends | (0.08 | ) | (0.08 | ) | (0.05 | ) | — | — | ||||||||||||
Change in net asset value | 4.63 | 4.52 | 1.70 | 5.30 | (5.42 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 36.55 | $ | 31.92 | $ | 27.40 | $ | 25.70 | $ | 20.40 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 14.77 | % | 16.80 | % | 6.81 | % | 25.98 | % | (20.99 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.27 | % | 0.31 | % | (0.07 | )% | (0.16 | )% | (0.77 | )% | ||||||||||
Expenses, after expense reductions | 2.09 | % | 2.14 | % | 2.14 | % | 2.25 | % | 2.17 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.09 | % | 2.14 | % | 2.14 | % | 2.25 | % | 2.17 | % | ||||||||||
Expenses, before expense reductions | 2.09 | % | 2.14 | % | 2.15 | % | 2.25 | % | 2.17 | % | ||||||||||
Portfolio turnover rate | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | 76.37 | % | ||||||||||
Net assets at end of year (000) | $ | 490,399 | $ | 446,567 | $ | 475,296 | $ | 441,103 | $ | 368,038 |
+ | Based on weighted average shares outstanding. |
Certified Annual Report | 23 |
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
Net asset value, beginning of year | $ | 33.23 | $ | 28.49 | $ | 26.64 | $ | 20.95 | $ | 26.18 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.50 | 0.45 | 0.31 | 0.26 | 0.11 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 4.82 | 4.70 | 1.84 | 5.51 | (5.34 | ) | ||||||||||||||
Total from investment operations | 5.32 | 5.15 | 2.15 | 5.77 | (5.23 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.44 | ) | (0.41 | ) | (0.30 | ) | (0.03 | ) | — | |||||||||||
Net realized gains | — | — | — | — | — | |||||||||||||||
Return of capital | — | — | — | (0.05 | ) | — | ||||||||||||||
Total dividends | (0.44 | ) | (0.41 | ) | (0.30 | ) | (0.08 | ) | — | |||||||||||
Change in net asset value | 4.88 | 4.74 | 1.85 | 5.69 | (5.23 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 38.11 | $ | 33.23 | $ | 28.49 | $ | 26.64 | $ | 20.95 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 16.10 | % | 18.16 | % | 8.04 | % | 27.55 | % | (19.98 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.41 | % | 1.44 | % | 1.07 | % | 1.10 | % | 0.42 | % | ||||||||||
Expenses, after expense reductions | 0.98 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.98 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.97 | % | 0.98 | % | 0.99 | % | 0.99 | % | 0.98 | % | ||||||||||
Expenses, before expense reductions | 0.98 | % | 1.00 | % | 0.99 | % | 1.03 | % | 0.99 | % | ||||||||||
Portfolio turnover rate | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | 76.37 | % | ||||||||||
Net assets at end of year (000) | $ | 1,074,492 | $ | 457,788 | $ | 378,334 | $ | 260,624 | $ | 207,613 |
+ | Based on weighted average shares outstanding. |
24 | Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | Period Ended September 30, | |||||||||||||||
2006 | 2005 | 2004 | 2003(c) | |||||||||||||
Class R1 Shares: | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
Net asset value, beginning of period | $ | 32.68 | $ | 28.06 | $ | 26.27 | $ | 25.83 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.37 | 0.33 | 0.17 | 0.03 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 4.71 | 4.60 | 1.85 | 0.41 | ||||||||||||
Total from investment operations | 5.08 | 4.93 | 2.02 | 0.44 | ||||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.33 | ) | (0.31 | ) | (0.23 | ) | — | |||||||||
Change in net asset value | 4.75 | 4.62 | 1.79 | 0.44 | ||||||||||||
NET ASSET VALUE, end of period | $ | 37.43 | $ | 32.68 | $ | 28.06 | $ | 26.27 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 15.60 | % | 17.64 | % | 7.68 | % | 1.70 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) | 1.05 | % | 1.07 | % | 0.61 | % | 0.48 | %(b) | ||||||||
Expenses, after expense reductions | 1.36 | % | 1.35 | % | 1.34 | % | 1.45 | %(b) | ||||||||
Expenses, after expense reductions and net of custody credits | 1.35 | % | 1.35 | % | 1.34 | % | 1.45 | %(b) | ||||||||
Expenses, before expense reductions | 1.69 | % | 1.94 | % | 2.22 | % | 44,445.63 | %(b)† | ||||||||
Portfolio turnover rate | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | ||||||||
Net assets at end of period (000) | $ | 48,627 | $ | 11,661 | $ | 5,754 | $ | 0 | (d) |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R1 Shares was July 1, 2003. |
(d) | Net assets at end of period were less than $1,000. |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
Certified Annual Report | 25 |
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, 2006 | Period Ended September 30, 2005(c) | |||||||
Class R5 Shares: | ||||||||
PER SHARE PERFORMANCE | ||||||||
Net asset value, beginning of period | $ | 33.22 | $ | 30.75 | ||||
Income from investment operations: | ||||||||
Net investment income | 0.24 | 0.28 | ||||||
Net realized and unrealized gain (loss) on investments | 5.07 | 2.45 | ||||||
Total from investment operations | 5.31 | 2.73 | ||||||
Less dividends from: | ||||||||
Net investment income | (0.44 | ) | (0.26 | ) | ||||
Change in net asset value | 4.87 | 2.47 | ||||||
NET ASSET VALUE, end of period | $ | 38.09 | $ | 33.22 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return(a) | 16.07 | % | 8.93 | % | ||||
Ratios to average net assets: | ||||||||
Net investment income | 0.64 | % | 1.31 | %(b) | ||||
Expenses, after expense reductions | 1.00 | % | 1.00 | %(b) | ||||
Expenses, after expense reductions and net of custody credits | 0.98 | % | 0.99 | %(b) | ||||
Expenses, before expense reductions | 3.24 | % | 127.30 | %(b)† | ||||
Portfolio turnover rate | 51.36 | % | 58.90 | % | ||||
Net assets at end of period (000) | $ | 10,483 | $ | 31 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R5 Shares was February 1, 2005. |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
26 | Certified Annual Report |
SCHEDULE OF INVESTMENTS | ||
Thornburg Value Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-731, CLASS B - 885-215-590, CLASS C - 885-215-715, CLASS I - 885-215-632, CLASS
R1 - 885-215-533, CLASS R5 - 885-215-376
NASDAQ SYMBOLS: CLASS A - TVAFX, CLASS B - TVBFX, CLASS C - TVCFX, CLASS I - TVIFX,
CLASS R1 - TVRFX, CLASS R5 - TVRRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/06
Telecommunication Services | 14.6 | % | |
Energy | 10.5 | % | |
Software & Services | 9.5 | % | |
Health Care Equipment & Services | 9.4 | % | |
Diversified Financials | 7.7 | % | |
Technology Hardware & Equipment | 5.4 | % | |
Pharmaceuticals & Biotechnology | 4.9 | % | |
Banks | 4.7 | % | |
Retailing | 4.6 | % | |
Materials | 4.6 | % | |
Insurance | 4.5 | % | |
Capital Goods | 4.4 | % | |
Media | 4.3 | % | |
Consumer Services | 2.4 | % | |
Automobiles & Components | 1.9 | % | |
Transportation | 1.2 | % | |
Food & Staples Retailing | 0.9 | % | |
Other Assets and Cash Equivalents | 4.5 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 91.32% | |||||
AUTOMOBILES & COMPONENTS — 1.92% | |||||
AUTOMOBILES — 1.92% | |||||
PSA Peugeot Citroen | 967,800 | $ | 54,600,275 | ||
54,600,275 | |||||
BANKS — 4.70% | |||||
COMMERCIAL BANKS — 2.27% | |||||
Lloyds TSB Group plc | 6,383,200 | 64,451,306 | |||
THRIFTS & MORTGAGE FINANCE — 2.43% | |||||
Federal Home Loan Mortgage Corp. | 1,042,909 | 69,176,154 | |||
133,627,460 | |||||
CAPITAL GOODS — 4.39% | |||||
INDUSTRIAL CONGLOMERATES — 4.39% | |||||
General Electric Co. | 2,368,700 | 83,615,110 | |||
Tyco International Ltd. | 1,472,300 | 41,209,677 | |||
124,824,787 | |||||
Certified Annual Report | 27 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
CONSUMER SERVICES — 2.35% | |||||
HOTELS RESTAURANTS & LEISURE — 2.35% | |||||
Las Vegas Sands Corp.+ | 975,000 | $ | 66,641,250 | ||
66,641,250 | |||||
DIVERSIFIED FINANCIALS — 7.67% | |||||
CAPITAL MARKETS — 1.93% | |||||
Charles Schwab Corp. | 3,061,100 | 54,793,690 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.74% | |||||
AllianceBernstein Holdings LP | 313,400 | 21,621,466 | |||
Citigroup, Inc. | 1,675,200 | 83,207,184 | |||
NYSE Group, Inc.+ | 782,400 | 58,484,400 | |||
218,106,740 | |||||
ENERGY — 10.47% | |||||
OIL, GAS & CONSUMABLE FUELS — 10.47% | |||||
Apache Corp. | 1,088,737 | 68,808,178 | |||
ChevronTexaco Corp. | 1,132,100 | 73,428,006 | |||
ConocoPhillips | 1,062,200 | 63,232,766 | |||
Exxon Mobil Corp. | 1,374,100 | 92,202,110 | |||
297,671,060 | |||||
FOOD & STAPLES RETAILING — 0.94% | |||||
BEVERAGES — 0.94% | |||||
Rite Aid Corp.+ | 5,863,600 | 26,620,744 | |||
26,620,744 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 9.44% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 2.45% | |||||
Fisher Scientific International, Inc.+ | 888,400 | 69,508,416 | |||
HEALTH CARE PROVIDERS & SERVICES — 6.99% | |||||
Caremark Rx, Inc. | 1,329,900 | 75,365,433 | |||
Eclipsys Corp.+ | 2,542,440 | 45,535,100 | |||
WellPoint, Inc.+ | 1,011,000 | 77,897,550 | |||
268,306,499 | |||||
INSURANCE — 4.46% | |||||
INSURANCE — 4.46% | |||||
American International Group, Inc. | 1,277,100 | 84,620,646 | |||
MBIA, Inc. | 685,000 | 42,086,400 | |||
126,707,046 | |||||
28 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
MATERIALS — 4.62% | |||||
CHEMICALS — 2.08% | |||||
Air Products & Chemicals, Inc. | 890,700 | $ | 59,115,759 | ||
METALS & MINING — 2.54% | |||||
Southern Copper Corp. | 779,084 | 72,065,270 | |||
131,181,029 | |||||
MEDIA — 4.31% | |||||
MEDIA — 4.31% | |||||
Comcast Corp.+ | 1,754,600 | 64,586,826 | |||
DIRECTV Group, Inc.+ | 2,945,985 | 57,976,985 | |||
122,563,811 | |||||
PHARMACEUTICALS & BIOTECHNOLOGY — 4.61% | |||||
PHARMACEUTICALS — 4.61% | |||||
Johnson & Johnson | 758,413 | 49,251,340 | |||
Pfizer, Inc. | 2,887,300 | 81,883,828 | |||
131,135,168 | |||||
RETAILING — 4.64% | |||||
MULTILINE RETAIL — 2.72% | |||||
Target Corp. | 1,398,100 | 77,245,025 | |||
SPECIALTY RETAIL — 1.92% | |||||
Abercrombie & Fitch Co. | 786,400 | 54,639,072 | |||
131,884,097 | |||||
SOFTWARE & SERVICES — 9.49% | |||||
INTERNET SOFTWARE & SERVICES — 1.55% | |||||
Google, Inc.+ | 109,467 | 43,994,787 | |||
IT SERVICES — 1.75% | |||||
Bearingpoint, Inc. Co.+ | 6,317,860 | 49,658,380 | |||
SOFTWARE — 6.19% | |||||
Microsoft Corp. | 3,283,200 | 89,729,856 | |||
Oracle Corp.+ | 4,861,100 | 86,235,914 | |||
269,618,937 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 5.45% | |||||
COMMUNICATIONS EQUIPMENT — 2.09% | |||||
Motorola, Inc. | 2,373,100 | 59,327,500 | |||
COMPUTERS & PERIPHERALS — 3.36% | |||||
Apple Computer, Inc.+ | 536,300 | 41,311,189 | |||
Dell, Inc.+ | 2,373,700 | 54,215,308 | |||
154,853,997 | |||||
Certified Annual Report | 29 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
TELECOMMUNICATION SERVICES — 10.69% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 3.66% | ||||||
Chunghwa Telecom Co. Ltd. ADR | 2,713,560 | $ | 46,971,724 | |||
Level 3 Communications, Inc.+ | 10,689,900 | 57,190,965 | ||||
WIRELESS TELECOMMUNICATION SERVICES — 7.03% | ||||||
American Tower Corp.+ | 2,218,300 | 80,967,950 | ||||
Leap Wireless International, Inc.+ | 486,240 | 23,577,778 | ||||
NII Holdings, Inc.+ | 1,531,408 | 95,192,321 | ||||
303,900,738 | ||||||
TRANSPORTATION — 1.17% | ||||||
AIRLINES — 1.17% | ||||||
JetBlue Airways Corp.+ | 3,583,900 | 33,222,753 | ||||
33,222,753 | ||||||
TOTAL COMMON STOCK (Cost $2,231,291,188) | 2,595,466,391 | |||||
CORPORATE BONDS — 0.47% | ||||||
TELECOMMUNICATION SERVICES — 0.47% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.47% | ||||||
Level 3 Communications, Inc., 11.50%, 3/1/2010 | $ | 12,900,000 | 13,254,750 | |||
13,254,750 | ||||||
TOTAL CORPORATE BONDS (Cost $10,733,590) | 13,254,750 | |||||
CONVERTIBLE BONDS — 3.75% | ||||||
PHARMACEUTICALS & BIOTECHNOLOGY — 0.26% | ||||||
PHARMACEUTICALS — 0.26% | ||||||
Cubist Pharmaceuticals, Inc., 2.25%, 6/15/2013 | 7,600,000 | 7,505,000 | ||||
7,505,000 | ||||||
TELECOMMUNICATION SERVICES — 3.49% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 3.49% | ||||||
Level 3 Communications, Inc., 6.00%, 9/15/2009 | 20,700,000 | 18,604,125 | ||||
Level 3 Communications, Inc., 6.00%, 3/15/2010 | 91,600,000 | 80,493,500 | ||||
99,097,625 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $ 86,455,607) | 106,602,625 | |||||
30 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||||
SHORT TERM INVESTMENTS — 4.49% | |||||||
AIG Funding, Inc., 5.17%, 10/16/2006 | $ | 22,500,000 | $ | 22,451,531 | |||
AIG Funding, Inc., 5.24%, 10/5/2006 | 30,000,000 | 29,982,533 | |||||
HSBC Finance Corp., 5.17%, 10/25/2006 | 14,000,000 | 13,951,747 | |||||
Lasalle Bank Corp., 5.21%, 10/13/2006 | 2,000,000 | 1,996,527 | |||||
Toyota Credit de Puerto Rico, 5.20%, 10/20/2006 | 3,000,000 | 2,991,767 | |||||
Toyota Credit de Puerto Rico, 5.21%, 10/23/2006 | 21,500,000 | 21,431,546 | |||||
Toyota Credit de Puerto Rico, 5.23%, 10/10/2006 | 31,000,000 | 30,959,467 | |||||
Toyota Motor Credit Corp., 5.20%, 10/18/2006 | 4,000,000 | 3,990,178 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $127,755,296) | 127,755,296 | ||||||
TOTAL INVESTMENTS — 100.03% (Cost $2,456,235,681) | $ | 2,843,079,062 | |||||
LIABILITIES NET OF OTHER ASSETS — (0.03)% | (771,170 | ) | |||||
NET ASSETS — 100.00% | $ | 2,842,307,892 | |||||
Footnote Legend
+ | Non-income producing |
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR American Depository Receipt
Certified Annual Report | 31 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Value Fund
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 (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
32 | Certified Annual Report |
EXPENSE EXAMPLE | ||
Thornburg Value Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including
(a) sales charges (loads) on purchase payments for Class A shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(c) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(d) a 30-day redemption fee on Class A and Class I shares;
(2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,055.20 | $ | 6.87 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.38 | $ | 6.75 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,051.10 | $ | 10.91 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.43 | $ | 10.71 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,051.30 | $ | 10.68 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.66 | $ | 10.48 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,057.10 | $ | 5.06 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.14 | $ | 4.97 | |||
Class R1 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,054.90 | $ | 6.96 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.30 | $ | 6.83 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,057.20 | $ | 5.05 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.16 | $ | 4.96 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.33%; B: 2.12%; C: 2.08%; I: 0.98%; R1: 1.35%; and R5: 0.98%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report | 33 |
INDEX COMPARISON | ||
Thornburg Value Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Value Fund versus S&P 500 Index (October 2, 1995 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2006 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 10/02/95) | 10.41 | % | 7.17 | % | 11.77 | % | 12.83 | % | ||||
B Shares (Incep: 4/03/00) | 9.71 | % | 6.99 | % | — | 1.90 | % | |||||
C Shares (Incep: 10/02/95) | 13.77 | % | 7.34 | % | 11.40 | % | 12.42 | % | ||||
R1 Shares (Incep: 7/01/03) | 15.60 | % | — | — | 13.04 | % | ||||||
R5 Shares (Incep: 2/01/05) | 16.07 | % | — | — | 15.20 | % | ||||||
S&P 500 (Since: 10/02/95) | 10.78 | % | 6.96 | % | 8.56 | % | 9.65 | % |
Performance data reflects past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 4.50%. Class B shares are sold with a contingent deferred sales charge (CDSC) that declines from 5.00% to 0% depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are subject to a 1% CDSC for the first year only. There is no up-front sales charge for Class R1 and R5 shares. Class R1 and R5 shares are available only to certain qualified investors. Class A shares are subject to a 1% 30-day redemption fee.
The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged index generally representative of the U.S. stock market. Unless otherwise noted, index returns do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
34 | Certified Annual Report |
TRUSTEES AND OFFICERS | ||
Thornburg Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report | 35 |
TRUSTEE AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
36 | Certified Annual Report |
TRUSTEE AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds.Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report | 37 |
OTHER INFORMATION | ||
Thornburg Value Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the tax year ended September 30, 2006, the Thornburg Value Fund designates 100% of the dividends paid from tax basis net ordinary income as qualifying for the reduced rate under the Jobs and Growth Tax Relief and Reconciliation Act of 2003.
100% of the ordinary income distributions paid by the Fund (or the maximum amount allowed) for the year ended September 30, 2006 qualified for the corporate dividends received deduction.
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006. Complete information will be computed and reported in conjunction with your 2006 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Value Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, industry, market and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
38 | Certified Annual Report |
OTHER INFORMATION, CONTINUED | ||
Thornburg Value Fund | September 30, 2006 |
(iv) | measures of the Fund’s investment performance over different periods of time relative to a category of mutual funds sharing certain comparable characteristics and selected by an independent mutual fund analyst firm, and relative to broad based securities indices; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the methods for selecting the investments for other funds.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s superior investment performance in most periods relative to the performance of a recognized category of equity mutual funds having certain characteristics comparable to the Fund and selected by an independent mutual fund analyst firm, the Fund’s outperformance of two broad based securities indices over multiple periods, the Fund’s cumulative returns over extended periods and the Fund’s performance relative to comparative measures of risk.
The Trustees concluded, based upon these and other observations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of equity mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the management fee charged to the Fund was somewhat higher than the average and median fee rates charged to the grouping of mutual funds assembled by the mutual fund analyst firm, but that the overall expense ratio was comparable to the average and median expense ratios for the same fund group. The Trustees also observed in this regard the quality of the Advisor’s services and the investment performance of the Fund. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparison of fees and costs charged to the Fund to fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by the Fund and other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund has realized and may reasonably be expected to realize further economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
Certified Annual Report | 39 |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’ re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 | 119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 |
Thornburg Value Fund
The Value of Experience
The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types. As a secondary consideration, the Fund also seeks some current income.
The portfolio is diversified to include basic value stocks, but also includes stocks of companies with consistent earnings characteristics and those of emerging franchises, when, in our opinion, these issues are value priced.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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Message from the Chairman
Garrett Thornburg Chairman & CEO | November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We seek to accomplish this through a range of equity funds that redefine traditional measures of value and growth and through a family of laddered bond funds that focus on quality, stability and minimizing risk over time.
Confirming our strategy, all Thornburg equity funds are highly ranked within their respective categories over the long term.
The Thornburg equity funds employ a comprehensive approach, which is more inclusive than the traditional deep value or high growth approach to stock selection. You can read much more about the stocks in your Fund’s portfolio, and all Thornburg equity funds, at our web site, www.thornburg.com/funds.
During this decade, the average dividend yield paid by equity and hybrid mutual funds has dipped well below 1%. We established Thornburg Investment Income Builder Fund in late 2002 to be clearly different from other equity/hybrid funds by paying attractive dividends today, with a further goal of increasing these in the future. Our record to date shows clear success in achieving each aspect of this mission.
On the bond side, we have always had a highly disciplined approach of laddering short-and intermediate-bond maturities, seeking to provide both an attractive return and relative stability of principal.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers. | |
Thank you for investing with us. We will do our best to continue to earn your trust every day. | ||
Sincerely, | ||
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Garrett Thornburg Chairman & CEO |
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Important Information
The information presented on the following pages was current as of September 30, 2006. The managers’ views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
Shares in the Fund carry risks including possible loss of principal. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Funds invested in a limited number of holdings may expose an investor to greater volatility. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any government agency. There is no guarantee that the Fund will meet its investment objectives.
Minimum investments for Class I shares are higher than those for other classes.
Glossary
Standard & Poor’s 500 Stock Index (S&P 500) – An index consisting of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large-cap universe. Unless otherwise noted, index returns do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
Beta – A measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price. The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median and half have values that are less. If there is an even number of companies, then the median is the average of the two companies in the middle.
Price to Book Value (P/B) – A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value (book value is simply assets minus liabilities).
Price to Cash Flow Ratio – A measure of the market’s expectations of a firm’s future financial health. It is calculated by dividing the price per share by cash flow per share.
Price to Earnings Ratio (P/E) – A valuation ratio of a company’s current share price compared to its per-share earnings. P/E equals a company’s market value per share divided by earnings per share.
4 This page is not part of the Annual Report.
Thornburg Value Fund
Promising Companies at a Discount
Investing is an art. It is also a science. It requires vision and precision – the vision to recognize opportunity and the precision to use that opportunity to achieve a specific goal.
The greatest success comes to those who strike a balance between the two.
Thornburg Value Fund strikes such a balance.
The Fund seeks to find promising companies at a discount price. It differs from many other value funds in two key ways. First, it focuses on a limited number of stocks; and second, it takes a more comprehensive approach to value investing. This unique strategy has provided positive returns for shareholders who have been invested since the Fund’s inception in 1995, and earned co-portfolio manager Bill Fries many awards over the Fund’s eleven-year history.
Fries’ unassuming and quiet demeanor belies his fierce determination to recognize value and harness it for his shareholders. He brings more than thirty years of investment experience to the process. He also brings a commitment to fundamental, hands-on research. He and co-portfolio managers Connor Browne and Ed Maran are dedicated to a collaborative approach in identifying and analyzing investment ideas. They scour the U.S. to find the country’s most promising companies at a discount to intrinsic value. The investment team is, in Fries’ words, “in continuous session.” Everybody’s idea is important. Combining “promise and discount” is the team’s mantra for stock selection.
In managing the Thornburg Value Fund, the portfolio management team takes a conservative, bottom-up approach to stock selection. The Fund is not predisposed to a geographical region, industry, or industry sector. And, it recognizes no “false gods.” Fries, Browne, and Maran use a combination of proprietary screens, financial analysis, collaborative research, and on-site company visits to gauge the intrinsic value of a company and to estimate its potential for future earnings growth. Their current goal is to maintain a portfolio of 45–55 companies diversified by sector, industry, market capitalization, and economic sensitivity.
Because of the limited number of stocks in the portfolio, every holding counts. Once a company has survived the team’s initial screens, the managers then expand their analysis of what is behind its revenue and cash-generating model. And they take the time to get to know the company, its people and its corporate culture. At the time of purchase, the managers set 12–18 month price targets for each stock. They review those targets as the fundamentals of the stocks change during the course of ownership.
The bottom line? By engendering a wide-open, collegial environment, information flows freely and the Fund benefits from the best of the team’s thinking. And because the Fund’s advisor, Thornburg Investment Management®, is located in Santa Fe, New Mexico, we believe the portfolio team avoids the tendency to be trapped by Wall Street’s “pack” instinct. While they have access to the best of Wall Street’s analysis, they are not ruled by it. Their distance from the herd serves to fortify independent and objective thinking.
Being diversified in multiple ways, the Fund is able to take advantage of a broad array of opportunities in multiple sectors. These sectors do not all move in sync. When one is up, often another is down. Losses in one may be offset by gains in another. Limiting the number of companies in the portfolio and employing a rigorous sell discipline has enabled the Thornburg team to strike a balance between risk and reward.
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Portfolio Overview
Thornburg Value Fund
IMPORTANT PERFORMANCE INFORMATION
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
There is no up-front sales charge for Class I shares. Class I shares are subject to a 1% 30-day redemption fee.
MANAGEMENT TEAM
Front row, L to R: Wendy Trevisani, Bill Fries, Brad Kinkelaar, and Brian McMahon. Back row, L to R: Lei Wang, Connor Browne, Ed Maran,Vin Walden, Thomas Garcia, and Lewis Kaufman.
KEY PORTFOLIO ATTRIBUTES
Portfolio P/E Trailing 12-months* | 15.5x | ||
Portfolio Price to Cash Flow* | 11.0x | ||
Portfolio Price to Book Value* | 2.9x | ||
Median Market Cap* | $ | 25.8 B | |
3-Year Beta (Thornburg vs. S&P 500)* | 1.05 | ||
Holdings | 46 |
* | Source: FactSet |
For the fiscal year ended September 30, 2006, the Class I shares of the Thornburg Value Fund returned 16.10%, compared to a return of 10.78% for the S&P 500 Index. Once again, holdings in a variety of industries contributed to performance. The Fund’s good performance was primarily attributable to contributions from individual stock selection as elaborated below.
For the second consecutive year, a number of telecommunications stocks held by the Fund were performance leaders. As in 2005, NII Holdings Inc. was a top performer. While headquartered in the U.S., NII’s business is primarily in Mexico, Brazil and other Latin American countries where it provides mobile telecommunications service with the same push-to-talk feature pioneered in the U.S. by Nextel. Cell phone penetration in the areas where NII operates is low, which would suggest further green pastures for the company. Another holding, American Tower Corp., is also benefiting from the growing demand for mobile communications services. As a leading provider of tower space for cellular antennas, the business has characteristics that are similar to the rental of real estate. In this case, it is space on the tower, rather than property, which is being rented. As American Tower adds new tenants at a tower location, revenues increase, but costs usually do not. Level 3 Communications Inc., a provider of network capacity for internet traffic, contributed both income and capital appreciation. The company’s long-held bonds have been a productive investment. Level 3’s equity was recently added to the portfolio as well.
Energy holdings were also significant contributors to performance. As energy companies invested in future production, our holding Schlumberger Ltd. was ideally positioned. A global leader in services used in both the exploration and production of oil, Schlumberger was one of the most obvious beneficiaries of oil industry affluence.
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2006
YTD | 1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||
I Shares (Incep: 11/2/98) | 12.99 | % | 16.10 | % | 14.01 | % | 8.63 | % | 8.83 | % | |||||
S&P 500 Index (Since: 11/2/98) | 8.52 | % | 10.78 | % | 12.29 | % | 6.96 | % | 4.11 | % |
* | Periods under one year are not annualized. |
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Despite the impact of higher energy prices on the overall economy, a number of consumer related stocks did very well. Among these were Abercrombie & Fitch Co., an apparel retailer that we purchased as the stock sold off during a period of anxiety last summer; Las Vegas Sands Corp., which operates the Venetian and other venues in Las Vegas, Nevada and is now being recognized for the potential value of its gaming property developments in Macau and Singapore; DIRECTV Group Inc. and Comcast Corp., both media and entertainment stocks that rebounded from modest valuations in prior periods and gained recognition for their attractive annuity-like subscription revenue streams.
Stocks from a number of other industries contributed to performance, including: Oracle Corp., a leading enterprise software provider, which rose sharply on signs that its acquisition spree of a few years ago is beginning to pay off; Southern Copper Corp., added to the Fund in late 2005, which benefited from a rise in copper prices; and Goldman Sachs, the highly reputed financial services leader.
As always, a few of our investments did not perform as expected. Among these were XM Satellite Radio Holdings Inc., which did not sustain subscriber growth at the levels we had anticipated. As the investment thesis was not unfolding as anticipated, XM was sold. Other stocks that detracted from performance and were sold from the portfolio include American Greetings Corp. and Juniper Networks. A few new additions to the Fund also hampered performance, including JetBlue Airways Corp., Dell Inc. and Chunghwa Telecom Co. Ltd. JetBlue sold off as revenue growth projections were below general expectations, Dell weakened on diminished effectiveness of its long standing direct sales model, and Chunghwa Telecom was temporarily depressed pending a sale of shares by the Taiwan government. We remain hopeful about the longer-term prospects for these companies.
While we continually tune our investment process to accommodate the evolving challenges in the investment environment, the philosophy underpinning the Fund remains unchanged – to provide superior, risk-adjusted investment returns by holding a diversified portfolio of what we believe to be fundamentally sound equity investments.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/06
Top Contributors | Top Detractors | |||
NII Holdings, Inc. | XM Satellite Radio Holdings, Inc. | |||
Oracle Corp. | American Greetings Corp. | |||
Schlumberger Ltd. | Dell, Inc. | |||
Las Vegas Sands Corp. | JetBlue Airways Corp. | |||
American Tower Corp. | Juniper Networks |
Source: Thomson Portfolio Analytics
MARKET CAPITALIZATION EXPOSURE
As of 9/30/06
TOP TEN HOLDINGS
As of 9/30/06
Level 3 Communications, Inc. | 6.0 | % | |
NII Holdings, Inc. | 3.3 | % | |
Exxon Mobil Corp. | 3.2 | % | |
Microsoft Corp. | 3.2 | % | |
Oracle Corp. | 3.0 | % | |
American International Group, Inc. | 3.0 | % | |
General Electric Co. | 2.9 | % | |
Citigroup, Inc. | 2.9 | % | |
Pfizer, Inc. | 2.9 | % | |
American Tower Corp. | 2.8 | % |
TOP TEN INDUSTRIES
As of 9/30/06
Telecommunication Services | 14.6 | % | |
Energy | 10.5 | % | |
Software & Services | 9.5 | % | |
Health Care Equipment & Services | 9.4 | % | |
Diversified Financials | 7.7 | % | |
Technology Hardware & Equipment | 5.4 | % | |
Pharmaceuticals & Biotechnology | 4.9 | % | |
Banks | 4.7 | % | |
Retailing | 4.6 | % | |
Materials | 4.6 | % |
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I Shares – September 30, 2006
Table of Contents
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report 9
William V. Fries, CFA Co-Portfolio Manager
Connor Browne, CFA Co-Portfolio Manager
Edward E. Maran, CFA Co-Portfolio Manager | October 20, 2006
Dear Shareholder:
The fiscal year ended September 30, 2006 was another good year for our Fund. The net asset value of the Class I shares on September 30 was $38.11, a record high at the time. One year ago the net asset value per share was $33.23. For the current period, the Fund’s Class I shares had a total return of 16.10%, compared with 10.78% for the S&P 500 Index. For details on performance by share class please refer to the performance summary on page 29.
We are pleased with the performance during the current fiscal year, as well as the longer-term record. On October 2, 2005, we celebrated the 10th anniversary of the Value Fund’s launch. For the period ended September 30th, the Fund’s A shares returned 13.30% annually since inception to its original investors. This compares favorably to the 9.65% return of the S&P 500 over the same period. This performance includes a range of market cycles encompassing a technology bubble and subsequent contraction. While we have been fortunate to perform well in more ebullient markets, we are also satisfied with the performance we recorded during the challenging market periods.
The volatile price of crude oil has been among the most prominent economic issues of the past year. In the aftermath of hurricane Katrina and amidst continuing strife in the Middle East, oil prices have remained above $60 per barrel for a good part of the year, reaching an all-time high of $78 per barrel in July. As a result, oil company profits rose and consumers’ disposable income declined. Within our portfolio, this both contributed to performance and created opportunity. Our oil company holdings reported record earnings, modestly higher dividends, and continued share buybacks, yet still had the funding for necessary production investments. Energy prices have been moving lower, recently, which is an overall benefit for markets and most stocks. While energy company earnings and cash flows may be negatively impacted, we remain comfortable with the merits of our specific energy holdings and their valuations. At the same time, we are fully cognizant of the potential impact of lower oil prices on sentiment for these stocks. We do not expect oil prices to retrace the upward thrust of the last few years as long as global economic growth continues at a sustainable pace.
Generally speaking, technology stocks have been out of favor since the bubble period of 2000. Over the last year, some of these issues have begun to enjoy better business fundamentals, which has been reflected in their stock price performance. A portion of the Fund’s good performance in the current fiscal year has come from technology issues that have regained their footing and now appear to be enjoying a continued, strong operating environment. | |
10 Certified Annual Report
As we look to the year ahead, there is no less uncertainty than in past years. The War in Iraq drags on; nuclear proliferation is underway, despite treaty terms; and both recession and inflation remain legitimate worries. Nonetheless, the core drivers of stock prices – earnings progress and interest rates – remain positive. Improved corporate governance and discipline, relating to both capital allocation and cost containment, seem to be playing a supporting role. Economic expansion on a global basis continues unabated.
On February 1, 2006 Connor Browne and Ed Maran were promoted to co-portfolio managers of the Thornburg Value Fund. Both have contributed to the Fund’s past success and bring a range of experience to the Fund’s management. The promotions of Connor and Ed enhance our decision making process and improve the prospects of the Fund’s continued success.
Thank you for your trust and confidence over the past year. In the period ahead, each of us remains dedicated to finding investments that can help you achieve your goal of long-term capital appreciation. You can review descriptions of many of the stocks in your portfolio at your leisure by going to our web site, www.thornburg.com/funds.
Sincerely,
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William V. Fries, CFA | Connor Browne, CFA | Edward E. Maran, CFA | ||||||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager | ||||||
Managing Director | Managing Director | Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 11
STATEMENT OF ASSETS AND LIABILITIES
Thornburg Value Fund | September 30, 2006 |
ASSETS | |||
Investments at value (cost $2,456,235,681) | $ | 2,843,079,062 | |
Cash | 1,291,185 | ||
Receivable for fund shares sold | 12,302,355 | ||
Dividends receivable | 2,637,282 | ||
Interest receivable | 477,717 | ||
Prepaid expenses and other assets | 56,166 | ||
Total Assets | 2,859,843,767 | ||
LIABILITIES | |||
Payable for securities purchased | 11,954,059 | ||
Payable for fund shares redeemed | 2,461,827 | ||
Payable to investment advisor and other affiliates (Note 3) | 2,639,585 | ||
Accounts payable and accrued expenses | 480,404 | ||
Total Liabilities | 17,535,875 | ||
NET ASSETS | $ | 2,842,307,892 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 3,003,948 | |
Net unrealized appreciation on investments | 386,817,974 | ||
Accumulated net realized gain (loss) | 93,192,697 | ||
Net capital paid in on shares of beneficial interest | 2,359,293,273 | ||
$ | 2,842,307,892 | ||
12 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
Thornburg Value Fund | September 30, 2006 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share | $ | 37.59 | |
Maximum sales charge, 4.50% of offering price | 1.77 | ||
Maximum offering price per share | $ | 39.36 | |
Class B Shares: | |||
Net asset value and offering price per share * | $ | 36.17 | |
Class C Shares: | |||
Net asset value and offering price per share * | $ | 36.55 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share | $ | 38.11 | |
Class R1 Shares: | |||
Net asset value, offering and redemption price per share | $ | 37.43 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share | $ | 38.09 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 13
Thornburg Value Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $794,813) | $ | 37,099,767 | ||
Interest income | 17,968,341 | |||
Total Income | 55,068,108 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 18,077,940 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,274,374 | |||
Class B Shares | 116,169 | |||
Class C Shares | 576,485 | |||
Class I Shares | 354,335 | |||
Class R1 Shares | 31,016 | |||
Class R5 Shares | 648 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 2,546,531 | |||
Class B Shares | 929,665 | |||
Class C Shares | 4,610,819 | |||
Class R1 Shares | 124,768 | |||
Transfer agent fees | ||||
Class A Shares | 1,359,825 | |||
Class B Shares | 157,832 | |||
Class C Shares | 590,040 | |||
Class I Shares | 539,047 | |||
Class R1 Shares | 41,722 | |||
Class R5 Shares | 12,847 | |||
Registration and filing fees | ||||
Class A Shares | 36,778 | |||
Class B Shares | 15,680 | |||
Class C Shares | 17,516 | |||
Class I Shares | 113,062 | |||
Class R1 Shares | 14,726 | |||
Class R5 Shares | 17,924 | |||
Custodian fees (Note 3) | 487,236 | |||
Professional fees | 126,672 | |||
Accounting fees | 166,035 | |||
Trustee fees | 56,840 | |||
Other expenses | 362,328 | |||
Total Expenses | 32,758,860 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (111,506 | ) | ||
Fees paid indirectly (Note 3) | (122,036 | ) | ||
Net Expenses | 32,525,318 | |||
Net Investment Income | $ | 22,542,790 | ||
14 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
Thornburg Value Fund | Year Ended September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 110,266,198 | ||
Foreign currency transactions | (219,350 | ) | ||
110,046,848 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 208,833,783 | |||
Foreign currency translations | (10,135 | ) | ||
208,823,648 | ||||
Net Realized and Unrealized Gain | 318,870,496 | |||
Net Increase in Net Assets Resulting From Operations | $ | 341,413,286 | ||
See notes to financial statements.
Certified Annual Report 15
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Value Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 22,542,790 | $ | 19,094,717 | ||||
Net realized gain on investments and foreign currency transactions | 110,046,848 | 255,644,685 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 208,823,648 | 57,921,767 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 341,413,286 | 332,661,169 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (9,041,451 | ) | (9,628,160 | ) | ||||
Class B Shares | (208,210 | ) | (253,266 | ) | ||||
Class C Shares | (1,136,901 | ) | (1,270,882 | ) | ||||
Class I Shares | (10,091,399 | ) | (5,577,033 | ) | ||||
Class R1 Shares | (308,217 | ) | (76,812 | ) | ||||
Class R5 Shares | (49,565 | ) | (246 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 8,192,636 | (280,665,531 | ) | |||||
Class B Shares | (8,432,486 | ) | (15,317,740 | ) | ||||
Class C Shares | (19,010,765 | ) | (99,126,047 | ) | ||||
Class I Shares | 516,880,753 | 16,018,891 | ||||||
Class R1 Shares | 33,144,127 | 4,801,953 | ||||||
Class R5 Shares | 10,020,743 | 29,098 | ||||||
Net Increase (Decrease) in Net Assets | 861,372,551 | (58,404,606 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 1,980,935,341 | 2,039,339,947 | ||||||
End of year | $ | 2,842,307,892 | $ | 1,980,935,341 | ||||
Undistributed net investment income | $ | 3,003,948 | $ | 1,516,251 |
See notes to financial statements.
16 Certified Annual Report
Thornburg Value Fund | September 30, 2006 |
NOTE 1 – ORGANIZATION
Thornburg Value Fund, hereinafter referred to as 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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg Limited Term Income Fund, Thornburg International Value Fund, Thornburg Core Growth Fund, Thornburg New York Intermediate Municipal Fund, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 six classes of shares of beneficial interest: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R1 and Class R5). 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 R1 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, (vi) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (vii) the respective classes may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Securities: 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. In any case where a market quotation is not readily available, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the 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 amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund to the shareholders. Therefore, no provision for Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Value Fund | September 30, 2006 |
value. When effecting such transactions, assets 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: 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, 2006, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $82,314 for Class R1 shares and $29,192 for Class R5 shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned net commissions aggregating $108,123 from the sale of Class A shares of the Fund, and collected contingent deferred sales charges aggregating $20,976 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class B, Class C, and Class R1 shares under which the Fund compensates the Distributor for services in promoting the sale of Class B, Class C, and Class R1 shares of the Fund at an annual rate of up to .75 of 1% per annum of the average daily net assets attributable to Class B, Class C, and Class R1 shares. Total fees incurred by the Distributor for each class of shares of the Fund under its respective service and distribution plans for the year ended September 30, 2006, are set forth in the Statement of Operations.
The Trust 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, 2006, fees paid indirectly were $122,036. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/ or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Value Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 5,364,547 | $ | 188,094,156 | 5,556,737 | $ | 169,738,087 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 225,438 | 8,058,294 | 279,894 | 8,715,714 | ||||||||||
Shares repurchased | (5,410,098 | ) | (187,983,831 | ) | (14,823,032 | ) | (459,171,181 | ) | ||||||
Redemption fees received** | — | 24,017 | — | 51,849 | ||||||||||
Net Increase (Decrease) | 179,887 | $ | 8,192,636 | (8,986,401 | ) | $ | (280,665,531 | ) | ||||||
Class B Shares | ||||||||||||||
Shares sold | 84,367 | $ | 2,870,375 | 77,850 | $ | 2,288,707 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 5,111 | 182,575 | 7,536 | 224,646 | ||||||||||
Shares repurchased | (343,699 | ) | (11,486,467 | ) | (607,159 | ) | (17,831,093 | ) | ||||||
Redemption fees received** | — | 1,031 | — | — | ||||||||||
Net Increase (Decrease) | (254,221 | ) | $ | (8,432,486 | ) | (521,773 | ) | $ | (15,317,740 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 1,293,511 | $ | 43,965,842 | 915,021 | $ | 27,095,236 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 27,097 | 974,298 | 35,972 | 1,085,438 | ||||||||||
Shares repurchased | (1,894,704 | ) | (63,956,086 | ) | (4,307,157 | ) | (127,306,721 | ) | ||||||
Redemption fees received** | — | 5,181 | — | — | ||||||||||
Net Increase (Decrease) | (574,096 | ) | $ | (19,010,765 | ) | (3,356,164 | ) | $ | (99,126,047 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 16,999,909 | $ | 608,478,099 | 3,589,202 | $ | 111,238,406 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 235,654 | 8,565,755 | 147,185 | 4,664,983 | ||||||||||
Shares repurchased | (2,814,649 | ) | (100,182,966 | ) | (3,238,887 | ) | (99,900,212 | ) | ||||||
Redemption fees received** | — | 19,865 | — | 15,714 | ||||||||||
Net Increase (Decrease) | 14,420,914 | $ | 516,880,753 | 497,500 | $ | 16,018,891 | ||||||||
�� | ||||||||||||||
Class R1 Shares | ||||||||||||||
Shares sold | 1,006,131 | $ | 35,300,994 | 239,052 | $ | 7,454,820 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 8,245 | 297,478 | 2,115 | 66,501 | ||||||||||
Shares repurchased | (72,017 | ) | (2,454,755 | ) | (89,436 | ) | (2,719,368 | ) | ||||||
Redemption fees received** | — | 410 | — | — | ||||||||||
Net Increase (Decrease) | 942,359 | $ | 33,144,127 | 151,731 | $ | 4,801,953 | ||||||||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Value Fund | September 30, 2006 |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 276,338 | $ | 10,096,784 | 927 | $ | 28,852 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,309 | 49,565 | 8 | 246 | ||||||||||
Shares repurchased | (3,390 | ) | (125,667 | ) | (— | ) | (— | ) | ||||||
Redemption fees received** | — | 61 | — | — | ||||||||||
Net Increase (Decrease) | 274,257 | $ | 10,020,743 | 935 | $ | 29,098 | ||||||||
* | Effective date of Class R5 shares was February 1, 2005. |
** | The Fund charges a redemption fee of 1% of the Class A & Class I shares exchanged within 30 days of purchase. Prior to February 1, 2006, the Fund charged a redemption fee of 1% of the Class A & Class I shares exchanged within 90 days of purchase. Redemption fees charged to any Class are allocated to all Classes upon receipt of payment based on relative net asset values of each Class or other appropriate allocation methods. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $1,623,807,261 and $1,162,848,579, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 2,455,022,682 | ||
Gross unrealized appreciation on a tax basis | $ | 437,995,286 | ||
Gross unrealized depreciation on a tax basis | (49,938,906 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 388,056,380 | ||
Distributable earnings – ordinary income | $ | 3,003,948 | ||
Distributable – capital gains | $ | 93,192,697 |
The Fund utilized $17,073,502 of its capital loss carry forward during the year ended September 30, 2006.
At September 30, 2006, the Fund had deferred currency losses occurring subsequent to October 31, 2005 of $205,646. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $219,350 and increased net realized investment gain by $219,350. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from currency losses.
The tax character of distributions paid during the year ended September 30, 2006, and September 30, 2005, was as follows:
2006 | 2005 | |||||
Distributions from: | ||||||
Ordinary income | $ | 20,835,743 | $ | 16,806,399 |
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity.
20 Certified Annual Report
Thornburg Value Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 33.23 | $ | 28.49 | $ | 26.64 | $ | 20.95 | $ | 26.18 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.50 | 0.45 | 0.31 | 0.26 | 0.11 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 4.82 | 4.70 | 1.84 | 5.51 | (5.34 | ) | ||||||||||||||
Total from investment operations | 5.32 | 5.15 | 2.15 | 5.77 | (5.23 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.44 | ) | (0.41 | ) | (0.30 | ) | (0.03 | ) | — | |||||||||||
Net realized gains | — | — | — | — | — | |||||||||||||||
Return of capital | — | — | — | (0.05 | ) | — | ||||||||||||||
Total dividends | (0.44 | ) | (0.41 | ) | (0.30 | ) | (0.08 | ) | — | |||||||||||
Change in net asset value | 4.88 | 4.74 | 1.85 | 5.69 | (5.23 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 38.11 | $ | 33.23 | $ | 28.49 | $ | 26.64 | $ | 20.95 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 16.10 | % | 18.16 | % | 8.04 | % | 27.55 | % | (19.98 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.41 | % | 1.44 | % | 1.07 | % | 1.10 | % | 0.42 | % | ||||||||||
Expenses, after expense reductions | 0.98 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.98 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.97 | % | 0.98 | % | 0.99 | % | 0.99 | % | 0.98 | % | ||||||||||
Expenses, before expense reductions | 0.98 | % | 1.00 | % | 0.99 | % | 1.03 | % | 0.99 | % | ||||||||||
Portfolio turnover rate | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | 76.37 | % | ||||||||||
Net assets at end of year (000) | $ | 1,074,492 | $ | 457,788 | $ | 378,334 | $ | 260,624 | $ | 207,613 |
+ | Based on weighted average shares outstanding. |
Certified Annual Report 21
Thornburg Value Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-731, CLASS B - 885-215-590, CLASS C - 885-215-715, CLASS I - 885-215-632, CLASS R1 - 885-215-533, CLASS R5 - 885-215-376
NASDAQ SYMBOLS: CLASS A - TVAFX, CLASS B - TVBFX, CLASS C - TVCFX, CLASS I - TVIFX, CLASS R1 - TVRFX, CLASS R5 - TVRRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/06
Telecommunication Services | 14.6 | % | |
Energy | 10.5 | % | |
Software & Services | 9.5 | % | |
Health Care Equipment & Services | 9.4 | % | |
Diversified Financials | 7.7 | % | |
Technology Hardware & Equipment | 5.4 | % | |
Pharmaceuticals & Biotechnology | 4.9 | % | |
Banks | 4.7 | % | |
Retailing | 4.6 | % | |
Materials | 4.6 | % | |
Insurance | 4.5 | % | |
Capital Goods | 4.4 | % | |
Media | 4.3 | % | |
Consumer Services | 2.4 | % | |
Automobiles & Components | 1.9 | % | |
Transportation | 1.2 | % | |
Food & Staples Retailing | 0.9 | % | |
Other Assets and Cash Equivalents | 4.5 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 91.32% | |||||
AUTOMOBILES & COMPONENTS — 1.92% | |||||
AUTOMOBILES — 1.92% | |||||
PSA Peugeot Citroen | 967,800 | $ | 54,600,275 | ||
54,600,275 | |||||
BANKS — 4.70% | |||||
COMMERCIAL BANKS — 2.27% | |||||
Lloyds TSB Group plc | 6,383,200 | 64,451,306 | |||
THRIFTS & MORTGAGE FINANCE — 2.43% | |||||
Federal Home Loan Mortgage Corp. | 1,042,909 | 69,176,154 | |||
133,627,460 | |||||
CAPITAL GOODS — 4.39% | |||||
INDUSTRIAL CONGLOMERATES — 4.39% | |||||
General Electric Co. | 2,368,700 | 83,615,110 | |||
Tyco International Ltd. | 1,472,300 | 41,209,677 | |||
124,824,787 | |||||
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
CONSUMER SERVICES — 2.35% | |||||
HOTELS RESTAURANTS & LEISURE — 2.35% | |||||
Las Vegas Sands Corp.+ | 975,000 | $ | 66,641,250 | ||
66,641,250 | |||||
DIVERSIFIED FINANCIALS — 7.67% | |||||
CAPITAL MARKETS — 1.93% | |||||
Charles Schwab Corp. | 3,061,100 | 54,793,690 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.74% | |||||
AllianceBernstein Holdings LP | 313,400 | 21,621,466 | |||
Citigroup, Inc. | 1,675,200 | 83,207,184 | |||
NYSE Group, Inc.+ | 782,400 | 58,484,400 | |||
218,106,740 | |||||
ENERGY — 10.47% | |||||
OIL, GAS & CONSUMABLE FUELS — 10.47% | |||||
Apache Corp. | 1,088,737 | 68,808,178 | |||
ChevronTexaco Corp. | 1,132,100 | 73,428,006 | |||
ConocoPhillips | 1,062,200 | 63,232,766 | |||
Exxon Mobil Corp. | 1,374,100 | 92,202,110 | |||
297,671,060 | |||||
FOOD & STAPLES RETAILING — 0.94% | |||||
BEVERAGES — 0.94% | |||||
Rite Aid Corp.+ | 5,863,600 | 26,620,744 | |||
26,620,744 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 9.44% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 2.45% | |||||
Fisher Scientific International, Inc.+ | 888,400 | 69,508,416 | |||
HEALTH CARE PROVIDERS & SERVICES — 6.99% | |||||
Caremark Rx, Inc. | 1,329,900 | 75,365,433 | |||
Eclipsys Corp.+ | 2,542,440 | 45,535,100 | |||
WellPoint, Inc.+ | 1,011,000 | 77,897,550 | |||
268,306,499 | |||||
INSURANCE — 4.46% | |||||
INSURANCE — 4.46% | |||||
American International Group, Inc. | 1,277,100 | 84,620,646 | |||
MBIA, Inc. | 685,000 | 42,086,400 | |||
126,707,046 | |||||
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
MATERIALS — 4.62% | |||||
CHEMICALS — 2.08% | |||||
Air Products & Chemicals, Inc. | 890,700 | $ | 59,115,759 | ||
METALS & MINING — 2.54% | |||||
Southern Copper Corp. | 779,084 | 72,065,270 | |||
131,181,029 | |||||
MEDIA — 4.31% | |||||
MEDIA — 4.31% | |||||
Comcast Corp.+ | 1,754,600 | 64,586,826 | |||
DIRECTV Group, Inc.+ | 2,945,985 | 57,976,985 | |||
122,563,811 | |||||
PHARMACEUTICALS & BIOTECHNOLOGY — 4.61% | |||||
PHARMACEUTICALS — 4.61% | |||||
Johnson & Johnson | 758,413 | 49,251,340 | |||
Pfizer, Inc. | 2,887,300 | 81,883,828 | |||
131,135,168 | |||||
RETAILING — 4.64% | |||||
MULTILINE RETAIL — 2.72% | |||||
Target Corp. | 1,398,100 | 77,245,025 | |||
SPECIALTY RETAIL — 1.92% | |||||
Abercrombie & Fitch Co. | 786,400 | 54,639,072 | |||
131,884,097 | |||||
SOFTWARE & SERVICES — 9.49% | |||||
INTERNET SOFTWARE & SERVICES — 1.55% | |||||
Google, Inc.+ | 109,467 | 43,994,787 | |||
IT SERVICES — 1.75% | |||||
Bearingpoint, Inc. Co.+ | 6,317,860 | 49,658,380 | |||
SOFTWARE — 6.19% | |||||
Microsoft Corp. | 3,283,200 | 89,729,856 | |||
Oracle Corp.+ | 4,861,100 | 86,235,914 | |||
269,618,937 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 5.45% | |||||
COMMUNICATIONS EQUIPMENT — 2.09% | |||||
Motorola, Inc. | 2,373,100 | 59,327,500 | |||
COMPUTERS & PERIPHERALS — 3.36% | |||||
Apple Computer, Inc.+ | 536,300 | 41,311,189 | |||
Dell, Inc.+ | 2,373,700 | 54,215,308 | |||
154,853,997 | |||||
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
TELECOMMUNICATION SERVICES — 10.69% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 3.66% | ||||||
Chunghwa Telecom Co. Ltd.ADR | 2,713,560 | $ | 46,971,724 | |||
Level 3 Communications, Inc.+ | 10,689,900 | 57,190,965 | ||||
WIRELESS TELECOMMUNICATION SERVICES — 7.03% | ||||||
American Tower Corp.+ | 2,218,300 | 80,967,950 | ||||
Leap Wireless International, Inc.+ | 486,240 | 23,577,778 | ||||
NII Holdings, Inc.+ | 1,531,408 | 95,192,321 | ||||
303,900,738 | ||||||
TRANSPORTATION — 1.17% | ||||||
AIRLINES — 1.17% | ||||||
JetBlue Airways Corp.+ | 3,583,900 | 33,222,753 | ||||
33,222,753 | ||||||
TOTAL COMMON STOCK (Cost $2,231,291,188) | 2,595,466,391 | |||||
CORPORATE BONDS — 0.47% | ||||||
TELECOMMUNICATION SERVICES — 0.47% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.47% | ||||||
Level 3 Communications, Inc., 11.50%, 3/1/2010 | $ | 12,900,000 | 13,254,750 | |||
13,254,750 | ||||||
TOTAL CORPORATE BONDS (Cost $10,733,590) | 13,254,750 | |||||
CONVERTIBLE BONDS — 3.75% | ||||||
PHARMACEUTICALS & BIOTECHNOLOGY — 0.26% | ||||||
PHARMACEUTICALS — 0.26% | ||||||
Cubist Pharmaceuticals, Inc., 2.25%, 6/15/2013 | 7,600,000 | 7,505,000 | ||||
7,505,000 | ||||||
TELECOMMUNICATION SERVICES — 3.49% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 3.49% | ||||||
Level 3 Communications, Inc., 6.00%, 9/15/2009 | 20,700,000 | 18,604,125 | ||||
Level 3 Communications, Inc., 6.00%, 3/15/2010 | 91,600,000 | 80,493,500 | ||||
99,097,625 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $86,455,607) | 106,602,625 | |||||
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||||
SHORT TERM INVESTMENTS — 4.49% | |||||||
AIG Funding, Inc., 5.17%, 10/16/2006 | $ | 22,500,000 | $ | 22,451,531 | |||
AIG Funding, Inc., 5.24%, 10/5/2006 | 30,000,000 | 29,982,533 | |||||
HSBC Finance Corp., 5.17%, 10/25/2006 | 14,000,000 | 13,951,747 | |||||
Lasalle Bank Corp., 5.21%, 10/13/2006 | 2,000,000 | 1,996,527 | |||||
Toyota Credit de Puerto Rico, 5.20%, 10/20/2006 | 3,000,000 | 2,991,767 | |||||
Toyota Credit de Puerto Rico, 5.21%, 10/23/2006 | 21,500,000 | 21,431,546 | |||||
Toyota Credit de Puerto Rico, 5.23%, 10/10/2006 | 31,000,000 | 30,959,467 | |||||
Toyota Motor Credit Corp., 5.20%, 10/18/2006 | 4,000,000 | 3,990,178 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $127,755,296) | 127,755,296 | ||||||
TOTAL INVESTMENTS — 100.03% (Cost $2,456,235,681) | $ | 2,843,079,062 | |||||
LIABILITIES NET OF OTHER ASSETS — (0.03)% | (771,170 | ) | |||||
NET ASSETS — 100.00% | $ | 2,842,307,892 | |||||
Footnote Legend
+ | Non-income producing |
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR American | Depository Receipt |
26 Certified Annual Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Value Fund
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 (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
Certified Annual Report 27
Thornburg Value Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including a 30-day redemption fee on Class I shares;
(2) ongoing costs, including management and administrative fees and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning 3/31/06 | Ending 9/30/06 | Expenses Paid During 3/31/06–9/30/06 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,057.10 | $ | 5.06 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.14 | $ | 4.97 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.98%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
28 Certified Annual Report
Thornburg Value Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Value Fund versus S&P 500 Index (November 2, 1998 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2006
1 Yr | 5 Yrs | Since Inception | |||||||
I Shares (Incep: 11/2/98) | 16.10 | % | 8.63 | % | 8.83 | % | |||
S&P 500 (Since: 11/2/98) | 10.78 | % | 6.96 | % | 4.11 | % |
Performance data reflects past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains. There is no up-front sales charge for Class I shares. Class I shares are subject to a 1% 30-day redemption fee.
The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged index generally representative of the U.S. stock market. Unless otherwise noted, index returns do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
Certified Annual Report 29
Thornburg Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP,Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
30 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report 31
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds.Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
32 Certified Annual Report
Thornburg Value Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the tax year ended September 30, 2006, the Thornburg Value Fund designates 100% of the dividends paid from tax basis net ordinary income as qualifying for the reduced rate under the Jobs and Growth Tax Relief and Reconciliation Act of 2003.
100% of the ordinary income distributions paid by the Fund (or the maximum amount allowed) for the year ended September 30, 2006 qualified for the corporate dividends received deduction.
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006. Complete information will be computed and reported in conjunction with your 2006 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Value Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, industry, market and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
Certified Annual Report 33
OTHER INFORMATION, CONTINUED
Thornburg Value Fund | September 30, 2006 (Unaudited) |
(iv) | measures of the Fund’s investment performance over different periods of time relative to a category of mutual funds sharing certain comparable characteristics and selected by an independent mutual fund analyst firm, and relative to broad based securities indices; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the methods for selecting the investments for other funds.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s superior investment performance in most periods relative to the performance of a recognized category of equity mutual funds having certain characteristics comparable to the Fund and selected by an independent mutual fund analyst firm, the Fund’s outperformance of two broad based securities indices over multiple periods, the Fund’s cumulative returns over extended periods and the Fund’s performance relative to comparative measures of risk.
The Trustees concluded, based upon these and other observations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of equity mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the management fee charged to the Fund was somewhat higher than the average and median fee rates charged to the grouping of mutual funds assembled by the mutual fund analyst firm, but that the overall expense ratio was comparable to the average and median expense ratios for the same fund group. The Trustees also observed in this regard the quality of the Advisor’s services and the investment performance of the Fund. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparison of fees and costs charged to the Fund to fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by the Fund and other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund has realized and may reasonably be expected to realize further economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
34 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
Certified Annual Report 35
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses.We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
![]() | ![]() | |
119 East Marcy Street | 119 East Marcy Street | |
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |
800.847.0200 | 800.847.0200 |
TH861
Thornburg International Value Fund
Value Knows No Boundaries
The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types. As a secondary consideration, the Fund also seeks some current income.
The portfolio is diversified to include basic value stocks, but also includes stocks of companies with consistent earnings characteristics and those of emerging franchises, when, in our opinion, these issues are value priced.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We seek to accomplish this through a range of equity funds that redefine traditional measures of value and growth and through a family of laddered bond funds that focus on quality, stability and minimizing risk over time.
Confirming our strategy, all Thornburg equity funds are highly ranked within their respective categories over the long term.
The Thornburg equity funds employ a comprehensive approach, which is more inclusive than the traditional deep value or high growth approach to stock selection. You can read much more about the stocks in your Fund’s portfolio, and all Thornburg equity funds, at our web site, www.thornburg.com/funds.
During this decade, the average dividend yield paid by equity and hybrid mutual funds has dipped well below 1%. We established Thornburg Investment Income Builder Fund in late 2002 to be clearly different from other equity/hybrid funds by paying attractive dividends today, with a further goal of increasing these in the future. Our record to date shows clear success in achieving each aspect of this mission.
On the bond side, we have always had a highly disciplined approach of laddering short-and intermediate-bond maturities, seeking to provide both an attractive return and relative stability of principal.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely, |
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Garrett Thornburg Chairman & CEO |
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Important Information
The information presented on the following pages was current as of September 30, 2006. The managers’ views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
Shares in the Fund carry risks including possible loss of principal. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity. Risks may be associated with investments in emerging markets including illiquidity and volatility. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Funds invested in a limited number of holdings may expose an investor to greater volatility. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any government agency. There is no guarantee that the Fund will meet its investment objectives.
Performance data given at net asset value (NAV) does not take into account the applicable sales charges. If the sales charges had been included, the performance would have been lower.
Awards
The Standard & Poor’s/Business Week Excellence in Fund Management award winners are selected based on in-depth interviews with portfolio managers. Winners are chosen from 810 funds rated A or B+ for the five years ended December 31, 2005 in the Business Week Mutual Fund Scoreboard. Ratings are based on risk-adjusted total returns. Eligible funds must also be open to new shareholders, have assets of at least $100 million, a manager with at least 5 years tenure, and minimum investments of less than $26,000.
Established in 1988, the Morningstar Fund Manager of the Year Award recognizes portfolio managers who demonstrate excellent investment skill and the courage to differ from the consensus. To qualify for the award, managers must have not only a great year, but also must have a record of delivering outstanding long-term performance and of aligning their interests with shareholders. The Fund Manager of the Year Award winners are chosen based upon Morningstar’s proprietary research and in-depth evaluation by its senior analysts.
Glossary
The Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East Index (EAFE) – The MSCI EAFE is an unmanaged index. It 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 with net dividends reinvested in U.S. dollars. Unless otherwise noted, index returns do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
Beta – A measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price. The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median, and half have values that are less. If there is an even number of companies, then the median is the average of the two companies in the middle.
Price to Book Value (P/B) – A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value (book value is simply assets minus liabilities).
Price to Cash Flow Ratio – A measure of the market’s expectations of a firm’s future financial health. It is calculated by dividing the price per share by cash flow per share.
Price to Earnings Ratio (P/E) – A valuation ratio of a company’s current share price compared to its per-share earnings. P/E equals a company’s market value per share divided by earnings per share.
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Thornburg International Value Fund
Value Knows No Boundaries
Investing is an art. It is also a science. It requires vision and precision – the vision to recognize opportunity and the precision to use that opportunity to achieve a specific goal.
The greatest success comes to those who strike a balance between the two.
Thornburg International Value Fund strikes such a balance.
The Fund seeks to find bargains in overseas markets. It differs from many other international equity funds in two key ways. First, it focuses on a limited number of stocks; and second, it takes a more comprehensive approach to value investing. This strategy has provided positive returns for shareholders who have been invested since the Fund’s inception in 1998, and earned co-portfolio manager Bill Fries the distinction of Morningstar’s 2003 International Fund Manager of the Year.
Fries’ unassuming and quiet demeanor belies his fierce determination to recognize value and harness it for his shareholders. He brings more than thirty years of investment experience to the process. He also brings a commitment to fundamental, hands-on research. He and co-portfolio managers Wendy Trevisani and Lei Wang are dedicated to a collaborative approach in identifying and analyzing investment ideas. They scour the globe to find the world’s most promising companies at a discount to intrinsic value. The investment team is, in Fries’ words, “in continuous session.” Everybody’s idea is important. Combining “promise and discount” is the team’s mantra for stock selection.
In managing the Thornburg International Value Fund, the team takes a conservative, bottom-up approach to stock selection. The Fund is not predisposed to a geographical region or industry. And, it recognizes no “false gods.” Fries, Trevisani, and Wang use a combination of proprietary screens, financial analysis, collaborative research, and on-site company visits to gauge the intrinsic value of a company and to estimate its potential for future earnings growth. Their current goal is to maintain a portfolio of 50–65 companies diversified by sector, country, region, and economic sensitivity.
Because of the limited number of stocks in the portfolio, every holding counts. Once a company has survived the team’s initial screens, the managers then expand their analysis of what is behind its revenue and cash-generating model. And they take the time to get to know the company, its people and its corporate culture. At the time of purchase, the managers set 12–18 month price targets for each stock. They review those targets as the fundamentals of the stocks change during the course of ownership.
The bottom line? By engendering a wide-open, collegial environment, the managers ensure that information flows freely and that the Fund benefits from the best of the team’s thinking. And because the Fund’s advisor, Thornburg Investment Management®, is located in Santa Fe, New Mexico, we believe the portfolio team avoids the tendency to be trapped by Wall Street’s “pack” instinct. While they have access to the best of Wall Street’s analysis, they are not ruled by it. Their distance from the herd serves to fortify independent and objective thinking.
Foreign markets now account for 52% of world market capitalization. These markets do not all move in sync. When one is up, often another is down. Losses in one may be offset by gains in another. Limiting the number of companies in the portfolio and employing a rigorous sell discipline has enabled the Thornburg team to strike a balance between risk and reward.
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Portfolio Overview
Thornburg International Value Fund
IMPORTANT PERFORMANCE
INFORMATION
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
The maximum sales charge for Class A shares is 4.50%. A shares are subject to a 1% 30-day redemption fee.
MANAGEMENT TEAM
Front row, L to R: Wendy Trevisani, Bill Fries, Brad Kinkelaar, and Brian McMahon. Back row, L to R: Thomas Garcia, Ed Maran, Lei Wang, Lewis Kaufman, and Vin Walden.
KEY PORTFOLIO ATTRIBUTES
Portfolio P/E Trailing 12-months* | 18.1x | |
Portfolio Price to Cash Flow* | 10.4x | |
Portfolio Price to Book Value* | 3.0x | |
Median Market Cap* $24.5 B | ||
3-Year Beta (Thornburg vs. MSCI EAFE)* | 0.96 | |
Holdings | 63 |
* | Source: FactSet |
During the fiscal year ended September 30, 2006, the Class A shares of the Thornburg International Value Fund posted a positive return of 19.30% (at NAV). This compares favorably to the 19.16% return of the MSCI EAFE Index. Once again, holdings in a variety of industries contributed to performance. Our results were largely due to individual stock selection.
Financials, specifically the stocks of international exchanges, were strong contributors. While the deal has not closed, the New York Stock Exchange Group has proposed a merger with Euronext NV, the France-based pan European stock exchange. Other exchanges are considering consolidation as well. As a leading candidate, Deutsche Börse AG has benefited from this trend. Our holding in Hong Kong Exchanges & Clearing Ltd. reacted favorably to stock issuance by companies in China, notably the large banks. Each of these significant new offerings increases the trading volume potential of the Hong Kong Exchange. Average daily trading volume has been steadily rising. Apart from the exchanges, Swiss-based financial services company UBS AG also performed well.
Companies with exposure to energy also performed well, including oil service holding Schlumberger Ltd. As oil companies generate more cash, this company is well positioned to help them spend it on identifying new production opportunities. While the stock has been volatile, trading with oil price movements, we anticipate that Schlumberger will continue to enjoy strong demand for its services and the pricing power to sustain earnings progress. Other superior performers were international oil and gas producers, including Russian company Lukoil Oil Co., China Petroleum and Chemical Corp. (Sinopec), and China Shenhua Energy, which was subsequently sold after achieving our target price.
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2006
YTD | 1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||
A Shares (Incep: 5/28/98) | |||||||||||||||
Without Sales Charge | 13.88 | % | 19.30 | % | 22.44 | % | 17.27 | % | 12.03 | % | |||||
With Sales Charge | 8.74 | % | 13.96 | % | 20.58 | % | 16.20 | % | 11.42 | % | |||||
MSCI EAFE Index (Since: 5/28/98) | 14.49 | % | 19.16 | % | 22.32 | % | 14.26 | % | 5.93 | % |
* | Periods under one year are not annualized. |
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Telecommunications was another area where the Fund performed well. A standout was Latin American telecommunications holding America Movil SA de CV, the dominant cellular provider in Mexico and Brazil, where penetration rates continue to grow rapidly. Canadian company Rogers Communications Inc. also did well based on its ongoing success in both cable TV and mobile communications. Rogers is one of the few communications and media companies offering consumers the triple play of cable TV, broadband internet access and mobile communications.
The remaining stocks adding to the Fund’s performance were diverse in nature. Amdocs Ltd., a leading provider of billing software and customer care services to telecommunications firms, exhibited strong performance. British retailer NEXT Group plc also contributed significantly, and Danish pharmaceutical company Novo-Nordisk A/S rebounded substantially after displaying weakness in the prior fiscal year.
Although the Fund was up over 19% for the period, not all stocks performed as hoped. Tandberg ASA, a leading provider of video conferencing services, was the largest detractor from performance. The stock sold off amid concern about future sales and the unexpected departure of the CEO. Spanish media company Sogecable SA declined on potential changes to its competitive position regarding the sports content of its cable programming. Burberry Group sold off on earnings concerns and the announcement that Rose Marie Bravo, the high-profile CEO, would step down after her current contract expired. TomTom NV’s weakness was triggered by leading electronics manufacturer Philips NV entering the navigational device market in Europe, where TomTom currently has over 50% market share. Vodafone Group plc underperformed against a backdrop of weak
Continued on page 8
CONTRIBUTORS AND DETRACTORS
FOR YEAR ENDED 9/30/06
Top Contributors | Top Detractors | |
Euronext NV | Tandberg ASA | |
Hong Kong Exchanges & Clearing, Ltd. | Sogecable SA | |
America Movil SA de CV | Burberry Group | |
Schlumberger Ltd. | TomTom NV | |
Next Group plc | Peugeot SA |
Source: | Thomson Portfolio Analytics |
TOP TEN EQUITY HOLDINGS
As of 9/30/06
UBS AG | 3.0 | % | |
Rogers Communications, Inc. | 2.8 | % | |
Roche Holdings AG | 2.8 | % | |
America Movil SA de CV | 2.6 | % | |
Eni S.p.A. | 2.5 | % | |
Amdocs, Ltd. | 2.3 | % | |
Next Group plc | 2.2 | % | |
Wal-Mart de Mexico SA de CV | 2.1 | % | |
Canadian Natural Resources Ltd. | 2.0 | % | |
Hyundai Motor Co. | 2.0 | % |
TOP TEN COUNTRIES
As of 9/30/06
U.K. | 18.2 | % | |
Japan | 14.6 | % | |
Switzerland | 11.8 | % | |
France | 8.7 | % | |
Germany | 6.4 | % | |
Canada | 6.2 | % | |
South Korea | 5.2 | % | |
Mexico | 4.9 | % | |
Israel | 4.0 | % | |
China | 3.8 | % |
TOP TEN INDUSTRIES
As of 9/30/06
Energy | 9.8 | % | |
Pharmaceuticals & Biotechnology | 9.8 | % | |
Banks | 9.8 | % | |
Diversified Financials | 7.3 | % | |
Food & Staples Retailing | 5.5 | % | |
Consumer Durables & Apparel | 5.4 | % | |
Media | 5.1 | % | |
Telecommunication Services | 4.9 | % | |
Materials | 4.8 | % | |
Automobiles & Components | 4.3 | % |
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Portfolio Overview
Thornburg International Value Fund, Continued
Japanese markets and higher capital spending requirements. French automaker Peugeot SA also struggled, centered on the risk that the new model “207” introduction might not be enough to resume long-term growth with margins pressured by high raw material and labor costs. OPAP SA, the leading gaming company in Greece detracted from performance as the launch of betting on Greek football was delayed. We remain hopeful about the longer-term prospects for these companies and will continue to monitor their progress carefully.
The Thornburg International Value Fund continues to be diversified by industry and geography. As of the end of the fiscal year, the Fund was invested in 61 companies spread across 19 countries and 22 industries. While we continually tune our investment process, our goal remains unchanged – to provide competitive, long-term returns to our shareholders.
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Certified Annual Report
Thornburg International Value Fund
September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report | 9 |
William V. Fries, CFA
Co-Portfolio Manager
Wendy Q. Trevisani
Co-Portfolio Manager
Lei Wang, CFA
Co-Portfolio Manager
October 27, 2006
Dear Shareholder:
The fiscal year ended September 30, 2006 was a good year for our Fund. The net asset value per share (NAV) of the Class A shares on September 30, 2006, was $26.51. One year ago on September 30, 2005, the NAV was $22.80. Total return for the Fund’s A shares for the most recent period was 19.30% (at NAV) compared with 19.16% for the MSCI EAFE Index. Portfolio gains were broadly based with notable performance from financial service, telecommunications service, health care, retail, and energy related issues. Contribution to returns by geography was also broadly based with holdings in the developed markets of Europe providing the biggest component of portfolio gains. Our positions in Hong Kong and Canada, as well as several emerging markets including Mexico, Israel, South Korea, and China, also contributed to the gains. For details on performance by share class, please refer to the performance summary on page 36.
These good results were achieved in an international environment that was indeed challenging. Progress in reducing the economic and emotional drain of near civil war in Iraq has not occurred as hoped and the lingering Taliban resistance in Afghanistan has taken its toll. North Korea and Iran also kept anxiety levels high by fostering nuclear proliferation. Add in a short war in Lebanon between Hezbollah and Israel, high commodity costs, and a fair amount of political and corporate scandal, and the surprise is just how good investment results have been. However, not all stocks performed as we would have liked. Detractors to performance included issues with disappointing fundamentals, several of which have been eliminated from the portfolio.
Ultimately, earnings progress is the most important value creation mechanism of public companies, and here there was mostly good news. In classic fashion, the economic expansion in most parts of the developed world has supported corporate profit growth. Emerging market economies continued their robustness and did not buckle as their markets traded lower in late spring. The solid earnings progress reflected in financial markets was a material contributor to our results for the year. Rising security prices on higher trading volumes powered earnings of securities exchange shares, three of which were among our top contributors to performance. These prospects for consolidation of the global exchanges complement good earnings.
The view from where we are today is as opaque as ever. Yet a few things seem fairly clear. Emerging markets, especially China, are fueling global economic development and will likely continue to do so. Developed market economies are experiencing modest growth. Some of the stocks that performed so well last year may not deliver an encore. Our philosophy of investing in a diverse array of promising companies offered at a discount focuses on holdings in three categories: Basic Value, Consistent Earners, and
10 | Certified Annual Report |
Emerging Franchises. This strategy affords us the opportunity to construct a dynamic portfolio that produces competitive returns. We will be diligent in pursuit of this investment objective. As in the past, successful investing will require insight, discipline, and energetic effort, which we are prepared to provide.
On February 1, 2006, Wendy Trevisani and Lei Wang were promoted to co-portfolio managers of the Thornburg International Value Fund. Both have contributed to the Fund’s past success and bring a range of experience to the Fund’s management. The promotions of Wendy and Lei enhance our decision making process and improve the prospects of the Fund’s continued success.
Thank you for your trust and confidence. In the period ahead, each of us remains dedicated to finding investments that can help you achieve your goal of long-term capital appreciation. You can review descriptions of many of the stocks in your portfolio at your leisure by going to our web site, www.thornburg.com/funds.
Sincerely,
![]() | ![]() | ![]() | ||
William V. Fries, CFA | Wendy Q. Trevisani | Lei Wang, CFA | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager | ||
Managing Director | Managing Director | Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report | 11 |
STATEMENT OF ASSETS AND LIABILITIES
Thornburg International Value Fund | September 30, 2006 |
ASSETS | |||
Investments at value (cost $ 6,925,472,340) | $ | 8,294,285,809 | |
Cash | 2,164,902 | ||
Cash denominated in foreign currency (cost $ 2,440,841) | 2,412,152 | ||
Receivable for investments sold | 14,131,675 | ||
Receivable for fund shares sold | 56,528,636 | ||
Unrealized gain on forward exchange contracts (Note 7) | 8,298,655 | ||
Dividends receivable | 17,958,598 | ||
Prepaid expenses and other assets | 70,555 | ||
Total Assets | 8,395,850,982 | ||
LIABILITIES | |||
Payable for securities purchased | 206,749,446 | ||
Payable for fund shares redeemed | 7,228,502 | ||
Unrealized loss on forward exchange contracts (Note 7) | 8,755,735 | ||
Payable to investment advisor and other affiliates (Note 3) | 7,372,469 | ||
Deferred tax payable | 393,320 | ||
Accounts payable and accrued expenses | 2,170,086 | ||
Dividends payable | 7,073 | ||
Total Liabilities | 232,676,631 | ||
NET ASSETS | $ | 8,163,174,351 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 11,154,896 | |
Net unrealized appreciation on investments | 1,367,833,610 | ||
Accumulated net realized gain (loss) | 140,862,331 | ||
Net capital paid in on shares of beneficial interest | 6,643,323,514 | ||
$ | 8,163,174,351 | ||
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STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
Thornburg International Value Fund | September 30, 2006 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($ 4,261,891,691 applicable to 160,755,368 shares of beneficial interest outstanding - Note 4) | $ | 26.51 | |
Maximum sales charge, 4.50% of offering price | 1.25 | ||
Maximum offering price per share | $ | 27.76 | |
Class B Shares: | |||
Net asset value and offering price per share * ($82,799,033 applicable to 3,275,280 shares of beneficial interest outstanding - Note 4) | $ | 25.28 | |
Class C Shares: | |||
Net asset value and offering price per share * ($ 1,290,250,111 applicable to 50,852,504 shares of beneficial interest outstanding - Note 4) | $ | 25.37 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($ 2,034,453,257 applicable to 75,380,489 shares of beneficial interest outstanding - Note 4) | $ | 26.99 | |
Class R1 Shares: | |||
Net asset value, offering and redemption price per share ($ 445,081,315 applicable to 16,744,118 shares of beneficial interest outstanding - Note 4) | $ | 26.58 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($ 48,698,944 applicable to 1,805,397 shares of beneficial interest outstanding - Note 4) | $ | 26.97 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. |
Certified Annual Report | 13 |
Thornburg International Value Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $ 8,584,629) | $ | 145,220,175 | ||
Interest income | 12,147,539 | |||
Total Income | 157,367,714 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 43,385,857 | |||
Administration fees (Note 3) | ||||
Class A Shares | 4,097,485 | |||
Class B Shares | 83,236 | |||
Class C Shares | 1,230,689 | |||
Class I Shares | 709,680 | |||
Class R1 Shares | 347,618 | |||
Class R5 Shares | 15,290 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 8,213,836 | |||
Class B Shares | 667,297 | |||
Class C Shares | 9,873,128 | |||
Class R1 Shares | 1,394,945 | |||
Transfer agent fees | ||||
Class A Shares | 4,909,675 | |||
Class B Shares | 117,733 | |||
Class C Shares | 1,186,711 | |||
Class I Shares | 1,198,847 | |||
Class R1 Shares | 487,526 | |||
Class R5 Shares | 17,658 | |||
Registration and filing fees | ||||
Class A Shares | 153,010 | |||
Class B Shares | 19,476 | |||
Class C Shares | 68,641 | |||
Class I Shares | 138,287 | |||
Class R1 Shares | 25,833 | |||
Class R5 Shares | 16,039 | |||
Custodian fees (Note 3) | 2,953,341 | |||
Professional fees | 216,910 | |||
Accounting fees | 412,925 | |||
Trustee fees | 145,890 | |||
Other expenses | 1,353,758 | |||
Total Expenses | 83,441,321 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (435,705 | ) | ||
Fees paid indirectly (Note 3) | (252,611 | ) | ||
Net Expenses | 82,753,005 | |||
Net Investment Income | $ | 74,614,709 | ||
14 | Certified Annual Report |
STATEMENT OF OPERATIONS, CONTINUED
Thornburg International Value Fund | Year Ended September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 168,728,897 | ||
Foreign currency transactions | (51,283,061 | ) | ||
117,445,836 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $ 356,490) | 766,113,166 | |||
Foreign currency translations | 20,620,538 | |||
786,733,704 | ||||
Net Realized and Unrealized Gain | 904,179,540 | |||
Net Increase in Net Assets Resulting From Operations | $ | 978,794,249 | ||
See notes to financial statements.
Certified Annual Report | 15 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg International Value Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 74,614,709 | $ | 21,959,200 | ||||
Net realized gain on investments and foreign currency transactions | 117,445,836 | 95,560,759 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, foreign currency translation, and deferred taxes | 786,733,704 | 491,406,584 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 978,794,249 | 608,926,543 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (31,195,911 | ) | (15,978,639 | ) | ||||
Class B Shares | (183,287 | ) | (42,865 | ) | ||||
Class C Shares | (3,436,661 | ) | (1,295,932 | ) | ||||
Class I Shares | (19,772,460 | ) | (9,263,083 | ) | ||||
Class R1 Shares | (2,966,495 | ) | (831,509 | ) | ||||
Class R5 Shares | (469,362 | ) | (63,095 | ) | ||||
From realized gains | ||||||||
Class A Shares | (42,242,602 | ) | — | |||||
Class B Shares | (917,829 | ) | — | |||||
Class C Shares | (12,682,161 | ) | — | |||||
Class I Shares | (16,701,676 | ) | — | |||||
Class R1 Shares | (2,457,320 | ) | — | |||||
Class R5 Shares | (259,590 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 1,592,927,792 | 914,862,678 | ||||||
Class B Shares | 26,257,162 | 17,432,995 | ||||||
Class C Shares | 519,539,149 | 296,865,675 | ||||||
Class I Shares | 943,931,604 | 475,565,309 | ||||||
Class R1 Shares | 290,585,064 | 94,648,632 | ||||||
Class R5 Shares | 30,251,506 | 13,789,338 | ||||||
Net Increase in Net Assets | 4,249,001,172 | 2,394,616,047 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 3,914,173,179 | 1,519,557,132 | ||||||
End of year | $ | 8,163,174,351 | $ | 3,914,173,179 | ||||
Undistributed net investment income | $ | 11,154,896 | — |
See notes to financial statements.
16 | Certified Annual Report |
Thornburg International Value Fund | September 30, 2006 |
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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg Limited Term Income Fund, Thornburg Value Fund, Thornburg Core Growth Fund, Thornburg New York Intermediate Municipal Fund, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 equity and debt securities of all types. The secondary, non-fundamental goal of the Fund is to seek some current income.
The Fund currently offers six classes of shares of beneficial interest: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R1 and Class R5). 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 R1 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, (vi) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (vii) the respective classes may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Securities: 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. In any case where a market quotation is not readily available, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the 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 amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund to the shareholders. Therefore, no provision for Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market
Certified Annual Report | 17 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2006 |
changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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: 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, 2006, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $433,081 for Class R1 shares, and $2,624 for Class R5 shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned net commissions aggregating $797,579 from the sale of Class A shares of the Fund, and collected contingent deferred sales charges aggregating $146,354 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class B, Class C, and Class R1, shares under which the Fund compensates the Distributor for services in promoting the sale of Class B, Class C, and Class R1 shares of the Fund at an annual rate of up to .75 of 1% per annum of the average daily net assets attributable to Class B, Class C, and Class R1 shares. Total fees incurred by the Distributor for each class of shares of the Fund under their respective service and distribution plans for the year ended September 30, 2006, are set forth in the Statement of Operations.
The Trust 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, 2006, fees paid indirectly were $252,611. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
18 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 87,468,381 | $ | 2,184,068,553 | 60,454,538 | $ | 1,242,916,897 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,262,190 | 54,173,870 | 516,124 | 11,403,851 | ||||||||||
Shares repurchased | (25,705,411 | ) | (645,390,435 | ) | (16,431,651 | ) | (339,552,808 | ) | ||||||
Redemption fees received** | — | 75,804 | — | 94,738 | ||||||||||
Net Increase (Decrease) | 64,025,160 | $ | 1,592,927,792 | 44,539,011 | $ | 914,862,678 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 1,253,957 | $ | 29,894,373 | 984,619 | $ | 19,222,274 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 38,925 | 851,686 | 1,513 | 33,010 | ||||||||||
Shares repurchased | (185,951 | ) | (4,489,669 | ) | (92,953 | ) | (1,822,289 | ) | ||||||
Redemption fees received** | — | 772 | — | — | ||||||||||
Net Increase (Decrease) | 1,106,931 | $ | 26,257,162 | 893,179 | $ | 17,432,995 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 25,567,387 | $ | 611,156,817 | 16,705,254 | $ | 329,116,035 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 413,698 | 9,175,773 | 34,263 | 741,499 | ||||||||||
Shares repurchased | (4,179,001 | ) | (100,805,360 | ) | (1,663,255 | ) | (32,991,859 | ) | ||||||
Redemption fees received** | — | 11,919 | — | — | ||||||||||
Net Increase (Decrease) | 21,802,084 | $ | 519,539,149 | 15,076,262 | $ | 296,865,675 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 43,224,765 | $ | 1,106,710,515 | 25,541,204 | $ | 537,358,303 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,101,563 | 27,170,524 | 305,722 | 6,870,416 | ||||||||||
Shares repurchased | (7,420,547 | ) | (189,981,388 | ) | (3,256,726 | ) | (68,691,746 | ) | ||||||
Redemption fees received** | — | 31,953 | — | 28,336 | ||||||||||
Net Increase (Decrease) | 36,905,781 | $ | 943,931,604 | 22,590,200 | $ | 475,565,309 | ||||||||
Class R1 Shares | ||||||||||||||
Shares sold | 14,043,775 | $ | 352,814,313 | 5,096,497 | $ | 105,840,553 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 176,361 | 4,335,854 | 24,709 | 559,227 | ||||||||||
Shares repurchased | (2,651,401 | ) | (66,568,696 | ) | (558,900 | ) | (11,751,148 | ) | ||||||
Redemption fees received** | — | 3,593 | — | — | ||||||||||
Net Increase (Decrease) | 11,568,735 | $ | 290,585,064 | 4,562,306 | $ | 94,648,632 | ||||||||
Certified Annual Report | 19 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2006 |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 1,365,851 | $ | 35,030,651 | 620,945 | $ | 13,726,467 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 28,818 | 726,553 | 2,722 | 63,095 | ||||||||||
Shares repurchased | (212,929 | ) | (5,506,089 | ) | (10 | ) | (224 | ) | ||||||
Redemption fees received** | — | 391 | — | — | ||||||||||
Net Increase (Decrease) | 1,181,740 | $ | 30,251,506 | 623,657 | $ | 13,789,338 | ||||||||
* | Sale of Class R5 shares commenced February 1, 2005. |
** | The Fund charges a redemption fee of 1% of the Class A & Class I shares exchanged within 30 days of purchase. Prior to February 1, 2006, the Fund charged a redemption fee of 1% of the Class A & Class I shares exchanged within 90 days of purchase. Redemption fees charged to any Class are allocated to all Classes upon receipt of payment based on relative net asset values of each Class or other appropriate allocation methods. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $5,220,720,973 and $2,130,274,583, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 6,937,991,812 | ||
Gross unrealized appreciation on a tax basis | $ | 1,428,824,168 | ||
Gross unrealized depreciation on a tax basis | (72,530,171 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 1,356,293,997 | ||
Distributable earnings – ordinary income | $ | 11,154,896 | ||
Distributable capital gains | $ | 140,862,331 |
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $3,494,640, decreased net capital paid in on shares of beneficial interest by $43,087, and increased accumulated net realized investment gain by $3,537,727. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign capital gains tax, excise tax, and currency gains/losses.
The tax character of distributions paid during the year ended September 30, 2006, and September 30, 2005, was as follows:
2006 | 2005 | |||||
Distributions from: | ||||||
Ordinary income | $ | 74,137,360 | $ | 27,475,123 | ||
Capital gains | $ | 59,147,994 | $ | — |
At September 30, 2006, the Fund has deferred tax basis currency losses occurring subsequent to October 31, 2005 of $2,558,536. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2006, 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. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity.
20 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2006 |
CONTRACTS TO SELL:
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
710,000,000 | Mexican Peso for 64,324,412 USD | October 04, 2006 | $ | (312,905 | ) | |||
2,380,000 | Pound Sterling for 4,443,460 USD | December 05, 2006 | (14,189 | ) | ||||
85,000,000 | Pound Sterling for 158,695,000 USD | December 05, 2006 | (506,740 | ) | ||||
905,000,000 | Mexican Peso for 79,834,157 USD | December 06, 2006 | (2,281,667 | ) | ||||
1,250,000,000 | Mexican Peso for 108,583,292 USD | December 14, 2006 | (4,783,825 | ) | ||||
Unrealized loss from forward Sell contracts: | (7,899,326 | ) | ||||||
2,440,000,000 | Indian Rupee for 53,803,749 USD | October 04, 2006 | 528,155 | |||||
79,000,000 | Euro Dollar for 103,121,860 USD | December 06, 2006 | 2,521,449 | |||||
890,000,000 | Mexican Peso for 81,361,758 USD | December 06, 2006 | 606,970 | |||||
240,000,000 | Euro Dollar for 310,024,800 USD | January 10, 2007 | 3,895,768 | |||||
90,000,000 | Euro Dollar for 115,544,700 USD | January 10, 2007 | 746,313 | |||||
Unrealized gain from forward Sell contracts: | 8,298,655 | |||||||
Net unrealized gain (loss) from forward Sell contracts: | $ | 399,329 | ||||||
CONTRACTS TO BUY: | ||||||||
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
2,440,000,000 | Indian Rupee for 54,132,002 USD | October 04, 2006 | $ | (856,409 | ) | |||
Net unrealized gain (loss) from forward Buy contracts: | $ | (856,409 | ) | |||||
Net unrealized gain (loss) from forward Exchange contracts: | $ | (457,080 | ) | |||||
Certified Annual Report | 21 |
Thornburg International Value Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 22.80 | $ | 18.18 | $ | 14.95 | $ | 11.88 | $ | 12.37 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.32 | 0.18 | 0.15 | 0.06 | 0.03 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 4.00 | 4.63 | 3.08 | 3.00 | (0.54 | ) | ||||||||||||||
Total from investment operations | 4.32 | 4.81 | 3.23 | 3.06 | (0.51 | ) | ||||||||||||||
Redemption fees added to paid in capital | — | — | — | 0.01 | 0.02 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.21 | ) | (0.19 | ) | — | — | — | |||||||||||||
Realized capital gains | (0.40 | ) | — | — | — | — | ||||||||||||||
Total dividends | (0.61 | ) | (0.19 | ) | — | — | — | |||||||||||||
Change in net asset value | 3.71 | 4.62 | 3.23 | 3.07 | (0.49 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 26.51 | $ | 22.80 | $ | 18.18 | $ | 14.95 | $ | 11.88 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 19.30 | % | 26.51 | % | 21.61 | % | 25.84 | % | (3.96 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.25 | % | 0.87 | % | 0.88 | % | 0.44 | % | 0.19 | % | ||||||||||
Expenses, after expense reductions | 1.33 | % | 1.44 | % | 1.49 | % | 1.59 | % | 1.57 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.33 | % | 1.44 | % | 1.49 | % | 1.59 | % | 1.57 | % | ||||||||||
Expenses, before expense reductions | 1.33 | % | 1.44 | % | 1.51 | % | 1.67 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | 28.39 | % | ||||||||||
Net assets at end of year (000) | $ | 4,261,892 | $ | 2,205,924 | $ | 948,631 | $ | 97,991 | $ | 69,490 |
(a) | Sales loads are not reflected in computing total return. |
+ | Based on weighted average shares outstanding. |
22 | Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class B Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 21.82 | $ | 17.39 | $ | 14.43 | $ | 11.57 | $ | 12.16 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.11 | 0.01 | (0.02 | ) | (0.04 | ) | (0.08 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 3.81 | 4.44 | 2.98 | 2.90 | (0.51 | ) | ||||||||||||||
Total from investment operations | 3.92 | 4.45 | 2.96 | 2.86 | (0.59 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.06 | ) | (0.02 | ) | — | — | — | |||||||||||||
Realized capital gains | (0.40 | ) | — | — | — | — | ||||||||||||||
Total dividends | (0.46 | ) | (0.02 | ) | — | — | — | |||||||||||||
Change in net asset value | 3.46 | 4.43 | 2.96 | 2.86 | (0.59 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 25.28 | $ | 21.82 | $ | 17.39 | $ | 14.43 | $ | 11.57 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 18.32 | % | 25.59 | % | 20.51 | % | 24.72 | % | (4.85 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.44 | % | 0.04 | % | (0.12 | )% | (0.32 | )% | (0.58 | )% | ||||||||||
Expenses, after expense reductions | 2.13 | % | 2.26 | % | 2.36 | % | 2.38 | % | 2.39 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.13 | % | 2.25 | % | 2.36 | % | 2.38 | % | 2.39 | % | ||||||||||
Expenses, before expense reductions | 2.13 | % | 2.27 | % | 2.42 | % | 2.84 | % | 2.88 | % | ||||||||||
Portfolio turnover rate | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | 28.39 | % | ||||||||||
Net assets at end of year (000) | $ | 82,799 | $ | 47,306 | $ | 22,181 | $ | 6,346 | $ | 4,672 |
+ | Based on weighted average shares outstanding. |
Certified Annual Report | 23 |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 21.89 | $ | 17.46 | $ | 14.47 | $ | 11.60 | $ | 12.19 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.13 | 0.03 | 0.01 | (0.04 | ) | (0.08 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | 3.82 | 4.45 | 2.98 | 2.91 | (0.51 | ) | ||||||||||||||
Total from investment operations | 3.95 | 4.48 | 2.99 | 2.87 | (0.59 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.07 | ) | (0.05 | ) | — | — | — | |||||||||||||
Realized capital gains | (0.40 | ) | — | — | — | — | ||||||||||||||
Total dividends | (0.47 | ) | (0.05 | ) | — | — | — | |||||||||||||
Change in net asset value | 3.48 | 4.43 | 2.99 | 2.87 | (0.59 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 25.37 | $ | 21.89 | $ | 17.46 | $ | 14.47 | $ | 11.60 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 18.41 | % | 25.65 | % | 20.66 | % | 24.74 | % | (4.84 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.55 | % | 0.16 | % | 0.04 | % | (0.31 | )% | (0.62 | )% | ||||||||||
Expenses, after expense reductions | 2.06 | % | 2.16 | % | 2.26 | % | 2.37 | % | 2.36 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.05 | % | 2.15 | % | 2.26 | % | 2.37 | % | 2.36 | % | ||||||||||
Expenses, before expense reductions | 2.06 | % | 2.16 | % | 2.26 | % | 2.45 | % | 2.36 | % | ||||||||||
Portfolio turnover rate | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | 28.39 | % | ||||||||||
Net assets at end of year (000) | $ | 1,290,250 | $ | 635,833 | $ | 243,955 | $ | 55,443 | $ | 39,995 |
+ | Based on weighted average shares outstanding. |
24 | Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 23.19 | $ | 18.48 | $ | 15.13 | $ | 11.96 | $ | 12.40 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.43 | 0.28 | 0.24 | 0.14 | 0.10 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 4.06 | 4.72 | 3.11 | 3.03 | (0.54 | ) | ||||||||||||||
Total from investment operations | 4.49 | 5.00 | 3.35 | 3.17 | (0.44 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.29 | ) | (0.29 | ) | — | — | — | |||||||||||||
Realized capital gains | (0.40 | ) | — | — | — | — | ||||||||||||||
Total dividends | (0.69 | ) | (0.29 | ) | — | — | — | |||||||||||||
Change in net asset value | 3.80 | 4.71 | 3.35 | 3.17 | (0.44 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 26.99 | $ | 23.19 | $ | 18.48 | $ | 15.13 | $ | 11.96 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 19.76 | % | 27.15 | % | 22.14 | % | 26.51 | % | (3.55 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.67 | % | 1.32 | % | 1.35 | % | 1.07 | % | 0.71 | % | ||||||||||
Expenses, after expense reductions | 0.94 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.94 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, before expense reductions | 0.94 | % | 1.02 | % | 1.11 | % | 1.25 | % | 1.28 | % | ||||||||||
Portfolio turnover rate | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | 28.39 | % | ||||||||||
Net assets at end of year (000) | $ | 2,034,453 | $ | 892,216 | $ | 293,583 | $ | 33,511 | $ | 19,187 |
+ | Based on weighted average shares outstanding. |
Certified Annual Report | 25 |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund
Year Ended September 30, | Period Ended September 30, | |||||||||||||||
2006 | 2005 | 2004 | 2003(c) | |||||||||||||
Class R1 Shares: | ||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 22.88 | $ | 18.28 | $ | 15.01 | $ | 13.59 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.33 | 0.21 | 0.19 | 0.02 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 3.97 | 4.63 | 3.08 | 1.40 | ||||||||||||
Total from investment operations | 4.30 | 4.84 | 3.27 | 1.42 | ||||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.20 | ) | (0.24 | ) | — | — | ||||||||||
Realized Capital Gains | (0.40 | ) | — | — | — | |||||||||||
Total dividend | (0.60 | ) | (0.24 | ) | — | — | ||||||||||
Change in net asset value | 3.70 | 4.60 | 3.27 | 1.42 | ||||||||||||
NET ASSET VALUE, end of period | $ | 26.58 | $ | 22.88 | $ | 18.28 | $ | 15.01 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 19.15 | % | 26.54 | % | 21.79 | % | 10.45 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) | 1.29 | % | 0.99 | % | 1.08 | % | 0.65 | % (b) | ||||||||
Expenses, after expense reductions | 1.45 | % | 1.45 | % | 1.45 | % | 1.60 | % (b) | ||||||||
Expenses, after expense reductions and net of custody credits | 1.45 | % | 1.45 | % | 1.45 | % | 1.60 | % (b) | ||||||||
Expenses, before expense reductions | 1.61 | % | 1.72 | % | 2.42 | % | 30,451.98 | % (b)† | ||||||||
Portfolio turnover rate | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | ||||||||
Net assets at end of period (000) | $ | 445,081 | $ | 118,436 | $ | 11,207 | $ | — | (d) |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R1 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. |
+ | Based on weighted average shares outstanding. |
26 | Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund
Period Ended September 30, | ||||||||
2006 | 2005(c) | |||||||
Class R5 Shares: | ||||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 23.18 | $ | 20.37 | ||||
Income from investment operations: | ||||||||
Net investment income | 0.45 | 0.16 | ||||||
Net realized and unrealized gain (loss) on investments | 4.03 | 2.84 | ||||||
Total from investment operations | 4.48 | 3.00 | ||||||
Less dividends from: | ||||||||
Net investment income | (0.29 | ) | (0.19 | ) | ||||
Realized Capital Gains | (0.40 | ) | — | |||||
Total dividends | (0.69 | ) | (0.19 | ) | ||||
Change in net asset value | 3.79 | 2.81 | ||||||
NET ASSET VALUE, end of period | $ | 26.97 | $ | 23.18 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return(a) | 19.72 | % | 14.72 | % | ||||
Ratios to average net assets: | ||||||||
Net investment income | 1.76 | % | 1.10 | %(b) | ||||
Expenses, after expense reductions | 0.95 | % | 1.00 | %(b) | ||||
Expenses, after expense reductions and net of custody credits | 0.95 | % | 0.99 | %(b) | ||||
Expenses, before expense reductions | 0.96 | % | 2.13 | %(b) | ||||
Portfolio turnover rate | 36.58 | % | 34.17 | % | ||||
Net assets at end of period (000) | $ | 48,699 | $ | 14,458 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R5 Shares was February 1, 2005. |
+ | Based on weighted average shares outstanding. |
Certified Annual Report | 27 |
Thornburg International Value | Fund September 30, 2006 |
CUSIPS: CLASS A - 885-215-657, CLASS B - 885-215-616, CLASS C - 885-215-640, CLASS I - 885-215-566, CLASS R1 - 885-215-525, CLASS R5 - 885-215-368
NASDAQ SYMBOLS: CLASS A - TGVAX, CLASS B - THGBX, CLASS C - THGCX, CLASS I - TGVIX, CLASS R1 - TGVRX, CLASS R5 - - TIVRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/06
Energy | 9.8 | % | |
Pharmaceuticals & Biotechnology | 9.8 | % | |
Banks | 9.8 | % | |
Diversified Financials | 7.3 | % | |
Food & Staples Retailing | 5.5 | % | |
Consumer Durables & Apparel | 5.4 | % | |
Media | 5.1 | % | |
Telecommunication Services | 4.9 | % | |
Materials | 4.8 | % | |
Automobiles & Components | 4.3 | % | |
Capital Goods | 3.8 | % | |
Household & Personal Products | 3.8 | % | |
Software & Services | 3.6 | % | |
Food Beverage & Tobacco | 3.5 | % | |
Insurance | 2.9 | % | |
Transportation | 2.9 | % | |
Consumer Services | 2.2 | % | |
Retailing | 2.2 | % | |
Utilities | 1.7 | % | |
Semiconductors & Equipment | 1.4 | % | |
Commercial Services & Supplies | 1.3 | % | |
Real Estate | 0.9 | % | |
Other Assets & Cash Equivalents | 3.1 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/06 (percent of equity holdings)
U.K. | 18.2 | % | |
Japan | 14.6 | % | |
Switzerland | 11.8 | % | |
France | 8.7 | % | |
Germany | 6.4 | % | |
Canada | 6.2 | % | |
South Korea | 5.2 | % | |
Mexico | 4.9 | % | |
Israel | 4.0 | % | |
China | 3.8 | % | |
Hong Kong | 2.6 | % | |
Italy | 2.6 | % | |
Netherlands | 2.5 | % | |
South Africa | 2.0 | % | |
Denmark | 1.8 | % | |
Greece | 1.7 | % | |
Brazil | 1.3 | % | |
Russia | 1.2 | % | |
India | 0.5 | % |
28 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 96.81% | |||||
AUTOMOBILES & COMPONENTS — 4.26% | |||||
AUTOMOBILES — 4.26% | |||||
Hero Honda Motors Ltd. | 2,116,903 | $ | 35,875,010 | ||
Hyundai Motor Co. | 1,908,900 | 163,395,224 | |||
Toyota Motor Corp. | 2,730,200 | 148,541,390 | |||
347,811,624 | |||||
BANKS — 9.75% | |||||
COMMERCIAL BANKS — 9.75% | |||||
Bank of China Ltd.+ | 143,848,300 | 61,847,606 | |||
Bank of Fukuoka Ltd. | 8,252,000 | 60,631,220 | |||
Bank of Yokohama | 15,361,410 | 121,068,740 | |||
Barclays plc | 11,052,400 | 139,417,828 | |||
China Merchants Bank Co., Ltd. | 4,538,000 | 6,394,994 | |||
Lloyds TSB Group plc | 12,690,300 | 128,134,229 | |||
Royal Bank of Scotland Group plc | 4,227,200 | 145,491,073 | |||
Shinhan Financial Group Co. | 2,945,760 | 132,766,209 | |||
795,751,899 | |||||
CAPITAL GOODS — 3.82% | |||||
AEROSPACE & DEFENSE — 1.27% | |||||
Embraer Brasileira de Aeronautica ADR | 2,647,228 | 103,956,643 | |||
MACHINERY — 2.55% | |||||
Fanuc Ltd. | 1,244,900 | 97,271,000 | |||
Komatsu Ltd. | 6,416,200 | 110,924,136 | |||
312,151,779 | |||||
COMMERCIAL SERVICES & SUPPLIES — 1.28% | |||||
COMMERCIAL SERVICES & SUPPLIES — 1.28% | |||||
Secom Co. | 2,110,600 | 104,635,678 | |||
104,635,678 | |||||
CONSUMER DURABLES & APPAREL — 5.36% | |||||
HOUSEHOLD DURABLES — 1.61% | |||||
Sharp Corp. | 7,639,211 | 131,096,630 | |||
TEXTILES,APPAREL & LUXURY GOODS — 3.75% | |||||
Adidas-Salomon AG | 3,247,300 | 152,840,483 | |||
LVMH Moet Hennessy Louis Vuitton SA | 1,488,896 | 153,472,234 | |||
437,409,347 | |||||
Certified Annual Report | 29 |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
CONSUMER SERVICES — 2.19% | |||||
HOTELS RESTAURANTS & LEISURE — 2.19% | |||||
Carnival plc | 981,100 | $ | 46,914,382 | ||
OPAP SA | 3,926,212 | 131,996,283 | |||
178,910,665 | |||||
DIVERSIFIED FINANCIALS — 7.36% | |||||
CAPITAL MARKETS — 3.04% | |||||
UBS AG | 4,151,460 | 248,324,037 | |||
DIVERSIFIED FINANCIAL SERVICES — 4.32% | |||||
Deutsche Börse AG | 957,509 | 144,068,699 | |||
Euronext NV | 759,111 | 73,817,533 | |||
Hong Kong Exchanges & Clearing Ltd. | 18,467,400 | 134,981,060 | |||
601,191,329 | |||||
ENERGY — 9.79% | |||||
ENERGY EQUIPMENT & SERVICES — 1.48% | |||||
Schlumberger Ltd. | 1,952,000 | 121,082,560 | |||
OIL, GAS & CONSUMABLE FUELS — 8.31% | |||||
BP Amoco ADR | 1,876,700 | 123,073,986 | |||
Canadian Natural Resources Ltd. | 3,600,700 | 164,472,433 | |||
China Petroleum & Chemical Corp. | 150,719,331 | 93,237,227 | |||
Eni S.p.A. | 6,836,700 | 202,696,998 | |||
Lukoil Oil Co. | 494,900 | 37,364,950 | |||
Lukoil Oil Co. Sponsored ADR | 758,600 | 57,274,300 | |||
799,202,454 | |||||
FOOD & STAPLES RETAILING — 5.49% | |||||
FOOD & STAPLES RETAILING — 5.49% | |||||
Carrefour SA | 2,579,200 | 163,048,943 | |||
Tesco plc | 17,135,553 | 115,452,262 | |||
Wal-Mart de Mexico SA de CV | 49,872,400 | 169,851,820 | |||
448,353,025 | |||||
FOOD BEVERAGE & TOBACCO — 3.50% | |||||
BEVERAGES — 1.90% | |||||
Sabmiller plc | 8,280,150 | 154,657,351 | |||
FOOD PRODUCTS — 1.60% | |||||
Cadbury Schweppes plc | 12,290,541 | 130,768,544 | |||
285,425,895 | |||||
30 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
HOUSEHOLD & PERSONAL PRODUCTS — 3.80% | |||||
HOUSEHOLD PRODUCTS — 1.87% | |||||
Reckitt Benckiser plc | 3,672,630 | $ | 152,179,662 | ||
PERSONAL PRODUCTS — 1.93% | |||||
Shiseido Co., Ltd. | 7,891,700 | 157,834,000 | |||
310,013,662 | |||||
INSURANCE — 2.92% | |||||
INSURANCE — 2.92% | |||||
Millea Holdings, Inc. | 2,513,500 | 87,759,491 | |||
Swiss Re | 1,968,200 | 150,625,142 | |||
238,384,633 | |||||
MATERIALS — 4.81% | |||||
CHEMICALS — 3.29% | |||||
Air Liquide SA | 776,730 | 158,550,715 | |||
Givaudan AG | 137,514 | 110,077,180 | |||
METALS & MINING — 1.52% | |||||
Rio Tinto plc | 2,613,900 | 123,622,076 | |||
392,249,971 | |||||
MEDIA — 5.10% | |||||
MEDIA — 5.10% | |||||
JC Decaux SA | 3,447,763 | 93,297,572 | |||
Rogers Communications, Inc. | 4,228,900 | 232,073,781 | |||
Shaw Communications | 3,017,900 | 90,574,886 | |||
415,946,239 | |||||
PHARMACEUTICALS & BIOTECHNOLOGY — 9.78% | |||||
PHARMACEUTICALS — 9.78% | |||||
GlaxoSmithKline plc | 3,889,835 | 103,521,987 | |||
Novartis AG | 1,069,000 | 62,404,638 | |||
Novartis AG ADR | 2,388,700 | 139,595,628 | |||
Novo Nordisk A/S | 1,910,100 | 142,006,414 | |||
Roche Holdings AG | 1,305,200 | 225,657,129 | |||
Teva Pharmaceutical Industries Ltd.ADR | 3,660,000 | 124,769,400 | |||
797,955,196 | |||||
REAL ESTATE — 0.91% | |||||
REAL ESTATE — 0.91% | |||||
China Overseas Land & Investment | 96,480,300 | 74,419,452 | |||
74,419,452 | |||||
Certified Annual Report | 31 |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
RETAILING — 2.15% | |||||
MULTILINE RETAIL — 2.15% | |||||
Next Group plc | 4,949,800 | $ | 175,641,770 | ||
175,641,770 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.38% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.38% | |||||
Samsung Electronics Co. Ltd. | 160,260 | 112,451,273 | |||
112,451,273 | |||||
SOFTWARE & SERVICES — 3.63% | |||||
SOFTWARE — 3.63% | |||||
Amdocs Ltd.+ | 4,776,600 | 189,153,360 | |||
Sap AG | 541,900 | 107,522,160 | |||
296,675,520 | |||||
TELECOMMUNICATION SERVICES — 4.88% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.47% | |||||
France Telecom SA | 5,232,800 | 120,158,581 | |||
WIRELESS TELECOMMUNICATION SERVICES — 3.41% | |||||
America Movil S.A. de C.V. | 5,464,544 | 215,139,097 | |||
Vodafone Group plc ADR | 2,765,775 | 63,225,617 | |||
398,523,295 | |||||
TRANSPORTATION — 2.90% | |||||
TRANSPORTATION INFRASTRUCTURE — 2.90% | |||||
China Merchants Holdings International Co. Ltd. | 46,808,500 | 137,573,111 | |||
Fraport AG | 1,443,731 | 99,382,096 | |||
236,955,207 | |||||
UTILITIES — 1.75% | |||||
GAS UTILITIES — 1.75% | |||||
Tokyo Gas Co., Ltd. | 28,455,300 | 142,758,793 | |||
142,758,793 | |||||
TOTAL COMMON STOCK (Cost $6,534,005,237) | 7,902,818,706 | ||||
32 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||||
SHORT TERM INVESTMENTS — 4.80% | |||||||
Abbey National, 5.19%, 10/13/2006 | $ | 50,000,000 | $ | 49,913,500 | |||
AIG Funding, Inc., 5.17%, 10/18/2006 | 29,000,000 | 28,929,200 | |||||
AIG Funding, Inc., 5.24%, 10/10/2006 | 35,000,000 | 34,954,150 | |||||
HSBC Finance Corp., 5.17%, 10/30/2006 | 40,000,000 | 39,833,411 | |||||
Lasalle Bank Corp., 5.18%, 10/5/2006 | 27,000,000 | 26,984,460 | |||||
Lasalle Bank Corp., 5.21%, 10/16/2006 | 21,000,000 | 20,954,412 | |||||
Toyota Credit de Puerto Rico, 5.20%, 10/20/2006 | 19,000,000 | 18,947,856 | |||||
Toyota Credit de Puerto Rico, 5.20%, 10/25/2006 | 53,000,000 | 52,816,267 | |||||
Toyota Credit de Puerto Rico, 5.20%, 10/23/2006 | 50,000,000 | 49,841,111 | |||||
Toyota Motor Credit Corp., 5.21%, 10/27/2006 | 43,500,000 | 43,336,319 | |||||
UBS Finance, 5.23%, 10/13/2006 | 25,000,000 | 24,956,417 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $391,467,103) | 391,467,103 | ||||||
TOTAL INVESTMENTS — 101.61% (Cost $6,925,472,340) | $ | 8,294,285,809 | |||||
LIABILITIES NET OF OTHER ASSETS — (1.61)% | (131,111,458 | ) | |||||
NET ASSETS — 100.00% | $ | 8,163,174,351 | |||||
Footnote Legend
+ | Non-income producing |
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
Certified Annual Report | 33 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg International Value Fund
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 (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
34 | Certified Annual Report |
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
Thornburg International Value Fund
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including
(a) sales charges (loads) on purchase payments, for Class A shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(c) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(d) a 30-day redemption fee on Class A and Class I shares;
(2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,036.50 | $ | 6.77 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.42 | $ | 6.71 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,032.90 | $ | 10.86 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.38 | $ | 10.76 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,032.80 | $ | 10.47 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.77 | $ | 10.38 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,038.90 | $ | 4.82 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.34 | $ | 4.78 | |||
. Class R1 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,036.10 | $ | 7.40 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.80 | $ | 7.34 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,038.90 | $ | 4.73 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.43 | $ | 4.69 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.33%; B: 2.13%; C: 2.05%; I: 0.94%; R1: 1.45%; and R5: 0.93%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report | 35 |
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg International Value Fund versus MSCI EAFE Index (May 28, 1998 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2006 (with sales charge)
1 Yr | 5 Yrs | Since Inception | |||||||
A Shares (Incep: 05/28/98) | 13.96 | % | 16.20 | % | 11.42 | % | |||
B Shares (Incep: 4/03/00) | 13.32 | % | 16.05 | % | 7.44 | % | |||
C Shares (Incep: 5/28/98) | 17.41 | % | 16.34 | % | 11.09 | % | |||
R1 Shares (Incep: 7/01/03) | 19.15 | % | — | 24.31 | % | ||||
R5 Shares (Incep: 2/01/05) | 19.72 | % | — | 21.09 | % | ||||
MSCI EAFE Index (Since: 05/28/98) | 19.16 | % | 14.26 | % | 5.93 | % |
Performance data reflects past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 4.50%. Class B shares are sold with a contingent deferred sales charge (CDSC) that declines from 5.00% to 0% depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are subject to a 1% CDSC for the first year only. There is no up-front sales charge for Class R1 and R5 shares. Class R1 and R5 shares are available only to certain qualified investors. Class A shares are subject to a 1% 30-day redemption fee.
The Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East Index (EAFE) is an unmanaged index. It 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 with net dividends reinvested in U.S. dollars. Unless otherwise noted, index returns do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
36 | Certified Annual Report |
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report | 37 |
TRUSTEES AND OFFICERS, CONTINUED
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
38 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. (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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report | 39 |
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, the Fund designates long-term capital gain dividends of $59,147,994.
For the tax year ended September 30, 2006, the Thornburg International Value Fund designates 100% of the dividends paid from tax basis net ordinary income as qualifying for the reduced rate under the Jobs and Growth Tax Relief and Reconciliation Act of 2003.
Zero percent of the ordinary income distributions paid by the Fund for the year ended September 30, 2006 qualified for the corporate dividends received deduction.
For the year ended September 30, 2006, foreign taxes paid and foreign source income is $8,773,239 and $147,903,087, respectively.
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006. Complete information will be computed and reported in conjunction with your 2006 Form 1099-DIV.
Please note that the above information is provided to satisfy Internal Revenue Code notification requirements. Foreign tax information will be provided with your 2006 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg International Value Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, industry, market and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
(iv) | measures of the Fund’s investment performance over different periods of time, relative to a category of mutual |
40 | Certified Annual Report |
OTHER INFORMATION, CONTINUED
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
funds sharing certain comparable characteristics and selected by an independent mutual fund analyst firm, and relative to broad based securities indices; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the methods for selecting the investments for other funds.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s above-average or superior investment performance in most periods relative to the performance of a category of equity mutual funds having certain characteristics comparable to the Fund and selected by an independent mutual fund analyst firm, the Fund’s out performance of two broad based securities indices over multiple periods, the Fund’s cumulative returns over extended periods, and the Fund’s performance relative to comparative measures of risk.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of equity mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the management fee charged to the Fund was somewhat lower than the average and median fee rates charged to the grouping of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio also was somewhat lower than the average and median expense ratios for the same fund group. The Trustees also observed in this regard the quality of the Advisor’s services and the investment performance of the Fund. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparison of fees and costs charged to the Fund to fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by the Fund and other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund has realized and may reasonably be expected to realize further economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
Certified Annual Report | 41 |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
42 | This page is not part of the Annual Report. |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 | 119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 |
Thornburg International Value Fund
Value Knows No Boundaries
The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types. As a secondary consideration, the Fund also seeks some current income.
The portfolio is diversified to include basic value stocks, but also includes stocks of companies with consistent earnings characteristics and those of emerging franchises, when, in our opinion, these issues are value priced.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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2 | This page is not part of the Annual Report. |
Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We seek to accomplish this through a range of equity funds that redefine traditional measures of value and growth and through a family of laddered bond funds that focus on quality, stability and minimizing risk over time.
Confirming our strategy, all Thornburg equity funds are highly ranked within their respective categories over the long term.
The Thornburg equity funds employ a comprehensive approach, which is more inclusive than the traditional deep value or high growth approach to stock selection. You can read much more about the stocks in your Fund’s portfolio, and all Thornburg equity funds, at our web site, www.thornburg.com/funds.
During this decade, the average dividend yield paid by equity and hybrid mutual funds has dipped well below 1%. We established Thornburg Investment Income Builder Fund in late 2002 to be clearly different from other equity/hybrid funds by paying attractive dividends today, with a further goal of increasing these in the future. Our record to date shows clear success in achieving each aspect of this mission.
On the bond side, we have always had a highly disciplined approach of laddering short-and intermediate-bond maturities, seeking to provide both an attractive return and relative stability of principal.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely, |
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Garrett Thornburg Chairman & CEO |
This page is not part of the Annual Report. | 3 |
Important Information
The information presented on the following pages was current as of September 30, 2006. The managers’ views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
Shares in the Fund carry risks including possible loss of principal. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity. Risks may be associated with investments in emerging markets including illiquidity and volatility. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Funds invested in a limited number of holdings may expose an investor to greater volatility. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any government agency. There is no guarantee that the Fund will meet its investment objectives.
Minimum investments for Class I shares are higher than those for other classes.
Awards
The Standard & Poor’s/Business Week Excellence in Fund Management award winners are selected based on in-depth interviews with portfolio managers. Winners are chosen from 810 funds rated A or B+ for the five years ended December 31, 2005, in the Business Week Mutual Fund Scoreboard. Ratings are based on risk-adjusted total returns. Eligible funds must also be open to new shareholders, have assets of at least $100 million, a manager with at least 5 years tenure, and minimum investments of less than $26,000.
Established in 1988, the Morningstar Fund Manager of the Year Award recognizes portfolio managers who demonstrate excellent investment skill and the courage to differ from the consensus. To qualify for the award, managers must have not only a great year, but also must have a record of delivering outstanding long-term performance and of aligning their interests with shareholders. The Fund Manager of the Year Award winners are chosen based upon Morningstar’s proprietary research and in-depth evaluation by its senior analysts.
Glossary
The Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East Index (EAFE) – The MSCI EAFE is an unmanaged index. It 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 with net dividends reinvested in U.S. dollars. Unless otherwise noted, index returns do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
Beta – A measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price. The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median, and half have values that are less. If there is an even number of companies, then the median is the average of the two companies in the middle.
Price to Book Value (P/B) – A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value (book value is simply assets minus liabilities).
Price to Cash Flow Ratio – A measure of the market’s expectations of a firm’s future financial health. It is calculated by dividing the price per share by cash flow per share.
Price to Earnings Ratio (P/E) – A valuation ratio of a company’s current share price compared to its per-share earnings. P/E equals a company’s market value per share divided by earnings per share.
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Thornburg International Value Fund
Value Knows No Boundaries
Investing is an art. It is also a science. It requires vision and precision – the vision to recognize opportunity and the precision to use that opportunity to achieve a specific goal.
The greatest success comes to those who strike a balance between the two.
Thornburg International Value Fund strikes such a balance.
The Fund seeks to find bargains in overseas markets. It differs from many other international equity funds in two key ways. First, it focuses on a limited number of stocks; and second, it takes a more comprehensive approach to value investing. This strategy has provided positive returns for shareholders who have been invested since the Fund’s inception in 1998, and earned co-portfolio manager Bill Fries the distinction of Morningstar’s 2003 International Fund Manager of the Year.
Fries’ unassuming and quiet demeanor belies his fierce determination to recognize value and harness it for his shareholders. He brings more than thirty years of investment experience to the process. He also brings a commitment to fundamental, hands-on research. He and co-portfolio managers Wendy Trevisani and Lei Wang are dedicated to a collaborative approach in identifying and analyzing investment ideas. They scour the globe to find the world’s most promising companies at a discount to intrinsic value. The investment team is, in Fries’ words, “in continuous session.” Everybody’s idea is important. Combining “promise and discount” is the team’s mantra for stock selection.
In managing the Thornburg International Value Fund, the team takes a conservative, bottom-up approach to stock selection. The Fund is not predisposed to a geographical region or industry. And, it recognizes no “false gods.” Fries, Trevisani, and Wang use a combination of proprietary screens, financial analysis, collaborative research, and on-site company visits to gauge the intrinsic value of a company and to estimate its potential for future earnings growth. Their current goal is to maintain a portfolio of 50–65 companies diversified by sector, country, region, and economic sensitivity.
Because of the limited number of stocks in the portfolio, every holding counts. Once a company has survived the team’s initial screens, the managers then expand their analysis of what is behind its revenue and cash-generating model. And they take the time to get to know the company, its people and its corporate culture. At the time of purchase, the managers set 12–18 month price targets for each stock. They review those targets as the fundamentals of the stocks change during the course of ownership.
The bottom line? By engendering a wide-open, collegial environment, the managers ensure that information flows freely and that the Fund benefits from the best of the team’s thinking. And because the Fund’s advisor, Thornburg Investment Management®, is located in Santa Fe, New Mexico, we believe the portfolio team avoids the tendency to be trapped by Wall Street’s “pack” instinct. While they have access to the best of Wall Street’s analysis, they are not ruled by it. Their distance from the herd serves to fortify independent and objective thinking.
Foreign markets now account for 52% of world market capitalization. These markets do not all move in sync. When one is up, often another is down. Losses in one may be offset by gains in another. Limiting the number of companies in the portfolio and employing a rigorous sell discipline has enabled the Thornburg team to strike a balance between risk and reward.
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Portfolio Overview
Thornburg International Value Fund
IMPORTANT PERFORMANCE INFORMATION
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
There is no up-front sales charge for Class I shares. I shares are subject to a 1% 30-day redemption fee.
MANAGEMENT TEAM
Front row, L to R: Wendy Trevisani, Bill Fries, Brad Kinkelaar, and Brian McMahon. Back row, L to R: Thomas Garcia, Ed Maran, Lei Wang, Lewis Kaufman, and Vin Walden.
KEY PORTFOLIO ATTRIBUTES
Portfolio P/E Trailing 12-months* | 18.1 | x | ||
Portfolio Price to Cash Flow* | 10.4 | x | ||
Portfolio Price to Book Value* | 3.0 | x | ||
Median Market Cap* | $ | 24.5 | B | |
3-Year Beta (Thornburg vs. MSCI EAFE)* | 0.96 | |||
Holdings | 63 |
* | Source: FactSet |
During the fiscal year ended September 30, 2006, the Class I shares of the Thornburg International Value Fund posted a positive return of 19.76% (at NAV). This compares favorably to the 19.16% return of the MSCI EAFE Index. Once again, holdings in a variety of industries contributed to performance. Our results were largely due to individual stock selection.
Financials, specifically the stocks of international exchanges, were strong contributors. While the deal has not closed, the New York Stock Exchange Group has proposed a merger with Euronext NV, the France-based pan European stock exchange. Other exchanges are considering consolidation as well. As a leading candidate, Deutsche Börse AG has benefited from this trend. Our holding in Hong Kong Exchanges & Clearing Ltd. reacted favorably to stock issuance by companies in China, notably the large banks. Each of these significant new offerings increases the trading volume potential of the Hong Kong Exchange. Average daily trading volume has been steadily rising. Apart from the exchanges, Swiss-based financial services company UBS AG also performed well.
Companies with exposure to energy also performed well, including oil service holding Schlumberger Ltd. As oil companies generate more cash, this company is well positioned to help them spend it on identifying new production opportunities. While the stock has been volatile, trading with oil price movements, we anticipate that Schlumberger will continue to enjoy strong demand for its services and the pricing power to sustain earnings progress. Other superior performers were international oil and gas producers, including Russian company Lukoil Oil Co., China Petroleum and Chemical Corp. (Sinopec), and China Shenhua Energy, which was subsequently sold after achieving our target price.
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2006
YTD | 1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||
I Shares (Incep: 3/30/01) | 14.21 | % | 19.76 | % | 22.98 | % | 17.81 | % | 12.80 | % | |||||
MSCI EAFE Index (Since: 3/30/01) | 14.49 | % | 19.16 | % | 22.32 | % | 14.26 | % | 9.62 | % |
* | Periods under one year are not annualized. |
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CONTRIBUTORS AND DETRACTORS
FOR YEAR ENDED 9/30/06
Top Contributors | Top Detractors | |
Euronext NV | Tandberg ASA | |
Hong Kong Exchanges & Clearing, Ltd. | Sogecable SA | |
America Movil SA de CV | Burberry Group | |
Schlumberger Ltd. | TomTom NV | |
Next Group plc | Peugeot SA |
Source: Thomson Portfolio Analytics
TOP TEN EQUITY HOLDINGS
As of 9/30/06
UBS AG | 3.0 | % | |
Rogers Communications, Inc. | 2.8 | % | |
Roche Holdings AG | 2.8 | % | |
America Movil SA de CV | 2.6 | % | |
Eni S.p.A. | 2.5 | % | |
Amdocs, Ltd. | 2.3 | % | |
Next Group plc | 2.2 | % | |
Wal-Mart de Mexico SA de CV | 2.1 | % | |
Canadian Natural Resources Ltd. | 2.0 | % | |
Hyundai Motor Co. | 2.0 | % |
TOP TEN COUNTRIES
As of 9/30/06
U.K. | 18.2 | % | |
Japan | 14.6 | % | |
Switzerland | 11.8 | % | |
France | 8.7 | % | |
Germany | 6.4 | % | |
Canada | 6.2 | % | |
South Korea | 5.2 | % | |
Mexico | 4.9 | % | |
Israel | 4.0 | % | |
China | 3.8 | % |
TOP TEN INDUSTRIES
As of 9/30/06
Energy | 9.8 | % | |
Pharmaceuticals & Biotechnology | 9.8 | % | |
Banks | 9.8 | % | |
Diversified Financials | 7.3 | % | |
Food & Staples Retailing | 5.5 | % | |
Consumer Durables & Apparel | 5.4 | % | |
Media | 5.1 | % | |
Telecommunication Services | 4.9 | % | |
Materials | 4.8 | % | |
Automobiles & Components | 4.3 | % |
Telecommunications was another area where the Fund performed well. A standout was Latin American telecommunications holding America Movil SA de CV, the dominant cellular provider in Mexico and Brazil, where penetration rates continue to grow rapidly. Canadian company Rogers Communications Inc. also did well based on its ongoing success in both cable TV and mobile communications. Rogers is one of the few communications and media companies offering consumers the triple play of cable TV, broadband internet access and mobile communications.
The remaining stocks adding to the Fund’s performance were diverse in nature. Amdocs Ltd., a leading provider of billing software and customer care services to telecommunications firms, exhibited strong performance. British retailer NEXT Group plc also contributed significantly, and Danish pharmaceutical company Novo-Nordisk A/S rebounded substantially after displaying weakness in the prior fiscal year.
Although the Fund was up over 19% for the period, not all stocks performed as hoped. Tandberg ASA, a leading provider of video conferencing services, was the largest detractor to performance. The stock sold off amid concern about future sales and the unexpected departure of the CEO. Spanish media company Sogecable SA declined on potential changes to its competitive position regarding the sports content of its cable programming. Burberry Group sold off on earnings concerns and the announcement that Rose Marie Bravo, the high-profile CEO, would step down after her current contract expired. TomTom NV’s weakness was triggered by leading electronics manufacturer Philips NV entering the navigational device market in Europe, where TomTom currently has over 50% market share. Vodafone Group plc underperformed against a backdrop of
Continued on page 8
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Portfolio Overview
Thornburg International Value Fund, Continued
weak Japanese markets and higher capital spending requirements. French automaker Peugeot SA also struggled, centered on the risk that the new model “207” introduction might not be enough to resume long-term growth with margins pressured by high raw material and labor costs. OPAP SA, the leading gaming company in Greece detracted from performance as the launch of betting on Greek football was delayed. We remain hopeful about the longer-term prospects for these companies and will continue to monitor their progress carefully.
The Thornburg International Value Fund continues to be diversified by industry and geography. As of the end of the fiscal year, the Fund was invested in 61 companies spread across 19 countries and 22 industries. While we continually tune our investment process, our goal remains unchanged – to provide competitive, long-term returns to our shareholders.
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2006
Certified Annual Report
Thornburg International Value Fund
I Shares – September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report | 9 |
William V. Fries,CFA
Co-Portfolio Manager
Wendy Q. Trevisani
Co-Portfolio Manager
Lei Wang,CFA
Co-Portfolio Manager
October 27, 2006
Dear Shareholder:
The fiscal year ended September 30, 2006 was a good year for our Fund. The net asset value per share (NAV) of the Class I shares on September 30, 2006, was $26.99. One year ago on September 30, 2005, the NAV was $23.19. Total return for the Fund’s I shares for the most recent period was 19.76% (at NAV) compared with 19.16% for the MSCI EAFE Index. Portfolio gains were broadly based with notable performance from financial service, telecommunications service, health care, retail, and energy related issues. Contribution to returns by geography was also broadly based with holdings in the developed markets of Europe providing the biggest component of portfolio gains. Our positions in Hong Kong and Canada, as well as several emerging markets including Mexico, Israel, South Korea, and China, also contributed to the gains. For details on performance by share class, please refer to the performance summary on page 31.
These good results were achieved in an international environment that was indeed challenging. Progress in reducing the economic and emotional drain of near civil war in Iraq has not occurred as hoped and the lingering Taliban resistance in Afghanistan has taken its toll. North Korea and Iran also kept anxiety levels high by fostering nuclear proliferation. Add in a short war in Lebanon between Hezbollah and Israel, high commodity costs, and a fair amount of political and corporate scandal, and the surprise is just how good investment results have been. However, not all stocks performed as we would have liked. Detractors to performance included issues with disappointing fundamentals, several of which have been eliminated from the portfolio.
Ultimately, earnings progress is the most important value creation mechanism of public companies, and here there was mostly good news. In classic fashion, the economic expansion in most parts of the developed world has supported corporate profit growth. Emerging market economies continued their robustness and did not buckle as their markets traded lower in late spring. The solid earnings progress reflected in financial markets was a material contributor to our results for the year. Rising security prices on higher trading volumes powered earnings of securities exchange shares, three of which were among our top contributors to performance. These prospects for consolidation of the global exchanges complement good earnings.
The view from where we are today is as opaque as ever. Yet a few things seem fairly clear. Emerging markets, especially China, are fueling global economic development and will likely continue to do so. Developed market economies are experiencing modest growth. Some of the stocks that performed so well last year may not deliver an encore. Our philosophy of investing in a diverse array of promising companies offered at a discount focuses on holdings in three categories: Basic Value, Consistent Earners, and
10 | Certified Annual Report |
Emerging Franchises. This strategy affords us the opportunity to construct a dynamic portfolio that produces competitive returns. We will be diligent in pursuit of this investment objective. As in the past, successful investing will require insight, discipline, and energetic effort, which we are prepared to provide.
On February 1, 2006, Wendy Trevisani and Lei Wang were promoted to co-portfolio managers of the Thornburg International Value Fund. Both have contributed to the Fund’s past success and bring a range of experience to the Fund’s management. The promotions of Wendy and Lei enhance our decision making process and improve the prospects of the Fund’s continued success.
Thank you for your trust and confidence. In the period ahead, each of us remains dedicated to finding investments that can help you achieve your goal of long-term capital appreciation. You can review descriptions of many of the stocks in your portfolio at your leisure by going to our web site, www.thornburg.com/funds.
Sincerely,
![]() | ![]() | ![]() | ||
William V. Fries, CFA Co-Portfolio Manager Managing Director | Wendy Q. Trevisani Co-Portfolio Manager Managing Director | Lei Wang, CFA Co-Portfolio Manager Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report | 11 |
STATEMENT OF ASSETS AND LIABILITIES
Thornburg International Value Fund | September 30, 2006 |
ASSETS | |||
Investments at value (cost $ 6,925,472,340) | $ | 8,294,285,809 | |
Cash | 2,164,902 | ||
Cash denominated in foreign currency (cost $ 2,440,841) | 2,412,152 | ||
Receivable for investments sold | 14,131,675 | ||
Receivable for fund shares sold | 56,528,636 | ||
Unrealized gain on forward exchange contracts (Note 7) | 8,298,655 | ||
Dividends receivable | 17,958,598 | ||
Prepaid expenses and other assets | 70,555 | ||
Total Assets | 8,395,850,982 | ||
LIABILITIES | |||
Payable for securities purchased | 206,749,446 | ||
Payable for fund shares redeemed | 7,228,502 | ||
Unrealized loss on forward exchange contracts (Note 7) | 8,755,735 | ||
Payable to investment advisor and other affiliates (Note 3) | 7,372,469 | ||
Deferred tax payable | 393,320 | ||
Accounts payable and accrued expenses | 2,170,086 | ||
Dividends payable | 7,073 | ||
Total Liabilities | 232,676,631 | ||
NET ASSETS | $ | 8,163,174,351 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 11,154,896 | |
Net unrealized appreciation on investments | 1,367,833,610 | ||
Accumulated net realized gain (loss) | 140,862,331 | ||
Net capital paid in on shares of beneficial interest | 6,643,323,514 | ||
$ | 8,163,174,351 | ||
12 | Certified Annual Report |
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($4,261,891,691 applicable to 160,755,368 shares of beneficial interest outstanding - Note 4) | |||
$ | 26.51 | ||
Maximum sales charge, 4.50% of offering price | 1.25 | ||
Maximum offering price per share | $ | 27.76 | |
Class B Shares: | |||
Net asset value and offering price per share * ( $82,799,033 applicable to 3,275,280 shares of beneficial interest outstanding - Note 4) | $ | 25.28 | |
Class C Shares: | |||
Net asset value and offering price per share * ($1,290,250,111 applicable to 50,852,504 shares of beneficial interest outstanding - Note 4) | $ | 25.37 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($2,034,453,257 applicable to 75,380,489 shares of beneficial interest outstanding - Note 4) | $ | 26.99 | |
Class R1 Shares: | |||
Net asset value, offering and redemption price per share ($445,081,315 applicable to 16,744,118 shares of beneficial interest outstanding - Note 4) | $ | 26.58 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($48,698,944 applicable to 1,805,397 shares of beneficial interest outstanding - Note 4) | $ | 26.97 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report | 13 |
Thornburg International Value Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $ 8,584,629) | $ | 145,220,175 | ||
Interest income | 12,147,539 | |||
Total Income | 157,367,714 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 43,385,857 | |||
Administration fees (Note 3) | ||||
Class A Shares | 4,097,485 | |||
Class B Shares | 83,236 | |||
Class C Shares | 1,230,689 | |||
Class I Shares | 709,680 | |||
Class R1 Shares | 347,618 | |||
Class R5 Shares | 15,290 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 8,213,836 | |||
Class B Shares | 667,297 | |||
Class C Shares | 9,873,128 | |||
Class R1 Shares | 1,394,945 | |||
Transfer agent fees | ||||
Class A Shares | 4,909,675 | |||
Class B Shares | 117,733 | |||
Class C Shares | 1,186,711 | |||
Class I Shares | 1,198,847 | |||
Class R1 Shares | 487,526 | |||
Class R5 Shares | 17,658 | |||
Registration and filing fees | ||||
Class A Shares | 153,010 | |||
Class B Shares | 19,476 | |||
Class C Shares | 68,641 | |||
Class I Shares | 138,287 | |||
Class R1 Shares | 25,833 | |||
Class R5 Shares | 16,039 | |||
Custodian fees (Note 3) | 2,953,341 | |||
Professional fees | 216,910 | |||
Accounting fees | 412,925 | |||
Trustee fees | 145,890 | |||
Other expenses | 1,353,758 | |||
Total Expenses | 83,441,321 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (435,705 | ) | ||
Fees paid indirectly (Note 3) | (252,611 | ) | ||
Net Expenses | 82,753,005 | |||
Net Investment Income | $ | 74,614,709 | ||
14 | Certified Annual Report |
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg International Value Fund | Year Ended September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 168,728,897 | ||
Foreign currency transactions | (51,283,061 | ) | ||
117,445,836 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $ 356,490) | 766,113,166 | |||
Foreign currency translations | 20,620,538 | |||
786,733,704 | ||||
Net Realized and Unrealized Gain | 904,179,540 | |||
Net Increase in Net Assets Resulting From Operations | $ | 978,794,249 | ||
See notes to financial statements.
Certified Annual Report | 15 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg International Value Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 74,614,709 | $ | 21,959,200 | ||||
Net realized gain on investments and foreign currency transactions | 117,445,836 | 95,560,759 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, foreign currency translation, and deferred taxes | 786,733,704 | 491,406,584 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 978,794,249 | 608,926,543 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (31,195,911 | ) | (15,978,639 | ) | ||||
Class B Shares | (183,287 | ) | (42,865 | ) | ||||
Class C Shares | (3,436,661 | ) | (1,295,932 | ) | ||||
Class I Shares | (19,772,460 | ) | (9,263,083 | ) | ||||
Class R1 Shares | (2,966,495 | ) | (831,509 | ) | ||||
Class R5 Shares | (469,362 | ) | (63,095 | ) | ||||
From realized gains | ||||||||
Class A Shares | (42,242,602 | ) | — | |||||
Class B Shares | (917,829 | ) | — | |||||
Class C Shares | (12,682,161 | ) | — | |||||
Class I Shares | (16,701,676 | ) | — | |||||
Class R1 Shares | (2,457,320 | ) | — | |||||
Class R5 Shares | (259,590 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 1,592,927,792 | 914,862,678 | ||||||
Class B Shares | 26,257,162 | 17,432,995 | ||||||
Class C Shares | 519,539,149 | 296,865,675 | ||||||
Class I Shares | 943,931,604 | 475,565,309 | ||||||
Class R1 Shares | 290,585,064 | 94,648,632 | ||||||
Class R5 Shares | 30,251,506 | 13,789,338 | ||||||
Net Increase in Net Assets | 4,249,001,172 | 2,394,616,047 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 3,914,173,179 | 1,519,557,132 | ||||||
End of year | $ | 8,163,174,351 | $ | 3,914,173,179 | ||||
Undistributed net investment income | $ | 11,154,896 | — |
See notes to financial statements.
16 | Certified Annual Report |
Thornburg International Value Fund | September 30, 2006 |
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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg Limited Term Income Fund, Thornburg Value Fund, Thornburg Core Growth Fund, Thornburg New York Intermediate Municipal Fund, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 equity and debt securities of all types. The secondary, non-fundamental goal of the Fund is to seek some current income.
The Fund currently offers six classes of shares of beneficial interest: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R1 and Class R5). 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 R1 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, (vi) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (vii) the respective classes may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Securities: 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. In any case where a market quotation is not readily available, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the 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 amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund to the shareholders. Therefore, no provision for Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market
Certified Annual Report | 17 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 |
changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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: 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, 2006, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $433,081 for Class R1 shares, and $2,624 for Class R5 shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned net commissions aggregating $797,579 from the sale of Class A shares of the Fund, and collected contingent deferred sales charges aggregating $146,354 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class B, Class C, and Class R1, shares under which the Fund compensates the Distributor for services in promoting the sale of Class B, Class C, and Class R1 shares of the Fund at an annual rate of up to .75 of 1% per annum of the average daily net assets attributable to Class B, Class C, and Class R1 shares. Total fees incurred by the Distributor for each class of shares of the Fund under their respective service and distribution plans for the year ended September 30, 2006, are set forth in the Statement of Operations.
The Trust 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, 2006, fees paid indirectly were $252,611. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
18 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 87,468,381 | $ | 2,184,068,553 | 60,454,538 | $ | 1,242,916,897 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,262,190 | 54,173,870 | 516,124 | 11,403,851 | ||||||||||
Shares repurchased | (25,705,411 | ) | (645,390,435 | ) | (16,431,651 | ) | (339,552,808 | ) | ||||||
Redemption fees received** | — | 75,804 | — | 94,738 | ||||||||||
Net Increase (Decrease) | 64,025,160 | $ | 1,592,927,792 | 44,539,011 | $ | 914,862,678 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 1,253,957 | $ | 29,894,373 | 984,619 | $ | 19,222,274 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 38,925 | 851,686 | 1,513 | 33,010 | ||||||||||
Shares repurchased | (185,951 | ) | (4,489,669 | ) | (92,953 | ) | (1,822,289 | ) | ||||||
Redemption fees received** | — | 772 | — | — | ||||||||||
Net Increase (Decrease) | 1,106,931 | $ | 26,257,162 | 893,179 | $ | 17,432,995 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 25,567,387 | $ | 611,156,817 | 16,705,254 | $ | 329,116,035 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 413,698 | 9,175,773 | 34,263 | 741,499 | ||||||||||
Shares repurchased | (4,179,001 | ) | (100,805,360 | ) | (1,663,255 | ) | (32,991,859 | ) | ||||||
Redemption fees received** | — | 11,919 | — | — | ||||||||||
Net Increase (Decrease) | 21,802,084 | $ | 519,539,149 | 15,076,262 | $ | 296,865,675 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 43,224,765 | $ | 1,106,710,515 | 25,541,204 | $ | 537,358,303 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,101,563 | 27,170,524 | 305,722 | 6,870,416 | ||||||||||
Shares repurchased | (7,420,547 | ) | (189,981,388 | ) | (3,256,726 | ) | (68,691,746 | ) | ||||||
Redemption fees received** | — | 31,953 | — | 28,336 | ||||||||||
Net Increase (Decrease) | 36,905,781 | $ | 943,931,604 | 22,590,200 | $ | 475,565,309 | ||||||||
Class R1 Shares | ||||||||||||||
Shares sold | 14,043,775 | $ | 352,814,313 | 5,096,497 | $ | 105,840,553 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 176,361 | 4,335,854 | 24,709 | 559,227 | ||||||||||
Shares repurchased | (2,651,401 | ) | (66,568,696 | ) | (558,900 | ) | (11,751,148 | ) | ||||||
Redemption fees received** | — | 3,593 | — | — | ||||||||||
Net Increase (Decrease) | 11,568,735 | $ | 290,585,064 | 4,562,306 | $ | 94,648,632 | ||||||||
Certified Annual Report | 19 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 1,365,851 | $ | 35,030,651 | 620,945 | $ | 13,726,467 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 28,818 | 726,553 | 2,722 | 63,095 | ||||||||||
Shares repurchased | (212,929 | ) | (5,506,089 | ) | (10 | ) | (224 | ) | ||||||
Redemption fees received** | — | 391 | — | — | ||||||||||
Net Increase (Decrease) | 1,181,740 | $ | 30,251,506 | 623,657 | $ | 13,789,338 | ||||||||
* | Sale of Class R5 shares commenced February 1, 2005. |
** | The Fund charges a redemption fee of 1% of the Class A & Class I shares exchanged within 30 days of purchase. Prior to February 1, 2006, the Fund charged a redemption fee of 1% of the Class A & Class I shares exchanged within 90 days of purchase. Redemption fees charged to any Class are allocated to all Classes upon receipt of payment based on relative net asset values of each Class or other appropriate allocation methods. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $5,220,720,973 and $2,130,274,583, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 6,937,991,812 | ||
Gross unrealized appreciation on a tax basis | $ | 1,428,824,168 | ||
Gross unrealized depreciation on a tax basis | (72,530,171 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 1,356,293,997 | ||
Distributable earnings – ordinary income | $ | 11,154,896 | ||
Distributable capital gains | $ | 140,862,331 |
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $3,494,640, decreased net capital paid in on shares of beneficial interest by $43,087, and increased accumulated net realized investment gain by $3,537,727. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign capital gains tax, excise tax, and currency gains/losses.
The tax character of distributions paid during the year ended September 30, 2006, and September 30, 2005, was as follows:
2006 | 2005 | |||||
Distributions from: | ||||||
Ordinary income | $ | 74,137,360 | $ | 27,475,123 | ||
Capital gains | $ | 59,147,994 | $ | — |
At September 30, 2006, the Fund has deferred tax basis currency losses occurring subsequent to October 31, 2005 of $2,558,536. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2006, 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. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity.
20 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 |
CONTRACTS TO SELL:
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
710,000,000 | Mexican Peso for 64,324,412 USD | October 04, 2006 | $ | (312,905 | ) | |||
2,380,000 | Pound Sterling for 4,443,460 USD | December 05, 2006 | (14,189 | ) | ||||
85,000,000 | Pound Sterling for 158,695,000 USD | December 05, 2006 | (506,740 | ) | ||||
905,000,000 | Mexican Peso for 79,834,157 USD | December 06, 2006 | (2,281,667 | ) | ||||
1,250,000,000 | Mexican Peso for 108,583,292 USD | December 14, 2006 | (4,783,825 | ) | ||||
Unrealized loss from forward Sell contracts: | (7,899,326 | ) | ||||||
2,440,000,000 | Indian Rupee for 53,803,749 USD | October 04, 2006 | 528,155 | |||||
79,000,000 | Euro Dollar for 103,121,860 USD | December 06, 2006 | 2,521,449 | |||||
890,000,000 | Mexican Peso for 81,361,758 USD | December 06, 2006 | 606,970 | |||||
240,000,000 | Euro Dollar for 310,024,800 USD | January 10, 2007 | 3,895,768 | |||||
90,000,000 | Euro Dollar for 115,544,700 USD | January 10, 2007 | 746,313 | |||||
Unrealized gain from forward Sell contracts: | 8,298,655 | |||||||
Net unrealized gain (loss) from forward Sell contracts: | $ | 399,329 | ||||||
CONTRACTS TO BUY: | ||||||||
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
2,440,000,000 | Indian Rupee for 54,132,002 USD | October 04, 2006 | $ | (856,409 | ) | |||
Net unrealized gain (loss) from forward Buy contracts: | $ | (856,409 | ) | |||||
Net unrealized gain (loss) from forward Exchange contracts: | $ | (457,080 | ) | |||||
Certified Annual Report | 21 |
Thornburg International Value Fund
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 23.19 | $ | 18.48 | $ | 15.13 | $ | 11.96 | $ | 12.40 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.43 | 0.28 | 0.24 | 0.14 | 0.10 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 4.06 | 4.72 | 3.11 | 3.03 | (0.54 | ) | ||||||||||||||
Total from investment operations | 4.49 | 5.00 | 3.35 | 3.17 | (0.44 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.29 | ) | (0.29 | ) | — | — | — | |||||||||||||
Realized capital gains | (0.40 | ) | — | — | — | — | ||||||||||||||
Total dividends | (0.69 | ) | (0.29 | ) | — | — | — | |||||||||||||
Change in net asset value | 3.80 | 4.71 | 3.35 | 3.17 | (0.44 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 26.99 | $ | 23.19 | $ | 18.48 | $ | 15.13 | $ | 11.96 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 19.76 | % | 27.15 | % | 22.14 | % | 26.51 | % | (3.55 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.67 | % | 1.32 | % | 1.35 | % | 1.07 | % | 0.71 | % | ||||||||||
Expenses, after expense reductions | 0.94 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.94 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, before expense reductions | 0.94 | % | 1.02 | % | 1.11 | % | 1.25 | % | 1.28 | % | ||||||||||
Portfolio turnover rate | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | 28.39 | % | ||||||||||
Net assets at end of year (000) | $ | 2,034,453 | $ | 892,216 | $ | 293,583 | $ | 33,511 | $ | 19,187 |
+ | Based on weighted average shares outstanding. |
22 | Certified Annual Report |
Thornburg International Value Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-657, CLASS B - 885-215-616, CLASS C - 885-215-640, CLASS I - 885-215-566, CLASS R1 - 885-215-525, CLASS R5 - 885-215-368 NASDAQ SYMBOLS: CLASS A - TGVAX, CLASS B - THGBX, CLASS C - THGCX, CLASS I - TGVIX, CLASS R1 - TGVRX, CLASS R5 - TIVRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/06
Energy | 9.8 | % | |
Pharmaceuticals & Biotechnology | 9.8 | % | |
Banks | 9.8 | % | |
Diversified Financials | 7.3 | % | |
Food & Staples Retailing | 5.5 | % | |
Consumer Durables & Apparel | 5.4 | % | |
Media | 5.1 | % | |
Telecommunication Services | 4.9 | % | |
Materials | 4.8 | % | |
Automobiles & Components | 4.3 | % | |
Capital Goods | 3.8 | % | |
Household & Personal Products | 3.8 | % | |
Software & Services | 3.6 | % | |
Food Beverage & Tobacco | 3.5 | % | |
Insurance | 2.9 | % | |
Transportation | 2.9 | % | |
Consumer Services | 2.2 | % | |
Retailing | 2.2 | % | |
Utilities | 1.7 | % | |
Semiconductors & Equipment | 1.4 | % | |
Commercial Services & Supplies | 1.3 | % | |
Real Estate | 0.9 | % | |
Other Assets & Cash Equivalents | 3.1 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/06 (percent of equity holdings)
U.K. | 18.2 | % | |
Japan | 14.6 | % | |
Switzerland | 11.8 | % | |
France | 8.7 | % | |
Germany | 6.4 | % | |
Canada | 6.2 | % | |
South Korea | 5.2 | % | |
Mexico | 4.9 | % | |
Israel | 4.0 | % | |
China | 3.8 | % | |
Hong Kong | 2.6 | % | |
Italy | 2.6 | % | |
Netherlands | 2.5 | % | |
South Africa | 2.0 | % | |
Denmark | 1.8 | % | |
Greece | 1.7 | % | |
Brazil | 1.3 | % | |
Russia | 1.2 | % | |
India | 0.5 | % |
Certified Annual Report | 23 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 96.81% | |||||
AUTOMOBILES & COMPONENTS — 4.26% | |||||
AUTOMOBILES — 4.26% | |||||
Hero Honda Motors Ltd. | 2,116,903 | $ | 35,875,010 | ||
Hyundai Motor Co. | 1,908,900 | 163,395,224 | |||
Toyota Motor Corp. | 2,730,200 | 148,541,390 | |||
347,811,624 | |||||
BANKS — 9.75% | |||||
COMMERCIAL BANKS — 9.75% | |||||
Bank of China Ltd.+ | 143,848,300 | 61,847,606 | |||
Bank of Fukuoka Ltd. | 8,252,000 | 60,631,220 | |||
Bank of Yokohama | 15,361,410 | 121,068,740 | |||
Barclays plc | 11,052,400 | 139,417,828 | |||
China Merchants Bank Co., Ltd. | 4,538,000 | 6,394,994 | |||
Lloyds TSB Group plc | 12,690,300 | 128,134,229 | |||
Royal Bank of Scotland Group plc | 4,227,200 | 145,491,073 | |||
Shinhan Financial Group Co. | 2,945,760 | 132,766,209 | |||
795,751,899 | |||||
CAPITAL GOODS — 3.82% | |||||
AEROSPACE & DEFENSE — 1.27% | |||||
Embraer Brasileira de Aeronautica ADR | 2,647,228 | 103,956,643 | |||
MACHINERY — 2.55% | |||||
Fanuc Ltd. | 1,244,900 | 97,271,000 | |||
Komatsu Ltd. | 6,416,200 | 110,924,136 | |||
312,151,779 | |||||
COMMERCIAL SERVICES & SUPPLIES — 1.28% | |||||
COMMERCIAL SERVICES & SUPPLIES — 1.28% | |||||
Secom Co. | 2,110,600 | 104,635,678 | |||
104,635,678 | |||||
CONSUMER DURABLES & APPAREL — 5.36% | |||||
HOUSEHOLD DURABLES — 1.61% | |||||
Sharp Corp. | 7,639,211 | 131,096,630 | |||
TEXTILES, APPAREL & LUXURY GOODS — 3.75% | |||||
Adidas-Salomon AG | 3,247,300 | 152,840,483 | |||
LVMH Moet Hennessy Louis Vuitton SA | 1,488,896 | 153,472,234 | |||
437,409,347 | |||||
24 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
CONSUMER SERVICES — 2.19% | |||||
HOTELS RESTAURANTS & LEISURE — 2.19% | |||||
Carnival plc | 981,100 | $ | 46,914,382 | ||
OPAP SA | 3,926,212 | 131,996,283 | |||
178,910,665 | |||||
DIVERSIFIED FINANCIALS — 7.36% | |||||
CAPITAL MARKETS — 3.04% | |||||
UBS AG | 4,151,460 | 248,324,037 | |||
DIVERSIFIED FINANCIAL SERVICES — 4.32% | |||||
Deutsche Börse AG | 957,509 | 144,068,699 | |||
Euronext NV | 759,111 | 73,817,533 | |||
Hong Kong Exchanges & Clearing Ltd. | 18,467,400 | 134,981,060 | |||
601,191,329 | |||||
ENERGY — 9.79% | |||||
ENERGY EQUIPMENT & SERVICES — 1.48% | |||||
Schlumberger Ltd. | 1,952,000 | 121,082,560 | |||
OIL, GAS & CONSUMABLE FUELS — 8.31% | |||||
BP Amoco ADR | 1,876,700 | 123,073,986 | |||
Canadian Natural Resources Ltd. | 3,600,700 | 164,472,433 | |||
China Petroleum & Chemical Corp. | 150,719,331 | 93,237,227 | |||
Eni S.p.A. | 6,836,700 | 202,696,998 | |||
Lukoil Oil Co. | 494,900 | 37,364,950 | |||
Lukoil Oil Co. Sponsored ADR | 758,600 | 57,274,300 | |||
799,202,454 | |||||
FOOD & STAPLES RETAILING — 5.49% | |||||
FOOD & STAPLES RETAILING — 5.49% | |||||
Carrefour SA | 2,579,200 | 163,048,943 | |||
Tesco plc | 17,135,553 | 115,452,262 | |||
Wal-Mart de Mexico SA de CV | 49,872,400 | 169,851,820 | |||
448,353,025 | |||||
FOOD BEVERAGE & TOBACCO — 3.50% | |||||
BEVERAGES — 1.90% | |||||
Sabmiller plc | 8,280,150 | 154,657,351 | |||
FOOD PRODUCTS — 1.60% | |||||
Cadbury Schweppes plc | 12,290,541 | 130,768,544 | |||
285,425,895 | |||||
Certified Annual Report | 25 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
HOUSEHOLD & PERSONAL PRODUCTS — 3.80% | |||||
HOUSEHOLD PRODUCTS — 1.87% | |||||
Reckitt Benckiser plc | 3,672,630 | $ | 152,179,662 | ||
PERSONAL PRODUCTS — 1.93% | |||||
Shiseido Co., Ltd. | 7,891,700 | 157,834,000 | |||
310,013,662 | |||||
INSURANCE — 2.92% | |||||
INSURANCE — 2.92% | |||||
Millea Holdings, Inc. | 2,513,500 | 87,759,491 | |||
Swiss Re | 1,968,200 | 150,625,142 | |||
238,384,633 | |||||
MATERIALS — 4.81% | |||||
CHEMICALS — 3.29% | |||||
Air Liquide SA | 776,730 | 158,550,715 | |||
Givaudan AG | 137,514 | 110,077,180 | |||
METALS & MINING — 1.52% | |||||
Rio Tinto plc | 2,613,900 | 123,622,076 | |||
392,249,971 | |||||
MEDIA — 5.10% | |||||
MEDIA — 5.10% | |||||
JC Decaux SA | 3,447,763 | 93,297,572 | |||
Rogers Communications, Inc. | 4,228,900 | 232,073,781 | |||
Shaw Communications | 3,017,900 | 90,574,886 | |||
415,946,239 | |||||
PHARMACEUTICALS & BIOTECHNOLOGY — 9.78% | |||||
PHARMACEUTICALS — 9.78% | |||||
GlaxoSmithKline plc | 3,889,835 | 103,521,987 | |||
Novartis AG | 1,069,000 | 62,404,638 | |||
Novartis AG ADR | 2,388,700 | 139,595,628 | |||
Novo Nordisk A/S | 1,910,100 | 142,006,414 | |||
Roche Holdings AG | 1,305,200 | 225,657,129 | |||
Teva Pharmaceutical Industries Ltd. ADR | 3,660,000 | 124,769,400 | |||
797,955,196 | |||||
REAL ESTATE — 0.91% | |||||
REAL ESTATE — 0.91% | |||||
China Overseas Land & Investment | 96,480,300 | 74,419,452 | |||
74,419,452 | |||||
26 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
RETAILING — 2.15% | |||||
MULTILINE RETAIL — 2.15% | |||||
Next Group plc | 4,949,800 | $ | 175,641,770 | ||
175,641,770 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.38% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.38% | |||||
Samsung Electronics Co. Ltd. | 160,260 | 112,451,273 | |||
112,451,273 | |||||
SOFTWARE & SERVICES — 3.63% | |||||
SOFTWARE — 3.63% | |||||
Amdocs Ltd.+ | 4,776,600 | 189,153,360 | |||
Sap AG | 541,900 | 107,522,160 | |||
296,675,520 | |||||
TELECOMMUNICATION SERVICES — 4.88% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.47% | |||||
France Telecom SA | 5,232,800 | 120,158,581 | |||
WIRELESS TELECOMMUNICATION SERVICES — 3.41% | |||||
America Movil S.A. de C.V. | 5,464,544 | 215,139,097 | |||
Vodafone Group plc ADR | 2,765,775 | 63,225,617 | |||
398,523,295 | |||||
TRANSPORTATION — 2.90% | |||||
TRANSPORTATION INFRASTRUCTURE — 2.90% | |||||
China Merchants Holdings International Co. Ltd. | 46,808,500 | 137,573,111 | |||
Fraport AG | 1,443,731 | 99,382,096 | |||
236,955,207 | |||||
UTILITIES — 1.75% | |||||
GAS UTILITIES — 1.75% | |||||
Tokyo Gas Co., Ltd. | 28,455,300 | 142,758,793 | |||
142,758,793 | |||||
TOTAL COMMON STOCK (Cost $ 6,534,005,237) | 7,902,818,706 | ||||
Certified Annual Report | 27 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||||
SHORT TERM INVESTMENTS — 4.80% | |||||||
Abbey National, 5.19%, 10/13/2006 | $ | 50,000,000 | $ | 49,913,500 | |||
AIG Funding, Inc., 5.17%, 10/18/2006 | 29,000,000 | 28,929,200 | |||||
AIG Funding, Inc., 5.24%, 10/10/2006 | 35,000,000 | 34,954,150 | |||||
HSBC Finance Corp., 5.17%, 10/30/2006 | 40,000,000 | 39,833,411 | |||||
Lasalle Bank Corp., 5.18%, 10/5/2006 | 27,000,000 | 26,984,460 | |||||
Lasalle Bank Corp., 5.21%, 10/16/2006 | 21,000,000 | 20,954,412 | |||||
Toyota Credit de Puerto Rico, 5.20%, 10/20/2006 | 19,000,000 | 18,947,856 | |||||
Toyota Credit de Puerto Rico, 5.20%, 10/25/2006 | 53,000,000 | 52,816,267 | |||||
Toyota Credit de Puerto Rico, 5.20%, 10/23/2006 | 50,000,000 | 49,841,111 | |||||
Toyota Motor Credit Corp., 5.21%, 10/27/2006 | 43,500,000 | 43,336,319 | |||||
UBS Finance, 5.23%, 10/13/2006 | 25,000,000 | 24,956,417 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $ 391,467,103) | 391,467,103 | ||||||
TOTAL INVESTMENTS — 101.61% (Cost $ 6,925,472,340) | $ | 8,294,285,809 | |||||
LIABILITIES NET OF OTHER ASSETS — (1.61)% | (131,111,458 | ) | |||||
NET ASSETS — 100.00% | $ | 8,163,174,351 | |||||
Footnote Legend
+ | Non-income producing |
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
28 | Certified Annual Report |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg International Value Fund
To the Trustees and Class I 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 (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
Certified Annual Report | 29 |
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including a 30-day redemption fee on Class I shares and
(2) ongoing costs, including management and administrative fees and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,038.90 | $ | 4.82 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.34 | $ | 4.78 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.94%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
30 | Certified Annual Report |
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg International Value Fund versus MSCI EAFE Index (March 30, 2001 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2006
1 Yr | 5 Yrs | Since Inception | |||||||
I Shares (Incep: 3/30/01) | 19.76 | % | 17.81 | % | 12.80 | % | |||
MSCI EAFE Index (Since: 3/30/01) | 19.16 | % | 14.26 | % | 9.62 | % |
Performance data reflects past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains. There is no up-front sales charge for Class I shares. Class I shares are subject to a 1% 30-day redemption fee.
The Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East Index (EAFE) is an unmanaged index. It 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 with net dividends reinvested in U.S. dollars. Unless otherwise noted, index returns do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
Certified Annual Report | 31 |
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
32 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report | 33 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
34 | Certified Annual Report |
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, the Fund designates long-term capital gain dividends of $59,147,994.
For the tax year ended September 30, 2006, the Thornburg International Value Fund designates 100% of the dividends paid from tax basis net ordinary income as qualifying for the reduced rate under the Jobs and Growth Tax Relief and Reconciliation Act of 2003.
Zero percent of the ordinary income distributions paid by the Fund for the year ended September 30, 2006 qualified for the corporate dividends received deduction.
For the year ended September 30, 2006, foreign taxes paid and foreign source income is $8,773,239 and $147,903,087, respectively.
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006. Complete information will be computed and reported in conjunction with your 2006 Form 1099-DIV.
Please note that the above information is provided to satisfy Internal Revenue Code notification requirements. Foreign tax information will be provided with your 2006 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg International Value Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, industry, market and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
Certified Annual Report | 35 |
OTHER INFORMATION, CONTINUED | ||
Thornburg International Value Fund | September 30, 2006 (Unaudited) |
(iv) | measures of the Fund’s investment performance over different periods of time, relative to a category of mutual funds sharing certain comparable characteristics and selected by an independent mutual fund analyst firm, and relative to broad based securities indices; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectuses, are unique or may vary from the methods for selecting the investments for other funds.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s above-average or superior investment performance in most periods relative to the performance of a category of equity mutual funds having certain characteristics comparable to the Fund and selected by an independent mutual fund analyst firm, the Fund’s outperformance of two broad based securities indices over multiple periods, the Fund’s cumulative returns over extended periods, and the Fund’s performance relative to comparative measures of risk.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of equity mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the management fee charged to the Fund was somewhat lower than the average and median fee rates charged to the grouping of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio also was somewhat lower than the average and median expense ratios for the same fund group. The Trustees also observed in this regard the quality of the Advisor’s services and the investment performance of the Fund. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparison of fees and costs charged to the Fund to fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by the Fund and other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund has realized and may reasonably be expected to realize further economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
36 | Certified Annual Report |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street | 119 East Marcy Street | |
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |
800.847.0200 | 800.847.0200 |
Thornburg Core Growth Fund
The Fund seeks long-term growth of capital by investing in equity securities selected for their growth potential.
The Fund can invest in companies of any size, from large, well-established firms to small, emerging growth franchises. Management uses traditional fundamental research to evaluate securities and make buy/sell decisions.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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Receive your shareholder reports and prospectus online instead of through traditional mail. | ||
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www.thornburg.com/edelivery |
2 | This page is not part of the Annual Report. |
Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We seek to accomplish this through a range of equity funds that redefine traditional measures of value and growth and through a family of laddered bond funds that focus on quality, stability and minimizing risk over time.
Confirming our strategy, all Thornburg equity funds are highly ranked within their respective categories over the long term.
The Thornburg equity funds employ a comprehensive approach, which is more inclusive than the traditional deep value or high growth approach to stock selection. You can read much more about the stocks in your Fund’s portfolio, and all Thornburg equity funds, at our web site, www.thornburg.com/funds.
During this decade, the average dividend yield paid by equity and hybrid mutual funds has dipped well below 1%. We established Thornburg Investment Income Builder Fund in late 2002 to be clearly different from other equity/hybrid funds by paying attractive dividends today, with a further goal of increasing these in the future. Our record to date shows clear success in achieving each aspect of this mission.
On the bond side, we have always had a highly disciplined approach of laddering short-and intermediate-bond maturities, seeking to provide both an attractive return and relative stability of principal.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely, |
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Garrett Thornburg Chairman & CEO |
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Important Information
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
Shares in the Fund carry risks including possible loss of principal. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Funds invested in a limited number of holdings may expose an investor to greater volatility. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
Performance data given at net asset value (NAV) does not take into account the applicable sales charges. If the sales charges had been included, the performance would have been lower.
From time to time the Fund may invest in shares of companies through initial public offerings (IPOs). IPOs have the potential to produce substantial gains. There is no assurance that the Fund will have continued access to profitable IPOs and as the Fund’s assets grow, the impact of an IPO investment may decline. Therefore investors should not rely on these past gains as an indication of future performance.
The Morningstar Risk-Adjusted Rating (commonly called the star rating) brings both performance and risk together into one evaluation. To determine a fund’s star rating for a given period (three, five, or ten years), the fund’s Morningstar Risk score is subtracted from its Morningstar Return score. The resulting number is plotted along a bell curve to determine the fund’s rating for each time period: If the fund scores in the top 10% of its broad investment class (domestic stock, international stock, taxable bond, or municipal bond), it receives 5 stars (Highest); if it falls in the next 22.5%, it receives 4 stars (Above Average); a place in the middle 35% earns it 3 stars (Average); those in the next 22.5% receive 2 stars (Below Average); and the bottom 10% get 1 star (Lowest). The star ratings are recalculated monthly.
Glossary
NASDAQ Composite Index – The NASDAQ Composite Index is a market-value weighted, technology-oriented index comprised of approximately 5,000 domestic and non-U.S.-based securities.
Russell 3000 Growth Index – The Russell 3000 Growth Index is an unmanaged index comprised of those Russell 3000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 1000 Growth Index – Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
Standard & Poor’s 500 Stock Index (S&P 500) – The S&P 500 Index is an unmanaged index generally representative of the U.S. stock market.
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. The performance of any index is not indicative of the performance of any particular investment.
Beta – Beta is a measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price. The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median, and half have values that are less. If there is an even number of companies, then the median is the average of the two companies in the middle.
Price to Book Value (P/B) – A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value (book value is simply assets minus liabilities).
Price to Cash Flow Ratio – A measure of the market’s expectations of a firm’s future financial health. It is calculated by dividing the price per share by cash flow per share.
Price to Earnings Ratio (P/E) – A valuation ratio of a company’s current share price compared to its per-share earnings. P/E equals a company’s market value per share divided by earnings per share.
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Thornburg Core Growth Fund
Continually Evaluating the Risk Equation
Growth stocks are often referred to as “glamour” stocks . .. . and it is easy to understand why. Growth stocks generate excitement. These are stocks where rapid earnings growth is expected to be followed by rapid price appreciation. Growth stocks capture the imagination, and investing in them can offer considerable opportunities for reward.
But growth stocks can also be volatile. Identifying which companies will succeed takes work. It takes digging down to the nuts and bolts of companies. The management team of Thornburg Core Growth Fund understands this. They know that it is grit, not glamour, that creates a successful growth fund.
Portfolio Manager Alex Motola and his team apply a rigorous stock selection process to investments for Thornburg Core Growth Fund. This is a portfolio run on common sense, not on abstract theory. Motola’s overarching philosophy is to create a fund that generates good performance over the long term, while reducing volatility in the interim. Intensive, hands-on, independent research is the central theme. While many other growth funds rely on broad portfolio diversification to temper volatility, the Thornburg Core Growth Fund concentrates on a limited number of stocks and diversifies those investments among three segments of the growth fund universe: consistent growth companies, growth industry leaders, and emerging growth companies. By limiting the number of securities, Thornburg’s managers can cover each stock in greater depth. We believe that diversifying among three growth baskets further mitigates risk because each of these segments typically reacts differently than the equity markets as a whole.
How does the stock selection process work? Before adding a stock to the Fund’s portfolio, Motola and his team drill down into the company and its business. The team believes that an intimate understanding of the companies in the portfolio is one of the most effective forms of risk management.
Companies are initially screened using a variety of quantitative measures and parameters. Most are rejected and logged onto a screening rejection spreadsheet. Only those with the most appealing opportunities to expand margins and grow earnings move on to the next step – the construction of a company-specific model. The goal is to cut to the quick and get at the underlying business. The team uses SEC filings to construct proprietary income statement, balance sheet and cash flow statement models for each remaining company. From these they analyze historical data, monitor current conditions, identify red-flags and estimate future growth potential.
Motola, a former historian who has been at the Fund’s helm since its inception, is not one to go along with the crowd. He and his team are not tied to “mainstream thinking.” While they have access to the best of Wall Street’s analysis, they are not ruled by it.
They test the strength of a company’s underlying business model against a variety of what-if screens. They conduct site visits and interview company management. And they complete the picture by checking in with a company’s major customers, suppliers, and distributors. Revenue and cost of goods sold are given particular attention, with each broken down in as many ways as the data will allow.
This team is positioned to demonstrate the strength of its grit over glamour strategy and will continue seeking steady, consistent performance for shareholders through a variety of market cycles.
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Portfolio Overview
Thornburg Core Growth Fund
IMPORTANT PERFORMANCE
INFORMATION
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
The maximum sales charge for Class A shares is 4.50%. A shares are subject to a 1% 30-day redemption fee.
MANAGEMENT TEAM
Left to Right: Alex Motola, Brian Summers, and Greg Dunn
KEY PORTFOLIO ATTRIBUTES
Portfolio P/E Trailing 12-months* | 24.3x | ||
Portfolio Price to Cash Flow* | 18.9x | ||
Portfolio Price to Book Value* | 4.2x | ||
Median Market Cap* | $ | 2.4 B | |
3-Year Beta (Thornburg vs. NASDAQ) | 0.80 | ||
Holdings | 37 |
* | Source: FactSet |
The Class A shares (at NAV) of the Thornburg Core Growth Fund posted a positive return of 17.20% for the fiscal year ended September 30, 2006. The Fund outperformed the NASDAQ Composite Index (which returned 5.83%), the Russell 1000 Growth Index (with a return of 6.04%) and the Russell 3000 Growth Index (which gained 6.05%). As has usually been the case, individual stock selection was the primary driver of outperformance.
A number of specific consumer discretionary stocks did well. Las Vegas Sands Corp. was the greatest single source of outperformance for the Fund. The company operates hotels and casinos in Las Vegas, Nevada, and the stock rose as the market recognized its development of the Cotai Strip in Macau, China. The stock saw further gains after the company was awarded a license to offer gaming in Singapore. Two other consumer stocks – Focus Media Holdings Ltd. and CJ Home Shopping Co. Ltd. – provided additional gains. Focus Media operates an advertising network in China while CJ Home Shopping is a South Korean home shopping company. Both stocks were sold early in 2006 at a significant profit to the Fund.
Information technology was also an area where the Fund realized success. Longtime holding Amdocs Ltd., provider of billing support and customer care to telecommunications companies around the world, posted strong performance during the fiscal year; Google Inc., the world’s leading internet search engine, rose sharply early in the year; and Apple Computer Inc. demonstrated strong results based on its prospects for increased share of the computer market following the success of its iPod products.
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2006
YTD | 1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||
A Shares (Incep: 12/27/00) | |||||||||||||||
Without Sales Charge | 8.26 | % | 17.20 | % | 18.10 | % | 16.38 | % | 5.95 | % | |||||
With Sales Charge | 3.41 | % | 11.92 | % | 16.29 | % | 15.31 | % | 5.11 | % | |||||
NASDAQ Composite | 3.02 | % | 5.83 | % | 8.84 | % | 9.16 | % | (1.49 | )% | |||||
Russell 3000 Growth | 3.11 | % | 6.05 | % | 8.64 | % | 4.83 | % | (2.26 | )% |
* | Periods under one year are not annualized. |
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Other gains in the portfolio came from an eclectic group of stocks. Biotechnology firm Gilead Sciences is a long-time holding of the Fund and the stock rose sharply during the past fiscal year. Copa Holdings SA, operator of a Panamanian airline, saw its stock price increase late in the period amidst positive developments at the firm. Affiliated Managers Group, a company that acquires majority ownership stakes in mid-sized investment managers, was also a major contributor to performance.
Not every stock performed as hoped. Getty Images Inc. was the top overall detractor from performance, as its stock price fell amidst a difficult competitive environment. The stock is no longer in the portfolio. Netflix, in the consumer discretionary area, struggled as they spent heavily to attract new subscribers. As the investment thesis was not developing as hoped, the position was liquidated. Semiconductor RF Micro Devices Inc. struggled; IMAX Corp. fell amidst lower order volume; and Patterson-UTI Energy Inc., sold from the portfolio in May, detracted from the Fund’s performance.
Overall, performance for the Fund during the period was strong. The team continues to apply a comprehensive approach to growth, building a portfolio that is diversified by sector, market capitalization and style, with a focus on controlling risk. This approach has served investors well during the period, as well as over the life of the Fund. The team will continue to use rigorous, bottom-up research to find what they feel are the best possible opportunities for investment.
CONTRIBUTORS AND DETRACTORS
FOR YEAR ENDED 9/30/06
Top Contributors | Top Detractors | |
Las Vegas Sands Corp. | Getty Images, Inc. | |
Focus Media Holdings, Ltd. | Netflix, Inc. | |
Apple Computer, Inc. | RF Micro Devices, Inc. | |
Amdocs, Ltd. | IMAX Corp. | |
Gilead Sciences, Inc. | Patterson-UTI Energy, Inc. |
Source: Thomson Portfolio Analytics
MARKET CAPITALIZATION EXPOSURE
As of 9/30/06
TOP TEN EQUITY HOLDINGS
As of 9/30/06
Apple Computer, Inc. | 4.7 | % | |
NYSE Group, Inc. | 4.5 | % | |
Amdocs, Ltd. | 4.4 | % | |
Microsoft Corp. | 4.2 | % | |
Google, Inc. | 4.2 | % | |
Las Vegas Sands Corp. | 4.1 | % | |
DIRECTV Group, Inc. | 4.1 | % | |
Affiliated Managers Group | 4.0 | % | |
Gilead Sciences, Inc. | 3.8 | % | |
Caremark Rx, Inc. | 3.4 | % |
TOP TEN INDUSTRIES
As of 9/30/06
Software & Services | 18.4 | % | |
Health Care Equipment & Services | 13.3 | % | |
Consumer Services | 9.9 | % | |
Diversified Financials | 9.5 | % | |
Pharmaceuticals & Biotechnology | 8.2 | % | |
Technology Hardware & Equipment | 7.8 | % | |
Transportation | 4.6 | % | |
Media | 4.1 | % | |
Retailing | 3.0 | % | |
Telecommunication Services | 2.8 | % |
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2006
Certified Annual Report
Thornburg Core Growth Fund
September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report | 9 |
Alexander M.V.
Motola,CFA
Portfolio Manager
October 20, 2006
Dear Fellow Shareholder:
For the fiscal year ended September 30, 2006, the Thornburg Core Growth Fund had strong relative and absolute performance. On September 30, 2005, the net asset value (NAV) for the Class A shares was $14.21. As of the end of this fiscal year, the Fund’s NAV was $16.38. The Fund’s Class A shares outperformed its benchmarks with a total return of 17.20% (at NAV) over that period. The NASDAQ Composite Index returned 5.83% and the Russell 3000 Growth Index returned 6.05% from September 30, 2005 through September 30, 2006.
The exposure of your Fund to various sectors has changed a fair amount over the past twelve months. This can be expected in a concentrated portfolio. A year ago, we were more concentrated in our two biggest sectors (information technology & health care). While the positions have reversed (health care is now larger than IT), our aggregate exposure to both has declined. Industrials now comprise almost 9% of the portfolio, whereas concentration was less than two percent at the end of September 2005. Our exposure to financials has increased as well, but modestly. However, our holdings in the sector are not in the traditional financial stocks like banks, but rather in asset management firms and securities exchanges.
Growth Industry Leaders is now our largest basket, followed by Emerging Growth Companies, then Consistent Growers. This shift was driven solely by a challenging opportunity set for Consistent Growers. We continue to target approximately 33% of the portfolio exposure to each of the three baskets. Our small cap exposure remains the same (around 31% of the portfolio), but large caps as a percentage of the portfolio have crept up to over 40%. The outlook for our larger cap holdings appears very robust, and I think our exposure to them will remain at higher than average levels for the foreseeable future.
Once again, our best performers have come from disparate parts of the markets: Las Vegas Sands Corp., Focus Media Holdings Ltd., Amdocs Ltd., Copa Holdings SA, Apple Computer Inc., Gilead Sciences Inc., PeopleSupport Inc., and CJ Home Shopping Co. Ltd. Las Vegas Sands continues to grow in Las Vegas, and is looking to be a dominant player in Macau by the end of the decade. Macau’s gambling market is approximately the same size today as Las Vegas, Nevada, but it’s growing much faster. Sands has also made inroads on the island of Singapore, where the company won a concession to be one of just two casinos in the country. Copa has turned around its troubled acquisition, AeroRepública, much quicker than most investors expected, leading to strong returns. Gilead Sciences and Apple Computer continue to do what they’ve been doing – taking share from incumbents and building their respective brands.
Our worst performers didn’t hurt as much as the winners helped, but they were still present. Among our most disappointing holdings were Getty Images Inc., Netflix Inc., Patterson-UTI Energy Inc., RF Micro Devices Inc., IMAX Corp., and JetBlue Airways Corp. Getty Images and Netflix had tougher competitive environments than we envisioned; in the case of Getty, this is being realized today. For Netflix, which has done well against new entrants in the past – including Wal-Mart and Blockbuster – the true test will come when video downloading levels the playing field. We still have a lot of confidence in JetBlue. The management team is one of the best of the industry and they have a compelling product offering. Even with geopolitical risks and rising oil/jet fuel prices, people continue to travel more and more.
It is important to understand our focus on risk control. Although we hope our statistical risk is low (standard deviation of returns), our focus is on appropriate diversification and stock specific risk control. “Knowing what you own” is our mantra. Our approach is to maintain a balance between diversifying our portfolio and maximizing the impact of individual stock selection.
We seek to control risk through consciously diversifying our portfolio by capitalization range, by sector and within sectors, and by basket (Growth Industry Leaders, Consistent Growth Companies,
10 | Certified Annual Report |
and Emerging Growth Companies). We focus our research efforts on identifying stock specific risks by knowing the business model, identifying the accounting issues, assessing the competitive, regulatory, and legal risks, and weighing the quality of earnings being generated. We feel we are managing our risks at the most basic and important level: the individual security level. It is my belief that adhering to an investment strategy focused on valuation, growth, and rigorous analysis will reward our shareholders.
Our Fund was “born” in December of 2000. Over the entire life of the Fund, and in every single year of its existence, value as an investment style has outperformed growth. This was even true during the fast market of 2003. Over the past five years, value (as measured by the S&P 500 Index/Citigroup style indices) has outperformed growth by a wide margin: Value returned 9.09%, annualized, versus just 4.71% for Growth. Over the same five-year period, your Fund (A shares at NAV, ending 9/30/2006) has generated an annualized return in excess of 16%. At some point in the future, growth investors will accord higher multiples to growth businesses. We feel many of the larger growth oriented companies are selling at excellent valuations, and we hope their value is realized in the marketplace over the next several years.
Initial public offerings contributed 0.35% of total return to the Fund during the fiscal year. The effects of offerings in prior periods are disclosed in prior reports.
We believe the Thornburg Core Growth Fund continues to fulfill its mandate as a growth oriented investment vehicle that can form 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 web sites can be found by pointing your Internet browser to www.thornburg.com/funds. Thank you for investing in the Thornburg Core Growth Fund. Best wishes for a wonderful holiday season and New Year.
Regards, |
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Alexander M.V. Motola,CFA Portfolio Manager Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report | 11 |
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Core Growth Fund | September 30, 2006 |
ASSETS | ||||
Investments at value | ||||
Non-controlled affiliated issuers (cost $10,259,267) | $ | 19,136,104 | ||
Non-affiliated issuers (cost $837,939,969) | 933,711,944 | |||
Cash | 1,270,779 | |||
Cash denominated in foreign currency (cost $465,743) | 465,639 | |||
Receivable for fund shares sold | 21,245,736 | |||
Unrealized gain on forward exchange contracts (Note 7) | 43,989 | |||
Dividends receivable | 57,573 | |||
Prepaid expenses and other assets | 35,568 | |||
Total Assets | 975,967,332 | |||
LIABILITIES | ||||
Payable for securities purchased | 4,675,397 | |||
Payable for fund shares redeemed | 1,550,253 | |||
Unrealized loss on forward exchange contracts (Note 7) | 163,084 | |||
Payable to investment advisor and other affiliates (Note 3) | 934,383 | |||
Deferred tax payable | 246,409 | |||
Accounts payable and accrued expenses | 238,382 | |||
Total Liabilities | 7,807,908 | |||
NET ASSETS | $ | 968,159,424 | ||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (81,967 | ) | |
Net unrealized appreciation on investments | 104,282,370 | |||
Accumulated net realized gain (loss) | (3,129,981 | ) | ||
Net capital paid in on shares of beneficial interest | 867,089,002 | |||
$ | 968,159,424 | |||
12 | Certified Annual Report |
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share | $ | 16.38 | |
Maximum sales charge, 4.50% of offering price | 0.77 | ||
Maximum offering price per share | $ | 17.15 | |
Class C Shares: | |||
Net asset value and offering price per share * | $ | 15.59 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share | $ | 16.66 | |
Class R1 Shares: | |||
Net asset value, offering and redemption price per share | $ | 16.43 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share | $ | 16.65 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. |
Certified Annual Report | 13 |
STATEMENT OF OPERATIONS | ||
Thornburg Core Growth Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Dividend income from non-affiliated issuers (net of foreign taxes withheld of $85,736) | $ | 2,229,661 | ||
Interest income | 1,583,661 | |||
Total Income | 3,813,322 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 5,502,296 | |||
Administration fees (Note 3) | ||||
Class A Shares | 424,429 | |||
Class C Shares | 143,675 | |||
Class I Shares | 70,320 | |||
Class R1 Shares | 56,382 | |||
Class R5 Shares | 9 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 851,929 | |||
Class C Shares | 1,154,101 | |||
Class R1 Shares | 226,263 | |||
Transfer agent fees | ||||
Class A Shares | 493,422 | |||
Class C Shares | 182,225 | |||
Class I Shares | 91,152 | |||
Class R1 Shares | 56,214 | |||
Class R5 Shares | 10,095 | |||
Registration and filing fees | ||||
Class A Shares | 72,815 | |||
Class C Shares | 25,922 | |||
Class I Shares | 61,774 | |||
Class R1 Shares | 15,008 | |||
Class R5 Shares | 19,635 | |||
Custodian fees (Note 3) | 231,835 | |||
Professional fees | 61,040 | |||
Accounting fees | 25,085 | |||
Trustee fees | 15,441 | |||
Other expenses | 199,911 | |||
Total Expenses | 9,990,978 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (247,594 | ) | ||
Distribution and service fees waived (Note 3) | (1,000 | ) | ||
Fees paid indirectly (Note 3) | (141,147 | ) | ||
Net Expenses | 9,601,237 | |||
Net Investment Loss | $ | (5,787,915 | ) | |
14 | Certified Annual Report |
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Core Growth Fund | Year Ended September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | (2,626,666 | ) | |
Foreign currency transactions | (803,144 | ) | ||
(3,429,810 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $231,186) | 72,072,198 | |||
Foreign currency translations | (143,565 | ) | ||
71,928,633 | ||||
Net Realized and Unrealized Gain | 68,498,823 | |||
Net Increase in Net Assets Resulting From Operations | $ | 62,710,908 | ||
See notes to financial statements.
Certified Annual Report | 15 |
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Core Growth Fund |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (5,787,915 | ) | $ | (1,279,056 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | (3,429,810 | ) | 6,645,681 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, foreign currency translation, and deferred taxes | 71,928,633 | 25,147,705 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 62,710,908 | 30,514,330 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From realized gains | ||||||||
Class A Shares | (2,295,746 | ) | — | |||||
Class C Shares | (899,989 | ) | — | |||||
Class I Shares | (998,879 | ) | — | |||||
Class R1 Shares | (228,837 | ) | — | |||||
Class R5 Shares | (1 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 361,920,829 | 53,496,950 | ||||||
Class C Shares | 134,311,126 | 21,351,328 | ||||||
Class I Shares | 125,861,734 | 20,375,442 | ||||||
Class R1 Shares | 78,841,386 | 5,969,887 | ||||||
Class R5 Shares | 43,038 | — | ||||||
Net Increase in Net Assets | 759,265,569 | 131,707,937 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 208,893,855 | 77,185,918 | ||||||
End of year | $ | 968,159,424 | $ | 208,893,855 | ||||
See notes to financial statements.
16 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Core Growth Fund | September 30, 2006 |
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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg New York Intermediate Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg Limited Term Income Fund, Thornburg Value Fund, Thornburg International Value Fund, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 equity securities selected for their growth potential.
The Fund currently offers five classes of shares of beneficial interest: Class A, Class C, Institutional Class (Class I), and Retirement Classes (Class R1 and Class R5). 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 I shares are sold at net asset value without a sales charge at the time of purchase, (iv) Class R1 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 may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Securities: 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. In any case where a market quotation is not readily available, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the 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 amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Certified Annual Report | 17 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund to the shareholders. Therefore, no provision for Federal income taxes 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.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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.
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, 2006, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,000 for Class C shares, $127,427 for Class I shares, $90,440 for Class R1 shares and $29,727 for Class R5 shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned commissions aggregating $371,433 from the sale of Class A shares of the Fund and collected contingent deferred sales charges aggregating $47,155 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
18 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
The Trust has also adopted distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class C and Class R1 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C and Class R1 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 R1 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 Trust 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, 2006, fees paid indirectly were $141,147. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/ or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 31,205,445 | $ | 490,887,835 | 4,753,098 | $ | 62,419,689 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 145,954 | 2,090,059 | — | — | ||||||||||
Shares repurchased | (8,482,187 | ) | (131,249,232 | ) | (714,886 | ) | (8,926,162 | ) | ||||||
Redemption fees received** | — | 192,167 | — | 3,423 | ||||||||||
Net Increase (Decrease) | 22,869,212 | $ | 361,920,829 | 4,038,212 | $ | 53,496,950 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 9,826,021 | $ | 147,394,797 | 1,892,754 | $ | 24,074,650 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 54,556 | 748,508 | — | — | ||||||||||
Shares repurchased | (932,965 | ) | (13,875,119 | ) | (228,812 | ) | (2,723,322 | ) | ||||||
Redemption fees received** | — | 42,940 | — | — | ||||||||||
Net Increase (Decrease) | 8,947,612 | $ | 134,311,126 | 1,663,942 | $ | 21,351,328 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 12,137,575 | $ | 193,746,428 | 1,588,545 | $ | 21,467,761 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 63,694 | 923,572 | — | — | ||||||||||
Shares repurchased | (4,369,477 | ) | (68,872,491 | ) | (85,287 | ) | (1,092,663 | ) | ||||||
Redemption fees received** | — | 64,225 | — | 344 | ||||||||||
Net Increase (Decrease) | 7,831,792 | $ | 125,861,734 | 1,503,258 | $ | 20,375,442 | ||||||||
Class R1 Shares | ||||||||||||||
Shares sold | 5,664,323 | $ | 88,572,584 | 490,525 | $ | 6,601,537 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 15,760 | 226,474 | — | — | ||||||||||
Shares repurchased | (635,940 | ) | (9,972,757 | ) | (46,935 | ) | (631,650 | ) | ||||||
Redemption fees received** | — | 15,085 | — | — | ||||||||||
Net Increase (Decrease) | 5,044,143 | $ | 78,841,386 | 443,590 | $ | 5,969,887 | ||||||||
Certified Annual Report | 19 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Class R5 Shares * | ||||||||||||
Shares sold | 2,707 | $ | 43,064 | — | $ | — | ||||||
Shares issued to shareholders in reinvestment of dividends | 0 | 1 | — | — | ||||||||
Shares repurchased | (2 | ) | (35 | ) | — | — | ||||||
Redemption fees received** | — | 8 | — | — | ||||||||
Net Increase (Decrease) | 2,705 | $ | 43,038 | — | $ | — | ||||||
* | Effective date of Class R5 shares was October 3, 2005. |
** | The Fund charges a redemption fee of 1% of the Class A & Class I shares exchanged within 30 days of purchase. Prior to February 1, 2006, the Fund charged a redemption fee of 1% of the Class A & Class I shares exchanged within 90 days of purchase. Redemption fees charged to any Class are allocated to all Classes upon receipt of payment based on relative net asset values of each Class or other appropriate allocation methods. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $1,212,084,189 and $591,704,531, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 848,837,345 | ||
Gross unrealized appreciation on a tax basis | $ | 125,348,809 | ||
Gross unrealized depreciation on a tax basis | (21,338,106 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 104,010,703 | ||
At September 30, 2006, the Fund did not have any undistributed ordinary net income or undistributed capital gains.
At September 30, 2006, the Fund has deferred tax basis currency and capital losses occurring subsequent to October 31, 2005 of $81,967 and $1,926,292 respectively. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
At September 30, 2006, the Fund had tax basis capital losses of $587,448, which may be carried over to offset future capital gains. To the extent such carry forwards are used, capital gains distributions may be reduced to the extent provided by regulations. Such losses expire September 30, 2014.
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $6,063,359, decreased accumulated net realized investment loss by $299,282, and decreased net investment loss by $5,764,077. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from net operating loss and currency losses.
The tax character of distributions paid by the Fund for the year ended September 30, 2006 was $4,423,452 from the distribution of long-term capital gains.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2006, 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
20 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
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. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity.
CONTRACTS TO SELL: | ||||||||
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
723,000,000 | Indian Rupee for 15,605,439 USD | Dec 13, 2006 | $ | (140,963 | ) | |||
7,700,000 | Euro for 9,790,473 USD | Dec 21, 2006 | (22,121 | ) | ||||
Unrealized loss from forward Sell contracts: | $ | (163,084 | ) | |||||
CONTRACTS TO BUY: | ||||||||
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
7,700,000 | Euro for 9,768,605 USD | Dec 21, 2006 | $ | 43,989 | ||||
Unrealized gain from forward Buy contracts: | $ | 43,989 | ||||||
Net unrealized gain (loss) from forward Exchange contracts: | $ | (119,095 | ) | |||||
Certified Annual Report | 21 |
Thornburg Core Growth Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 14.21 | $ | 10.87 | $ | 10.11 | $ | 6.45 | $ | 7.80 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.14 | ) | (0.14 | ) | (0.15 | ) | (0.13 | ) | (0.12 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 2.54 | 3.48 | 0.90 | 3.77 | (1.23 | ) | ||||||||||||||
Total from investment operations | 2.40 | 3.34 | 0.75 | 3.64 | (1.35 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Realized capital gains | (0.24 | ) | — | — | — | — | ||||||||||||||
Redemption fees added to paid in capital | 0.01 | — | 0.01 | 0.02 | — | |||||||||||||||
Change in net asset value | 2.17 | 3.34 | 0.76 | 3.66 | (1.35 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 16.38 | $ | 14.21 | $ | 10.87 | $ | 10.11 | $ | 6.45 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 17.20 | % | 30.73 | % | 7.52 | % | 56.74 | % | (17.31 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.86 | )% | (1.14 | )% | (1.37 | )% | (1.43 | )% | (1.44 | )% | ||||||||||
Expenses, after expense reductions | 1.48 | % | 1.60 | % | 1.62 | % | 1.65 | % | 1.64 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.46 | % | 1.57 | % | 1.61 | % | 1.63 | % | 1.63 | % | ||||||||||
Expenses, before expense reductions | 1.48 | % | 1.60 | % | 1.70 | % | 2.03 | % | 2.39 | % | ||||||||||
Portfolio turnover rate | 98.00 | % | 115.37 | % | 108.50 | % | 102.91 | % | 212.17 | % | ||||||||||
Net assets at end of year (000) | $ | 502,345 | $ | 110,836 | $ | 40,899 | $ | 36,247 | $ | 5,685 |
(a) | Sales loads are not reflected in computing total return. |
+ | Based on weighted average shares outstanding. |
22 | Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Core Growth Fund
Year Ended September 30, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.63 | $ | 10.51 | $ | 9.85 | $ | 6.38 | $ | 7.76 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.24 | ) | (0.23 | ) | (0.22 | ) | (0.18 | ) | (0.18 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 2.43 | 3.35 | 0.88 | 3.65 | (1.20 | ) | ||||||||||||||
Total from investment operations | 2.19 | 3.12 | 0.66 | 3.47 | (1.38 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Realized capital gains | (0.24 | ) | — | — | — | — | ||||||||||||||
Redemption fees added to paid in capital | 0.01 | — | — | — | — | |||||||||||||||
Change in net asset value | 1.96 | 3.12 | 0.66 | 3.47 | (1.38 | ) | ||||||||||||||
NET ASSET VALUE, end of year | $ | 15.59 | $ | 13.63 | $ | 10.51 | $ | 9.85 | $ | 6.38 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 16.38 | % | 29.69 | % | 6.70 | % | 54.39 | % | (17.78 | )% | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.63 | )% | (1.91 | )% | (2.13 | )% | (2.19 | )% | (2.19 | )% | ||||||||||
Expenses, after expense reductions | 2.25 | % | 2.37 | % | 2.38 | % | 2.40 | % | 2.39 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.23 | % | 2.34 | % | 2.37 | % | 2.38 | % | 2.38 | % | ||||||||||
Expenses, before expense reductions | 2.25 | % | 2.37 | % | 2.52 | % | 3.35 | % | 3.45 | % | ||||||||||
Portfolio turnover rate | 98.00 | % | 115.37 | % | 108.50 | % | 102.91 | % | 212.17 | % | ||||||||||
Net assets at end of year (000) | $ | 187,180 | $ | 41,737 | $ | 14,693 | $ | 7,146 | $ | 1,892 |
+ | Based on weighted average shares outstanding. |
Certified Annual Report | 23 |
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Year Ended September 30, | Period Ended September 30, | |||||||||||
2006 | 2005 | 2004(c) | ||||||||||
Class I Shares: | ||||||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 14.37 | $ | 10.93 | $ | 10.87 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | (0.06 | ) | (0.07 | ) | (0.08 | ) | ||||||
Net realized and unrealized gain (loss) on investments | 2.58 | 3.51 | 0.14 | |||||||||
Total from investment operations | 2.52 | 3.44 | 0.06 | |||||||||
Less dividends from: | ||||||||||||
Realized capital gains | (0.24 | ) | — | — | ||||||||
Redemption fees added to paid in capital | 0.01 | — | — | |||||||||
Change in net asset value | 2.29 | 3.44 | 0.06 | |||||||||
NET ASSET VALUE, end of period | $ | 16.66 | $ | 14.37 | $ | 10.93 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return(a) | 17.85 | % | 31.47 | % | 0.55 | % | ||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) | (0.40 | )% | (0.55 | )% | (0.74 | )%(b) | ||||||
Expenses, after expense reductions | 1.01 | % | 1.02 | % | 1.00 | %(b) | ||||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.99 | % | 0.99 | %(b) | ||||||
Expenses, before expense reductions | 1.10 | % | 1.15 | % | 1.31 | %(b) | ||||||
Portfolio turnover rate | 98.00 | % | 115.37 | % | 108.50 | % | ||||||
Net assets at end of period (000) | $ | 188,422 | $ | 49,975 | $ | 21,578 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class I Shares was November 1, 2003. |
+ | Based on weighted average shares outstanding. |
24 | Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Year Ended September 30, | Period Ended September 30, | |||||||||||||||
2006 | 2005 | 2004 | 2003(c) | |||||||||||||
Class R1 Shares: | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 14.26 | $ | 10.90 | $ | 10.11 | $ | 9.59 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | (0.14 | ) | (0.14 | ) | (0.12 | ) | (0.03 | ) | ||||||||
Net realized and unrealized gain (loss) on investments | 2.54 | 3.50 | 0.91 | 0.55 | ||||||||||||
Total from investment operations | 2.40 | 3.36 | 0.79 | 0.52 | ||||||||||||
Less dividends from: | ||||||||||||||||
Realized capital gains | (0.24 | ) | — | — | — | |||||||||||
Redemption fees added to paid in capital | 0.01 | — | — | — | ||||||||||||
Change in net asset value | 2.17 | 3.36 | 0.79 | 0.52 | ||||||||||||
NET ASSET VALUE, end of period | $ | 16.43 | $ | 14.26 | $ | 10.90 | $ | 10.11 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 17.14 | % | 30.83 | % | 7.81 | % | 5.42 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) | (0.90 | )% | (1.08 | )% | (1.17 | )% | (1.06 | )%(b) | ||||||||
Expenses, after expense reductions | 1.53 | % | 1.52 | % | 1.50 | % | 1.65 | % (b) | ||||||||
Expenses, after expense reductions and net of custody credits | 1.50 | % | 1.49 | % | 1.49 | % | 1.65 | % (b) | ||||||||
Expenses, before expense reductions | 1.73 | % | 3.56 | % | 722.79 | %† | 22,219.77 | %(b)† | ||||||||
Portfolio turnover rate | 98.00 | % | 115.37 | % | 108.50 | % | 102.91 | % | ||||||||
Net assets at end of period (000) | $ | 90,167 | $ | 6,345 | $ | 16 | $ | — | (d) |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R1 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. |
+ | Based on weighted average shares outstanding. |
Certified Annual Report | 25 |
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Period Ended September 30, 2006(b) | ||||
Class R5 Shares: | ||||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 14.43 | ||
Income from investment operations: | ||||
Net investment income | (0.06 | ) | ||
Net realized and unrealized gain (loss) on investments | 2.51 | |||
Total from investment operations | 2.45 | |||
Less dividends from: | ||||
Realized capital gains | (0.24 | ) | ||
Redemption fees added to paid in capital | 0.01 | |||
Change in net asset value | 2.22 | |||
NET ASSET VALUE, end of period | $ | 16.65 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 17.29 | % | ||
Ratios to average net assets: | ||||
Net investment income (loss) | (0.38 | )% | ||
Expenses, after expense reductions | 1.01 | % | ||
Expenses, after expense reductions and net of custody credits | 0.99 | % | ||
Expenses, before expense reductions | 176.54 | %† | ||
Portfolio turnover rate | 98.00 | % | ||
Net assets at end of period (000) | $ | 45 |
(a) | Not annualized for periods less than one year. |
(b) | Effective date of Class R5 Shares was October 3, 2005. |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
26 | Certified Annual Report |
Thornburg Core Growth Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-582, CLASS C - 885-215-574, CLASS I - 885-215-475, CLASS R1 - 885-215-517, CLASS R5 - 855-215-350
NASDAQ SYMBOLS: CLASS A - THCGX, CLASS C - TCGCX, CLASS I - THIGX, CLASS R1 - THCRX, CLASS R5 - THGRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/06
Software & Services | 18.4 | % | |
Health Care Equipment & Services | 13.3 | % | |
Consumer Services | 9.9 | % | |
Diversified Financials | 9.5 | % | |
Pharmaceuticals & Biotechnology | 8.2 | % | |
Technology Hardware & Equipment | 7.8 | % | |
Transportation | 4.6 | % | |
Media | 4.1 | % | |
Retailing | 3.0 | % | |
Telecommunication Services | 2.8 | % | |
Commercial Services & Supplies | 2.4 | % | |
Utilities | 2.3 | % | |
Semiconductors & Semiconductor Equipment | 1.8 | % | |
Capital Goods | 1.8 | % | |
Food & Staples Retailing | 1.7 | % | |
Food Beverage & Tobacco | 0.6 | % | |
Other Assets & Cash Equivalents | 7.8 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 92.23% | |||||
CAPITAL GOODS — 1.80% | |||||
BUILDING PRODUCTS — 1.80% | |||||
Nice SpA+ | 2,149,028 | $ | 17,394,215 | ||
17,394,215 | |||||
COMMERCIAL SERVICES & SUPPLIES — 2.36% | |||||
COMMERCIAL SERVICES & SUPPLIES — 2.36% | |||||
Paxys, Inc.+ | 17,281,600 | 3,697,059 | |||
PeopleSupport, Inc.+(1) | 1,034,384 | 19,136,104 | |||
22,833,163 | |||||
CONSUMER SERVICES — 9.86% | |||||
DIVERSIFIED CONSUMER SERVICES — 1.13% | |||||
Bright Horizons Family Solutions, Inc.+ | 262,400 | 10,949,952 | |||
HOTELS RESTAURANTS & LEISURE — 8.73% | |||||
FuJi Food & Catering Services | 6,414,100 | 10,701,692 | |||
Las Vegas Sands Corp.+ | 587,400 | 40,148,790 | |||
Melco International Development Ltd. | 5,225,900 | 11,174,020 | |||
Wyndham Worldwide Corp.+ | 805,200 | 22,521,444 | |||
95,495,898 | |||||
Certified Annual Report | 27 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
DIVERSIFIED FINANCIALS — 9.53% | |||||
CAPITAL MARKETS — 5.01% | |||||
Affiliated Managers Group, Inc.+ | 383,925 | $ | 38,434,732 | ||
Indiabulls Financial Services Ltd. | 1,119,000 | 10,080,530 | |||
DIVERSIFIED FINANCIAL SERVICES — 4.52% | |||||
NYSE Group, Inc.+ | 585,400 | 43,758,650 | |||
92,273,912 | |||||
FOOD & STAPLES RETAILING — 1.68% | |||||
FOOD & STAPLES RETAILING — 1.68% | |||||
Celestial Nutrifoods Ltd.+ | 16,736,000 | 16,250,593 | |||
16,250,593 | |||||
FOOD BEVERAGE & TOBACCO — 0.57% | |||||
FOOD PRODUCTS — 0.57% | |||||
China Milk Products Group Ltd.+ | 8,319,000 | 5,559,987 | |||
5,559,987 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 13.33% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 2.67% | |||||
Cytyc Corp.+ | 1,055,400 | 25,836,192 | |||
HEALTH CARE PROVIDERS & SERVICES — 10.66% | |||||
Allscripts Healthcare Solutions, Inc.+ | 414,100 | 9,296,545 | |||
Caremark Rx, Inc. | 584,071 | 33,099,303 | |||
Lincare Holdings, Inc.+ | 890,212 | 30,836,944 | |||
WellPoint, Inc.+ | 389,500 | 30,010,975 | |||
129,079,959 | |||||
MEDIA — 4.12% | |||||
MEDIA — 4.12% | |||||
DIRECTV Group, Inc.+ | 2,025,300 | 39,857,904 | |||
39,857,904 | |||||
PHARMACEUTICALS & BIOTECHNOLOGY — 8.24% | |||||
BIOTECHNOLOGY — 6.23% | |||||
Gilead Sciences, Inc.+ | 540,050 | 37,101,435 | |||
Nuvelo, Inc.+ | 1,269,156 | 23,149,405 | |||
PHARMACEUTICALS — 2.01% | |||||
Aspreva Pharmaceuticals Corp.+ | 750,600 | 19,478,070 | |||
79,728,910 | |||||
28 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
RETAILING — 3.01% | |||||
MULTILINE RETAIL — 3.01% | |||||
Kohl’s Corp.+ | 449,300 | $ | 29,168,556 | ||
29,168,556 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.82% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.82% | |||||
Austriamicrosystems AG+ | 310,434 | 17,588,364 | |||
17,588,364 | |||||
SOFTWARE & SERVICES — 18.43% | |||||
INTERNET SOFTWARE & SERVICES — 6.22% | |||||
Equinix, Inc.+ | 331,000 | 19,893,100 | |||
Google, Inc.+ | 100,250 | 40,290,475 | |||
IT SERVICES — 2.84% | |||||
Gevity HR, Inc. | 625,358 | 14,245,655 | |||
Satyam Computer | 737,200 | 13,204,880 | |||
SOFTWARE — 9.37% | |||||
Amdocs Ltd.+ | 1,073,225 | 42,499,710 | |||
Microsoft Corp. | 1,489,500 | 40,708,035 | |||
Opsware, Inc.+ | 839,000 | 7,559,390 | |||
178,401,245 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 7.83% | |||||
COMPUTERS & PERIPHERALS — 7.83% | |||||
Apple Computer, Inc.+ | 590,500 | 45,486,215 | |||
Diebold, Inc. | 697,500 | 30,362,175 | |||
75,848,390 | |||||
TELECOMMUNICATION SERVICES — 2.74% | |||||
WIRELESS TELECOMMUNICATION SERVICES — 2.74% | |||||
America Movil SA | 13,414,000 | 26,506,743 | |||
26,506,743 | |||||
TRANSPORTATION — 4.58% | |||||
AIRLINES — 4.58% | |||||
Copa Holdings SA | 805,940 | 27,667,920 | |||
JetBlue Airways Corp.+ | 1,801,400 | 16,698,978 | |||
44,366,898 | |||||
Certified Annual Report | 29 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
UTILITIES — 2.33% | ||||||
INDUSTRIAL POWER PRODUCTION / ENERGY TRADING — 2.33% | ||||||
Ormat Technologies, Inc. | 690,060 | $ | 22,578,763 | |||
22,578,763 | ||||||
TOTAL COMMON STOCK (Cost $788,284,689) | 892,933,500 | |||||
SHORT TERM INVESTMENTS — 6.19% | ||||||
AIG Funding, Inc., 5.17%, 10/3/2006 | $ | 7,000,000 | 6,997,988 | |||
AIG Funding, Inc., 5.24%, 10/5/2006 | 20,000,000 | 19,988,355 | ||||
Lasalle Bank Corp., 5.21%, 10/13/2006 | 3,000,000 | 2,994,790 | ||||
Toyota Credit de Puerto Rico, 5.23%, 10/10/2006 | 5,500,000 | 5,492,809 | ||||
Toyota Credit de Puerto Rico, 5.20%, 10/16/2006 | 3,000,000 | 2,993,500 | ||||
Toyota Credit de Puerto Rico, 5.21%, 10/18/2006 | 21,500,000 | 21,447,106 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $59,914,547) | 59,914,548 | |||||
TOTAL INVESTMENTS — 98.42% (Cost $848,199,236) | $ | 952,848,048 | ||||
OTHER ASSETS LESS LIABILITIES — 1.58% | 15,311,376 | |||||
NET ASSETS — 100.00% | $ | 968,159,424 | ||||
Footnote Legend
+ | Non-income producing |
See notes to financial statements.
(1) | Investment in Affiliates |
Holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940 because the Fund’s holding represented 5% or more of the company’s voting securities during the period, are shown below:
Issuer | Shares at Sept. 30, 2005 | Gross Additions | Gross Reductions | Shares at Sept. 30, 2006 | Market Value Sept. 30, 2006 | Dividend Income | ||||||
PeopleSupport, Inc. | — | 1,105,900 | 71,516 | 1,034,384 | 19,136,104 | — |
Total non-controlled “affiliated companies” — 1.98% of Net Assets
30 | Certified Annual Report |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
Thornburg Core Growth Fund |
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 (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP |
New York, New York November 16, 2006 |
Certified Annual Report | 31 |
EXPENSE EXAMPLE | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) | transaction costs, including |
(a) sales charges (loads) on purchase payments, for Class A shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(c) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(d) a 30-day redemption fee on Class A and Class I shares;
(2) | ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. |
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 993.90 | $ | 7.39 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.65 | $ | 7.48 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 990.50 | $ | 11.16 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.86 | $ | 11.29 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 996.40 | $ | 4.95 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | |||
Class R1 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 994.00 | $ | 7.51 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.54 | $ | 7.59 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 996.40 | $ | 4.92 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.14 | $ | 4.98 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.48%; C: 2.24%; I: 0.99%; R1: 1.50%; and R5: 0.98%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
32 | Certified Annual Report |
INDEX COMPARISON | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Core Growth Fund versus NASDAQ Composite Index (December 27, 2000 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2006 (with sales charge)
1 Yr | 5 Yrs | Since Inception | |||||||
A Shares (Incep: 12/27/00) | 11.92 | % | 15.31 | % | 5.11 | % | |||
C Shares (Incep: 12/27/00) | 15.38 | % | 15.37 | % | 5.06 | % | |||
R1 Shares (Incep: 7/01/03) | 17.14 | % | — | 18.62 | % | ||||
R5 Shares (Incep: 10/03/05) | — | — | 17.29 | % | |||||
NASDAQ Composite Index (Since: 12/27/00) | 5.83 | % | 9.16 | % | (1.49 | )% |
Performance data reflects past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 4.50%. Class C shares are subject to a 1% contingent deferred sales charge (CDSC) for the first year only. There is no up-front sales charge for Class R1 and R5 shares. Class R1 and R5 shares are available only to certain qualified investors. Class A shares are subject to a 1% 30-day redemption fee.
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. The performance of any index is not indicative of the performance of any particular investment.
Certified Annual Report | 33 |
TRUSTEES AND OFFICERS | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
34 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report | 35 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
36 | Certified Annual Report |
OTHER INFORMATION | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, the Fund designates long-term capital gain dividends of $4,423,505.
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006. Complete information will be computed and reported in conjunction with your 2006 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Core Growth Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance: In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting company, industry, market and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
Certified Annual Report | 37 |
OTHER INFORMATION, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
(iv) | measures of the Fund’s investment performance over different periods of time, relative to a category of mutual funds sharing certain comparable characteristics and selected by an independent mutual fund analyst firm, and relative to broad based securities indices; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectus, are unique or may vary from the methods for selecting the investments for other funds.
In conducting their evaluation, the Trustees determined that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s above average or better investment performance in most periods relative to the performance of a category of equity mutual funds having certain characteristics comparable to the Fund and selected by an independent mutual fund analyst firm, the Fund’s outperformance of two broad based securities indices in each period since its inception, the Fund’s relative performance in periods of negative market conditions and the Fund’s cumulative returns.
The Trustees concluded, based upon these and other observations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, the Advisor’s waiver of a portion of its fee, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of multi-capitalization growth equity mutual funds assembled by an independent analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the Fund’s management fee was somewhat higher than the average and median fee rates for the grouping of equity mutual funds selected by the mutual fund analyst firm, but that the overall expense ratio of the Fund was comparable to the average and median expense ratios for the same group of mutual funds. The Trustees also observed in this regard the quality of the Advisor’s services and the investment performance of the Fund. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the investment performance of the Fund and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
38 | Certified Annual Report |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report. | 39 |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 | 119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 |
Thornburg Core Growth Fund
The Fund seeks long-term growth of capital by investing in equity securities selected for their growth potential.
The Fund can invest in companies of any size, from large, well-established firms to small, emerging growth franchises. Management uses traditional fundamental research to evaluate securities and make buy/sell decisions.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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2 | This page is not part of the Annual Report. |
Message
from the Chairman
Garrett Thornburg
Chairman & CEO
November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We seek to accomplish this through a range of equity funds that redefine traditional measures of value and growth and through a family of laddered bond funds that focus on quality, stability and minimizing risk over time.
Confirming our strategy, all Thornburg equity funds are highly ranked within their respective categories over the long term.
The Thornburg equity funds employ a comprehensive approach, which is more inclusive than the traditional deep value or high growth approach to stock selection. You can read much more about the stocks in your Fund’s portfolio, and all Thornburg equity funds, at our web site, www.thornburg.com/funds.
During this decade, the average dividend yield paid by equity and hybrid mutual funds has dipped well below 1%. We established Thornburg Investment Income Builder Fund in late 2002 to be clearly different from other equity/hybrid funds by paying attractive dividends today, with a further goal of increasing these in the future. Our record to date shows clear success in achieving each aspect of this mission.
On the bond side, we have always had a highly disciplined approach of laddering short-and intermediate-bond maturities, seeking to provide both an attractive return and relative stability of principal.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely, |
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Garrett Thornburg Chairman & CEO |
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Important Information
The information presented on the following pages was current as of September 30, 2006. The manager’s views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
Shares in the Fund carry risks including possible loss of principal. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Funds invested in a limited number of holdings may expose an investor to greater volatility. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
Minimum investments for Class I shares are higher than those for other classes.
From time to time the Fund may invest in shares of companies through initial public offerings (IPOs). IPOs have the potential to produce substantial gains. There is no assurance that the Fund will have continued access to profitable IPOs and as the Fund’s assets grow, the impact of an IPO investment may decline. Therefore investors should not rely on these past gains as an indication of future performance.
The Morningstar Risk-Adjusted Rating (commonly called the star rating) brings both performance and risk together into one evaluation. To determine a fund’s star rating for a given period (three, five, or ten years), the fund’s Morningstar Risk score is subtracted from its Morningstar Return score. The resulting number is plotted along a bell curve to determine the fund’s rating for each time period: If the fund scores in the top 10% of its broad investment class (domestic stock, international stock, taxable bond, or municipal bond), it receives 5 stars (Highest); if it falls in the next 22.5%, it receives 4 stars (Above Average); a place in the middle 35% earns it 3 stars (Average); those in the next 22.5% receive 2 stars (Below Average); and the bottom 10% get 1 star (Lowest). The star ratings are recalculated monthly.
Glossary
NASDAQ Composite Index – The NASDAQ Composite Index is a market-value weighted, technology-oriented index comprised of approximately 5,000 domestic and non-U.S.-based securities.
Russell 3000 Growth Index – The Russell 3000 Growth Index is an unmanaged index comprised of those Russell 3000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 1000 Growth Index – Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
Standard & Poor’s 500 Stock Index (S&P 500) – The S&P 500 Index is an unmanaged index generally representative of the U.S. stock market.
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. The performance of any index is not indicative of the performance of any particular investment.
Beta – Beta is a measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price. The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median, and half have values that are less. If there is an even number of companies, then the median is the average of the two companies in the middle.
Price to Book Value (P/B) – A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value (book value is simply assets minus liabilities).
Price to Cash Flow Ratio – A measure of the market’s expectations of a firm’s future financial health. It is calculated by dividing the price per share by cash flow per share.
Price to Earnings Ratio (P/E) – A valuation ratio of a company’s current share price compared to its per-share earnings. P/E equals a company’s market value per share divided by earnings per share.
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Thornburg Core Growth Fund
Continually Evaluating the Risk Equation
Growth stocks are often referred to as “glamour” stocks . .. . and it is easy to understand why. Growth stocks generate excitement. These are stocks where rapid earnings growth is expected to be followed by rapid price appreciation. Growth stocks capture the imagination, and investing in them can offer considerable opportunities for reward.
But growth stocks can also be volatile. Identifying which companies will succeed takes work. It takes digging down to the nuts and bolts of companies. The management team of Thornburg Core Growth Fund understands this. They know that it is grit, not glamour, that creates a successful growth fund.
Portfolio Manager Alex Motola and his team apply a rigorous stock selection process to investments for Thornburg Core Growth Fund. This is a portfolio run on common sense, not on abstract theory. Motola’s overarching philosophy is to create a fund that generates good performance over the long term, while reducing volatility in the interim. Intensive, hands-on, independent research is the central theme. While many other growth funds rely on broad portfolio diversification to temper volatility, the Thornburg Core Growth Fund concentrates on a limited number of stocks and diversifies those investments among three segments of the growth fund universe: consistent growth companies, growth industry leaders, and emerging growth companies. By limiting the number of securities, Thornburg’s managers can cover each stock in greater depth. We believe that diversifying among three growth baskets further mitigates risk because each of these segments typically reacts differently than the equity markets as a whole.
How does the stock selection process work? Before adding a stock to the Fund’s portfolio, Motola and his team drill down into the company and its business. The team believes that an intimate understanding of the companies in the portfolio is one of the most effective forms of risk control.
Companies are initially screened using a variety of quantitative measures and parameters. Most are rejected and logged onto a screening rejection spreadsheet. Only those with the most appealing opportunities to expand margins and grow earnings move on to the next step –the construction of a company-specific model. The goal is to cut to the quick and get at the underlying business. The team uses SEC filings to construct proprietary income statement, balance sheet and cash flow statement models for each remaining company. From these they analyze historical data, monitor current conditions, identify red-flags and estimate future growth potential.
Motola, a former historian who has been at the Fund’s helm since its inception, is not one to go along with the crowd. He and his team are not tied to “mainstream thinking.” While they have access to the best of Wall Street’s analysis, they are not ruled by it.
They test the strength of a company’s underlying business model against a variety of what-if screens. They conduct site visits and interview company management. And they complete the picture by checking in with a company’s major customers, suppliers, and distributors. Revenue and cost of goods sold are given particular attention, with each broken down in as many ways as the data will allow.
This team is positioned to demonstrate the strength of its grit over glamour strategy and will continue seeking steady, consistent performance for shareholders through a variety of market cycles.
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Portfolio Overview
Thornburg Core Growth Fund
IMPORTANT PERFORMANCE
INFORMATION
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
There is no up-front sales charge for Class I shares. I shares are subject to a 1% 30-day redemption fee.
MANAGEMENT TEAM
Left to Right: Alex Motola, Brian Summers, and Greg Dunn
KEY PORTFOLIO ATTRIBUTES
Portfolio P/E Trailing 12-months* | 24.3x | ||
Portfolio Price to Cash Flow* | 18.9x | ||
Portfolio Price to Book Value* | 4.2x | ||
Median Market Cap* | $ | 2.4 B | |
3-Year Beta (Thornburg vs. NASDAQ) | 0.80 | ||
Holdings | 37 |
* | Source: FactSet |
The Class I shares of the Thornburg Core Growth Fund posted a positive return of 17.85% for the fiscal year ended September 30, 2006. The Fund outperformed the NASDAQ Composite Index (which returned 5.83%), the Russell 1000 Growth (with a return of 6.04%) and the Russell 3000 Growth (which gained 6.05%). As has usually been the case, individual stock selection was the primary driver of outperformance.
A number of specific consumer discretionary stocks did well. Las Vegas Sands Corp. was the greatest single source of outperformance for the Fund. The company operates hotels and casinos in Las Vegas, Nevada, and the stock rose as the market recognized its development of the Cotai Strip in Macau, China. The stock saw further gains after the company was awarded a license to offer gaming in Singapore. Two other consumer stocks – Focus Media Holdings Ltd. and CJ Home Shopping Co. Ltd. – provided additional gains. Focus Media operates an advertising network in China while CJ Home Shopping is a South Korean home shopping company. Both stocks were sold early in 2006 at a significant profit to the Fund.
Information technology was also an area where the Fund realized success. Longtime holding Amdocs Ltd., provider of billing support and customer care to telecommunications companies around the world, posted strong performance during the fiscal year; Google Inc., the world’s leading internet search engine, rose sharply early in the year; and Apple Computer Inc. demonstrated strong results based on its prospects for increased share of the computer market following the success of its iPod products.
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2006
YTD | 1 Yr | Since Inception | |||||||
I Shares (Incep: 11/3/03) | 8.75 | % | 17.85 | % | 16.48 | % | |||
NASDAQ Composite | 3.02 | % | 5.83 | % | 5.56 | % | |||
Russell 3000 Growth Index | 3.11 | % | 6.05 | % | 6.81 | % |
* | Periods under one year are not annualized. |
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Other gains in the portfolio came from an eclectic group of stocks. Biotechnology firm Gilead Sciences is a long-time holding of the Fund and the stock rose sharply during the past fiscal year. Copa Holdings SA, operator of a Panamanian airline, saw its stock price increase late in the period amidst positive developments at the firm. Affiliated Managers Group, a company that acquires majority ownership stakes in mid-sized investment managers, was also a major contributor to performance.
Not every stock performed as hoped. Getty Images Inc. was the top overall detractor from performance, as its stock price fell amidst a difficult competitive environment. The stock is no longer in the portfolio. Netflix, in the consumer discretionary area, struggled as they spent heavily to attract new subscribers. As the investment thesis was not developing as hoped, the position was liquidated. Semiconductor RF Micro Devices Inc. struggled; IMAX Corp. fell amidst lower order volume; and Patterson-UTI Energy Inc., sold from the portfolio in May, detracted from the Fund’s performance.
Overall, performance for the Fund during the period was strong. The team continues to apply a comprehensive approach to growth, building a portfolio that is diversified by sector, market capitalization and style, with a focus on controlling risk. This approach has served investors well during the period, as well as over the life of the Fund. The team will continue to use rigorous, bottom-up research to find what they feel are the best possible opportunities for investment.
CONTRIBUTORS AND DETRACTORS
FOR YEAR ENDED 9/30/06
Top Contributors | Top Detractors | |
Las Vegas Sands Corp. | Getty Images, Inc. | |
Focus Media Holdings, Ltd. | Netflix, Inc. | |
Apple Computer, Inc. | RF Micro Devices, Inc. | |
Amdocs, Ltd. | IMAX Corp. | |
Gilead Sciences, Inc. | Patterson-UTI Energy, Inc. |
Source: Thomson Portfolio Analytics
MARKET CAPITALIZATION EXPOSURE
As of 9/30/06
TOP TEN EQUITY HOLDINGS
As of 9/30/06
Apple Computer, Inc. | 4.7 | % | |
NYSE Group, Inc. | 4.5 | % | |
Amdocs, Ltd. | 4.4 | % | |
Microsoft Corp. | 4.2 | % | |
Google, Inc. | 4.2 | % | |
Las Vegas Sands Corp. | 4.1 | % | |
DIRECTV Group, Inc. | 4.1 | % | |
Affiliated Managers Group | 4.0 | % | |
Gilead Sciences, Inc. | 3.8 | % | |
Caremark Rx, Inc. | 3.4 | % |
TOP TEN INDUSTRIES
As of 9/30/06
Software & Services | 18.4 | % | |
Health Care Equipment & Services | 13.3 | % | |
Consumer Services | 9.9 | % | |
Diversified Financials | 9.5 | % | |
Pharmaceuticals & Biotechnology | 8.2 | % | |
Technology Hardware & Equipment | 7.8 | % | |
Transportation | 4.6 | % | |
Media | 4.1 | % | |
Retailing | 3.0 | % | |
Telecommunication Services | 2.8 | % |
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2006
Certified Annual Report
Thornburg Core Growth Fund
I Shares – September 30, 2006
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report | 9 |
Alexander M.V.
Motola, CFA
Portfolio Manager
October 20, 2006
Dear Fellow Shareholder:
For the fiscal year ended September 30, 2006, the Thornburg Core Growth Fund had strong relative and absolute performance. On September 30, 2005, the net asset value (NAV) for the Class I shares was $14.37. As of the end of this fiscal year, the Fund’s NAV was $16.66. The Fund’s Class I shares outperformed its benchmarks with a total return of 17.85% over that period. The NASDAQ Composite Index returned 5.83% and the Russell 3000 Growth Index returned 6.05% from September 30, 2005 through September 30, 2006.
The exposure of your Fund to various sectors has changed a fair amount over the past twelve months. This can be expected in a concentrated portfolio. A year ago, we were more concentrated in our two biggest sectors (information technology & health care). While the positions have reversed (health care is now larger than IT), our aggregate exposure to both has declined. Industrials now comprise almost 9% of the portfolio, whereas concentration was less than two percent at the end of September 2005. Our exposure to financials has increased as well, but modestly. However, our holdings in the sector are not in the traditional financial stocks like banks, but rather in asset management firms and securities exchanges.
Growth Industry Leaders is now our largest basket, followed by Emerging Growth Companies, then Consistent Growers. This shift was driven solely by a challenging opportunity set for Consistent Growers. We continue to target approximately 33% of the portfolio exposure to each of the three baskets. Our small cap exposure remains the same (around 31% of the portfolio), but large caps as a percentage of the portfolio have crept up to over 40%. The outlook for our larger cap holdings appears very robust, and I think our exposure to them will remain at higher than average levels for the foreseeable future.
Once again, our best performers have come from disparate parts of the markets: Las Vegas Sands Corp., Focus Media Holdings Ltd., Amdocs Ltd., Copa Holdings SA, Apple Computer Inc., Gilead Sciences Inc., PeopleSupport Inc., and CJ Home Shopping Co. Ltd. Las Vegas Sands continues to grow in Las Vegas, and is looking to be a dominant player in Macau by the end of the decade. Macau’s gambling market is approximately the same size today as Las Vegas, Nevada, but it’s growing much faster. Sands has also made inroads on the island of Singapore, where the company won a concession to be one of just two casinos in the country. Copa has turned around its troubled acquisition, AeroRepública, much quicker than most investors expected, leading to strong returns. Gilead Sciences and Apple Computer continue to do what they’ve been doing – taking share from incumbents and building their respective brands.
Our worst performers didn’t hurt as much as the winners helped, but they were still present. Among our most disappointing holdings were Getty Images Inc., Netflix Inc., Patterson-UTI Energy Inc., RF Micro Devices Inc., IMAX Corp., and JetBlue Airways Corp. Getty Images and Netflix had tougher competitive environments than we envisioned; in the case of Getty, this is being realized today. For Netflix, which has done well against new entrants in the past – including Wal-Mart and Blockbuster – the true test will come when video downloading levels the playing field. We still have a lot of confidence in JetBlue. The management team is one of the best of the industry and they have a compelling product offering. Even with geopolitical risks and rising oil/jet fuel prices, people continue to travel more and more. It is important to understand our focus on risk control. Although we hope our statistical risk is low (standard deviation of returns), our focus is on appropriate diversification and stock specific risk control. “Knowing what you own” is our mantra. Our approach is to maintain a balance between diversifying our portfolio and maximizing the impact of individual stock selection.
We seek to control risk through consciously diversifying our portfolio by capitalization range, by sector and within sectors, and by basket (Growth Industry Leaders, Consistent Growth Companies,
10 | Certified Annual Report |
and Emerging Growth Companies). We focus our research efforts on identifying stock specific risks by knowing the business model, identifying the accounting issues, assessing the competitive, regulatory, and legal risks, and weighing the quality of earnings being generated. We feel we are managing our risks at the most basic and important level: the individual security level. It is my belief that adhering to an investment strategy focused on valuation, growth, and rigorous analysis will reward our shareholders.
Our Fund was “born” in December of 2000. Over the entire life of the Fund, and in every single year of its existence, value as an investment style has outperformed growth. This was even true during the fast market of 2003. Over the past five years, value (as measured by the S&P 500 Index/Citigroup style indices) has outperformed growth by a wide margin: Value returned 9.09%, annualized, versus just 4.71% for Growth. At some point in the future, growth investors will accord higher multiples to growth businesses. We feel many of the larger growth oriented companies are selling at excellent valuations, and we hope their value is realized in the marketplace over the next several years.
Initial public offerings contributed 0.35% of total return to the Fund during the fiscal year. The effects of offerings in prior periods are disclosed in prior reports.
We believe the Thornburg Core Growth Fund continues to fulfill its mandate as a growth oriented investment vehicle that can form 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 web sites can be found by pointing your Internet browser to www.thornburg.com/funds. Thank you for investing in the Thornburg Core Growth Fund. Best wishes for a wonderful holiday season and New Year.
Regards,
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Alexander M.V. Motola, CFA Portfolio Manager Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report | 11 |
STATEMENT OF ASSETS AND LIABILITIES
Thornburg Core Growth Fund | September 30, 2006 |
ASSETS | ||||
Investments at value | ||||
Non-controlled affiliated issuers (cost $10,259,267) | $ | 19,136,104 | ||
Non-affiliated issuers (cost $837,939,969) | 933,711,944 | |||
Cash | 1,270,779 | |||
Cash denominated in foreign currency (cost $465,743) | 465,639 | |||
Receivable for fund shares sold | 21,245,736 | |||
Unrealized gain on forward exchange contracts (Note 7) | 43,989 | |||
Dividends receivable | 57,573 | |||
Prepaid expenses and other assets | 35,568 | |||
Total Assets | 975,967,332 | |||
LIABILITIES | ||||
Payable for securities purchased | 4,675,397 | |||
Payable for fund shares redeemed | 1,550,253 | |||
Unrealized loss on forward exchange contracts (Note 7) | 163,084 | |||
Payable to investment advisor and other affiliates (Note 3) | 934,383 | |||
Deferred tax payable | 246,409 | |||
Accounts payable and accrued expenses | 238,382 | |||
Total Liabilities | 7,807,908 | |||
NET ASSETS | $ | 968,159,424 | ||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (81,967 | ) | |
Net unrealized appreciation on investments | 104,282,370 | |||
Accumulated net realized gain (loss) | (3,129,981 | ) | ||
Net capital paid in on shares of beneficial interest | 867,089,002 | |||
$ | 968,159,424 | |||
12 | Certified Annual Report |
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share | $ | 16.38 | |
Maximum sales charge, 4.50% of offering price | 0.77 | ||
Maximum offering price per share | $ | 17.15 | |
Class C Shares: | |||
Net asset value and offering price per share * | $ | 15.59 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share | $ | 16.66 | |
Class R1 Shares: | |||
Net asset value, offering and redemption price per share | $ | 16.43 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share | $ | 16.65 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report | 13 |
STATEMENT OF OPERATIONS | ||
Thornburg Core Growth Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Dividend income from non-affiliated issuers (net of foreign taxes withheld of $ 85,736) | $ | 2,229,661 | ||
Interest income | 1,583,661 | |||
Total Income | 3,813,322 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 5,502,296 | |||
Administration fees (Note 3) | ||||
Class A Shares | 424,429 | |||
Class C Shares | 143,675 | |||
Class I Shares | 70,320 | |||
Class R1 Shares | 56,382 | |||
Class R5 Shares | 9 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 851,929 | |||
Class C Shares | 1,154,101 | |||
Class R1 Shares | 226,263 | |||
Transfer agent fees | ||||
Class A Shares | 493,422 | |||
Class C Shares | 182,225 | |||
Class I Shares | 91,152 | |||
Class R1 Shares | 56,214 | |||
Class R5 Shares | 10,095 | |||
Registration and filing fees | ||||
Class A Shares | 72,815 | |||
Class C Shares | 25,922 | |||
Class I Shares | 61,774 | |||
Class R1 Shares | 15,008 | |||
Class R5 Shares | 19,635 | |||
Custodian fees (Note 3) | 231,835 | |||
Professional fees | 61,040 | |||
Accounting fees | 25,085 | |||
Trustee fees | 15,441 | |||
Other expenses | 199,911 | |||
Total Expenses | 9,990,978 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (247,594 | ) | ||
Distribution and service fees waived (Note 3) | (1,000 | ) | ||
Fees paid indirectly (Note 3) | (141,147 | ) | ||
Net Expenses | 9,601,237 | |||
Net Investment Loss | $ | (5,787,915 | ) | |
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STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Core Growth Fund | Year Ended September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | (2,626,666 | ) | |
Foreign currency transactions | (803,144 | ) | ||
(3,429,810 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $231,186) | 72,072,198 | |||
Foreign currency translations | (143,565 | ) | ||
71,928,633 | ||||
Net Realized and Unrealized Gain | 68,498,823 | |||
Net Increase in Net Assets Resulting From Operations | $ | 62,710,908 | ||
See notes to financial statements.
Certified Annual Report | 15 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Core Growth Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (5,787,915 | ) | $ | (1,279,056 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | (3,429,810 | ) | 6,645,681 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, foreign currency translation, and deferred taxes | 71,928,633 | 25,147,705 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 62,710,908 | 30,514,330 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From realized gains | ||||||||
Class A Shares | (2,295,746 | ) | — | |||||
Class C Shares | (899,989 | ) | — | |||||
Class I Shares | (998,879 | ) | — | |||||
Class R1 Shares | (228,837 | ) | — | |||||
Class R5 Shares | (1 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 361,920,829 | 53,496,950 | ||||||
Class C Shares | 134,311,126 | 21,351,328 | ||||||
Class I Shares | 125,861,734 | 20,375,442 | ||||||
Class R1 Shares | 78,841,386 | 5,969,887 | ||||||
Class R5 Shares | 43,038 | — | ||||||
Net Increase in Net Assets | 759,265,569 | 131,707,937 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 208,893,855 | 77,185,918 | ||||||
End of year | $ | 968,159,424 | $ | 208,893,855 | ||||
See notes to financial statements.
16 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Core Growth Fund | September 30, 2006 |
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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg New York Intermediate Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg Limited Term Income Fund, Thornburg Value Fund, Thornburg International Value Fund, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities 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 equity securities selected for their growth potential.
The Fund currently offers five classes of shares of beneficial interest: Class A, Class C, Institutional Class (Class I), and Retirement Classes (Class R1 and Class R5). 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 I shares are sold at net asset value without a sales charge at the time of purchase, (iv) Class R1 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 may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Securities: 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. In any case where a market quotation is not readily available, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the 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 amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Certified Annual Report | 17 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund to the shareholders. Therefore, no provision for Federal income taxes 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.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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.
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, 2006, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,000 for Class C shares, $127,427 for Class I shares, $90,440 for Class R1 shares and $29,727 for Class R5 shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned commissions aggregating $371,433 from the sale of Class A shares of the Fund and collected contingent deferred sales charges aggregating $47,155 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
18 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
The Trust has also adopted distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class C and Class R1 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C and Class R1 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 R1 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 Trust 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, 2006, fees paid indirectly were $141,147. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/ or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 31,205,445 | $ | 490,887,835 | 4,753,098 | $ | 62,419,689 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 145,954 | 2,090,059 | — | — | ||||||||||
Shares repurchased | (8,482,187 | ) | (131,249,232 | ) | (714,886 | ) | (8,926,162 | ) | ||||||
Redemption fees received** | — | 192,167 | — | 3,423 | ||||||||||
Net Increase (Decrease) | 22,869,212 | $ | 361,920,829 | 4,038,212 | $ | 53,496,950 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 9,826,021 | $ | 147,394,797 | 1,892,754 | $ | 24,074,650 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 54,556 | 748,508 | — | — | ||||||||||
Shares repurchased | (932,965 | ) | (13,875,119 | ) | (228,812 | ) | (2,723,322 | ) | ||||||
Redemption fees received** | — | 42,940 | — | — | ||||||||||
Net Increase (Decrease) | 8,947,612 | $ | 134,311,126 | 1,663,942 | $ | 21,351,328 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 12,137,575 | $ | 193,746,428 | 1,588,545 | $ | 21,467,761 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 63,694 | 923,572 | — | — | ||||||||||
Shares repurchased | (4,369,477 | ) | (68,872,491 | ) | (85,287 | ) | (1,092,663 | ) | ||||||
Redemption fees received** | — | 64,225 | — | 344 | ||||||||||
Net Increase (Decrease) | 7,831,792 | $ | 125,861,734 | 1,503,258 | $ | 20,375,442 | ||||||||
Class R1 Shares | ||||||||||||||
Shares sold | 5,664,323 | $ | 88,572,584 | 490,525 | $ | 6,601,537 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 15,760 | 226,474 | — | — | ||||||||||
Shares repurchased | (635,940 | ) | (9,972,757 | ) | (46,935 | ) | (631,650 | ) | ||||||
Redemption fees received** | — | 15,085 | — | — | ||||||||||
Net Increase (Decrease) | 5,044,143 | $ | 78,841,386 | 443,590 | $ | 5,969,887 | ||||||||
Certified Annual Report | 19 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Class R5 Shares * | ||||||||||||
Shares sold | 2,707 | $ | 43,064 | — | $ | — | ||||||
Shares issued to shareholders in reinvestment of dividends | 0 | 1 | — | — | ||||||||
Shares repurchased | (2 | ) | (35 | ) | — | — | ||||||
Redemption fees received** | — | 8 | — | — | ||||||||
Net Increase (Decrease) | 2,705 | $ | 43,038 | — | $ | — | ||||||
* | Effective date of Class R5 shares was October 3, 2005. |
** | The Fund charges a redemption fee of 1% of the Class A & Class I shares exchanged within 30 days of purchase. Prior to February 1, 2006, the Fund charged a redemption fee of 1% of the Class A & Class I shares exchanged within 90 days of purchase. Redemption fees charged to any Class are allocated to all Classes upon receipt of payment based on relative net asset values of each Class or other appropriate allocation methods. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $1,212,084,189 and $591,704,531, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 848,837,345 | ||
Gross unrealized appreciation on a tax basis | $ | 125,348,809 | ||
Gross unrealized depreciation on a tax basis | (21,338,106 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 104,010,703 | ||
At September 30, 2006, the Fund did not have any undistributed ordinary net income or undistributed capital gains.
At September 30, 2006, the Fund has deferred tax basis currency and capital losses occurring subsequent to October 31, 2005 of $81,967 and $1,926,292 respectively. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
At September 30, 2006, the Fund had tax basis capital losses of $587,448, which may be carried over to offset future capital gains. To the extent such carry forwards are used, capital gains distributions may be reduced to the extent provided by regulations. Such losses expire September 30, 2014.
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $6,063,359, decreased accumulated net realized investment loss by $299,282, and decreased net investment loss by $5,764,077. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from net operating loss and currency losses.
The tax character of distributions paid by the Fund for the year ended September 30, 2006 was $4,423,452 from the distribution of long-term capital gains.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2006, 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
20 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
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. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity.
CONTRACTS TO SELL: | ||||||||
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
723,000,000 | Indian Rupee for 15,605,439 USD | Dec 13, 2006 | $ | (140,963 | ) | |||
7,700,000 | Euro for 9,790,473 USD | Dec 21, 2006 | (22,121 | ) | ||||
Unrealized loss from forward Sell contracts: | $ | (163,084 | ) | |||||
CONTRACTS TO BUY: | ||||||||
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
7,700,000 | Euro for 9,768,605 USD | Dec 21, 2006 | $ | 43,989 | ||||
Unrealized gain from forward Buy contracts: | $ | 43,989 | ||||||
Net unrealized gain (loss) from forward Exchange contracts: | $ | (119,095 | ) | |||||
Certified Annual Report | 21 |
FINANCIAL HIGHLIGHTS | ||
Thornburg Core Growth Fund |
Year Ended September 30, | Period Ended September 30, | |||||||||||
Class I Shares: | 2006 | 2005 | 2004(c) | |||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 14.37 | $ | 10.93 | $ | 10.87 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | (0.06 | ) | (0.07 | ) | (0.08 | ) | ||||||
Net realized and unrealized gain (loss) on investments | 2.58 | 3.51 | 0.14 | |||||||||
Total from investment operations | 2.52 | 3.44 | 0.06 | |||||||||
Less dividends from: | ||||||||||||
Realized capital gains | (0.24 | ) | — | — | ||||||||
Redemption fees added to paid in capital | 0.01 | — | — | |||||||||
Change in net asset value | 2.29 | 3.44 | 0.06 | |||||||||
NET ASSET VALUE, end of period | $ | 16.66 | $ | 14.37 | $ | 10.93 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return(a) | 17.85 | % | 31.47 | % | 0.55 | % | ||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) | (0.40 | )% | (0.55 | )% | (0.74 | )%(b) | ||||||
Expenses, after expense reductions | 1.01 | % | 1.02 | % | 1.00 | %(b) | ||||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.99 | % | 0.99 | %(b) | ||||||
Expenses, before expense reductions | 1.10 | % | 1.15 | % | 1.31 | %(b) | ||||||
Portfolio turnover rate | 98.00 | % | 115.37 | % | 108.50 | % | ||||||
Net assets at end of period (000) | $ | 188,422 | $ | 49,975 | $ | 21,578 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class I Shares was November 1, 2003. |
+ | Based on weighted average shares outstanding. |
22 | Certified Annual Report |
SCHEDULE OF INVESTMENTS | ||
Thornburg Core Growth Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-582, CLASS C - 885-215-574, CLASS I - 885-215-475, CLASS R1 - 885-215-517, CLASS R5 - 855-215-350
NASDAQ SYMBOLS: CLASS A - THCGX, CLASS C - TCGCX, CLASS I - THIGX, CLASS R1 - THCRX, CLASS R5 - THGRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/06
Software & Services | 18.4 | % | |
Health Care Equipment & Services | 13.3 | % | |
Consumer Services | 9.9 | % | |
Diversified Financials | 9.5 | % | |
Pharmaceuticals & Biotechnology | 8.2 | % | |
Technology Hardware & Equipment | 7.8 | % | |
Transportation | 4.6 | % | |
Media | 4.1 | % | |
Retailing | 3.0 | % | |
Telecommunication Services | 2.8 | % | |
Commercial Services & Supplies | 2.4 | % | |
Utilities | 2.3 | % | |
Semiconductors & Semiconductor Equipment | 1.8 | % | |
Capital Goods | 1.8 | % | |
Food & Staples Retailing | 1.7 | % | |
Food Beverage & Tobacco | 0.6 | % | |
Other Assets & Cash Equivalents | 7.8 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 92.23% | |||||
CAPITAL GOODS — 1.80% | |||||
BUILDING PRODUCTS — 1.80% | |||||
Nice SpA+ | 2,149,028 | $ | 17,394,215 | ||
17,394,215 | |||||
COMMERCIAL SERVICES & SUPPLIES — 2.36% | |||||
COMMERCIAL SERVICES & SUPPLIES — 2.36% | |||||
Paxys, Inc.+ | 17,281,600 | 3,697,059 | |||
PeopleSupport, Inc.+(1) | 1,034,384 | 19,136,104 | |||
22,833,163 | |||||
CONSUMER SERVICES — 9.86% | |||||
DIVERSIFIED CONSUMER SERVICES — 1.13% | |||||
Bright Horizons Family Solutions, Inc.+ | 262,400 | 10,949,952 | |||
HOTELS RESTAURANTS & LEISURE — 8.73% | |||||
FuJi Food & Catering Services | 6,414,100 | 10,701,692 | |||
Las Vegas Sands Corp.+ | 587,400 | 40,148,790 | |||
Melco International Development Ltd. | 5,225,900 | 11,174,020 | |||
Wyndham Worldwide Corp.+ | 805,200 | 22,521,444 | |||
95,495,898 | |||||
Certified Annual Report | 23 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
DIVERSIFIED FINANCIALS — 9.53% | |||||
CAPITAL MARKETS — 5.01% | |||||
Affiliated Managers Group, Inc.+ | 383,925 | $ | 38,434,732 | ||
Indiabulls Financial Services Ltd. | 1,119,000 | 10,080,530 | |||
DIVERSIFIED FINANCIAL SERVICES — 4.52% | |||||
NYSE Group, Inc.+ | 585,400 | 43,758,650 | |||
92,273,912 | |||||
FOOD & STAPLES RETAILING — 1.68% | |||||
FOOD & STAPLES RETAILING — 1.68% | |||||
Celestial Nutrifoods Ltd.+ | 16,736,000 | 16,250,593 | |||
16,250,593 | |||||
FOOD BEVERAGE & TOBACCO — 0.57% | |||||
FOOD PRODUCTS — 0.57% | |||||
China Milk Products Group Ltd.+ | 8,319,000 | 5,559,987 | |||
5,559,987 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 13.33% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 2.67% | |||||
Cytyc Corp.+ | 1,055,400 | 25,836,192 | |||
HEALTH CARE PROVIDERS & SERVICES — 10.66% | |||||
Allscripts Healthcare Solutions, Inc.+ | 414,100 | 9,296,545 | |||
Caremark Rx, Inc. | 584,071 | 33,099,303 | |||
Lincare Holdings, Inc.+ | 890,212 | 30,836,944 | |||
WellPoint, Inc.+ | 389,500 | 30,010,975 | |||
129,079,959 | |||||
MEDIA — 4.12% | |||||
MEDIA — 4.12% | |||||
DIRECTV Group, Inc.+ | 2,025,300 | 39,857,904 | |||
39,857,904 | |||||
PHARMACEUTICALS & BIOTECHNOLOGY — 8.24% | |||||
BIOTECHNOLOGY — 6.23% | |||||
Gilead Sciences, Inc.+ | 540,050 | 37,101,435 | |||
Nuvelo, Inc.+ | 1,269,156 | 23,149,405 | |||
PHARMACEUTICALS — 2.01% | |||||
Aspreva Pharmaceuticals Corp.+ | 750,600 | 19,478,070 | |||
79,728,910 | |||||
24 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
RETAILING — 3.01% | |||||
MULTILINE RETAIL — 3.01% | |||||
Kohl’s Corp.+ | 449,300 | $ | 29,168,556 | ||
29,168,556 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.82% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.82% | |||||
Austriamicrosystems AG+ | 310,434 | 17,588,364 | |||
17,588,364 | |||||
SOFTWARE & SERVICES — 18.43% | |||||
INTERNET SOFTWARE & SERVICES — 6.22% | |||||
Equinix, Inc.+ | 331,000 | 19,893,100 | |||
Google, Inc.+ | 100,250 | 40,290,475 | |||
IT SERVICES — 2.84% | |||||
Gevity HR, Inc. | 625,358 | 14,245,655 | |||
Satyam Computer | 737,200 | 13,204,880 | |||
SOFTWARE — 9.37% | |||||
Amdocs Ltd.+ | 1,073,225 | 42,499,710 | |||
Microsoft Corp. | 1,489,500 | 40,708,035 | |||
Opsware, Inc.+ | 839,000 | 7,559,390 | |||
178,401,245 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 7.83% | |||||
COMPUTERS & PERIPHERALS — 7.83% | |||||
Apple Computer, Inc.+ | 590,500 | 45,486,215 | |||
Diebold, Inc. | 697,500 | 30,362,175 | |||
75,848,390 | |||||
TELECOMMUNICATION SERVICES — 2.74% | |||||
WIRELESS TELECOMMUNICATION SERVICES — 2.74% | |||||
America Movil SA | 13,414,000 | 26,506,743 | |||
26,506,743 | |||||
TRANSPORTATION — 4.58% | |||||
AIRLINES — 4.58% | |||||
Copa Holdings SA | 805,940 | 27,667,920 | |||
JetBlue Airways Corp.+ | 1,801,400 | 16,698,978 | |||
44,366,898 | |||||
Certified Annual Report | 25 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
UTILITIES — 2.33% | ||||||
INDUSTRIAL POWER PRODUCTION / ENERGY TRADING — 2.33% | ||||||
Ormat Technologies, Inc. | 690,060 | $ | 22,578,763 | |||
22,578,763 | ||||||
TOTAL COMMON STOCK (Cost $788,284,689) | 892,933,500 | |||||
SHORT TERM INVESTMENTS — 6.19% | ||||||
AIG Funding, Inc., 5.17%, 10/3/2006 | $ | 7,000,000 | 6,997,988 | |||
AIG Funding, Inc., 5.24%, 10/5/2006 | 20,000,000 | 19,988,355 | ||||
Lasalle Bank Corp., 5.21%, 10/13/2006 | 3,000,000 | 2,994,790 | ||||
Toyota Credit de Puerto Rico, 5.23%, 10/10/2006 | 5,500,000 | 5,492,809 | ||||
Toyota Credit de Puerto Rico, 5.20%, 10/16/2006 | 3,000,000 | 2,993,500 | ||||
Toyota Credit de Puerto Rico, 5.21%, 10/18/2006 | 21,500,000 | 21,447,106 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $59,914,547) | 59,914,548 | |||||
TOTAL INVESTMENTS — 98.42% (Cost $848,199,236) | $ | 952,848,048 | ||||
OTHER ASSETS LESS LIABILITIES — 1.58% | 15,311,376 | |||||
NET ASSETS — 100.00% | $ | 968,159,424 | ||||
Footnote Legend
+ | Non-income producing |
See notes to financial statements.
(1) | Investment in Affiliates |
Holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940 because the Fund’s holding represented 5% or more of the company’s voting securities during the period, are shown below:
Issuer | Shares at Sept. 30, 2005 | Gross Additions | Gross Reductions | Shares at Sept. 30, 2006 | Market Value Sept. 30, 2006 | Dividend Income | ||||||
PeopleSupport, Inc. | — | 1,105,900 | 71,516 | 1,034,384 | 19,136,104 | — |
Total non-controlled “affiliated companies” — 1.98% of Net Assets
26 | Certified Annual Report |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Core Growth Fund
To the Trustees and Class I 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 (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
Certified Annual Report | 27 |
EXPENSE EXAMPLE | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including a 30-day redemption fee on Class I shares;
(2) ongoing costs, including management and administrative fees and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 996.40 | $ | 4.95 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
28 | Certified Annual Report |
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Core Growth Fund versus NASDAQ Composite Index (November 3, 2003 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2006
1 Yr | Since Inception | |||||
I Shares (Incep: 11/3/03) | 17.85 | % | 16.48 | % | ||
NASDAQ Composite Index (Since: 11/3/03) | 5.83 | % | 5.56 | % |
Performance data reflects past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains. There is no up-front sales charge for Class I shares. Class I shares are subject to a 1% 30-day redemption fee.
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. The performance of any index is not indicative of the performance of any particular investment.
Certified Annual Report | 29 |
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
30 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report | 31 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds.Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
32 | Certified Annual Report |
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, the Fund designates long-term capital gain dividends of $4,423,505.
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006. Complete information will be computed and reported in conjunction with your 2006 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Core Growth Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance: In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting company, industry, market and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives; |
Certified Annual Report | 33 |
OTHER INFORMATION, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2006 (Unaudited) |
(iv) | measures of the Fund’s investment performance over different periods of time, relative to a category of mutual funds sharing certain comparable characteristics and selected by an independent mutual fund analyst firm, and relative to broad based securities indices; and |
(v) | comparative measures of portfolio volatility, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectus, are unique or may vary from the methods for selecting the investments for other funds.
In conducting their evaluation, the Trustees determined that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s above average or better investment performance in most periods relative to the performance of a category of equity mutual funds having certain characteristics comparable to the Fund and selected by an independent mutual fund analyst firm, the Fund’s outperformance of two broad based securities indices in each period since its inception, the Fund’s relative performance in periods of negative market conditions and the Fund’s cumulative returns.
The Trustees concluded, based upon these and other observations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, the Advisor’s waiver of a portion of its fee, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of multi-capitalization growth equity mutual funds assembled by an independent analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients of the Advisor and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the Fund’s management fee was somewhat higher than the average and median fee rates for the grouping of equity mutual funds selected by the mutual fund analyst firm, but that the overall expense ratio of the Fund was comparable to the average and median expense ratios for the same group of mutual funds. The Trustees also observed in this regard the quality of the Advisor’s services and the investment performance of the Fund. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the investment performance of the Fund and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
34 | Certified Annual Report |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report. | 35 |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |||
![]() | ![]() | |||
119 East Marcy Street | 119 East Marcy Street | |||
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |||
800.847.0200 | 800.847.0200 |
Thornburg Investment Income Builder Fund
Current Stream of Income Plus Potential for Growth
The Fund seeks to provide a level of current income which exceeds the average yield on U.S. stocks generally, and which will generally grow, subject to periodic fluctuations, over the years on a per share basis. The Fund’s secondary investment objective is long-term capital appreciation.
The Fund invests primarily in companies (both in the U.S. and abroad) that pay dividends and, in the opinion of Thornburg Investment Management, that show the capacity to increase them.To provide additional income, the Fund also invests in bonds and hybrid securities.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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2 This page is not part of the Annual Report.
Message from the Chairman
Garrett Thornburg Chairman & CEO | November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We seek to accomplish this through a range of equity funds that redefine traditional measures of value and growth and through a family of laddered bond funds that focus on quality, stability and minimizing risk over time.
Confirming our strategy, all Thornburg equity funds are highly ranked within their respective categories over the long term.
The Thornburg equity funds employ a comprehensive approach, which is more inclusive than the traditional deep value or high growth approach to stock selection. You can read much more about the stocks in your Fund’s portfolio, and all Thornburg equity funds, at our web site, www.thornburg.com/funds.
During this decade, the average dividend yield paid by equity and hybrid mutual funds has dipped well below 1%. We established Thornburg Investment Income Builder Fund in late 2002 to be clearly different from other equity/hybrid funds by paying attractive dividends today, with a further goal of increasing these in the future. Our record to date shows clear success in achieving each aspect of this mission.
On the bond side, we have always had a highly disciplined approach of laddering short-and intermediate-bond maturities, seeking to provide both an attractive return and relative stability of principal.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely,
Garrett Thornburg Chairman & CEO |
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The Dividend Landscape
To appreciate the investment environment that Thornburg Investment Income Builder Fund operates in, you may wish to review these highlights of the “dividend landscape.”
The S&P 500 Index Payout Ratio – A Historical Perspective
S&P 500 Index Payout Ratio (January 1940 to December 2005)
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.
Corporate Willingness to Pay Dividends is Improving
Percentage of Companies Paying Dividends in Russell 1000 Index (December 1979 to December 2005)
The Russell 1000 Index includes 1000 public companies that are supposed to be generally representative of corporate America. Between 1980 and 1993, at least 75% of these firms paid some dividend. Between 1994 and 2001, the percentage of Russell 1000 companies paying dividends sank 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.
4 This page is not part of the Annual Report.
Rising Dividend Payments Despite Decreasing 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.
Hypothetical chart is for illustration purposes only and is not indicative of an investment in any particular security. Investors may not invest directly in an index.
S&P 500 Index Average Yield vs.Annual Dividends from a OneTime $10,000 Investment in the Index (Dividends not Reinvested)
A Truly Diversified Dividend-Paying Portfolio Must Look Beyond the Obvious High Yield Stocks!
In the (large cap) Russell 1000 Index, 63% of the top 100 dividend payers are in the real estate or utilities sectors. In the (small cap) Russell 2000 Index, 72% of the top 100 dividend-yielding stocks are either real estate or utilities. In order to construct a diversified portfolio of attractive yielding stocks, one must look beyond these two sectors.We do!
Source:Thomson Portfolio Analytics, as of December 2005; (Numbers may not add to 100% due to rounding.)
Dividend yield is a ratio that shows how much a company pays out in dividends each year relative to its share price.
The Top 100 Dividend Yields
Russell 1000 Index | Russell 2000 Index | |||||
Real Estate | 37 | % | 68 | % | ||
Banks | 9 | % | 1 | % | ||
Other Financials | 7 | % | 6 | % | ||
Total Financials | 53 | % | 75 | % | ||
Utilities | 26 | % | 4 | % | ||
Consumer Staples | 6 | % | 3 | % | ||
Telecom | 6 | % | 6 | % | ||
Consumer Discretionary | 3 | % | 5 | % | ||
Health Care | 3 | % | 1 | % | ||
Materials | 2 | % | 2 | % | ||
Industrials | 1 | % | 1 | % | ||
Technology | 0 | % | 3 | % | ||
Energy | 0 | % | 0 | % |
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The Dividend Landscape Continued
Global Diversification Can Improve the Portfolio Yield
Average Dividend Yields of Markets Around the Globe
Source: FactSet, as of September 30, 2006; Countries and regions above, except the U.S., are represented by MSCI indices defined on the following pages.
Since firms outside the U.S. tend to pay higher dividends than U.S. firms, particularly outside the real estate and utility sectors, we diversify the Thornburg Investment Income Builder Fund into foreign dividend-paying stocks to try to take advantage of these opportunities.
6 This page is not part of the Annual Report.
Important Information
The information presented on the following pages was current as of September 30, 2006. The managers’ views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
Shares in the Fund carry risks including possible loss of principal. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations.
As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The value of a bond will fluctuate relative to changes in interest rates; as interest rates rise, the overall price of bonds fall. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
Glossary
Blended Index – 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 U.S. 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 (MSCI) World Index is an unmanaged market-weighted index that consists of over 1,200 equity securities traded in 23 of the world’s most developed countries. Securities are listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The index is calculated with net dividends reinvested, in U.S. dollars.
MSCI All Country Asia ex-Japan Index – a free float-adjusted market capitalization index that is designed to measure equity market performance in Asia. As of May 2005, the MSCI All Country Asia ex-Japan Index consisted of the following 11 countries: China, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, Philippines, Singapore Free,Taiwan, and Thailand.
MSCI Country Indices (Australia, U.K. and Japan) – free float-adjusted market capitalization indices that are designed to measure equity market performance in that specific country.
MSCI Europe ex-U.K. Index – a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of May 2005, the MSCI Europe Index consisted of the following 15 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and Switzerland.
MSCI EM (Emerging Markets) Latin America Index – a free float-adjusted market capitalization index that is designed to measure equity market performance in Latin America. As of May 2005 the MSCI EM Latin America Index consisted of the following seven emerging market country indices: Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. Russell 1000 Index – Consists of the 1,000 largest securities in the Russell 3000 Index, which represents approximately 90% of the total market capitalization of the Russell 3000 Index. It is a large-cap, market-oriented index and is highly correlated with the S&P 500 Index.
Russell 2000 Index – An unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 Index, representing approximately 10% of the total market capitalization of the Russell 3000 Index.
Standard & Poor’s 500 Stock Index (S&P 500) – An unmanaged index generally representative of the U.S. stock market.
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. The performance of any index is not indicative of the performance of any particular investment.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price.The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median, and half have values that are less. If there is an even number of companies, then the median is the average of the two companies in the middle.
Price to Earnings Ratio (P/E) – A valuation ratio of a company’s current share price compared to its per-share earnings. P/E equals a company’s market value per share divided by earnings per share.
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Portfolio Overview Thornburg Investment Income Builder Fund
IMPORTANT PERFORMANCE INFORMATION
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
The maximum sales charge for Class A shares is 4.50%. A shares are subject to a 1% 30-day redemption fee.
MANAGEMENT TEAM
Front row, L to R: Steven Bohlin, Brad Kinkelaar, and Brian McMahon. Back row, L to R: Wendy Trevisani, Lewis Kaufman, Ed Maran,Vin Walden, and Lei Wang.
PORTFOLIO COMPOSITION
As of 9/30/06
We do not expect each sequential quarter’s dividend to increase over that of the prior quarter, since dividend payments outside the U.S. tend to be seasonal. Rather, the Fund aspires to increase the dividend paid on an annual basis. 90% of 2005’s dividend payments qualified for the lower 15% tax rate on stock dividends. In 2004 and 2003, 100% qualified. (There is no guarantee that this will be the case for future dividends.)
QUARTERLY DIVIDEND HISTORY
Q1 | Q2 | Q3 | Q4 | Total | |||||||||||
Class A Shares | |||||||||||||||
2006 | 12.5 | ¢ | 16.0 | ¢ | 19.2 | ¢ | N/A | N/A | |||||||
2005 | 11.0 | ¢ | 13.6 | ¢ | 17.4 | ¢ | 29.0 | ¢ | 71.0 | ¢ | |||||
2004 | 10.2 | ¢ | 12.5 | ¢ | 15.0 | ¢ | 21.8 | ¢ | 59.5 | ¢ | |||||
2003 | 9.2 | ¢ | 11.2 | ¢ | 12.4 | ¢ | 17.5 | ¢ | 50.3 | ¢ | |||||
Class C Shares | |||||||||||||||
2006 | 10.2 | ¢ | 13.5 | ¢ | 16.5 | ¢ | N/A | N/A | |||||||
2005 | 9.1 | ¢ | 11.7 | ¢ | 15.6 | ¢ | 26.8 | ¢ | 63.2 | ¢ | |||||
2004 | 8.4 | ¢ | 10.9 | ¢ | 13.7 | ¢ | 20.2 | ¢ | 53.2 | ¢ | |||||
2003 | 8.3 | ¢ | 9.5 | ¢ | 10.4 | ¢ | 15.9 | ¢ | 44.1 | ¢ |
KEY PORTFOLIO ATTRIBUTES
Equity Statistics | ||||
Portfolio P/E (12-mo. trailing) | 15.0x | |||
Median Market Cap | $ | 12.3 B | ||
Equity Holdings | 49 | |||
Fixed Income Statistics | ||||
Weighted Average Coupon | 5.6 | % | ||
Average Credit Quality | A- | |||
Average Maturity | 2.7 yrs | |||
Duration | 1.8 yrs | |||
Bond Holdings | 40 | |||
30-day SEC Yield (A Shares) | 3.53 | % |
TOP TEN EQUITY HOLDINGS
Eni S.p.A. | 3.5 | % | |
Host Hotels & Resorts, Inc. | 3.2 | % | |
BBVA | 3.1 | % | |
Telefónica S.A. | 3.1 | % | |
Pfizer, Inc. | 2.9 | % | |
Altria Group, Inc. | 2.9 | % | |
GlaxoSmithKline plc | 2.9 | % | |
General Electric Co. | 2.9 | % | |
Southern Copper Corp. | 2.8 | % | |
Microsoft Corp. | 2.5 | % |
AVERAGE ANNUAL TOTAL RETURNS*
For periods ending September 30, 2006
YTD | 1 Yr | 3 Yrs | Since Inception | |||||||||
A Shares (Incep: 12/24/02) | ||||||||||||
Without Sales Charge | 14.53 | % | 16.05 | % | 17.54 | % | 18.91 | % | ||||
With Sales Charge | 9.35 | % | 10.86 | % | 15.75 | % | 17.47 | % | ||||
Blended Index** (Since: 12/31/02) | 8.86 | % | 11.53 | % | 13.33 | % | 14.28 | % |
* | Periods under one year are not annualized. |
** | Blended Index: 75% MSCI World Equity Index/25% Lehman Brothers Aggregate Bond Index |
8 This page is not part of the Annual Report.
The investment objective of Thornburg Investment Income Builder Fund is to provide a level of current income which exceeds the average yield on U.S. stocks, and which will grow, subject to periodic fluctuations, over the years. This objective remains constant over time. However, the specific investments we have used to try to reach our objective have changed over time. There is no guarantee the Fund will meet its investment objectives.
Business conditions for various industries and operating effectiveness at individual firms, change over time. Investor preferences, expressed as both absolute and relative prices, also change over time. In the view of your portfolio management team, “some doors close and others open.” As shown in the tables below, the percentage industry allocations of your Fund evolve to reflect these changing conditions.
TOP TEN INDUSTRIES
As of 9/30/06
Energy | 12.1 | % | |
Banks | 12.0 | % | |
Diversified Financials | 10.4 | % | |
Telecommunication Services | 9.9 | % | |
Food Beverage & Tobacco | 6.6 | % | |
Real Estate | 6.3 | % | |
Pharmaceuticals & Biotechnology | 6.0 | % | |
Utilities | 4.1 | % | |
Consumer Services | 2.9 | % | |
Capital Goods | 2.9 | % |
TOP TEN INDUSTRIES
As of 6/30/06
Energy | 13.2 | % | |
Banks | 10.0 | % | |
Telecommunication Services | 9.9 | % | |
Diversified Financials | 9.4 | % | |
Pharmaceuticals & Biotechnology | 8.5 | % | |
Real Estate | 6.1 | % | |
Food Beverage & Tobacco | 5.7 | % | |
Utilities | 5.3 | % | |
Capital Goods | 3.1 | % | |
Consumer Services | 3.1 | % |
TOP TEN INDUSTRIES
As of 3/31/06
Diversified Financials | 12.4 | % | |
Energy | 11.9 | % | |
Banks | 8.4 | % | |
Telecommunication Services | 8.2 | % | |
Real Estate | 7.2 | % | |
Pharmaceuticals & Biotechnology | 7.1 | % | |
Food Beverage & Tobacco | 6.2 | % | |
Utilities | 4.8 | % | |
Food & Staples Retailing | 4.3 | % | |
Consumer Services | 3.7 | % |
TOP TEN INDUSTRIES
As of 12/31/05
Diversified Financials | 15.2 | % | |
Energy | 13.3 | % | |
Banks | 10.2 | % | |
Utilities | 8.9 | % | |
Pharmaceuticals & Biotechnology | 7.9 | % | |
Real Estate | 6.0 | % | |
Telecommunication Services | 5.9 | % | |
Food Beverage & Tobacco | 5.1 | % | |
Transportation | 4.5 | % | |
Food & Staples Retailing | 3.9 | % |
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Thornburg Investment Income Builder Fund
September 30, 2006
Table of Contents
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report 11
October 18, 2006
Dear Fellow Shareholder:
Thornburg Investment Income Builder Fund paid income dividends of 35.2¢ per Class A share in the six months ended September 30, 2006, up 13.5% from the 31.0¢ paid in the comparable prior year period. The dividend per share was higher for Class I shares and lower on Class C shares, due to varying class specific expenses. The net asset value per share increased 2.9% during the six-month period, from $19.02 to $19.58. For the fiscal year ended September 30, 2006, A share income dividends were 76.7¢, up 20.2% over the prior year. Your Fund also paid capital gains dividends of 34.0¢ per share. After paying these dividends, the net asset value per share increased $1.65, to $19.58. Recall that Thornburg Investment Income Builder Fund seeks to generate attractive and rising dividends over time from its portfolio of income producing stocks, bonds, and hybrid securities. These results indicate that we are on track with respect to these goals.
The median percentage increase of the most recent dividend paid by your portfolio firms was approximately 13% over the year-earlier level. This reflects the improving ability and willingness to pay dividends by most of the firms included in your Fund. Under the surface of the dividend landscape, there is a more complicated dynamic. Too many firms in certain U.S. industries that traditionally have the highest yields, utilities and REITs, appear relatively unattractive at this time, due to prior price appreciation and competition from rising short maturity interest rates. Broadly speaking, utilities are squeezed between higher fuel costs and political/ regulatory pressure to restrain, or even roll back rates. As each REIT is somewhat unique, it is difficult to generalize. We can say that capital flows into building rent-producing structures of almost every description have been enormous, so there is too little scarcity value in most sectors to hold out the prospect of interesting future reward for incoming investors at this time. Making our equity portfolio produce more dividend income with a modest allocation to REITs and utilities has been a challenge. We depend on the improved ability and willingness of firms in a broad group of other industries to pay higher dividends.
Oil & gas producers and refiners are one such group. Cash flows generated by these firms are enormous, given today’s prices for their hydrocarbon output. So far, most of these companies are not overspending to increase supply in a way that will lower visible future returns. We know that these cash flows are cyclical, so we remain guarded about our investment exposure to this area. During the latest semi-annual period, Chevron Corp. was among our better performers, while Canadian Oil Sands Trust, BP plc, and Precision Drilling Trust were all negative performers, following earlier periods of strong performance. Another group with attractive cash flows and modest valuations is the telecom services industry. We are particularly interested in firms that obtain a growing percentage of revenues from mobile telephony and broadband services. France Telecom S.A. languished during the period, while Telefónica S.A. and Telefónica O2 Czech Republic performed decently on the strength of attractive dividends. Vodafone was one of your Fund’s better performers as it refocused its business and paid special dividends with operating cash flows and the proceeds from the sale of an underperforming Japanese unit.
Contrary to most predictions in this time of rising money market interest rates, your bank and diversified financial services holdings, generally performed quite well during the last six months. Your portfolio’s top performers included Banco Bilbao Vizcaya Argentaria (Spanish headquartered bank), Hong Kong Exchanges and Clearing Ltd., and Bank of America Corp. One investment manager, W.P. Stewart & Co. Ltd., was among the worst portfolio performers, due to difficulties specific to its business execution.
Other strong portfolio performers during the period included UST Inc. (smokeless tobacco), Host Hotels and Resorts Inc. (hotels), Pfizer Inc. (pharmaceuticals), and Agile Property Holdings Ltd. (residential real estate development in China). Other weak portfolio performers during the period included OPAP SA (lotteries and gaming, based in Greece), FU JI Food & Catering Services (food services, based in China), Synagro Technologies
12 Certified Annual Report
Inc. (solid waste disposal), and Mediaset S.p.A. (video production and TV broadcasting, based in Italy). For the time being, we believe the business prospects of these weak performers are better than the stock price action of recent months would indicate. Your portfolio includes a diverse collection of dividend paying businesses from around the world.
Bond yields, while improved from their lows of last year, are not yet interesting – and the reward for taking corporate credit risk remains meager. The percentage of Thornburg Investment Income Builder assets invested in bonds has gradually declined over several quarters. However, we have increased your portfolio’s weighting in short maturity money market investments since yields on these surpassed 5%. The duration of the cash/bond component of the Thornburg Investment Income Builder Fund, now around 18% of fund assets, is less than 1.3 years. Domestic stocks, including preferred stocks, comprise around 40% of the portfolio, and foreign stocks make up around 41%.
We look forward to the coming quarters, recognizing that 2007 will present challenges. Consensus operating earnings per unit of the S&P 500 Index, around $76 for 2005, are forecast to be $86 for 2006 and about $90 in 2007. Dividend payouts on both U.S. and European corporate earnings are modest, leaving a high probability, we believe, that dividend growth will exceed earnings growth in future years. Don’t you agree that highly paid corporate chiefs should be able to distribute more than $25 out of operating earnings of $86? Cash is piling up on business balance sheets, with Federal Reserve data showing an incremental accumulation of more than $1 trillion in the last five years. Stay tuned.
Thank you for being a shareholder of Thornburg Investment Income Builder Fund. Remember that you can review descriptions of many of the stocks in your portfolio at your leisure by going to our internet site, www.thornburg.com/funds. Best wishes for a wonderful holiday season and New Year.
Sincerely,
![]() | ![]() | |||
Brian McMahon | Brad Kinkelaar | Steven J. Bohlin | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager | ||
President & Chief Investment Officer | Managing Director | Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995.These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully.Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 13
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
ASSETS | |||
Investments at value | |||
Non-controlled affiliated issuers (cost $ 52,787,439) | $ | 54,726,296 | |
Non-affiliated issuers (cost $ 1,612,734,658) | 1,777,146,557 | ||
Cash | 4,040,861 | ||
Receivable for fund shares sold | 19,414,858 | ||
Unrealized gain on forward exchange contracts (Note 7) | 2,248,623 | ||
Dividends receivable | 6,694,739 | ||
Interest receivable | 2,029,474 | ||
Prepaid expenses and other assets | 29,340 | ||
Total Assets | 1,866,330,748 | ||
LIABILITIES | |||
Payable for securities purchased | 10,456,247 | ||
Payable for fund shares redeemed | 1,298,136 | ||
Unrealized loss on forward exchange contracts (Note 7) | 1,104,044 | ||
Payable to investment advisor and other affiliates (Note 3) | 1,815,209 | ||
Accounts payable and accrued expenses | 642,798 | ||
Dividends payable | 559,860 | ||
Total Liabilities | 15,876,294 | ||
NET ASSETS | $ | 1,850,454,454 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 12,565,595 | |
Net unrealized appreciation on investments | 167,483,179 | ||
Accumulated net realized gain (loss) | 48,061,630 | ||
Net capital paid in on shares of beneficial interest | 1,622,344,050 | ||
$ | 1,850,454,454 | ||
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($903,346,983 applicable to 46,128,508 shares of beneficial interest outstanding - Note 4) | $ | 19.58 | |
Maximum sales charge, 4.50% of offering price | 0.92 | ||
Maximum offering price per share | $ | 20.50 | |
Class C Shares: | |||
Net asset value and offering price per share * ($636,947,195 applicable to 32,501,898 shares of beneficial interest outstanding - Note 4) | $ | 19.60 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($308,859,226 applicable to 15,672,074 shares of beneficial interest outstanding - Note 4) | $ | 19.71 | |
Class R1 Shares: | |||
Net asset value, offering and redemption price per share ($1,301,050 applicable to 66,457 shares of beneficial interest outstanding - Note 4) | $ | 19.58 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. |
Certified Annual Report 15
STATEMENT OF OPERATIONS | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Dividend income | ||||
Non-controlled affiliated issuers | $ | 2,724,710 | ||
Non-affiliated issuers (net of foreign taxes withheld of $ 3,051,975) | 58,658,607 | |||
Interest income (net of premium amortized of $ 172,849) | 12,534,567 | |||
Total Income | 73,917,884 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 10,797,815 | |||
Administration fees (Note 3) | ||||
Class A Shares | 823,635 | |||
Class C Shares | 562,892 | |||
Class I Shares | 94,488 | |||
Class R1 Shares | 818 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,656,256 | |||
Class C Shares | 4,537,666 | |||
Class R1 Shares | 3,196 | |||
Transfer agent fees | ||||
Class A Shares | 612,375 | |||
Class C Shares | 476,447 | |||
Class I Shares | 87,965 | |||
Class R1 Shares | 15,770 | |||
Registration and filing fees | ||||
Class A Shares | 54,458 | |||
Class C Shares | 40,336 | |||
Class I Shares | 31,458 | |||
Class R1 Shares | 13,854 | |||
Custodian fees (Note 3) | 501,413 | |||
Professional fees | 95,857 | |||
Accounting fees | 94,073 | |||
Trustee fees | 32,085 | |||
Other expenses | 234,762 | |||
Total Expenses | 20,767,619 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,194,932 | ) | ||
Distribution and service fees waived (Note 3) | (20,000 | ) | ||
Fees paid indirectly (Note 3) | (57,509 | ) | ||
Net Expenses | 19,495,178 | |||
Net Investment Income | $ | 54,422,706 | ||
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 59,186,747 | ||
Foreign currency transactions | (5,679,701 | ) | ||
53,507,046 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $ 306,966) | 85,874,326 | |||
Foreign currency translations | (91,078 | ) | ||
85,783,248 | ||||
Net Realized and Unrealized Gain | 139,290,294 | |||
Net Increase in Net Assets Resulting From Operations | $ | 193,713,000 | ||
See notes to financial statements.
Certified Annual Report 17
Thornburg Investment Income Builder Fund |
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 54,422,706 | $ | 27,694,765 | ||||
Net realized gain on investments and foreign currency transactions | 53,507,046 | 19,208,885 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, foreign currency translation, and deferred taxes | 85,783,248 | 56,812,692 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 193,713,000 | 103,716,342 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (27,097,402 | ) | (13,160,919 | ) | ||||
Class C Shares | (16,063,539 | ) | (7,462,307 | ) | ||||
Class I Shares | (8,357,488 | ) | (2,791,906 | ) | ||||
Class R1 Shares | (25,242 | ) | (2,854 | ) | ||||
From realized gains | ||||||||
Class A Shares | (10,140,082 | ) | (11,306 | ) | ||||
Class C Shares | (6,660,050 | ) | (7,266 | ) | ||||
Class I Shares | (2,568,880 | ) | (1,756 | ) | ||||
Class R1 Shares | (6,756 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 325,267,307 | 247,700,405 | ||||||
Class C Shares | 257,138,902 | 166,392,249 | ||||||
Class I Shares | 161,508,626 | 87,260,594 | ||||||
Class R1 Shares | 952,708 | 271,714 | ||||||
Net Increase in Net Assets | 867,661,104 | 581,902,990 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 982,793,350 | 400,890,360 | ||||||
End of year | $ | 1,850,454,454 | $ | 982,793,350 | ||||
Undistributed net investment income | $ | 12,565,595 | $ | 6,877,895 |
See notes to financial statements.
18 Certified Annual Report
Thornburg Investment Income Builder Fund | September 30, 2006 |
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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg Limited Term Income Fund, Thornburg Value Fund, Thornburg International Value Fund, Thornburg New York Intermediate Municipal Fund, Thornburg Core Growth Fund, and Thornburg Global Opportunities 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 stocks and bonds.
The Fund currently offers four classes of shares of beneficial interest: Class A, Class C, Institutional Class (Class I), and Retirement Class (Class R1). 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 I shares are sold at net asset value without a sales charge at the time of purchase, (iv) Class R1 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 (v) the respective classes may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Securities: 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. 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. When quotations are not readily available, securities are valued at evaluated prices 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. In any case where a market quotation is not readily available, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the 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 amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund to the shareholders. Therefore, no provision for Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. 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, 2006, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,127,503 for Class C shares, $57,725 for Class I shares, and $29,704 for Class R1 shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned commissions aggregating $573,564 from the sale of Class A shares of the Fund and collected contingent deferred sales charges aggregating $66,100 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class C and Class R1 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C and Class R1 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 R1 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 Trust 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, 2006, fees paid indirectly were $57,509. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 20,476,188 | $ | 383,476,280 | 15,824,625 | $ | 272,463,968 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,620,907 | 29,347,480 | 582,139 | 10,174,628 | ||||||||||
Shares repurchased | (4,735,350 | ) | (87,574,938 | ) | (2,029,458 | ) | (34,963,867 | ) | ||||||
Redemption fees received** | — | 18,485 | — | 25,676 | ||||||||||
Net Increase (Decrease) | 17,361,745 | $ | 325,267,307 | 14,377,306 | $ | 247,700,405 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 14,763,665 | $ | 277,357,697 | 10,240,222 | $ | 176,652,670 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 887,275 | 16,040,689 | 278,319 | 4,873,053 | ||||||||||
Shares repurchased | (1,951,047 | ) | (36,264,521 | ) | (878,803 | ) | (15,133,474 | ) | ||||||
Redemption fees received** | — | 5,037 | — | — | ||||||||||
Net Increase (Decrease) | 13,699,893 | $ | 257,138,902 | 9,639,738 | $ | 166,392,249 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 8,727,511 | $ | 165,649,392 | 5,095,258 | $ | 88,334,328 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 486,642 | 8,942,006 | 133,505 | 2,350,289 | ||||||||||
Shares repurchased | (701,013 | ) | (13,090,059 | ) | (195,879 | ) | (3,428,955 | ) | ||||||
Redemption fees received** | — | 7,287 | — | 4,932 | ||||||||||
Net Increase (Decrease) | 8,513,140 | $ | 161,508,626 | 5,032,884 | $ | 87,260,594 | ||||||||
Class R1 Shares* | ||||||||||||||
Shares sold | 51,927 | $ | 972,264 | 15,475 | $ | 269,569 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,712 | 31,478 | 159 | 2,832 | ||||||||||
Shares repurchased | (2,776 | ) | (51,042 | ) | (40 | ) | (687 | ) | ||||||
Redemption fees received** | — | 8 | — | — | ||||||||||
Net Increase (Decrease) | 50,863 | $ | 952,708 | 15,594 | $ | 271,714 | ||||||||
* | Effective date of Class R1 shares was February 1, 2005. |
** | The Fund charges a redemption fee of 1% of the Class A & Class I shares exchanged within 30 days of purchase. Prior to February 1, 2006, the Fund charged a redemption fee of 1% of the Class A & Class I shares exchanged within 90 days of purchase. Redemption fees charged to any Class are allocated to all Classes upon receipt of payment based on relative net asset values of each Class or other appropriate allocation methods. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $1,337,513,432 and $688,957,626, respectively.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 1,662,316,960 | ||
Gross unrealized appreciation on a tax basis | $ | 195,555,333 | ||
Gross unrealized depreciation on a tax basis | (25,999,440 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 169,555,893 | ||
Distributable earnings – ordinary income | $ | 12,565,595 | ||
Distributable – capital gains | $ | 48,061,630 |
At September 30, 2006, the Fund had deferred tax basis currency losses occurring subsequent to October 31, 2005 of $160,467. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
In order to account for permanent book/tax differences, the Fund increased undistributed net investment income by $2,808,665 and decreased accumulated net realized investment gain by $2,808,665. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency transactions, investments in REITs, and partnerships. The tax character of distributions paid during the year ended September 30, 2006, and September 30, 2005, was as follows:
2006 | 2005 | |||||
Distributions from: | ||||||
Ordinary income | $ | 54,324,964 | $ | 23,435,475 | ||
Capital gains | 16,594,475 | 2,839 | ||||
Total | $ | 70,919,439 | $ | 23,438,314 | ||
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2006, 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. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity.
CONTRACTS TO SELL:
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||
50,000,000 Euro Dollar for 64,303,000 USD | November 24, 2006 | $ | 670,940 | |||
38,000,000 Euro Dollar for 49,532,240 USD | November 24, 2006 | 1,171,874 | ||||
25,000,000 Euro Dollar for 32,294,250 USD | January 10, 2007 | 405,809 | ||||
Unrealized gain from forward Sell contracts: | 2,248,623 | |||||
25,000,000 Greater British Pound for 46,675,000 USD | December 05, 2006 | (149,041 | ) | |||
21,000,000 Greater British Pound for 38,382,120 USD | December 21, 2006 | (955,003 | ) | |||
Unrealized loss from forward | ||||||
Sell contracts: | (1,104,044 | ) | ||||
Net unrealized gain (loss) from forward | ||||||
Exchange contracts | $ | 1,144,579 | ||||
22 Certified Annual Report
Thornburg Investment Income Builder Fund |
Year Ended September 30, | Period Ended September 30, 2003(c) | |||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||
Class A Shares: | ||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 17.93 | $ | 15.60 | $ | 13.77 | $ | 11.94 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income | 0.78 | 0.73 | 0.72 | 0.56 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 1.98 | 2.24 | 1.66 | 1.60 | ||||||||||||
Total from investment operations | 2.76 | 2.97 | 2.38 | 2.16 | ||||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.77 | ) | (0.64 | ) | (0.55 | ) | (0.33 | ) | ||||||||
Net realized gains | (0.34 | ) | — | — | — | |||||||||||
Total dividends | (1.11 | ) | (0.64 | ) | (0.55 | ) | (0.33 | ) | ||||||||
Change in net asset value | 1.65 | 2.33 | 1.83 | 1.83 | ||||||||||||
NET ASSET VALUE, end of period | $ | 19.58 | $ | 17.93 | $ | 15.60 | $ | 13.77 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 16.05 | % | 19.21 | % | 17.40 | % | 18.25 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income | 4.22 | % | 4.26 | % | 4.72 | % | 5.65 | %(b) | ||||||||
Expenses, after expense reductions | 1.38 | % | 1.47 | % | 1.50 | % | 1.61 | %(b) | ||||||||
Expenses, after expense reductionsand net of custody credits | 1.38 | % | 1.47 | % | 1.49 | % | 1.60 | %(b) | ||||||||
Expenses, before expense reductions | 1.38 | % | 1.47 | % | 1.50 | % | 1.74 | %(b) | ||||||||
Portfolio turnover rate | 55.29 | % | 76.76 | % | 109.21 | % | 52.10 | % | ||||||||
Net assets at end of period (000) | $ | 903,347 | $ | 515,915 | $ | 224,522 | $ | 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. |
Certified Annual Report 23
FINANCIAL HIGHLIGHTS, CONTINUED |
Thornburg Investment Income Builder Fund |
Year Ended September 30, | Period Ended September 30, 2003(c) | |||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||
Class C Shares: | ||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 17.95 | $ | 15.62 | $ | 13.79 | $ | 11.94 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income | 0.70 | 0.66 | 0.66 | 0.51 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 1.97 | 2.24 | 1.66 | 1.62 | ||||||||||||
Total from investment operations | 2.67 | 2.90 | 2.32 | 2.13 | ||||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.68 | ) | (0.57 | ) | (0.49 | ) | (0.28 | ) | ||||||||
Net realized gains | (0.34 | ) | — | — | — | |||||||||||
Total dividends | (1.02 | ) | (0.57 | ) | (0.49 | ) | (0.28 | ) | ||||||||
Change in net asset value | 1.65 | 2.33 | 1.83 | 1.85 | ||||||||||||
Net asset value, end of period | $ | 19.60 | $ | 17.95 | $ | 15.62 | $ | 13.79 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 15.45 | % | 18.70 | % | 16.89 | % | 18.01 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income | 3.73 | % | 3.84 | % | 4.33 | % | 5.10 | %(b) | ||||||||
Expenses, after expense reductions | 1.90 | % | 1.90 | % | 1.89 | % | 1.91 | %(b) | ||||||||
Expenses, after expense reductions and net of custody credits | 1.90 | % | 1.89 | % | 1.89 | % | 1.90 | %(b) | ||||||||
Expenses, before expense reductions | 2.15 | % | 2.23 | % | 2.25 | % | 2.55 | %(b) | ||||||||
Portfolio turnover rate | 55.29 | % | 76.76 | % | 109.21 | % | 52.10 | % | ||||||||
Net assets at end of period (000) | $ | 636,947 | $ | 337,489 | $ | 143,122 | $ | 39,613 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Fund commenced operations on December 24, 2002. |
+ | Based on weighted average shares outstanding. |
24 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED |
Thornburg Investment Income Builder Fund |
Year Ended September 30, | Period Ended 2004(c) | |||||||||||
2006 | 2005 | |||||||||||
Class I Shares: | ||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 18.03 | $ | 15.64 | $ | 14.45 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.88 | 0.84 | 0.74 | |||||||||
Net realized and unrealized gain (loss) on investments | 1.98 | 2.22 | 1.01 | |||||||||
Total from investment operations | 2.86 | 3.06 | 1.75 | |||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.84 | ) | (0.67 | ) | (0.56 | ) | ||||||
Net realized gains | (0.34 | ) | — | — | ||||||||
Total dividends | (1.18 | ) | (0.67 | ) | (0.56 | ) | ||||||
Change in net asset value | 1.68 | 2.39 | 1.19 | |||||||||
NET ASSET VALUE, end of period | $ | 19.71 | $ | 18.03 | $ | 15.64 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return(a) | 16.53 | % | 19.73 | % | 12.19 | % | ||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) | 4.68 | % | 4.86 | % | 5.33 | %(b) | ||||||
Expenses, after expense reductions | 0.99 | % | 1.00 | % | 0.99 | %(b) | ||||||
Expenses, after expense reductions and net of custody credits | 0.98 | % | 0.99 | % | 0.99 | %(b) | ||||||
Expenses, before expense reductions | 1.02 | % | 1.09 | % | 1.21 | %(b) | ||||||
Portfolio turnover rate | 55.29 | % | 76.76 | % | 109.21 | % | ||||||
Net assets at end of period (000) | $ | 308,859 | $ | 129,110 | $ | 33,247 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class I Shares was November 1, 2003. |
+ | Based on weighted average shares outstanding. |
Certified Annual Report 25
FINANCIAL HIGHLIGHTS, CONTINUED |
Thornburg Investment Income Builder Fund |
Period Ended September 30, | ||||||||
2006 | 2005(c) | |||||||
Class R1 Shares: | ||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 17.93 | $ | 16.98 | ||||
Income from investment operations: | ||||||||
Net investment income | 0.82 | 0.50 | ||||||
Net realized and unrealized gain (loss) on investments | 1.92 | 0.79 | ||||||
Total from investment operations | 2.74 | 1.29 | ||||||
Less dividends from: | ||||||||
Net investment income | (0.75 | ) | (0.34 | ) | ||||
Net realized gains | (0.34 | ) | — | |||||
Total dividends | (1.09 | ) | (0.34 | ) | ||||
Change in net asset value | 1.65 | 0.95 | ||||||
NET ASSET VALUE, end of period | $ | 19.58 | $ | 17.93 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return(a) | 15.91 | % | 7.67 | % | ||||
Ratios to average net assets: | ||||||||
Net investment income | 4.36 | % | 4.27 | %(b) | ||||
Expenses, after expense reductions | 1.50 | % | 1.50 | %(b) | ||||
Expenses, after expense reductions and net of custody credits | 1.50 | % | 1.49 | %(b) | ||||
Expenses, before expense reductions | 6.05 | % | 28.93 | %(b)† | ||||
Portfolio turnover rate | 55.29 | % | 76.76 | % | ||||
Net assets at end of period (000) | $ | 1,301 | $ | 280 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R1 Shares was February 1, 2005. |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
26 Certified Annual Report
Thornburg Investment Income Builder Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-558, CLASS C - 885-215-541, CLASS I - 885-215-467, CLASS R1 - 885-215-384
NASDAQ SYMBOLS: CLASS A - TIBAX, CLASS C - TIBCX, CLASS I - TIBIX, CLASS R1 - TIBRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/06
Energy | 12.1 | % | |
Banks | 12.0 | % | |
Diversified Financials | 10.4 | % | |
Telecommunication Services | 9.9 | % | |
Food Beverage & Tobacco | 6.6 | % | |
Real Estate | 6.3 | % | |
Pharmaceuticals & Biotechnology | 6.0 | % | |
Utilities | 4.1 | % | |
Consumer Services | 2.9 | % | |
Capital Goods | 2.9 | % | |
Materials | 2.7 | % | |
Transportation | 2.7 | % | |
Software & Services | 2.5 | % | |
Food & Staples Retailing | 2.4 | % | |
Commercial Services & Supplies | 2.2 | % | |
Media | 1.8 | % | |
Technology Hardware & Equipment | 0.3 | % | |
Insurance | 0.3 | % | |
Cash | 6.7 | % | |
U.S.Treasury/Agency Securities | 4.3 | % | |
Foreign Bonds | 0.5 | % | |
Taxable Municipal Bonds | 0.4 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/06
USA | 50.9 | % | |
U.K. | 10.3 | % | |
Spain | 7.8 | % | |
Italy | 7.2 | % | |
Canada | 4.1 | % | |
Hong Kong | 2.8 | % | |
Greece | 2.0 | % | |
China | 1.9 | % | |
France | 1.8 | % | |
Switzerland | 1.6 | % | |
Australia | 1.0 | % | |
Czech Republic | 0.9 | % | |
Malaysia | 0.9 | % | |
Ireland | 0.1 | % | |
Cash | 6.7 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 79.13% | |||||
BANKS — 11.35% | |||||
COMMERCIAL BANKS — 11.35% | |||||
Bank of America Corp. | 625,000 | $ | 33,481,250 | ||
Barclays plc | 1,500,000 | 18,921,387 | |||
BBVA | 2,500,000 | 57,882,191 | |||
Liechtenstein Landesbank | 36,000 | 28,702,119 | |||
Lloyds TSB Group plc | 1,500,000 | 15,145,532 | |||
Royal Bank of Scotland Group plc | 563,615 | 19,398,408 | |||
US Bancorp | 1,100,000 | 36,542,000 | |||
210,072,887 | |||||
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
CAPITAL GOODS — 2.86% | |||||
INDUSTRIAL CONGLOMERATES — 2.86% | |||||
General Electric Co. | 1,500,000 | $ | 52,950,000 | ||
52,950,000 | |||||
COMMERCIAL SERVICES & SUPPLIES — 1.39% | |||||
COMMERCIAL SERVICES & SUPPLIES — 1.39% | |||||
Synagro Technologies, Inc.(1) | 6,086,800 | 25,686,296 | |||
25,686,296 | |||||
CONSUMER SERVICES — 2.89% | |||||
HOTELS RESTAURANTS & LEISURE — 2.89% | |||||
Berjaya Sports Toto Berhad | 13,016,000 | 16,517,050 | |||
OPAP SA | 1,100,000 | 36,981,169 | |||
53,498,219 | |||||
DIVERSIFIED FINANCIALS — 8.01% | |||||
CAPITAL MARKETS — 2.24% | |||||
The Bank of New York Co., Inc. | 850,000 | 29,971,000 | |||
WP Stewart & Co. Ltd. | 915,000 | 11,400,900 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.77% | |||||
AllianceBernstein Hldgs. LP | 350,000 | 24,146,500 | |||
Bolsas y Mercados Espanoles+ | 800,000 | 29,930,009 | |||
Hong Kong Exchanges & Clearing Ltd. | 2,400,000 | 17,541,968 | |||
JPMorgan Chase & Co. | 750,000 | 35,220,000 | |||
148,210,377 | |||||
ENERGY — 11.82% | |||||
ENERGY EQUIPMENT & SERVICES — 1.58% | |||||
Precision Drilling Trust | 950,000 | 29,244,530 | |||
OIL, GAS & CONSUMABLE FUELS — 10.24% | |||||
BP plc ADR | 400,000 | 26,232,000 | |||
Canadian Oil Sands Trust | 1,425,000 | 38,103,928 | |||
Centennial Coal Co. Ltd. | 6,448,692 | 17,707,026 | |||
Chevron Corp. | 650,000 | 42,159,000 | |||
Eni S.p.A. | 2,200,000 | 65,226,410 | |||
218,672,894 | |||||
FOOD & STAPLES RETAILING — 2.37% | |||||
FOOD & STAPLES RETAILING — 2.37% | |||||
FU JI Food & Catering Services | 13,000,000 | 21,690,025 | |||
Tesco plc | 3,300,000 | 22,234,034 | |||
43,924,059 | |||||
FOOD BEVERAGE & TOBACCO — 6.39% | |||||
FOOD PRODUCTS — 1.57% | |||||
Reddy Ice Holdings, Inc. (1) | 1,200,000 | 29,040,000 |
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
TOBACCO — 4.82% | |||||
Altria Group, Inc. | 700,000 | $ | 53,585,000 | ||
UST, Inc. | 650,000 | 35,639,500 | |||
118,264,500 | |||||
MATERIALS — 2.75% | |||||
METALS & MINING — 2.75% | |||||
Southern Copper Corp. | 550,000 | 50,875,000 | |||
50,875,000 | |||||
MEDIA — 1.74% | |||||
MEDIA — 1.74% | |||||
Mediaset S.p.A. | 3,000,000 | 32,255,445 | |||
32,255,445 | |||||
PHARMACEUTICALS & BIOTECHNOLOGY — 5.79% | |||||
PHARMACEUTICALS — 5.79% | |||||
GlaxoSmithKline plc | 2,000,000 | 53,226,930 | |||
Pfizer, Inc. | 1,900,000 | 53,884,000 | |||
107,110,930 | |||||
REAL ESTATE — 5.81% | |||||
REAL ESTATE — 5.81% | |||||
Agile Property Holdings Ltd. | 27,000,000 | 22,004,466 | |||
Highland Hospitality Corp. | 1,800,000 | 25,794,000 | |||
Host Hotels & Resorts, Inc. | 2,600,000 | 59,618,000 | |||
107,416,466 | |||||
SOFTWARE & SERVICES — 2.51% | |||||
SOFTWARE — 2.51% | |||||
Microsoft Corp. | 1,700,000 | 46,461,000 | |||
46,461,000 | |||||
TELECOMMUNICATION SERVICES — 7.55% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 5.80% | |||||
France Telecom SA | 1,450,000 | 33,295,739 | |||
Telefónica 02 Czech Republic a.s. | 850,700 | 16,846,677 | |||
Telefónica S.A. | 3,300,000 | 57,230,104 | |||
WIRELESS TELECOMMUNICATION SERVICES — 1.75% | |||||
Vodafone Group plc | 14,111,125 | 32,285,857 | |||
139,658,377 | |||||
TRANSPORTATION — 2.40% | |||||
TRANSPORTATION INFRASTRUCTURE — 2.40% | |||||
Hopewell Highway | 15,643,500 | 12,207,054 | |||
Macquarie Infrastructure Co. | 600,000 | 18,708,000 | |||
Shenzhen Chiwan Wharf Holdings Ltd. | 8,732,449 | 13,449,020 | |||
44,364,074 | |||||
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
UTILITIES — 3.50% | ||||||
ELECTRIC UTILITIES — 1.97% | ||||||
Enel S.p.A. | 4,000,000 | $ | 36,511,769 | |||
MULTI-UTILITIES — 1.53% | ||||||
Dominion Resources, Inc. | 370,000 | 28,301,300 | ||||
64,813,069 | ||||||
TOTAL COMMON STOCK (Cost $ 1,305,893,212) | 1,464,233,593 | |||||
PREFERRED STOCK — 1.61% | ||||||
BANKS — 0.67% | ||||||
COMMERCIAL BANKS — 0.67% | ||||||
First Tennessee Bank | 12,000 | 12,363,000 | ||||
12,363,000 | ||||||
DIVERSIFIED FINANCIALS — 0.94% | ||||||
CAPITAL MARKETS — 0.17% | ||||||
Morgan Stanley | 120,000 | 3,096,000 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.77% | ||||||
Lehman Brothers Holdings, Inc. | 140,000 | 3,589,600 | ||||
Merrill Lynch & Co., Inc. | 420,000 | 10,672,200 | ||||
17,357,800 | ||||||
TOTAL PREFERRED STOCK (Cost $29,008,250) | 29,720,800 | |||||
CORPORATE BONDS — 5.90% | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.79% | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.79% | ||||||
Allied Waste North America, Inc., 6.375%, 4/15/2011 | $ | 500,000 | 487,500 | |||
Valassis Communications, 6.625%, 1/15/2009 | 14,000,000 | 13,963,320 | ||||
Waste Management, Inc., 7.375%, 8/1/2010 | 175,000 | 187,572 | ||||
14,638,392 | ||||||
DIVERSIFIED FINANCIALS — 1.48% | ||||||
CONSUMER FINANCE — 1.09% | ||||||
Capital One Financial Corp., 6.15%, 9/1/2016 | 20,000,000 | 20,237,260 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.39% | ||||||
Capital One Bank, 6.70%, 5/15/2008 | 655,000 | 668,548 | ||||
Capital One Bank, 6.50%, 6/13/2013 | 1,500,000 | 1,568,831 | ||||
SLM Corp. CPI Floating Rate Note, 6.44%, 1/31/2014 | 3,080,000 | 2,950,609 | ||||
SLM Corp. CPI Floating Rate Note, 5.52%, 3/2/2009 | 2,000,000 | 1,933,400 | ||||
27,358,648 | ||||||
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
ENERGY — 0.28% | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.28% | ||||||
Murphy Oil Corp., 6.375%, 5/1/2012 | $ | 5,000,000 | $ | 5,161,815 | ||
5,161,815 | ||||||
FOOD BEVERAGE & TOBACCO — 0.21% | ||||||
BEVERAGES — 0.21% | ||||||
Diageo Capital plc, 5.50%, 9/30/2016 | 4,000,000 | 3,966,584 | ||||
3,966,584 | ||||||
INSURANCE — 0.25% | ||||||
INSURANCE — 0.25% | ||||||
AAG Holding Co., Inc., 6.875%, 6/1/2008 | 335,000 | 340,776 | ||||
Hartford Life, Inc., 7.10%, 6/15/2007 | 400,000 | 404,602 | ||||
Liberty Mutual Group, Inc., 5.75%, 3/15/2014 | 1,000,000 | 983,408 | ||||
Old Republic International Corp., 7.00%, 6/15/2007 | 1,000,000 | 1,006,369 | ||||
Pacific Life Global Funding CPI Floating Rate Note, 6.33%, 2/6/2016 | 2,000,000 | 1,906,360 | ||||
4,641,515 | ||||||
MEDIA — 0.07% | ||||||
MEDIA — 0.07% | ||||||
AOL Time Warner, Inc., 6.875%, 5/1/2012 | 425,000 | 449,391 | ||||
Independent News & Media plc, 5.75%, 5/17/2009 | 600,000 | 766,899 | ||||
1,216,290 | ||||||
PHARMACEUTICALS & BIOTECHNOLOGY — 0.25% | ||||||
BIOTECHNOLOGY — 0.25% | ||||||
Tiers Inflation Linked Trust Series Wyeth 2004 21 Trust Certificate | ||||||
CPI Floating Rate Note, 6.017%, 2/1/2014 | 5,000,000 | 4,596,800 | ||||
4,596,800 | ||||||
REAL ESTATE — 0.46% | ||||||
REAL ESTATE — 0.46% | ||||||
Agile Property Holdings Ltd, 9.00%, 9/22/2013 | 7,000,000 | 6,947,500 | ||||
MDC Holdings, Inc., 7.00%, 12/1/2012 | 1,500,000 | 1,523,333 | ||||
8,470,833 | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.30% | ||||||
COMPUTERS & PERIPHERALS — 0.19% | ||||||
Jabil Circuit, Inc., 5.875%, 7/15/2010 | 3,485,000 | 3,516,410 | ||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.11% | ||||||
Cisco Systems, Inc., 5.479%, 2/20/2009 | 2,000,000 | 2,003,502 | ||||
5,519,912 | ||||||
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
TELECOMMUNICATION SERVICES — 0.92% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.92% | ||||||
Level 3 Communications, Inc. Senior Notes, 11.50%, 3/1/2010 | $ | 6,500,000 | $ | 6,678,750 | ||
Level 3 Finance, Inc. Senior Notes, 12.25%, 3/15/2013 | 7,000,000 | 7,805,000 | ||||
TCI Communications, Inc., 7.875%, 8/1/2013 | 2,285,000 | 2,553,309 | ||||
17,037,059 | ||||||
TRANSPORTATION — 0.27% | ||||||
AIR FREIGHT & LOGISTICS — 0.27% | ||||||
FedEx Corp., 5.50%, 8/15/2009 | 5,000,000 | 5,032,115 | ||||
5,032,115 | ||||||
UTILITIES — 0.62% | ||||||
ELECTRIC UTILITIES — 0.38% | ||||||
Monongahela Power, 5.70%, 3/15/2017 | 7,000,000 | 7,036,400 | ||||
GAS UTILITIES — 0.24% | ||||||
Oneok Partners, LP Senior Notes, 5.90%, 4/1/2012 | 3,000,000 | 3,023,862 | ||||
Sonat, Inc., 7.625%, 7/15/2011 | 1,400,000 | 1,435,000 | ||||
11,495,262 | ||||||
TOTAL CORPORATE BONDS (Cost $106,852,943) | 109,135,225 | |||||
CONVERTIBLE BONDS — 1.40% | ||||||
TELECOMMUNICATION SERVICES — 1.40% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.40% | ||||||
Level 3 Communications, Inc., 6.00%, 3/15/2010 | 29,080,000 | 25,554,050 | ||||
Level 3 Communications, Inc., 6.00%, 9/15/2009 | 397,000 | 356,804 | ||||
25,910,854 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $21,134,889) | 25,910,854 | |||||
TAXABLE MUNICIPAL BONDS — 0.38% | ||||||
Michigan Public Educational Facilities Authority, 5.70%, 8/31/2007 | 1,795,000 | 1,796,831 | ||||
Short Pump Town Center Community Development, 6.26%, 2/1/2009 | 2,000,000 | 2,015,920 | ||||
Victor New York, 9.05%, 5/1/2008 | 1,175,000 | 1,183,401 | ||||
Victor New York, 9.20%, 5/1/2014 | 2,000,000 | 2,066,720 | ||||
TOTAL TAXABLE MUNICIPAL BONDS (Cost $7,131,416) | 7,062,872 | |||||
U.S. GOVERNMENT AGENCIES — 1.38% | ||||||
Federal National Mtg Assoc CPI Floating Rate Note, 5.459%, 2/17/2009 | 2,000,000 | 1,940,120 | ||||
Federal National Mtg Assoc Remic Series 2006-B1 Class AB, 6.00%, 6/25/2016 | 23,554,419 | 23,687,980 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $25,455,020) | 25,628,100 | |||||
32 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
U.S.TREASURY SECURITIES — 2.96% | ||||||
United States Treasury Notes, 3.50%, 11/15/2006 | $ | 20,000,000 | $ | 19,965,620 | ||
United States Treasury Notes, 2.625%, 11/15/2006 | 35,000,000 | 34,902,944 | ||||
TOTAL U.S.TREASURY SECURITIES (Cost $ 54,853,911) | 54,868,564 | |||||
FOREIGN BONDS — 0.49% | ||||||
Alberta Treasury Notes, 4.10%, 6/1/2011 | 10,000,000 | 8,984,936 | ||||
TOTAL FOREIGN BONDS (Cost $ 8,864,547) | 8,984,936 | |||||
SHORT TERM INVESTMENTS — 5.75% | ||||||
Abbey National, 5.19%, 10/3/2006 | 42,000,000 | 41,987,890 | ||||
American General Finance Corp., 5.30%, 10/5/2006 | 36,000,000 | 35,978,800 | ||||
Lasalle Bank Corp., 5.19%, 10/10/2006 | 24,000,000 | 23,968,860 | ||||
Toyota Motor Credit Corp.—Puerto Rico, 5.21%, 10/13/2006 | 4,400,000 | 4,392,359 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $ 106,327,909) | 106,327,909 | |||||
TOTAL INVESTMENTS — 99.00% (Cost $ 1,665,522,097) | $ | 1,831,872,853 | ||||
OTHER ASSETS LESS LIABILITIES — 1.00% | 18,581,601 | |||||
NET ASSETS — 100.00% | $ | 1,850,454,454 | ||||
Footnote Legend
+ | Non-income producing |
See notes to financial statements.
(1) | Investment in Affiliates |
Holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940 because the Fund’s holding represented 5% or more of the company’s voting securities during the period, are shown below:
Issuer | Shares at Sept. 30, 2005 | Gross Additions | Gross Reductions | Shares at Sept. 30, 2006 | Market Value Sept. 30, 2006 | Dividend Income | ||||||
Synagro Technologies, Inc. | 5,924,455 | 625,545 | 463,200 | 6,086,800 | 25,686,296 | 2,427,360 | ||||||
Ready Ice Holdings, Inc. | 500,000 | 700,000 | – | 1,200,000 | 29,040,000 | 297,350 |
Total non-controlled “affiliated companies” — 2.96% of Net Assets
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
REMIC | Real Estate Mortgage Investment Conduit |
Certified Annual Report 33
Thornburg Investment Income Builder Fund | September 30, 2006 |
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 (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New
York November 16, 2006
34 Certified Annual Report
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including
(a) sales charges (loads) on purchase payments, for Class A shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(c) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(d) a 30-day redemption fee on Class A and Class I shares;
(2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Beginning Account Value 3/31/06 | Ending Account Value | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,048.50 | $ | 7.02 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.21 | $ | 6.92 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,045.70 | $ | 9.68 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,015.60 | $ | 9.54 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,050.40 | $ | 5.02 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.17 | $ | 4.95 | |||
Class R1 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,048.40 | $ | 7.69 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.56 | $ | 7.57 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.37%; C: 1.89%; I: 0.98%; and R1: 1.50%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 35
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Investment Income Builder Fund versus Blended Index (December 31, 2002 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2006 (with sales charge)
1 Yr | Since Inception | |||||
A Shares (Incep: 12/24/02) | 10.86 | % | 17.47 | % | ||
C Shares (Incep: 12/24/02) | 14.45 | % | 18.42 | % | ||
R1 Shares (Incep: 2/01/05) | 15.91 | % | 14.30 | % | ||
Blended Index (Since: 12/31/02) | 11.53 | % | 14.28 | % |
Performance data reflects past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 4.50%. Class C shares are subject to a 1% contingent deferred sales charge (CDSC) for the first year only. There is no up-front sales charge for Class R1 shares. Class R1 shares are available only to certain qualified investors. Class A shares are subject to a 1% 30-day redemption fee.
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 U.S. 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 (MSCI) World Index is an unmanaged market-weighted index that consists of over 1,200 equity securities traded in 23 of the world’s most developed countries. Securities are listed on exchanges in the U.S., Europe, Canada,Australia, New Zealand, and the Far East. The index is calculated with net dividends reinvested, in U.S. dollars.
36 Certified Annual Report
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP,Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 37
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
38 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds.Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report 39
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, the Fund designates long-term capital gain dividends of $16,515,382 and long-term capital gain dividends taxed at the 25% rate of $79,093.
For the tax year ended September 30, 2006, the Thornburg Investment Income Builder Fund designates 76.81% of the dividends paid from tax basis net ordinary income as qualifying for the reduced rate under the Jobs and Growth Tax Relief and Reconciliation Act of 2003.
28.69% of the ordinary income distributions paid by the Fund for the year ended September 30, 2006 qualified for the corporate dividends received deduction.
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006. Complete information will be computed and reported in conjunction with your 2006 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Investment Income Builder Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, industry, market and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives, including specific dividend growth data; |
40 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
(iv) | measures of the Fund’s investment returns over different periods of time relative to a category of “world-allocation” mutual funds having income and capital appreciation objectives, selected by an independent mutual fund analyst firm, and relative to a blended performance benchmark comprised of two broad based securities indices; and |
(v) | comparative measures of portfolio relativity, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectus, are unique or may vary from the methods for selecting the investments for other funds.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies, and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s historical dividend payments to shareholders and the increases in the dividend each year, the Fund’s superior investment performance relative to the performance of a recognized category of equity income mutual funds having certain characteristics comparable to the Fund and selected by an independent mutual fund analyst firm, the Fund’s outperformance of a blended benchmark (consisting of two broad based indices reflecting the experience of fixed income securities and equity securities, respectively) in each year since the Fund’s inception, the Fund’s performance relative to the blended benchmark in periods of both positive and negative market conditions, and the positive effects of the Fund’s cumulative returns.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the management fee charged to the Fund was higher than (but comparable to) the average and median fee rates to the grouping of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio of the Fund was somewhat higher than the average and median expense ratios for the same group of mutual funds. The Trustees recognized the unique nature of the Fund, the superior performance of the Fund, the comparability of the overall expense ratio, the size of the Fund, the specific services of the Advisor and other factors. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the Fund’s investment performance, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by the Fund and other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund has realized and may reasonably be expected to realize further economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
Certified Annual Report 41
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
42 This page is not part of the Annual Report.
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. 43
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses.We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |||||
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119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 | 119 East Marcy Street Santa Fe, New Mexico 87501 800.847.0200 |
TH857
Thornburg Investment Income Builder Fund
Current Stream of Income Plus Potential for Growth
The Fund seeks to provide a level of current income which exceeds the average yield on U.S. stocks generally, and which will generally grow, subject to periodic fluctuations, over the years on a per share basis. The Fund’s secondary investment objective is long-term capital appreciation.
The Fund invests primarily in companies (both in the U.S. and abroad) that pay dividends and, in the opinion of Thornburg Investment Management, that show the capacity to increase them. To provide additional income, the Fund also invests in bonds and hybrid securities.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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Sign up at www.thornburg.com/edelivery |
2 This page is not part of the Annual Report.
Message from the Chairman
Garrett Thornburg Chairman & CEO | November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We seek to accomplish this through a range of equity funds that redefine traditional measures of value and growth and through a family of laddered bond funds that focus on quality, stability and minimizing risk over time.
Confirming our strategy, all Thornburg equity funds are highly ranked within their respective categories over the long term.
The Thornburg equity funds employ a comprehensive approach, which is more inclusive than the traditional deep value or high growth approach to stock selection. You can read much more about the stocks in your Fund’s portfolio, and all Thornburg equity funds, at our web site, www.thornburg.com/funds.
During this decade, the average dividend yield paid by equity and hybrid mutual funds has dipped well below 1%. We established Thornburg Investment Income Builder Fund in late 2002 to be clearly different from other equity/hybrid funds by paying attractive dividends today, with a further goal of increasing these in the future. Our record to date shows clear success in achieving each aspect of this mission.
On the bond side, we have always had a highly disciplined approach of laddering short-and intermediate-bond maturities, seeking to provide both an attractive return and relative stability of principal.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely,
Garrett Thornburg Chairman & CEO |
This page is not part of the Annual Report. 3
The Dividend Landscape
To appreciate the investment environment that Thornburg Investment Income Builder Fund operates in, you may wish to review these highlights of the “dividend landscape.”
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.
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 75% of these firms paid some dividend. Between 1994 and 2001, the percentage of Russell 1000 companies paying dividends sank 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.
4 This page is not part of the Annual Report.
Rising Dividend Payments Despite Decreasing 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.
Hypothetical chart is for illustration purposes only and is not indicative of an investment in any particular security. Investors may not invest directly in an index.
A Truly Diversified Dividend-Paying Portfolio Must Look Beyond the Obvious High Yield Stocks!
In the (large cap) Russell 1000 Index, 63% of the top 100 dividend payers are in the real estate or utilities sectors. In the (small cap) Russell 2000 Index, 72% of the top 100 dividend-yielding stocks are either real estate or utilities. In order to construct a diversified portfolio of attractive yielding stocks, one must look beyond these two sectors. We do!
Source: Thomson Portfolio Analytics, as of December 2005; (Numbers may not add to 100% due to rounding.)
Dividend yield is a ratio that shows how much a company pays out in dividends each year relative to its share price.
The Top 100 Dividend Yields
Russell 1000 Index | Russell 2000 Index | |||||
Real Estate | 37 | % | 68 | % | ||
Banks | 9 | % | 1 | % | ||
Other Financials | 7 | % | 6 | % | ||
Total Financials | 53 | % | 75 | % | ||
Utilities | 26 | % | 4 | % | ||
Consumer Staples | 6 | % | 3 | % | ||
Telecom | 6 | % | 6 | % | ||
Consumer Discretionary | 3 | % | 5 | % | ||
Health Care | 3 | % | 1 | % | ||
Materials | 2 | % | 2 | % | ||
Industrials | 1 | % | 1 | % | ||
Technology | 0 | % | 3 | % | ||
Energy | 0 | % | 0 | % |
This page is not part of the Annual Report. 5
The Dividend Landscape Continued
Global Diversification Can Improve the Portfolio Yield
Source: FactSet, as of September 30, 2006; Countries and regions above, except the U.S., are represented by MSCI indices defined on the following pages.
Since firms outside the U.S. tend to pay higher dividends than U.S. firms, particularly outside the real estate and utility sectors, we diversify the Thornburg Investment Income Builder Fund into foreign dividend-paying stocks to try to take advantage of these opportunities.
6 This page is not part of the Annual Report.
Important Information
The information presented on the following pages was current as of September 30, 2006. The managers’ views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
Shares in the Fund carry risks including possible loss of principal. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations.
As with direct bond ownership, funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. The value of a bond will fluctuate relative to changes in interest rates; as interest rates rise, the overall price of bonds fall. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any government agency. There is no guarantee that the Fund will meet its investment objectives.
Minimum investments for Class I shares are higher than those for other classes.
Glossary
Blended Index – 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 U.S. 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 (MSCI) World Index is an unmanaged market-weighted index that consists of over 1,200 equity securities traded in 23 of the world’s most developed countries. Securities are listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The index is calculated with net dividends reinvested, in U.S. dollars.
MSCI All Country Asia ex-Japan Index – a free float-adjusted market capitalization index that is designed to measure equity market performance in Asia. As of May 2005, the MSCI All Country Asia ex-Japan Index consisted of the following 11 countries: China, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, Philippines, Singapore Free, Taiwan, and Thailand.
MSCI Country Indices (Australia, U.K. and Japan) – free float-adjusted market capitalization indices that are designed to measure equity market performance in that specific country.
MSCI Europe ex-U.K. Index – a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of May 2005, the MSCI Europe Index consisted of the following 15 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and Switzerland.
MSCI EM (Emerging Markets) Latin America Index – a free float-adjusted market capitalization index that is designed to measure equity market performance in Latin America. As of May 2005 the MSCI EM Latin America Index consisted of the following seven emerging market country indices: Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela.
Russell 1000 Index – Consists of the 1,000 largest securities in the Russell 3000 Index, which represents approximately 90% of the total market capitalization of the Russell 3000 Index. It is a large-cap, market-oriented index and is highly correlated with the S&P 500 Index.
Russell 2000 Index – An unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 Index, representing approximately 10% of the total market capitalization of the Russell 3000 Index.
Standard & Poor’s 500 Stock Index (S&P 500) – An unmanaged index generally representative of the U.S. stock market.
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. The performance of any index is not indicative of the performance of any particular investment.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price. The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median, and half have values that are less. If there is an even number of companies, then the median is the average of the two companies in the middle.
Price to Earnings Ratio (P/E) – A valuation ratio of a company’s current share price compared to its per-share earnings. P/E equals a company’s market value per share divided by earnings per share.
Weighted Average Coupon – Coupon refers to the rate of interest paid on a bond, usually expressed as a percent of its par value. A fund’s weighted average coupon is calculated by weighting each bond’s coupon by its relative size in the portfolio and taking the average.
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Portfolio Overview
Thornburg Investment Income Builder Fund
IMPORTANT PERFORMANCE INFORMATION
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com.
There is no up-front sales charge for Class I shares. I shares are subject to a 1% 30-day redemption fee.
MANAGEMENT TEAM
Front row, L to R: Steven Bohlin, Brad Kinkelaar, and Brian McMahon. Back row, L to R: Wendy Trevisani, Lewis Kaufman, Ed Maran, Vin Walden, and Lei Wang.
PORTFOLIO COMPOSITION
As of 9/30/06
We do not expect each sequential quarter’s dividend to increase over that of the prior quarter, since dividend payments outside the U.S. tend to be seasonal. Rather, the Fund aspires to increase the dividend paid on an annual basis. 90% of 2005’s dividend payments qualified for the lower 15% tax rate on stock dividends. In 2004 and 2003, 100% qualified. (There is no guarantee that this will be the case for future dividends.)
QUARTERLY DIVIDEND HISTORY
Q1 | Q2 | Q3 | Q4 | Total | |||||||||||
Class I Shares | |||||||||||||||
2006 | 14.4 | ¢ | 18.0 | ¢ | 21.2 | ¢ | N/A | N/A | |||||||
2005 | 11.6 | ¢ | 14.2 | ¢ | 18.0 | ¢ | 29.7 | ¢ | 73.5 | ¢ | |||||
2004 | 11.7 | ¢ | 13.6 | ¢ | 16.0 | ¢ | 22.7 | ¢ | 64.0 | ¢ |
KEY PORTFOLIO ATTRIBUTES
Equity Statistics | ||||
Portfolio P/E (12-mo. trailing) | 15.0x | |||
Median Market Cap | $ | 12.3 B | ||
Equity Holdings | 49 | |||
Fixed Income Statistics | ||||
Weighted Average Coupon | 5.6 | % | ||
Average Credit Quality | A- | |||
Average Maturity | 2.7 yrs | |||
Duration | 1.8 yrs | |||
Bond Holdings | 40 | |||
30-day SEC Yield (I Shares) | 4.07 | % | ||
TOP TEN EQUITY HOLDINGS | ||||
Eni S.p.A. | 3.5 | % | ||
Host Hotels & Resorts, Inc. | 3.2 | % | ||
BBVA | 3.1 | % | ||
Telefónica S.A. | 3.1 | % | ||
Pfizer, Inc. | 2.9 | % | ||
Altria Group, Inc. | 2.9 | % | ||
GlaxoSmithKline plc | 2.9 | % | ||
General Electric Co. | 2.9 | % | ||
Southern Copper Corp. | 2.8 | % | ||
Microsoft Corp. | 2.5 | % |
AVERAGE ANNUAL TOTAL RETURNS*
For periods ending September 30, 2006
YTD | 1 Yr | Since Inception | |||||||
I Shares (Incep: 11/3/03) | 14.90 | % | 16.53 | % | 16.67 | % | |||
Blended Index** (Since: 11/3/03) | 8.86 | % | 11.53 | % | 12.15 | % |
* | Periods under one year are not annualized. |
** | Blended Index: 75% MSCI World Equity Index/25% Lehman Brothers Aggregate Bond Index |
8 This page is not part of the Annual Report.
The investment objective of Thornburg Investment Income Builder Fund is to provide a level of current income which exceeds the average yield on U.S. stocks, and which will grow, subject to periodic fluctuations, over the years. This objective remains constant over time. However, the specific investments we have used to try to reach our objective have changed over time. There is no guarantee the Fund will meet its investment objectives.
Business conditions for various industries and operating effectiveness at individual firms, change over time. Investor preferences, expressed as both absolute and relative prices, also change over time. In the view of your portfolio management team, “some doors close and others open.” As shown in the tables below, the percentage industry allocations of your Fund evolve to reflect these changing conditions.
TOP TEN INDUSTRIES
As of 9/30/06
Energy | 12.1 | % | |
Banks | 12.0 | % | |
Diversified Financials | 10.4 | % | |
Telecommunication Services | 9.9 | % | |
Food Beverage & Tobacco | 6.6 | % | |
Real Estate | 6.3 | % | |
Pharmaceuticals & Biotechnology | 6.0 | % | |
Utilities | 4.1 | % | |
Consumer Services | 2.9 | % | |
Capital Goods | 2.9 | % |
TOP TEN INDUSTRIES
As of 6/30/06
Energy | 13.2 | % | |
Banks | 10.0 | % | |
Telecommunication Services | 9.9 | % | |
Diversified Financials | 9.4 | % | |
Pharmaceuticals & Biotechnology | 8.5 | % | |
Real Estate | 6.1 | % | |
Food Beverage & Tobacco | 5.7 | % | |
Utilities | 5.3 | % | |
Capital Goods | 3.1 | % | |
Consumer Services | 3.1 | % |
TOP TEN INDUSTRIES
As of 3/31/06
Diversified Financials | 12.4 | % | |
Energy | 11.9 | % | |
Banks | 8.4 | % | |
Telecommunication Services | 8.2 | % | |
Real Estate | 7.2 | % | |
Pharmaceuticals & Biotechnology | 7.1 | % | |
Food Beverage & Tobacco | 6.2 | % | |
Utilities | 4.8 | % | |
Food & Staples Retailing | 4.3 | % | |
Consumer Services | 3.7 | % |
TOP TEN INDUSTRIES
As of 12/31/05
Diversified Financials | 15.2 | % | |
Energy | 13.3 | % | |
Banks | 10.2 | % | |
Utilities | 8.9 | % | |
Pharmaceuticals & Biotechnology | 7.9 | % | |
Real Estate | 6.0 | % | |
Telecommunication Services | 5.9 | % | |
Food Beverage & Tobacco | 5.1 | % | |
Transportation | 4.5 | % | |
Food & Staples Retailing | 3.9 | % |
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10 This page is not part of the Annual Report.
[GRAPHIC APPEARS HERE]
Thornburg Investment Income Builder Fund
I Shares – September 30, 2006
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14 | ||
16 | ||
18 | ||
19 | ||
23 | ||
24 | ||
31 | ||
32 | ||
33 | ||
34 | ||
37 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report 11
October 18, 2006
Dear Fellow Shareholder:
Thornburg Investment Income Builder Fund paid income dividends of 39.2¢ per I share in the six months ended September 30, 2006, up 21.7% from the 32.2¢ paid in the comparable prior year period. The net asset value per share increased 2.9% during the six-month period, from $19.15 to $19.71. For the fiscal year ended September 30, 2006, I share income dividends were 83.3¢, up 25.3% over the prior year. Your Fund also paid capital gains dividends of 34.0¢ per share. After paying these dividends, the net asset value per share increased $1.68, to $19.71. Recall that Thornburg Investment Income Builder Fund seeks to generate attractive and rising dividends over time from its portfolio of income producing stocks, bonds, and hybrid securities. These results indicate that we are on track with respect to these goals.
The median percentage increase of the most recent dividend paid by your portfolio firms was approximately 13% over the year-earlier level. This reflects the improving ability and willingness to pay dividends by most of the firms included in your Fund. Under the surface of the dividend landscape, there is a more complicated dynamic. Too many firms in certain U.S. industries that traditionally have the highest yields, utilities and REITs, appear relatively unattractive at this time, due to prior price appreciation and competition from rising short maturity interest rates. Broadly speaking, utilities are squeezed between higher fuel costs and political/ regulatory pressure to restrain, or even roll back rates. As each REIT is somewhat unique, it is difficult to generalize. We can say that capital flows into building rent-producing structures of almost every description have been enormous, so there is too little scarcity value in most sectors to hold out the prospect of interesting future reward for incoming investors at this time. Making our equity portfolio produce more dividend income with a modest allocation to REITs and utilities has been a challenge. We depend on the improved ability and willingness of firms in a broad group of other industries to pay higher dividends.
Oil & gas producers and refiners are one such group. Cash flows generated by these firms are enormous, given today’s prices for their hydrocarbon output. So far, most of these companies are not overspending to increase supply in a way that will lower visible future returns. We know that these cash flows are cyclical, so we remain guarded about our investment exposure to this area. During the latest semi-annual period, Chevron Corp. was among our better performers, while Canadian Oil Sands Trust, BP plc, and Precision Drilling Trust were all negative performers, following earlier periods of strong performance. Another group with attractive cash flows and modest valuations is the telecom services industry. We are particularly interested in firms that obtain a growing percentage of revenues from mobile telephony and broadband services. France Telecom S.A. languished during the period, while Telefónica S.A. and Telefónica O2 Czech Republic performed decently on the strength of attractive dividends. Vodafone was one of your Fund’s better performers as it refocused its business and paid special dividends with operating cash flows and the proceeds from the sale of an underperforming Japanese unit.
Contrary to most predictions in this time of rising money market interest rates, your bank and diversified financial services holdings, generally performed quite well during the last six months. Your portfolio’s top performers included Banco Bilbao Vizcaya Argentaria (Spanish headquartered bank), Hong Kong Exchanges and Clearing Ltd., and Bank of America Corp. One investment manager, W.P. Stewart & Co. Ltd., was among the worst portfolio performers, due to difficulties specific to its business execution.
Other strong portfolio performers during the period included UST Inc. (smokeless tobacco), Host Hotels and Resorts Inc. (hotels), Pfizer Inc. (pharmaceuticals), and Agile Property Holdings Ltd. (residential real estate development in China). Other weak portfolio performers during the period included OPAP SA (lotteries and gaming, based in Greece), FU JI Food & Catering Services (food services, based in China), Synagro Technologies Inc. (solid waste disposal), and Mediaset S.p.A. (video production and TV broadcasting, based in Italy). For the
12 Certified Annual Report
time being, we believe the business prospects of these weak performers are better than the stock price action of recent months would indicate. Your portfolio includes a diverse collection of dividend paying businesses from around the world.
Bond yields, while improved from their lows of last year, are not yet interesting – and the reward for taking corporate credit risk remains meager. The percentage of Thornburg Investment Income Builder assets invested in bonds has gradually declined over several quarters. However, we have increased your portfolio’s weighting in short maturity money market investments since yields on these surpassed 5%. The duration of the cash/bond component of the Thornburg Investment Income Builder Fund, now around 18% of fund assets, is less than 1.3 years. Domestic stocks, including preferred stocks, comprise around 40% of the portfolio, and foreign stocks make up around 41%.
We look forward to the coming quarters, recognizing that 2007 will present challenges. Consensus operating earnings per unit of the S&P 500 Index, around $76 for 2005, are forecast to be $86 for 2006 and about $90 in 2007. Dividend payouts on both U.S. and European corporate earnings are modest, leaving a high probability, we believe, that dividend growth will exceed earnings growth in future years. Don’t you agree that highly paid corporate chiefs should be able to distribute more than $25 out of operating earnings of $86? Cash is piling up on business balance sheets, with Federal Reserve data showing an incremental accumulation of more than $1 trillion in the last five years. Stay tuned.
Thank you for being a shareholder of Thornburg Investment Income Builder Fund. Remember that you can review descriptions of many of the stocks in your portfolio at your leisure by going to our internet site, www.thornburg.com/funds. Best wishes for a wonderful holiday season and New Year.
Sincerely,
![]() | ![]() | ![]() | ||
Brian McMahon | Brad Kinkelaar | Steven J. Bohlin | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager | ||
President & Chief Investment Officer | Managing Director | Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 13
Thornburg Investment Income Builder Fund | September 30, 2006 |
ASSETS | |||
Investments at value | |||
Non-controlled affiliated issuers (cost $52,787,439) | $ | 54,726,296 | |
Non-affiliated issuers (cost $1,612,734,658) | 1,777,146,557 | ||
Cash | 4,040,861 | ||
Receivable for fund shares sold | 19,414,858 | ||
Unrealized gain on forward exchange contracts (Note 7) | 2,248,623 | ||
Dividends receivable | 6,694,739 | ||
Interest receivable | 2,029,474 | ||
Prepaid expenses and other assets | 29,340 | ||
Total Assets | 1,866,330,748 | ||
LIABILITIES | |||
Payable for securities purchased | 10,456,247 | ||
Payable for fund shares redeemed | 1,298,136 | ||
Unrealized loss on forward exchange contracts (Note 7) | 1,104,044 | ||
Payable to investment advisor and other affiliates (Note 3) | 1,815,209 | ||
Accounts payable and accrued expenses | 642,798 | ||
Dividends payable | 559,860 | ||
Total Liabilities | 15,876,294 | ||
NET ASSETS | $ | 1,850,454,454 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 12,565,595 | |
Net unrealized appreciation on investments | 167,483,179 | ||
Accumulated net realized gain (loss) | 48,061,630 | ||
Net capital paid in on shares of beneficial interest | 1,622,344,050 | ||
$ | 1,850,454,454 | ||
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share | $ | 19.58 | |
Maximum sales charge, 4.50% of offering price | 0.92 | ||
Maximum offering price per share | $ | 20.50 | |
Class C Shares: | |||
Net asset value and offering price per share * | $ | 19.60 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share | $ | 19.71 | |
Class R1 Shares: | |||
Net asset value, offering and redemption price per share | $ | 19.58 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF OPERATIONS | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2006 |
INVESTMENT INCOME: | ||||
Dividend income | ||||
Non-controlled affiliated issuers | $ | 2,724,710 | ||
Non-affiliated issuers (net of foreign taxes withheld of $3,051,975) | 58,658,607 | |||
Interest income (net of premium amortized of $172,849) | 12,534,567 | |||
Total Income | 73,917,884 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 10,797,815 | |||
Administration fees (Note 3) | ||||
Class A Shares | 823,635 | |||
Class C Shares | 562,892 | |||
Class I Shares | 94,488 | |||
Class R1 Shares | 818 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,656,256 | |||
Class C Shares | 4,537,666 | |||
Class R1 Shares | 3,196 | |||
Transfer agent fees | ||||
Class A Shares | 612,375 | |||
Class C Shares | 476,447 | |||
Class I Shares | 87,965 | |||
Class R1 Shares | 15,770 | |||
Registration and filing fees | ||||
Class A Shares | 54,458 | |||
Class C Shares | 40,336 | |||
Class I Shares | 31,458 | |||
Class R1 Shares | 13,854 | |||
Custodian fees (Note 3) | 501,413 | |||
Professional fees | 95,857 | |||
Accounting fees | 94,073 | |||
Trustee fees | 32,085 | |||
Other expenses | 234,762 | |||
Total Expenses | 20,767,619 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,194,932 | ) | ||
Distribution and service fees waived (Note 3) | (20,000 | ) | ||
Fees paid indirectly (Note 3) | (57,509 | ) | ||
Net Expenses | 19,495,178 | |||
Net Investment Income | $ | 54,422,706 | ||
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 59,186,747 | ||
Foreign currency transactions | (5,679,701 | ) | ||
53,507,046 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $306,966) | 85,874,326 | |||
Foreign currency translations | (91,078 | ) | ||
85,783,248 | ||||
Net Realized and Unrealized Gain | 139,290,294 | |||
Net Increase in Net Assets Resulting From Operations | $ | 193,713,000 | ||
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Investment Income Builder Fund
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 54,422,706 | $ | 27,694,765 | ||||
Net realized gain on investments and foreign currency transactions | 53,507,046 | 19,208,885 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, foreign currency translation, and deferred taxes | 85,783,248 | 56,812,692 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 193,713,000 | 103,716,342 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (27,097,402 | ) | (13,160,919 | ) | ||||
Class C Shares | (16,063,539 | ) | (7,462,307 | ) | ||||
Class I Shares | (8,357,488 | ) | (2,791,906 | ) | ||||
Class R1 Shares | (25,242 | ) | (2,854 | ) | ||||
From realized gains | ||||||||
Class A Shares | (10,140,082 | ) | (11,306 | ) | ||||
Class C Shares | (6,660,050 | ) | (7,266 | ) | ||||
Class I Shares | (2,568,880 | ) | (1,756 | ) | ||||
Class R1 Shares | (6,756 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 325,267,307 | 247,700,405 | ||||||
Class C Shares | 257,138,902 | 166,392,249 | ||||||
Class I Shares | 161,508,626 | 87,260,594 | ||||||
Class R1 Shares | 952,708 | 271,714 | ||||||
Net Increase in Net Assets | 867,661,104 | 581,902,990 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 982,793,350 | 400,890,360 | ||||||
End of year | $ | 1,850,454,454 | $ | 982,793,350 | ||||
Undistributed net investment income | $ | 12,565,595 | $ | 6,877,895 |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg Limited Term Income Fund, Thornburg Value Fund, Thornburg International Value Fund, Thornburg New York Intermediate Municipal Fund, Thornburg Core Growth Fund, and Thornburg Global Opportunities 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 stocks and bonds.
The Fund currently offers four classes of shares of beneficial interest: Class A, Class C, Institutional Class (Class I), and Retirement Class (Class R1). 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 I shares are sold at net asset value without a sales charge at the time of purchase, (iv) Class R1 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 (v) the respective classes may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Securities: 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. 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. When quotations are not readily available, securities are valued at evaluated prices 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. In any case where a market quotation is not readily available, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the 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 amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund to the shareholders. Therefore, no provision for Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
transaction and reflect the value in determining its net asset value. When effecting such transactions, assets 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 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. 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, 2006, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum 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% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,127,503 for Class C shares, $57,725 for Class I shares, and $29,704 for Class R1 shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the year ended September 30, 2006, the Distributor has advised the Fund that it earned commissions aggregating $573,564 from the sale of Class A shares of the Fund and collected contingent deferred sales charges aggregating $66,100 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class C and Class R1 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C and Class R1 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 R1 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 Trust 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, 2006, fees paid indirectly were $57,509. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2006 | Year Ended September 30, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 20,476,188 | $ | 383,476,280 | 15,824,625 | $ | 272,463,968 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,620,907 | 29,347,480 | 582,139 | 10,174,628 | ||||||||||
Shares repurchased | (4,735,350 | ) | (87,574,938 | ) | (2,029,458 | ) | (34,963,867 | ) | ||||||
Redemption fees received** | — | 18,485 | — | 25,676 | ||||||||||
Net Increase (Decrease) | 17,361,745 | $ | 325,267,307 | 14,377,306 | $ | 247,700,405 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 14,763,665 | $ | 277,357,697 | 10,240,222 | $ | 176,652,670 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 887,275 | 16,040,689 | 278,319 | 4,873,053 | ||||||||||
Shares repurchased | (1,951,047 | ) | (36,264,521 | ) | (878,803 | ) | (15,133,474 | ) | ||||||
Redemption fees received** | — | 5,037 | — | — | ||||||||||
Net Increase (Decrease) | 13,699,893 | $ | 257,138,902 | 9,639,738 | $ | 166,392,249 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 8,727,511 | $ | 165,649,392 | 5,095,258 | $ | 88,334,328 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 486,642 | 8,942,006 | 133,505 | 2,350,289 | ||||||||||
Shares repurchased | (701,013 | ) | (13,090,059 | ) | (195,879 | ) | (3,428,955 | ) | ||||||
Redemption fees received** | — | 7,287 | — | 4,932 | ||||||||||
Net Increase (Decrease) | 8,513,140 | $ | 161,508,626 | 5,032,884 | $ | 87,260,594 | ||||||||
Class R1 Shares* | ||||||||||||||
Shares sold | 51,927 | $ | 972,264 | 15,475 | $ | 269,569 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,712 | 31,478 | 159 | 2,832 | ||||||||||
Shares repurchased | (2,776 | ) | (51,042 | ) | (40 | ) | (687 | ) | ||||||
Redemption fees received** | — | 8 | — | — | ||||||||||
Net Increase (Decrease) | 50,863 | $ | 952,708 | 15,594 | $ | 271,714 | ||||||||
* | Effective date of Class R1 shares was February 1, 2005. |
** | The Fund charges a redemption fee of 1% of the Class A & Class I shares exchanged within 30 days of purchase. Prior to February 1, 2006, the Fund charged a redemption fee of 1% of the Class A & Class I shares exchanged within 90 days of purchase. Redemption fees charged to any Class are allocated to all Classes upon receipt of payment based on relative net asset values of each Class or other appropriate allocation methods. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $1,337,513,432 and $688,957,626, respectively.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 1,662,316,960 | ||
Gross unrealized appreciation on a tax basis | $ | 195,555,333 | ||
Gross unrealized depreciation on a tax basis | (25,999,440 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 169,555,893 | ||
Distributable earnings – ordinary income | $ | 12,565,595 | ||
Distributable – capital gains | $ | 48,061,630 |
At September 30, 2006, the Fund had deferred tax basis currency losses occurring subsequent to October 31, 2005 of $160,467. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
In order to account for permanent book/tax differences, the Fund increased undistributed net investment income by $2,808,665 and decreased accumulated net realized investment gain by $2,808,665. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency transactions, investments in REITs, and partnerships.
The tax character of distributions paid during the year ended September 30, 2006, and September 30, 2005, was as follows:
2006 | 2005 | |||||
Distributions from: | ||||||
Ordinary income | $ | 54,324,964 | $ | 23,435,475 | ||
Capital gains | 16,594,475 | 2,839 | ||||
Total | $ | 70,919,439 | $ | 23,438,314 | ||
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2006, 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. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity.
CONTRACTS TO SELL:
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||
50,000,000 Euro Dollar for 64,303,000 USD | November 24, 2006 | $ | 670,940 | |||
38,000,000 Euro Dollar for 49,532,240 USD | November 24, 2006 | 1,171,874 | ||||
25,000,000 Euro Dollar for 32,294,250 USD | January 10, 2007 | 405,809 | ||||
Unrealized gain from forward Sell contracts: | 2,248,623 | |||||
25,000,000 Greater British Pound for 46,675,000 USD | December 05, 2006 | (149,041 | ) | |||
21,000,000 Greater British Pound for 38,382,120 USD | December 21, 2006 | (955,003 | ) | |||
Unrealized loss from forward Sell contracts: | (1,104,044 | ) | ||||
Net unrealized gain (loss) from forward Exchange contracts | $ | 1,144,579 | ||||
22 Certified Annual Report
Thornburg Investment Income Builder Fund
Year Ended September 30, | Period Ended 2004(c) | |||||||||||
2006 | 2005 | |||||||||||
Class I Shares: | ||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 18.03 | $ | 15.64 | $ | 14.45 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.88 | 0.84 | 0.74 | |||||||||
Net realized and unrealized gain (loss) on investments | 1.98 | 2.22 | 1.01 | |||||||||
Total from investment operations | 2.86 | 3.06 | 1.75 | |||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.84 | ) | (0.67 | ) | (0.56 | ) | ||||||
Net realized gains | (0.34 | ) | — | — | ||||||||
Total dividends | (1.18 | ) | (0.67 | ) | (0.56 | ) | ||||||
Change in net asset value | 1.68 | 2.39 | 1.19 | |||||||||
NET ASSET VALUE, end of period | $ | 19.71 | $ | 18.03 | $ | 15.64 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return(a) | 16.53 | % | 19.73 | % | 12.19 | % | ||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) | 4.68 | % | 4.86 | % | 5.33 | %(b) | ||||||
Expenses, after expense reductions | 0.99 | % | 1.00 | % | 0.99 | %(b) | ||||||
Expenses, after expense reductions and net of custody credits | 0.98 | % | 0.99 | % | 0.99 | %(b) | ||||||
Expenses, before expense reductions | 1.02 | % | 1.09 | % | 1.21 | %(b) | ||||||
Portfolio turnover rate | 55.29 | % | 76.76 | % | 109.21 | % | ||||||
Net assets at end of period (000) | $ | 308,859 | $ | 129,110 | $ | 33,247 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class I Shares was November 1, 2003. |
+ | Based on weighted average shares outstanding. |
Certified Annual Report 23
SCHEDULE OF INVESTMENTS | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-558, CLASS C - 885-215-541, CLASS I - 885-215-467, CLASS R1 - 885-215-384
NASDAQ SYMBOLS: CLASS A - TIBAX, CLASS C - TIBCX, CLASS I - TIBIX, CLASS R1 - TIBRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/06
Energy | 12.1 | % | |
Banks | 12.0 | % | |
Diversified Financials | 10.4 | % | |
Telecommunication Services | 9.9 | % | |
Food Beverage & Tobacco | 6.6 | % | |
Real Estate | 6.3 | % | |
Pharmaceuticals & Biotechnology | 6.0 | % | |
Utilities | 4.1 | % | |
Consumer Services | 2.9 | % | |
Capital Goods | 2.9 | % | |
Materials | 2.7 | % | |
Transportation | 2.7 | % | |
Software & Services | 2.5 | % | |
Food & Staples Retailing | 2.4 | % | |
Commercial Services & Supplies | 2.2 | % | |
Media | 1.8 | % | |
Technology Hardware & Equipment | 0.3 | % | |
Insurance | 0.3 | % | |
Cash | 6.7 | % | |
U.S.Treasury/Agency Securities | 4.3 | % | |
Foreign Bonds | 0.5 | % | |
Taxable Municipal Bonds | 0.4 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/06
USA | 50.9 | % | |
U.K. | 10.3 | % | |
Spain | 7.8 | % | |
Italy | 7.2 | % | |
Canada | 4.1 | % | |
Hong Kong | 2.8 | % | |
Greece | 2.0 | % | |
China | 1.9 | % | |
France | 1.8 | % | |
Switzerland | 1.6 | % | |
Australia | 1.0 | % | |
Czech Republic | 0.9 | % | |
Malaysia | 0.9 | % | |
Ireland | 0.1 | % | |
Cash | 6.7 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 79.13% | |||||
BANKS — 11.35% | |||||
COMMERCIAL BANKS — 11.35% | |||||
Bank of America Corp. | 625,000 | $ | 33,481,250 | ||
Barclays plc | 1,500,000 | 18,921,387 | |||
BBVA | 2,500,000 | 57,882,191 | |||
Liechtenstein Landesbank | 36,000 | 28,702,119 | |||
Lloyds TSB Group plc | 1,500,000 | 15,145,532 | |||
Royal Bank of Scotland Group plc | 563,615 | 19,398,408 | |||
US Bancorp | 1,100,000 | 36,542,000 | |||
210,072,887 | |||||
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
CAPITAL GOODS — 2.86% | |||||
INDUSTRIAL CONGLOMERATES — 2.86% | |||||
General Electric Co. | 1,500,000 | $ | 52,950,000 | ||
52,950,000 | |||||
COMMERCIAL SERVICES & SUPPLIES — 1.39% | |||||
COMMERCIAL SERVICES & SUPPLIES — 1.39% | |||||
Synagro Technologies, Inc.(1) | 6,086,800 | 25,686,296 | |||
25,686,296 | |||||
CONSUMER SERVICES — 2.89% | |||||
HOTELS RESTAURANTS & LEISURE — 2.89% | |||||
Berjaya Sports Toto Berhad | 13,016,000 | 16,517,050 | |||
OPAP SA | 1,100,000 | 36,981,169 | |||
53,498,219 | |||||
DIVERSIFIED FINANCIALS — 8.01% | |||||
CAPITAL MARKETS — 2.24% | |||||
The Bank of New York Co., Inc. | 850,000 | 29,971,000 | |||
WP Stewart & Co. Ltd. | 915,000 | 11,400,900 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.77% | |||||
AllianceBernstein Hldgs. LP | 350,000 | 24,146,500 | |||
Bolsas y Mercados Espanoles+ | 800,000 | 29,930,009 | |||
Hong Kong Exchanges & Clearing Ltd. | 2,400,000 | 17,541,968 | |||
JPMorgan Chase & Co. | 750,000 | 35,220,000 | |||
148,210,377 | |||||
ENERGY — 11.82% | |||||
ENERGY EQUIPMENT & SERVICES — 1.58% | |||||
Precision Drilling Trust | 950,000 | 29,244,530 | |||
OIL, GAS & CONSUMABLE FUELS — 10.24% | |||||
BP plc ADR | 400,000 | 26,232,000 | |||
Canadian Oil Sands Trust | 1,425,000 | 38,103,928 | |||
Centennial Coal Co. Ltd. | 6,448,692 | 17,707,026 | |||
Chevron Corp. | 650,000 | 42,159,000 | |||
Eni S.p.A. | 2,200,000 | 65,226,410 | |||
218,672,894 | |||||
FOOD & STAPLES RETAILING — 2.37% | |||||
FOOD & STAPLES RETAILING — 2.37% | |||||
FU JI Food & Catering Services | 13,000,000 | 21,690,025 | |||
Tesco plc | 3,300,000 | 22,234,034 | |||
43,924,059 | |||||
FOOD BEVERAGE & TOBACCO — 6.39% | |||||
FOOD PRODUCTS — 1.57% | |||||
Reddy Ice Holdings, Inc. (1) | 1,200,000 | 29,040,000 |
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
TOBACCO — 4.82% | |||||
Altria Group, Inc. | 700,000 | $ | 53,585,000 | ||
UST, Inc. | 650,000 | 35,639,500 | |||
118,264,500 | |||||
MATERIALS — 2.75% | |||||
METALS & MINING — 2.75% | |||||
Southern Copper Corp. | 550,000 | 50,875,000 | |||
50,875,000 | |||||
MEDIA — 1.74% | |||||
MEDIA — 1.74% | |||||
Mediaset S.p.A. | 3,000,000 | 32,255,445 | |||
32,255,445 | |||||
PHARMACEUTICALS & BIOTECHNOLOGY — 5.79% | |||||
PHARMACEUTICALS — 5.79% | |||||
GlaxoSmithKline plc | 2,000,000 | 53,226,930 | |||
Pfizer, Inc. | 1,900,000 | 53,884,000 | |||
107,110,930 | |||||
REAL ESTATE — 5.81% | |||||
REAL ESTATE — 5.81% | |||||
Agile Property Holdings Ltd. | 27,000,000 | 22,004,466 | |||
Highland Hospitality Corp. | 1,800,000 | 25,794,000 | |||
Host Hotels & Resorts, Inc. | 2,600,000 | 59,618,000 | |||
107,416,466 | |||||
SOFTWARE & SERVICES — 2.51% | |||||
SOFTWARE — 2.51% | |||||
Microsoft Corp. | 1,700,000 | 46,461,000 | |||
46,461,000 | |||||
TELECOMMUNICATION SERVICES — 7.55% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 5.80% | |||||
France Telecom SA | 1,450,000 | 33,295,739 | |||
Telefónica 02 Czech Republic a.s. | 850,700 | 16,846,677 | |||
Telefónica S.A. | 3,300,000 | 57,230,104 | |||
WIRELESS TELECOMMUNICATION SERVICES — 1.75% | |||||
Vodafone Group plc | 14,111,125 | 32,285,857 | |||
139,658,377 | |||||
TRANSPORTATION — 2.40% | |||||
TRANSPORTATION INFRASTRUCTURE — 2.40% | |||||
Hopewell Highway | 15,643,500 | 12,207,054 | |||
Macquarie Infrastructure Co. | 600,000 | 18,708,000 | |||
Shenzhen Chiwan Wharf Holdings Ltd. | 8,732,449 | 13,449,020 | |||
44,364,074 | |||||
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
UTILITIES — 3.50% | ||||||
ELECTRIC UTILITIES — 1.97% | ||||||
Enel S.p.A. | 4,000,000 | $ | 36,511,769 | |||
MULTI-UTILITIES — 1.53% | ||||||
Dominion Resources, Inc. | 370,000 | 28,301,300 | ||||
64,813,069 | ||||||
TOTAL COMMON STOCK (Cost $1,305,893,212) | 1,464,233,593 | |||||
PREFERRED STOCK — 1.61% | ||||||
BANKS — 0.67% | ||||||
COMMERCIAL BANKS — 0.67% | ||||||
First Tennessee Bank | 12,000 | 12,363,000 | ||||
12,363,000 | ||||||
DIVERSIFIED FINANCIALS — 0.94% | ||||||
CAPITAL MARKETS — 0.17% | ||||||
Morgan Stanley | 120,000 | 3,096,000 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.77% | ||||||
Lehman Brothers Holdings, Inc. | 140,000 | 3,589,600 | ||||
Merrill Lynch & Co., Inc. | 420,000 | 10,672,200 | ||||
17,357,800 | ||||||
TOTAL PREFERRED STOCK (Cost $29,008,250) | 29,720,800 | |||||
CORPORATE BONDS — 5.90% | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.79% | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.79% | ||||||
Allied Waste North America, Inc., 6.375%, 4/15/2011 | $ | 500,000 | 487,500 | |||
Valassis Communications, 6.625%, 1/15/2009 | 14,000,000 | 13,963,320 | ||||
Waste Management, Inc., 7.375%, 8/1/2010 | 175,000 | 187,572 | ||||
14,638,392 | ||||||
DIVERSIFIED FINANCIALS — 1.48% | ||||||
CONSUMER FINANCE — 1.09% | ||||||
Capital One Financial Corp., 6.15%, 9/1/2016 | 20,000,000 | 20,237,260 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.39% | ||||||
Capital One Bank, 6.70%, 5/15/2008 | 655,000 | 668,548 | ||||
Capital One Bank, 6.50%, 6/13/2013 | 1,500,000 | 1,568,831 | ||||
SLM Corp. CPI Floating Rate Note, 6.44%, 1/31/2014 | 3,080,000 | 2,950,609 | ||||
SLM Corp. CPI Floating Rate Note, 5.52%, 3/2/2009 | 2,000,000 | 1,933,400 | ||||
27,358,648 | ||||||
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
ENERGY — 0.28% | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.28% | ||||||
Murphy Oil Corp., 6.375%, 5/1/2012 | $ | 5,000,000 | $ | 5,161,815 | ||
5,161,815 | ||||||
FOOD BEVERAGE & TOBACCO — 0.21% | ||||||
BEVERAGES — 0.21% | ||||||
Diageo Capital plc, 5.50%, 9/30/2016 | 4,000,000 | 3,966,584 | ||||
3,966,584 | ||||||
INSURANCE — 0.25% | ||||||
INSURANCE — 0.25% | ||||||
AAG Holding Co., Inc., 6.875%, 6/1/2008 | 335,000 | 340,776 | ||||
Hartford Life, Inc., 7.10%, 6/15/2007 | 400,000 | 404,602 | ||||
Liberty Mutual Group, Inc., 5.75%, 3/15/2014 | 1,000,000 | 983,408 | ||||
Old Republic International Corp., 7.00%, 6/15/2007 | 1,000,000 | 1,006,369 | ||||
Pacific Life Global Funding CPI Floating Rate Note, 6.33%, 2/6/2016 | 2,000,000 | 1,906,360 | ||||
4,641,515 | ||||||
MEDIA — 0.07% | ||||||
MEDIA — 0.07% | ||||||
AOL Time Warner, Inc., 6.875%, 5/1/2012 | 425,000 | 449,391 | ||||
Independent News & Media plc, 5.75%, 5/17/2009 | 600,000 | 766,899 | ||||
1,216,290 | ||||||
PHARMACEUTICALS & BIOTECHNOLOGY — 0.25% | ||||||
BIOTECHNOLOGY — 0.25% | ||||||
Tiers Inflation Linked Trust Series Wyeth 2004 21 Trust Certificate | ||||||
CPI Floating Rate Note, 6.017%, 2/1/2014 | 5,000,000 | 4,596,800 | ||||
4,596,800 | ||||||
REAL ESTATE — 0.46% | ||||||
REAL ESTATE — 0.46% | ||||||
Agile Property Holdings Ltd, 9.00%, 9/22/2013 | 7,000,000 | 6,947,500 | ||||
MDC Holdings, Inc., 7.00%, 12/1/2012 | 1,500,000 | 1,523,333 | ||||
8,470,833 | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.30% | ||||||
COMPUTERS & PERIPHERALS — 0.19% | ||||||
Jabil Circuit, Inc., 5.875%, 7/15/2010 | 3,485,000 | 3,516,410 | ||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.11% | ||||||
Cisco Systems, Inc., 5.479%, 2/20/2009 | 2,000,000 | 2,003,502 | ||||
5,519,912 | ||||||
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
TELECOMMUNICATION SERVICES — 0.92% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.92% | ||||||
Level 3 Communications, Inc. Senior Notes, 11.50%, 3/1/2010 | $ | 6,500,000 | $ | 6,678,750 | ||
Level 3 Finance, Inc. Senior Notes, 12.25%, 3/15/2013 | 7,000,000 | 7,805,000 | ||||
TCI Communications, Inc., 7.875%, 8/1/2013 | 2,285,000 | 2,553,309 | ||||
17,037,059 | ||||||
TRANSPORTATION — 0.27% | ||||||
AIR FREIGHT & LOGISTICS — 0.27% | ||||||
FedEx Corp., 5.50%, 8/15/2009 | 5,000,000 | 5,032,115 | ||||
5,032,115 | ||||||
UTILITIES — 0.62% | ||||||
ELECTRIC UTILITIES — 0.38% | ||||||
Monongahela Power, 5.70%, 3/15/2017 | 7,000,000 | 7,036,400 | ||||
GAS UTILITIES — 0.24% | ||||||
Oneok Partners, LP Senior Notes, 5.90%, 4/1/2012 | 3,000,000 | 3,023,862 | ||||
Sonat, Inc., 7.625%, 7/15/2011 | 1,400,000 | 1,435,000 | ||||
11,495,262 | ||||||
TOTAL CORPORATE BONDS (Cost $106,852,943) | 109,135,225 | |||||
CONVERTIBLE BONDS — 1.40% | ||||||
TELECOMMUNICATION SERVICES — 1.40% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.40% | ||||||
Level 3 Communications, Inc., 6.00%, 3/15/2010 | 29,080,000 | 25,554,050 | ||||
Level 3 Communications, Inc., 6.00%, 9/15/2009 | 397,000 | 356,804 | ||||
25,910,854 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $21,134,889) | 25,910,854 | |||||
TAXABLE MUNICIPAL BONDS — 0.38% | ||||||
Michigan Public Educational Facilities Authority, 5.70%, 8/31/2007 | 1,795,000 | 1,796,831 | ||||
Short Pump Town Center Community Development, 6.26%, 2/1/2009 | 2,000,000 | 2,015,920 | ||||
Victor New York, 9.05%, 5/1/2008 | 1,175,000 | 1,183,401 | ||||
Victor New York, 9.20%, 5/1/2014 | 2,000,000 | 2,066,720 | ||||
TOTAL TAXABLE MUNICIPAL BONDS (Cost $7,131,416) | 7,062,872 | |||||
U.S. GOVERNMENT AGENCIES — 1.38% | ||||||
Federal National Mtg Assoc CPI Floating Rate Note, 5.459%, 2/17/2009 | 2,000,000 | 1,940,120 | ||||
Federal National Mtg Assoc Remic Series 2006-B1 Class AB, 6.00%, 6/25/2016 | 23,554,419 | 23,687,980 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $25,455,020) | 25,628,100 | |||||
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
U.S.TREASURY SECURITIES — 2.96% | ||||||
United States Treasury Notes, 3.50%, 11/15/2006 | $ | 20,000,000 | $ | 19,965,620 | ||
United States Treasury Notes, 2.625%, 11/15/2006 | 35,000,000 | 34,902,944 | ||||
TOTAL U.S.TREASURY SECURITIES (Cost $54,853,911) | 54,868,564 | |||||
FOREIGN BONDS — 0.49% | ||||||
Alberta Treasury Notes, 4.10%, 6/1/2011 | 10,000,000 | 8,984,936 | ||||
TOTAL FOREIGN BONDS (Cost $8,864,547) | 8,984,936 | |||||
SHORT TERM INVESTMENTS — 5.75% | ||||||
Abbey National, 5.19%, 10/3/2006 | 42,000,000 | 41,987,890 | ||||
American General Finance Corp., 5.30%, 10/5/2006 | 36,000,000 | 35,978,800 | ||||
Lasalle Bank Corp., 5.19%, 10/10/2006 | 24,000,000 | 23,968,860 | ||||
Toyota Motor Credit Corp. - Puerto Rico, 5.21%, 10/13/2006 | 4,400,000 | 4,392,359 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $106,327,909) | 106,327,909 | |||||
TOTAL INVESTMENTS — 99.00% (Cost $1,665,522,097) | $ | 1,831,872,853 | ||||
OTHER ASSETS LESS LIABILITIES — 1.00% | 18,581,601 | |||||
NET ASSETS — 100.00% | $ | 1,850,454,454 | ||||
Footnote Legend
+ | Non-income producing |
See notes to financial statements.
(1) | Investment in Affiliates |
Holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940 because the Fund’s holding represented 5% or more of the company’s voting securities during the period, are shown below:
Issuer | Shares at Sept. 30, 2005 | Gross Additions | Gross Reductions | Shares at Sept. 30, 2006 | Market Value Sept. 30, 2006 | Dividend Income | ||||||
Synagro Technologies, Inc. | 5,924,455 | 625,545 | 463,200 | 6,086,800 | 25,686,296 | 2,427,360 | ||||||
Ready Ice Holdings, Inc. | 500,000 | 700,000 | — | 1,200,000 | 29,040,000 | 297,350 |
Total non-controlled “affiliated companies” — 2.96% of Net Assets
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt | |
REMIC | Real Estate Mortgage Investment Conduit |
30 Certified Annual Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
Thornburg Investment Income Builder Fund | September 30, 2006 |
To the Trustees and Class I 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 (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
Certified Annual Report 31
EXPENSE EXAMPLE | ||
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including a 30-day redemption fee on Class I shares and
(2) ongoing costs, including management and administrative fees and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,050.40 | $ | 5.02 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.17 | $ | 4.95 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.98%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
32 Certified Annual Report
INDEX COMPARISON | ||
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Investment Income Builder Fund versus Blended Index (November 3, 2003 to September 30, 2006)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2006
1 Yr | Since Inception | |||||
I Shares (Incep: 11/3/03) | 16.53 | % | 16.67 | % | ||
Blended Index (Since: 11/3/03) | 11.53 | % | 12.15 | % |
Performance data reflects past performance, which is no guarantee of future results. 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.
Returns reflect the reinvestment of dividends and capital gains. There is no up-front sales charge for Class I shares. Class I shares are subject to a 1% 30-day redemption fee.
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 U.S. 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 (MSCI) World Index is an unmanaged market-weighted index that consists of over 1,200 equity securities traded in 23 of the world’s most developed countries. Securities are listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The index is calculated with net dividends reinvested, in U.S. dollars.
Certified Annual Report 33
TRUSTEES AND OFFICERS | ||
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
Name, Age, Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report 35
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
Name, Age, Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
36 Certified Annual Report
OTHER INFORMATION | ||
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
TAX INFORMATION
For the fiscal year ended September 30, 2006, the Fund designates long-term capital gain dividends of $16,515,382 and long-term capital gain dividends taxed at the 25% rate of $79,093.
For the tax year ended September 30, 2006, the Thornburg Investment Income Builder Fund designates 76.81% of the dividends paid from tax basis net ordinary income as qualifying for the reduced rate under the Jobs and Growth Tax Relief and Reconciliation Act of 2003.
28.69% of the ordinary income distributions paid by the Fund for the year ended September 30, 2006 qualified for the corporate dividends received deduction.
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006. Complete information will be computed and reported in conjunction with your 2006 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Investment Income Builder Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s investment performance, purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met with representatives of the Advisor in July 2006 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The independent Trustees thereafter met in independent session to consider various factors respecting the agreement’s renewal, and met in a subsequent session with the Advisor’s chief investment officer to present questions. Following these sessions, the Trustees met on September 12, 2006 to consider a renewal of the advisory agreement.
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In evaluating the nature, extent and quality of services provided by the Advisor to the Fund, and in reviewing the Fund’s investment performance, the Trustees considered qualitative and quantitative information presented to the Trustees throughout the preceding year and in anticipation of their annual evaluation, including:
(i) | reports from portfolio management personnel respecting execution of portfolio investment strategies in prevailing market conditions; |
(ii) | information respecting issuer, industry, market and economic developments; |
(iii) | the Fund’s absolute investment performance and achievement of stated objectives, including specific dividend growth data; |
Certified Annual Report 37
OTHER INFORMATION, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2006 (Unaudited) |
(iv) | measures of the Fund’s investment returns over different periods of time relative to a category of “world-allocation” mutual funds having income and capital appreciation objectives, selected by an independent mutual fund analyst firm, and relative to a blended performance benchmark comprised of two broad based securities indices; and |
(v) | comparative measures of portfolio relativity, risk and return. |
The Trustees also considered the Advisor’s staffing and other resources, the Advisor’s efforts to contain costs and expenses, the Advisor’s supervision of services provided to the Trust by third party service providers, the Advisor’s performance of administrative, accounting and other services, the Advisor’s adherence to compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors. The Trustees noted that the value of comparisons of the Fund’s investment performance to mutual fund categories may be limited in some degree because the Fund’s investment objective and strategies, as defined in its prospectus, are unique or may vary from the methods for selecting the investments for other funds.
In conducting their evaluation, the Trustees observed that the Advisor had continued to faithfully pursue and achieve the Fund’s stated objectives, as demonstrated particularly by the Advisor’s selection of investments in accordance with the Fund’s stated strategies, and the Fund’s investment returns. The Trustees also observed in conducting their evaluations the Fund’s historical dividend payments to shareholders and the increases in the dividend each year, the Fund’s superior investment performance relative to the performance of a recognized category of equity income mutual funds having certain characteristics comparable to the Fund and selected by an independent mutual fund analyst firm, the Fund’s outperformance of a blended benchmark (consisting of two broad based indices reflecting the experience of fixed income securities and equity securities, respectively) in each year since the Fund’s inception, the Fund’s performance relative to the blended benchmark in periods of both positive and negative market conditions, and the positive effects of the Fund’s cumulative returns.
The Trustees concluded, based upon these and other considerations, that the Advisor had actively and competently pursued the Fund’s stated investment objectives in accordance with the Fund’s investment policies stated in its prospectuses. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor. In reviewing the fees charged by the Advisor to the Fund, the Trustees primarily considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a grouping of mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. In addition, the Trustees considered the profitability of the Advisor compared to other investment management firms, and comparisons of the investment management fee rates charged by the Advisor to the Fund with rates charged to other clients and the differing types of services furnished to the Fund and the other clients. The Trustees noted that the management fee charged to the Fund was higher than (but comparable to) the average and median fee rates to the grouping of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio of the Fund was somewhat higher than the average and median expense ratios for the same group of mutual funds. The Trustees recognized the unique nature of the Fund, the superior performance of the Fund, the comparability of the overall expense ratio, the size of the Fund, the specific services of the Advisor and other factors. The Trustees noted in their review that fee rates charged by the Advisor to other clients of the Advisor were not directly comparable to rates charged to the Fund principally because of the significant differences in the services provided.
The Trustees concluded, based upon these and other considerations, that the fees charged to the Fund by the Advisor were fair and reasonable in view of the services provided, the clear disclosure of these fees and expenses in the Fund’s prospectuses, the Fund’s investment performance, and fees and expenses charged to other mutual funds. The Trustees further concluded that there was no indication that the Advisor’s profitability was unusual, viewed in the context of the services provided, the performance of the Fund, and the fees and profitability of other investment management firms.
Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by the Fund and other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The Trustees concluded that the Fund has realized and may reasonably be expected to realize further economies of scale for the benefit of its shareholders as it grows in size.
Ancillary Benefits to Advisor. In reviewing benefits enjoyed by the Advisor because of its relationship with the Fund, the Trustees considered the Advisor’s receipt of certain research services, favorable publicity received by the Advisor because of the superior investment performance of certain Funds of the Trust, and the benefits to the Fund from the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment clients. The Trustees concluded, based upon these and other considerations, that there was no unusual or unfair benefit enjoyed by the Advisor, and that the Fund enjoyed benefits by virtue of the Advisor’s engagement by other investment clients.
38 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
Certified Annual Report 39
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
![]() | ![]() | |
119 East Marcy Street | 119 East Marcy Street | |
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |
800.847.0200 | 800.847.0200 |
TH864
Thornburg Global Opportunities Fund
The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types from issuers around the world.
The portfolio is diversified to include basic value stocks, but also includes stocks of companies with consistent earnings characteristics and those of emerging franchises, when, in our opinion, these issues are value priced.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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Sign up at www.thornburg.com/edelivery |
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Message from the Chairman
Garrett Thornburg Chairman & CEO | November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We seek to accomplish this through a range of equity funds that redefine traditional measures of value and growth and through a family of laddered bond funds that focus on quality, stability and minimizing risk over time.
Confirming our strategy, all Thornburg equity funds are highly ranked within their respective categories over the long term.
The Thornburg equity funds employ a comprehensive approach, which is more inclusive than the traditional deep value or high growth approach to stock selection. You can read much more about the stocks in your Fund’s portfolio, and all Thornburg equity funds, at our web site, www.thornburg.com/funds.
During this decade, the average dividend yield paid by equity and hybrid mutual funds has dipped well below 1%. We established Thornburg Investment Income Builder Fund in late 2002 to be clearly different from other equity/hybrid funds by paying attractive dividends today, with a further goal of increasing these in the future. Our record to date shows clear success in achieving each aspect of this mission.
On the bond side, we have always had a highly disciplined approach of laddering short-and intermediate-bond maturities, seeking to provide both an attractive return and relative stability of principal.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely,
Garrett Thornburg Chairman & CEO |
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Important Information
The information presented on the following pages was current as of September 30, 2006. The managers’ views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
Shares in the Fund carry risks including possible loss of principal. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity. Risks may be associated with investments in emerging markets including illiquidity and volatility. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Funds invested in a limited number of holdings may expose an investor to greater volatility. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any government agency. There is no guarantee that the Fund will meet its investment objectives.
Performance data given at net asset value (NAV) does not take into account the applicable sales charges. If the sales charges had been included, the performance would have been lower.
From time to time, the Fund may invest in shares of companies through initial public offerings (“IPOs”). IPOs have the potential to produce substantial gains for some of the Funds. There is no assurance that any of the Funds will have continued access to profitable IPOs and as a Fund’s assets grow, the impact of IPO investment may decline. Therefore investors should not rely on these past gains as an indication of future performance.
Glossary
The Morgan Stanley Capital International (MSCI) All Country (AC) World Index – The Morgan Stanley Capital International All Country World Index (MSCI AC World Index) is a market capitalization weighted index composed of over 2,000 companies, and is representative of the market structure of 48 developed and emerging market countries in North and South America, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars.
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Thornburg Global Opportunities Fund
September 30, 2006
Table of Contents
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report 5
October 17, 2006
Dear Fellow Shareholder:
Thornburg Global Opportunities Fund (NASDAQ symbol THOAX for the A Shares) was launched on July 28th, 2006. The fiscal year ended September 30, 2006 marks the end of the brief initial reporting period for Thornburg Global Opportunities Fund. The net asset value (NAV) of the Class A shares on September 30, 2006 was $12.86, while the NAV per share at launch was $11.94. Total return of the Fund’s A shares for the period since inception (7/28/06) was 7.71% at NAV compared with 3.73% for the MSCI AC World Index.
The Fund represents an extension of two core competencies of our equity team: a global investment perspective and active fund management. The Thornburg Global Opportunities Fund features some basic characteristics of our other funds that have served us well over the years. Specifically, the Fund employs a focused “promising companies at a discount to intrinsic value” philosophy. The analysts and portfolio managers of other Thornburg equity funds contribute opinions, data, and ideas to this portfolio. Unique to our mutual fund lineup, Thornburg Global Opportunities Fund is a focused portfolio of equity holdings from around the world, selected only with capital appreciation in mind.
We are pleased with the reception that Thornburg Global Opportunities Fund has already seen in the marketplace. We expected to invest our own money in the Fund and labor relatively unnoticed for a couple of years. While still containing a substantial percentage of shares owned by Thornburg principals and their associates, the Fund reached $25 million of assets as of September 30, 2006. This compares very well with our experience launching previous funds.
What makes Thornburg Global Opportunities Fund different? Our market research revealed that over $240 billion is already invested in “global equity” mutual funds. The ten largest of these hold 86% of the sector assets, and these funds average more than 230 different stocks each in their portfolios. Since your Fund holds around 36 stocks, it is certainly different.
You will notice from the report that your Fund’s largest sector weighting in these early days has been energy, a sector that generally has not performed well in recent months. Three out of the eleven negative performers in your portfolio during this initial period were energy stocks, including China Shenhua Energy (China), Apache Corp. (USA), and ENI (Italy). Two pharmaceutical firms, Teva (Israel) and Sanofi-Aventis (France), were also among the otherwise diverse collection of mildly negative performers.
These were more than offset by 27 stocks that delivered positive total returns in the period under review. An initial public offering, New Oriental Education (China), was your portfolio’s top performer. Three telecom companies, Level 3 Communications (USA), NII Holdings (USA), and France Telecom (France), made significant positive contributions, along with Copa Holdings (Panama), Agile Property Holdings (Hong Kong), and Eclipsys Corp. (USA).
6 Certified Annual Report
You can find additional descriptive information about most of the holdings in your portfolio by going to our in-ternet web site, www.thornburg.com/funds. We believe your portfolio is an undervalued collection of businesses.
Thank you for your interest in Thornburg Global Opportunities Fund.
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Brian McMahon | W. Vinson Walden, CFA | |||
Co-Portfolio Manager | Co-Portfolio Manager | |||
President & Chief Investment Officer | Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 7
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
ASSETS | |||
Investments at value (cost $23,241,235) | $ | 24,137,409 | |
Cash | 119,323 | ||
Receivable for fund shares sold | 3,498,408 | ||
Receivable from investment advisor and other affiliates (Note 3) | 34,058 | ||
Dividends receivable | 14,807 | ||
Prepaid expenses and other assets | 28,885 | ||
Total Assets | 27,832,890 | ||
LIABILITIES | |||
Payable for securities purchased | 2,873,973 | ||
Accounts payable and accrued expenses | 8,277 | ||
Total Liabilities | 2,882,250 | ||
NET ASSETS | $ | 24,950,640 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 12,732 | |
Net unrealized appreciation on investments | 896,129 | ||
Accumulated net realized gain (loss) | 110,562 | ||
Net capital paid in on shares of beneficial interest | 23,931,217 | ||
$ | 24,950,640 | ||
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share | $ | 12.86 | |
Maximum sales charge, 4.50% of offering price | 0.61 | ||
Maximum offering price per share | $ | 13.47 | |
Class C Shares: | |||
Net asset value and offering price per share * | $ | 12.84 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share | $ | 12.87 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
8 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg Global Opportunities Fund | For the period from commencement of operations on July 28, 2006 to September 30, 2006 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $1,489) | $ | 24,377 | ||
Interest income | 11,051 | |||
Total Income | 35,428 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 16,105 | |||
Administration fees (Note 3) | ||||
Class A Shares | 573 | |||
Class C Shares | 307 | |||
Class I Shares | 573 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,164 | |||
Class C Shares | 2,533 | |||
Transfer agent fees | ||||
Class A Shares | 2,250 | |||
Class C Shares | 2,250 | |||
Class I Shares | 2,250 | |||
Registration and filing fees | ||||
Class A Shares | 16,371 | |||
Class C Shares | 12,939 | |||
Class I Shares | 13,009 | |||
Custodian fees (Note 3) | 4,417 | |||
Professional fees | 2,291 | |||
Accounting fees | 125 | |||
Trustee fees | 77 | |||
Other expenses | 7,053 | |||
Total Expenses | 84,287 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (48,289 | ) | ||
Management fees waived by investment advisor (Note 3) | (10,247 | ) | ||
Distribution and service fees waived (Note 3) | (94 | ) | ||
Fees paid indirectly (Note 3) | (1,108 | ) | ||
Net Expenses | 24,549 | |||
Net Investment Income | $ | 10,879 | ||
Certified Annual Report 9
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Global Opportunities Fund | For the period from commencement of operations on July 28, 2006 to September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 110,562 | ||
Foreign currency transactions | (2,530 | ) | ||
108,032 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 896,174 | |||
Foreign currency translations | (45 | ) | ||
896,129 | ||||
Net Realized and Unrealized Gain | 1,004,161 | |||
Net Increase in Net Assets Resulting From Operations | $ | 1,015,040 | ||
See notes to financial statements.
10 Certified Annual Report
Thornburg Global Opportunities Fund |
For the period from of operations on | |||
INCREASE (DECREASE) IN NET ASSETS FROM: | |||
OPERATIONS: | |||
Net investment income | $ | 10,879 | |
Net realized gain on investments and foreign currency transactions | 108,032 | ||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 896,129 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,015,040 | ||
FUND SHARE TRANSACTIONS (NOTE 4): | |||
Class A Shares | 8,191,425 | ||
Class C Shares | 3,351,987 | ||
Class I Shares | 12,392,188 | ||
Net Increase in Net Assets | 24,950,640 | ||
NET ASSETS: | |||
Beginning of period | 0 | ||
End of period | $ | 24,950,640 | |
Undistributed net investment income | $ | 12,732 |
See notes to financial statements.
Certified Annual Report 11
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
NOTE 1 – ORGANIZATION
Thornburg Global Opportunities Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on July 28, 2006. 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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg Limited Term Income Fund, Thornburg Value Fund, Thornburg International Value Fund, Thornburg New York Intermediate Municipal 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 seeks long-term capital appreciation by investing in equity and debt securities of all types from issuers around the world.
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 both 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 may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Securities: 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. In any case where a market quotation is not readily available, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the 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 amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund to the shareholders. Therefore, no provision for Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient
12 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
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: 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 period ended September 30, 2006, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. For the period ended September 30, 2006, the Advisor voluntarily waived investment Advisory fees of $10,247. The Trust also has 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% per annum of the average daily net assets attributable to each class of shares. For the period ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $17,695 for Class A shares, $14,857 for Class C shares, and $15,831 for Class I shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the period ended September 30, 2006, the Distributor has advised the Fund that it earned commissions aggregating $5,559 from the sale of Class A shares of the Fund and collected contingent deferred sales charges aggregating $735 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust 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.
The Trust 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, 2006, fees paid indirectly were $1,108. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
For the Period Ended* September 30, 2006 | |||||||
Shares | Amount | ||||||
Class A Shares | |||||||
Shares sold | 659,222 | $ | 8,193,500 | ||||
Shares repurchased | (170 | ) | (2,075 | ) | |||
Redemption fees received** | — | — | |||||
Net Increase (Decrease) | 659,052 | $ | 8,191,425 | ||||
Class C Shares | |||||||
Shares sold | 278,996 | $ | 3,429,727 | ||||
Shares repurchased | (6,096 | ) | (77,740 | ) | |||
Redemption fees received** | — | — | |||||
Net Increase (Decrease) | 272,900 | $ | 3,351,987 | ||||
Class I Shares | |||||||
Shares sold | 1,007,805 | $ | 12,393,212 | ||||
Shares repurchased | (84 | ) | (1,024 | ) | |||
Redemption fees received** | — | — | |||||
Net Increase (Decrease) | 1,007,721 | $ | 12,392,188 | ||||
* | The Fund commenced operations on July 28, 2006. |
** | The Fund charges a redemption fee of 1% of the Class A & Class I shares exchanged within 30 days of purchase. Redemption fees charged to any Class are allocated to all Classes upon receipt of payment based on relative net asset values of each Class or other appropriate allocation methods. |
The Advisor, its owners, employees and affiliated entities of the Advisor have invested amounts in the Fund valued at $12,000,265, representing 48.10% of the net asset value as of September 30, 2006.
NOTE 5 – SECURITIES TRANSACTIONS
For the period ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $21,898,195 and $866,125, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 23,241,639 | ||
Gross unrealized appreciation on a tax basis | $ | 1,111,218 | ||
Gross unrealized depreciation on a tax basis | (215,448 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 895,770 | ||
Distributable earnings – ordinary income | $ | 12,732 | ||
Distributable capital gains | $ | 110,562 |
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $4,383, increased undistributed net realized investment gains by $2,530, and increased undistributed net investment income by $1,853. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from unreimbursed stock issuance expenses and foreign currency gains/losses.
At September 30, 2006, the Fund had deferred tax basis currency losses occurring subsequent to inception date of July 28, 2006 of $2,530. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity.
14 Certified Annual Report
Thornburg Global Opportunities Fund |
Period Ended September 30, 2006 (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 | 0.01 | |||
Net realized and unrealized gain (loss) on investments | 0.91 | |||
Total from investment operations | 0.92 | |||
Less dividends from: | ||||
Net investment income | — | |||
Change in net asset value | 0.92 | |||
NET ASSET VALUE, end of period | $ | 12.86 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (a) | 7.71 | % | ||
Ratios to average net assets: | ||||
Net investment income | 0.34 | %(b) | ||
Expenses, after expense reductions | 1.70 | %(b) | ||
Expenses, after expense reductions and net of custody credits | 1.63 | %(b) | ||
Expenses, before expense reductions | 6.12 | %(b)† | ||
Portfolio turnover rate | 6.08 | % | ||
Net assets at end of period (000) | $ | 8,477 |
(a) | Sales load is not computed in total return, which is not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Fund commenced operations on July 28, 2006. |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
Certified Annual Report 15
FINANCIAL HIGHLIGHTS, CONTINUED |
Thornburg Global Opportunities Fund |
Period Ended September 30, 2006 (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 | (0.01 | ) | ||
Net realized and unrealized gain (loss) on investments | 0.91 | |||
Total from investment operations | 0.90 | |||
Less dividends from: | ||||
Net investment income | — | |||
Change in net asset value | 0.90 | |||
Net asset value, end of period | $ | 12.84 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (a) | 7.54 | % | ||
Ratios to average net assets: | ||||
Net investment income (loss) | (0.40 | )%(b) | ||
Expenses, after expense reductions | 2.41 | %(b) | ||
Expenses, after expense reductions and net of custody credits | 2.35 | %(b) | ||
Expenses, before expense reductions | 9.01 | %(b)† | ||
Portfolio turnover rate | 6.08 | % | ||
Net assets at end of period (000) | $ | 3,505 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Fund commenced operations on July 28, 2006. |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
16 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED |
Thornburg Global Opportunities Fund |
Period Ended September 30, 2006 (c) | ||||
Class I 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 | 0.02 | |||
Net realized and unrealized gain (loss) on investments | 0.91 | |||
Total from investment operations | 0.93 | |||
Less dividends from: | ||||
Net investment income | — | |||
Change in net asset value | 0.93 | |||
NET ASSET VALUE, end of period | $ | 12.87 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (a) | 7.79 | % | ||
Ratios to average net assets: | ||||
Net investment income | 0.90 | %(b) | ||
Expenses, after expense reductions | 1.04 | %(b) | ||
Expenses, after expense reductions and net of custody credits | 0.99 | %(b) | ||
Expenses, before expense reductions | 2.98 | %(b)† | ||
Portfolio turnover rate | 6.08 | % | ||
Net assets at end of period (000) | $ | 12,968 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Fund commenced operations on July 28, 2006. |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-343, CLASS C - 885-215-335, CLASS I - 885-215-327
NASDAQ SYMBOLS: CLASS A - THOAX, CLASS C - THOCX, CLASS I - THOIX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/06
Energy | 17.3 | % | |
Telecommunication Services | 12.5 | % | |
Diversified Financials | 8.8 | % | |
Health Care Equipment and Services | 7.2 | % | |
Pharmaceuticals & Biotechnology | 7.1 | % | |
Consumer Services | 7.0 | % | |
Insurance | 6.7 | % | |
Transportation | 4.7 | % | |
Commercial Services & Supplies | 3.7 | % | |
Media | 3.7 | % | |
Banks | 2.7 | % | |
Real Estate | 2.5 | % | |
Technology Hardware & Equipment | 2.3 | % | |
Materials | 0.9 | % | |
Food & Staples Retailing | 0.8 | % | |
Software & Services | 0.5 | % | |
Other Assets & Cash Equivalents | 11.6 | % |
SUMMARY OF COUNTRY EXPOSURE (PERCENT OF EQUITY HOLDINGS)
As of 9/30/06
U.S.A. | 55.2 | % | |
Switzerland | 8.9 | % | |
China | 7.3 | % | |
Hong Kong | 5.3 | % | |
Israel | 5.0 | % | |
Australia | 4.7 | % | |
Greece | 3.5 | % | |
Italy | 3.5 | % | |
Panama | 3.0 | % | |
France | 2.7 | % | |
Mexico | 0.9 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 88.33% | |||||
BANKS — 2.66% | |||||
COMMERCIAL BANKS — 2.66% | |||||
China Merchants Bank Co., Ltd+ | 84,500 | $ | 119,078 | ||
US Bancorp | 16,400 | 544,808 | |||
663,886 | |||||
COMMERCIAL SERVICES & SUPPLIES — 3.73% | |||||
COMMERCIAL SERVICES & SUPPLIES — 3.73% | |||||
FTI Consulting Inc.+ | 37,100 | 929,726 | |||
929,726 | |||||
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
CONSUMER SERVICES — 7.02% | |||||
DISCRETIONARY CONSUMER SERVICES — 0.97% | |||||
New Oriental Education & Technology Group, Inc. ADR+ | 10,000 | $ | 242,500 | ||
HOTELS RESTAURANTS & LEISURE — 6.05% | |||||
Las Vegas Sands Corp.+ | 10,700 | 731,345 | |||
OPAP SA | 23,100 | 776,605 | |||
1,750,450 | |||||
DIVERSIFIED FINANCIALS — 8.80% | |||||
CAPITAL MARKETS — 3.79% | |||||
Charles Schwab Corp. | 18,800 | 336,520 | |||
UBS AG | 10,200 | 610,124 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.01% | |||||
Hong Kong Exchanges & Clearing Ltd. | 75,000 | 548,186 | |||
Resource America, Inc. | 33,700 | 700,960 | |||
2,195,790 | |||||
ENERGY — 17.25% | |||||
OIL, GAS & CONSUMABLE FUELS — 17.25% | |||||
Apache Corp. | 15,950 | 1,008,040 | |||
Centennial Coal Co. Ltd | 380,500 | 1,044,789 | |||
ChevronTexaco Corp. | 11,650 | 755,619 | |||
China Shenhua Energy | 449,000 | 722,632 | |||
Eni S.p.A. | 26,100 | 773,823 | |||
4,304,903 | |||||
FOOD & STAPLES RETAILING — 0.80% | |||||
FOOD & STAPLES RETAILING — 0.80% | |||||
Wal-Mart de Mexico | 58,600 | 199,576 | |||
199,576 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 7.21% | |||||
HEALTH CARE PROVIDERS & SERVICES — 7.21% | |||||
Eclipsys Corp.+ | 66,000 | 1,182,060 | |||
WellPoint, Inc.+ | 8,000 | 616,400 | |||
1,798,460 | |||||
INSURANCE — 6.74% | |||||
INSURANCE — 6.74% | |||||
American International Group, Inc. | 15,200 | 1,007,152 | |||
Swiss Re | 8,825 | 675,372 | |||
1,682,524 | |||||
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
MATERIALS — 0.85% | |||||
METALS & MINING — 0.85% | |||||
Southern Copper Corp. | 2,300 | $ | 212,750 | ||
212,750 | |||||
MEDIA — 3.72% | |||||
MEDIA — 3.72% | |||||
Comcast Corp.+ | 25,200 | 927,612 | |||
927,612 | |||||
PHARMACEUTICALS & BIOTECHNOLOGY — 7.08% | |||||
BIOTECHNOLOGY — 2.68% | |||||
Bachem Holding AG | 10,100 | 669,564 | |||
PHARMACEUTICALS — 4.40% | |||||
Teva Pharmaceutical Industries Ltd.ADR | 32,200 | 1,097,698 | |||
1,767,262 | |||||
REAL ESTATE — 2.50% | |||||
REAL ESTATE — 2.50% | |||||
Agile Property Holdings Ltd. | 764,000 | 622,645 | |||
622,645 | |||||
SOFTWARE & SERVICES — 0.47% | |||||
IT SERVICES — 0.47% | |||||
Bearingpoint, Inc. Co.+ | 15,000 | 117,900 | |||
117,900 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.30% | |||||
COMPUTERS & PERIPHERALS — 2.30% | |||||
Dell, Inc.+ | 25,100 | 573,284 | |||
573,284 | |||||
TELECOMMUNICATION SERVICES — 12.46% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 6.63% | |||||
France Telecom SA | 26,100 | 599,323 | |||
Level 3 Communications, Inc.+ | 197,100 | 1,054,485 | |||
WIRELESS TELECOMMUNICATION SERVICES — 5.83% | |||||
American Tower Corp.+ | 12,300 | 448,950 | |||
NII Holdings, Inc.+ | 16,200 | 1,006,992 | |||
3,109,750 | |||||
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
TRANSPORTATION — 4.74% | ||||||
AIRLINES — 2.64% | ||||||
Copa Holdings SA | 19,200 | $ | 659,136 | |||
TRANSPORTATION INFRASTRUCTURE — 2.10% | ||||||
China Merchants Holdings International Co. Ltd. | 178,000 | 523,153 | ||||
1,182,289 | ||||||
TOTAL COMMON STOCK (Cost $21,142,633) | 22,038,807 | |||||
SHORT TERM INVESTMENTS — 8.41% | ||||||
Federal Home Loan Bank, 5.11%, 10/3/2006 | $ | 600,000 | 599,829 | |||
Prudential Funding Corp., 5.20%, 10/10/2006 | 500,000 | 499,350 | ||||
Toyota Credit de Puerto Rico Corp., 5.20%, 10/5/2006 | 1,000,000 | 999,423 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $2,098,602) | 2,098,602 | |||||
TOTAL INVESTMENTS — 96.74% (Cost $23,241,235) | $ | 24,137,409 | ||||
OTHER ASSETS LESS LIABILITIES — 3.26% | 813,231 | |||||
NET ASSETS — 100.00% | $ | 24,950,640 | ||||
Footnote Legend
+ | Non-income producing |
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR American | Depository Receipt |
Certified Annual Report 21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Global Opportunities Fund
To the Trustees and Shareholders of
Thornburg Global Opportunities 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 Global Opportunities Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, and the results of its operations, the changes in its net assets, and the financial highlights for the period from July 28, 2006 to September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
22 Certified Annual Report
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including
(a) sales charges (loads) on purchase payments, for Class A shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(c) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(d) a 30-day redemption fee on Class A and Class I shares;
(2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,217.07 | $ | 9.04 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,016.92 | $ | 8.22 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,212.28 | $ | 13.03 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.29 | $ | 11.86 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,219.32 | $ | 5.50 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.63%; C: 2.35%; I: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 23
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
TOTAL RETURNS*
For periods ended September 30, 2006 (with sales charge)
Since Inception | |||
A Shares (Inception: 07/28/06) | 2.88 | % | |
C Shares (Inception: 07/28/06) | 6.54 | % | |
MSCI AC World Index (Since: 07/28/06) | 3.73 | % |
* | Not annualized |
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com. The performance data does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.
Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 4.50%. Class C shares are subject to a 1% CDSC for the first year only. Class A shares are subject to a 1% 30-day redemption fee.
The Morgan Stanley Capital International All Country World Index (MSCI AC World Index) is a market capitalization weighted index composed of over 2,000 companies, and is representative of the market structure of 48 developed and emerging market countries in North and South America, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars. Investors may not make direct investments into any index.
24 Certified Annual Report
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP,Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 25
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
26 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. (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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report 27
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Global Opportunities Fund pursuant to an investment advisory agreement. The advisory agreement for the Fund was initially approved for the Fund by the Trustees at their meeting on April 19, 2006. The Trustees reviewed and approved the continuance of the agreement again on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their initial consideration of the advisory agreement for the Fund, the independent Trustees met in independent session on April 18, 2006 to discuss the proposed agreement for the Fund, the Advisor’s service for other Funds of the Trust, the proposed investment objectives and policies of the Fund, and other matters pertaining to the Fund. The independent Trustees also met with the Advisor’s chief investment officer in a subsequent session to discuss in detail the proposed Fund and the Advisor’s services for the Fund. Following these sessions, the Trustees met on April 19, 2006 to consider an adoption of the proposed investment advisory agreement for the Fund and unanimously approved and adopted the agreement for the Fund. In accordance with their established practice, the Trustees determined (with the Advisor’s concurrence) to place the annual review of the Fund’s advisory agreement on the same cycle for review applicable to the other Funds of the Trust. Accordingly, the independent Trustees met in independent session again on September 11, 2006 to review the Advisor’s services for the Fund, and the Trustees approved a continuance of the advisory agreement on September 12, 2006 with the other Funds of the Trust.
The information below summarizes certain factors considered by the Trustees in connection with the determination to initially approve and renew the advisory agreement. In determining to approve and renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In considering the nature, extent and quality of services proposed to be provided by the Advisor to the new Fund, the Trustees primarily considered the Advisor’s adherence to the stated objectives and policies of the Trust’s other Funds, its execution of strategies for the other Funds and the investment performance of the Trust’s other equity Funds, noting specifically their deliberations in September 2005 when they considered the renewal of the agreements for the other Funds, and supplemental performance information which was provided to and reviewed by the independent Trustees on April 18, 2006. The Trustees noted in particular the Advisor’s success in executing a variety of investment strategies, and particularly its success in selecting securities issued by foreign companies. The Trustees considered the proposed investment strategies for the Fund and the Advisor’s ability to pursue those strategies, as demonstrated by the Advisor’s services for the other Funds, the Advisor’s creation of a synthetic portfolio to evaluate the proposed strategies, the proposed staffing for the Fund and the Advisor’s other resources. The Trustees concluded, based upon these and other considerations, that Thornburg was prepared to pursue actively and competently the Fund’s stated investment objective in accordance with the Fund’s investment policies to be stated in the Fund’s prospectuses. On September 12, 2006, the Trustees reconsidered their previous deliberations at the time
28 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
they initially approved the advisory agreement for the Fund in April 2006. The Trustees considered limited investment performance information, because the Fund had only commenced investment operations on July 28, 2006. The Trustees determined that the Advisor had faithfully pursued the Fund’s stated objectives, as demonstrated by the Advisor’s selection of investments.
Fees and Expenses; Profitability of Advisor. The Trustees also considered in their April 2006 deliberations the fees proposed to be charged by Thornburg to the Fund. In this regard, the Trustees primarily considered the proposed fees in relation to the expected nature and quality of services to be provided, the fees charged to the Trust’s other equity Funds in relation to the services provided by Thornburg to those Funds, comparison of the proposed fees and expected expenses for the Fund against fees and expenses charged to categories of similar funds, and the Advisor’s proposed waivers of fees and reimbursement of expenses. The Trustees observed in their discussions that the proposed fees and expected expenses, after Thornburg’s waivers of fees and reimbursement of expenses, were generally comparable to average and median expense ratios for different categories of Funds. The Trustees concluded that the fees proposed to be charged to the Fund by the Advisor were fair and reasonable in view of the services to be provided, fees and expenses charged to other mutual funds and the Advisor’s proposed fee waivers and expense reimbursements. The Trustees further concluded in April 2006 that Thornburg’s profitability was not a significant factor in this regard, because it was unlikely to enjoy any profitability from its services for the Fund in the initial period of its operations.
The Trustees noted the proposed breakpoint structure for advisory fees chargeable to the Fund, demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size and economies of scale realized by other mutual funds, and concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
On September 12, 2006, the Trustees again noted the matters considered in their initial review and approval of the proposed fees and estimated expenses of the Fund in April 2006, the Advisor’s reports respecting the services provided by the Advisor since the commencement of the Fund’s investment operations on July 28, 2006, and the Advisor’s intended waivers of fees and reimbursement of Fund expenses consistent with its past practice for new funds. The Trustees did not consider the profitability of the Advisor relative to the Fund, in view of the likelihood that the Advisor would not enjoy any profit from the Fund’s initial operations and the Advisor’s intended waivers of fees and reimbursement of expenses in accordance with its historical practices.
Certified Annual Report 29
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
30 This page is not part of the Annual Report.
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. 31
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
![]() | ||
119 East Marcy Street | 119 East Marcy Street | |
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |
800.847.0200 | 800.847.0200 |
TH1245
Thornburg Global Opportunities Fund
The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types from issuers around the world.
The portfolio is diversified to include basic value stocks, but also includes stocks of companies with consistent earnings characteristics and those of emerging franchises, when, in our opinion, these issues are value priced.
Thornburg Bond Funds
• | Thornburg Limited Term Municipal Fund |
• | Thornburg Intermediate Municipal Fund |
• | Thornburg California Limited Term Municipal Fund |
• | Thornburg New Mexico Intermediate Municipal Fund |
• | Thornburg New York Intermediate Municipal Fund |
• | Thornburg Limited Term U.S. Government Fund Thornburg Limited Term Income Fund |
Thornburg invests in short- and intermediate-term investment grade bonds. We ladder the maturities of individual bonds in the portfolios to moderate risk. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. We apply this disciplined process in all interest rate environments.
Thornburg Equity Funds
• | Thornburg Value Fund |
• | Thornburg International Value Fund Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
Thornburg’s equity research uses a fundamental, yet comprehensive, analytical approach. We invest when and where we perceive compelling value. Thornburg equity funds focus on a limited number of securities so that each holding can impact performance. The equity team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic value.
More information at www.thornburg.com
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Sign up at www.thornburg.com/edelivery |
2 This page is not part of the Annual Report.
Message from the Chairman
Garrett Thornburg Chairman & CEO | November 10, 2006
Dear Fellow Shareholder:
Thornburg Investment Management has a clear mission: to preserve and increase the real wealth of our shareholders. We seek to accomplish this through a range of equity funds that redefine traditional measures of value and growth and through a family of laddered bond funds that focus on quality, stability and minimizing risk over time.
Confirming our strategy, all Thornburg equity funds are highly ranked within their respective categories over the long term.
The Thornburg equity funds employ a comprehensive approach, which is more inclusive than the traditional deep value or high growth approach to stock selection. You can read much more about the stocks in your Fund’s portfolio, and all Thornburg equity funds, at our web site, www.thornburg.com/funds.
During this decade, the average dividend yield paid by equity and hybrid mutual funds has dipped well below 1%. We established Thornburg Investment Income Builder Fund in late 2002 to be clearly different from other equity/hybrid funds by paying attractive dividends today, with a further goal of increasing these in the future. Our record to date shows clear success in achieving each aspect of this mission.
On the bond side, we have always had a highly disciplined approach of laddering short-and intermediate-bond maturities, seeking to provide both an attractive return and relative stability of principal.
An exciting event occurred recently, Thornburg Investment Management is the first U.S. investment manager to complete the independent certification process and receive the CEFEX Certification for Fiduciary Excellence. The Centre for Fiduciary Excellence (CEFEX) is an independent rating and certification organization, providing comprehensive assessments that measure risk and trustworthiness of investment fiduciaries. We are proud to have received certificate #1 from CEFEX for investment managers.
Thank you for investing with us. We will do our best to continue to earn your trust every day.
Sincerely,
Garrett Thornburg Chairman & CEO |
This page is not part of the Annual Report. 3
Important Information
The information presented on the following pages was current as of September 30, 2006. The managers’ views, portfolio holdings, and sector diversification are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned.
Shares in the Fund carry risks including possible loss of principal. There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity. Risks may be associated with investments in emerging markets including illiquidity and volatility. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Funds invested in a limited number of holdings may expose an investor to greater volatility. Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any government agency. There is no guarantee that the Fund will meet its investment objectives.
Minimum investments for Class I shares are higher than those for other classes.
From time to time, the Fund may invest in shares of companies through initial public offerings (“IPOs”). IPOs have the potential to produce substantial gains for some of the Funds. There is no assurance that any of the Funds will have continued access to profitable IPOs and as a Fund’s assets grow, the impact of IPO investment may decline. Therefore investors should not rely on these past gains as an indication of future performance.
Glossary
The Morgan Stanley Capital International (MSCI) All Country (AC) World Index – The Morgan Stanley Capital International All Country World Index (MSCI AC World Index) is a market capitalization weighted index composed of over 2,000 companies, and is representative of the market structure of 48 developed and emerging market countries in North and South America, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars.
4 This page is not part of the Annual Report.
Thornburg Global Opportunities Fund
I Shares – September 30, 2006
Table of Contents
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8 | ||
9 | ||
11 | ||
12 | ||
15 | ||
16 | ||
20 | ||
21 | ||
22 | ||
23 | ||
26 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report 5
October 17, 2006
Dear Fellow Shareholder:
The fiscal year ended September 30, 2006 marks the end of the brief initial reporting period for Thornburg Global Opportunities Fund. The net asset value (NAV) of the Class I shares on September 30, 2006 was $12.87, while the NAV per share at launch was $11.94. Total return of the Fund’s I shares for the period since inception (7/28/06) was 7.79% compared with 3.73% for the MSCI AC World Index.
Thornburg Global Opportunities Fund (NASDAQ symbol THOIX for the I Shares) was launched on July 28th, 2006. The Fund represents an extension of two core competencies of our equity team: a global investment perspective and active fund management.
The Thornburg Global Opportunities Fund features some basic characteristics of our other funds that have served us well over the years. Specifically, the Fund employs a focused “promising companies at a discount to intrinsic value” philosophy. The analysts and portfolio managers of other Thornburg equity funds contribute opinions, data, and ideas to this portfolio. Unique to our mutual fund lineup, Thornburg Global Opportunities Fund is a focused portfolio of equity holdings from around the world, selected only with capital appreciation in mind.
We are pleased with the reception that Thornburg Global Opportunities Fund has already seen in the marketplace. We expected to invest our own money in the Fund and labor relatively unnoticed for a couple of years. While still containing a substantial percentage of shares owned by Thornburg principals and their associates, the Fund reached $25 million of assets as of September 30. This compares very well with our experience launching previous funds.
What makes Thornburg Global Opportunities Fund different? Our market research revealed that over $240 billion is already invested in “global equity” mutual funds. The ten largest of these hold 86% of the sector assets, and these funds average more than 230 different stocks each in their portfolios. Since your Fund holds around 36 stocks, it is certainly different.
You will notice from the report that your Fund’s largest sector weighting in these early days has been energy, a sector that generally has not performed well in recent months. Three out of the eleven negative performers in your portfolio during this initial period were energy stocks, including China Shenhua Energy (China), Apache Corp. (USA), and ENI (Italy). Two pharmaceutical firms, Teva (Israel) and Sanofi-Aventis (France), were also among the otherwise diverse collection of mildly negative performers.
These were more than offset by 27 stocks that delivered positive total returns in the period under review. An initial public offering, New Oriental Education (China), was your portfolio’s top performer. Three telecom companies, Level 3 Communications (USA), NII Holdings (USA), and France Telecom (France), made significant positive contributions, along with Copa Holdings (Panama), Agile Property Holdings (Hong Kong), and Eclipsys Corp. (USA).
6 Certified Annual Report
You can find additional descriptive information about most of the holdings in your portfolio by going to our internet web site, www.thornburg.com/funds. We believe your portfolio is an undervalued collection of businesses.
Thank you for your interest in Thornburg Global Opportunities Fund.
![]() | ![]() | |||
Brian McMahon | W. Vinson Walden, CFA | |||
Co-Portfolio Manager | Co-Portfolio Manager | |||
President & Chief Investment Officer | Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995.These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 7
S TATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
ASSETS | |||
Investments at value (cost $ 23,241,235) | $ | 24,137,409 | |
Cash | 119,323 | ||
Receivable for fund shares sold | 3,498,408 | ||
Receivable from investment advisor and other affiliates (Note 3) | 34,058 | ||
Dividends receivable | 14,807 | ||
Prepaid expenses and other assets | 28,885 | ||
Total Assets | 27,832,890 | ||
LIABILITIES | |||
Payable for securities purchased | 2,873,973 | ||
Accounts payable and accrued expenses | 8,277 | ||
Total Liabilities | 2,882,250 | ||
NET ASSETS | $ | 24,950,640 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 12,732 | |
Net unrealized appreciation on investments | 896,129 | ||
Accumulated net realized gain (loss) | 110,562 | ||
Net capital paid in on shares of beneficial interest | 23,931,217 | ||
$ | 24,950,640 | ||
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share | $ | 12.86 | |
Maximum sales charge, 4.50% of offering price | 0.61 | ||
Maximum offering price per share | $ | 13.47 | |
Class C Shares: | |||
Net asset value and offering price per share * | $ | 12.84 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share | $ | 12.87 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
8 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg Global Opportunities Fund | For the period from commencement of operations on July 28, 2006 to September 30, 2006 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $ 1,489) | $ | 24,377 | ||
Interest income | 11,051 | |||
Total Income | 35,428 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 16,105 | |||
Administration fees (Note 3) | ||||
Class A Shares | 573 | |||
Class C Shares | 307 | |||
Class I Shares | 573 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,164 | |||
Class C Shares | 2,533 | |||
Transfer agent fees | ||||
Class A Shares | 2,250 | |||
Class C Shares | 2,250 | |||
Class I Shares | 2,250 | |||
Registration and filing fees | ||||
Class A Shares | 16,371 | |||
Class C Shares | 12,939 | |||
Class I Shares | 13,009 | |||
Custodian fees (Note 3) | 4,417 | |||
Professional fees | 2,291 | |||
Accounting fees | 125 | |||
Trustee fees | 77 | |||
Other expenses | 7,053 | |||
Total Expenses | 84,287 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (48,289 | ) | ||
Management fees waived by investment advisor (Note 3) | (10,247 | ) | ||
Distribution and service fees waived (Note 3) | (94 | ) | ||
Fees paid indirectly (Note 3) | (1,108 | ) | ||
Net Expenses | 24,549 | |||
Net Investment Income | $ | 10,879 | ||
Certified Annual Report 9
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Global Opportunities Fund | For the period from commencement of operations on July 28, 2006 to September 30, 2006 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 110,562 | ||
Foreign currency transactions | (2,530 | ) | ||
108,032 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 896,174 | |||
Foreign currency translations | (45 | ) | ||
896,129 | ||||
Net Realized and Unrealized Gain | 1,004,161 | |||
Net Increase in Net Assets Resulting From Operations | $ | 1,015,040 | ||
See notes to financial statements.
10 Certified Annual Report
Thornburg Global Opportunities Fund | |||
For the period from commencement of operations on July 28, 2006 to September 30, 2006 | |||
INCREASE (DECREASE) IN NET ASSETS FROM: | |||
OPERATIONS: | |||
Net investment income | $ | 10,879 | |
Net realized gain on investments and foreign currency transactions | 108,032 | ||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 896,129 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,015,040 | ||
FUND SHARE TRANSACTIONS (NOTE 4): | |||
Class A Shares | 8,191,425 | ||
Class C Shares | 3,351,987 | ||
Class I Shares | 12,392,188 | ||
Net Increase in Net Assets | 24,950,640 | ||
NET ASSETS: | |||
Beginning of period | 0 | ||
End of period | $ | 24,950,640 | |
Undistributed net investment income | $ | 12,732 |
See notes to financial statements.
Certified Annual Report 11
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
NOTE 1 – ORGANIZATION
Thornburg Global Opportunities Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on July 28, 2006. 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 eleven series of shares of beneficial interest in addition to those of the Fund: Thornburg Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Limited Term U.S. Government Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg Limited Term Income Fund, Thornburg Value Fund, Thornburg International Value Fund, Thornburg New York Intermediate Municipal 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 seeks long-term capital appreciation by investing in equity and debt securities of all types from issuers around the world.
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 both 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 may have different reinvestment privileges and conversion rights. 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 Trust are as follows:
Valuation of Securities: 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. In any case where a market quotation is not readily available, the Trust’s valuation and pricing committee determines a fair value for the investment using factors approved by the 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 amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund to the shareholders. Therefore, no provision for Federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient
12 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
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: 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 period ended September 30, 2006, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. For the period ended September 30, 2006, the Advisor voluntarily waived investment Advisory fees of $10,247. The Trust also has 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% per annum of the average daily net assets attributable to each class of shares. For the period ended September 30, 2006, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $17,695 for Class A shares, $14,857 for Class C shares, and $15,831 for Class I shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the Distributor of the Fund’s shares. For the period ended September 30, 2006, the Distributor has advised the Fund that it earned commissions aggregating $5,559 from the sale of Class A shares of the Fund and collected contingent deferred sales charges aggregating $735 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 and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust 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.
The Trust 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, 2006, fees paid indirectly were $1,108. This figure may include additional fees waived by the Custodian.
Certain officers and Trustees of the Trust are also officers and/or Directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2006, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
For the Period Ended* September 30, 2006 | |||||||
Shares | Amount | ||||||
Class A Shares | |||||||
Shares sold | 659,222 | $ | 8,193,500 | ||||
Shares repurchased | (170 | ) | (2,075 | ) | |||
Redemption fees received** | — | — | |||||
Net Increase (Decrease) | 659,052 | $ | 8,191,425 | ||||
Class C Shares | |||||||
Shares sold | 278,996 | $ | 3,429,727 | ||||
Shares repurchased | (6,096 | ) | (77,740 | ) | |||
Redemption fees received** | — | — | |||||
Net Increase (Decrease) | 272,900 | $ | 3,351,987 | ||||
Class I Shares | |||||||
Shares sold | 1,007,805 | $ | 12,393,212 | ||||
Shares repurchased | (84 | ) | (1,024 | ) | |||
Redemption fees received** | — | — | |||||
Net Increase (Decrease) | 1,007,721 | $ | 12,392,188 | ||||
* | The Fund commenced operations on July 28, 2006. |
** | The Fund charges a redemption fee of 1% of the Class A & Class I shares exchanged within 30 days of purchase. Redemption fees charged to any Class are allocated to all Classes upon receipt of payment based on relative net asset values of each Class or other appropriate allocation methods. |
The Advisor, its owners, employees and affiliated entities of the Advisor have invested amounts in the Fund valued at $12,000,265, representing 48.10% of the net asset value as of September 30, 2006.
NOTE 5 – SECURITIES TRANSACTIONS
For the period ended September 30, 2006, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $21,898,195 and $866,125, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2006, information on the tax components of capital is as follows:
Cost of investments for tax purpose | $ | 23,241,639 | ||
Gross unrealized appreciation on a tax basis | $ | 1,111,218 | ||
Gross unrealized depreciation on a tax basis | (215,448 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 895,770 | ||
Distributable earnings – ordinary income | $ | 12,732 | ||
Distributable capital gains | $ | 110,562 |
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $4,383, increased undistributed net realized investment gains by $2,530, and increased undistributed net investment income by $1,853. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from unreimbursed stock issuance expenses and foreign currency gains/losses.
At September 30, 2006, the Fund had deferred tax basis currency losses occurring subsequent to inception date of July 28, 2006 of $2,530. For tax purposes, such losses will be reflected in the year ending September 30, 2007.
New Accounting Pronouncement:
On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation prescribes a comprehensive model for how a company, including the Fund, should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on income tax returns, and also revises certain disclosure requirements. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
There are special risks associated with international investing, including currency fluctuations, government regulation, political developments, and differences in liquidity.
14 Certified Annual Report
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Fund commenced operations on July 28, 2006. |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
Certified Annual Report 15
Thornburg Global Opportunities Fund | September 30, 2006 |
CUSIPS: CLASS A - 885-215-343, CLASS C - 885-215-335, CLASS I - 885-215-327
NASDAQ SYMBOLS: CLASS A - THOAX, CLASS C - THOCX, CLASS I - THOIX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/06
Energy | 17.3 | % | |
Telecommunication Services | 12.5 | % | |
Diversified Financials | 8.8 | % | |
Health Care Equipment and Services | 7.2 | % | |
Pharmaceuticals & Biotechnology | 7.1 | % | |
Consumer Services | 7.0 | % | |
Insurance | 6.7 | % | |
Transportation | 4.7 | % | |
Commercial Services & Supplies | 3.7 | % | |
Media | 3.7 | % | |
Banks | 2.7 | % | |
Real Estate | 2.5 | % | |
Technology Hardware & Equipment | 2.3 | % | |
Materials | 0.9 | % | |
Food & Staples Retailing | 0.8 | % | |
Software & Services | 0.5 | % | |
Other Assets & Cash Equivalents | 11.6 | % |
SUMMARY OF COUNTRY EXPOSURE (PERCENT OF EQUITY HOLDINGS)
As of 9/30/06
U.S.A. | 55.2 | % | |
Switzerland | 8.9 | % | |
China | 7.3 | % | |
Hong Kong | 5.3 | % | |
Israel | 5.0 | % | |
Australia | 4.7 | % | |
Greece | 3.5 | % | |
Italy | 3.5 | % | |
Panama | 3.0 | % | |
France | 2.7 | % | |
Mexico | 0.9 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 88.33% | |||||
BANKS — 2.66% | |||||
COMMERCIAL BANKS — 2.66% | |||||
China Merchants Bank Co., Ltd+ | 84,500 | $ | 119,078 | ||
US Bancorp | 16,400 | 544,808 | |||
663,886 | |||||
COMMERCIAL SERVICES & SUPPLIES — 3.73% | |||||
COMMERCIAL SERVICES & SUPPLIES — 3.73% | |||||
FTI Consulting Inc.+ | 37,100 | 929,726 | |||
929,726 | |||||
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
CONSUMER SERVICES — 7.02% | |||||
DISCRETIONARY CONSUMER SERVICES — 0.97% | |||||
New Oriental Education & Technology Group, Inc. ADR+ | 10,000 | $ | 242,500 | ||
HOTELS RESTAURANTS & LEISURE — 6.05% | |||||
Las Vegas Sands Corp.+ | 10,700 | 731,345 | |||
OPAP SA | 23,100 | 776,605 | |||
1,750,450 | |||||
DIVERSIFIED FINANCIALS — 8.80% | |||||
CAPITAL MARKETS — 3.79% | |||||
Charles Schwab Corp. | 18,800 | 336,520 | |||
UBS AG | 10,200 | 610,124 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.01% | |||||
Hong Kong Exchanges & Clearing Ltd. | 75,000 | 548,186 | |||
Resource America, Inc. | 33,700 | 700,960 | |||
2,195,790 | |||||
ENERGY — 17.25% | |||||
OIL, GAS & CONSUMABLE FUELS — 17.25% | |||||
Apache Corp. | 15,950 | 1,008,040 | |||
Centennial Coal Co. Ltd | 380,500 | 1,044,789 | |||
ChevronTexaco Corp. | 11,650 | 755,619 | |||
China Shenhua Energy | 449,000 | 722,632 | |||
Eni S.p.A. | 26,100 | 773,823 | |||
4,304,903 | |||||
FOOD & STAPLES RETAILING — 0.80% | |||||
FOOD & STAPLES RETAILING — 0.80% | |||||
Wal-Mart de Mexico | 58,600 | 199,576 | |||
199,576 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 7.21% | |||||
HEALTH CARE PROVIDERS & SERVICES — 7.21% | |||||
Eclipsys Corp.+ | 66,000 | 1,182,060 | |||
WellPoint, Inc.+ | 8,000 | 616,400 | |||
1,798,460 | |||||
INSURANCE — 6.74% | |||||
INSURANCE — 6.74% | |||||
American International Group, Inc. | 15,200 | 1,007,152 | |||
Swiss Re | 8,825 | 675,372 | |||
1,682,524 | |||||
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
Shares/ Principal Amount | Value | ||||
MATERIALS — 0.85% | |||||
METALS & MINING — 0.85% | |||||
Southern Copper Corp. | 2,300 | $ | 212,750 | ||
212,750 | |||||
MEDIA — 3.72% | |||||
MEDIA — 3.72% | |||||
Comcast Corp.+ | 25,200 | 927,612 | |||
927,612 | |||||
PHARMACEUTICALS & BIOTECHNOLOGY — 7.08% | |||||
BIOTECHNOLOGY — 2.68% | |||||
Bachem Holding AG | 10,100 | 669,564 | |||
PHARMACEUTICALS — 4.40% | |||||
Teva Pharmaceutical Industries Ltd.ADR | 32,200 | 1,097,698 | |||
1,767,262 | |||||
REAL ESTATE — 2.50% | |||||
REAL ESTATE — 2.50% | |||||
Agile Property Holdings Ltd. | 764,000 | 622,645 | |||
622,645 | |||||
SOFTWARE & SERVICES — 0.47% | |||||
IT SERVICES — 0.47% | |||||
Bearingpoint, Inc. Co.+ | 15,000 | 117,900 | |||
117,900 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.30% | |||||
COMPUTERS & PERIPHERALS — 2.30% | |||||
Dell, Inc.+ | 25,100 | 573,284 | |||
573,284 | |||||
TELECOMMUNICATION SERVICES — 12.46% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 6.63% | |||||
France Telecom SA | 26,100 | 599,323 | |||
Level 3 Communications, Inc.+ | 197,100 | 1,054,485 | |||
WIRELESS TELECOMMUNICATION SERVICES — 5.83% | |||||
American Tower Corp.+ | 12,300 | 448,950 | |||
NII Holdings, Inc.+ | 16,200 | 1,006,992 | |||
3,109,750 | |||||
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 |
Shares/ Principal Amount | Value | |||||
TRANSPORTATION — 4.74% | ||||||
AIRLINES — 2.64% | ||||||
Copa Holdings SA | 19,200 | $ | 659,136 | |||
TRANSPORTATION INFRASTRUCTURE — 2.10% | ||||||
China Merchants Holdings International Co. Ltd. | 178,000 | 523,153 | ||||
1,182,289 | ||||||
TOTAL COMMON STOCK (Cost $21,142,633) | 22,038,807 | |||||
SHORT TERM INVESTMENTS — 8.41% | ||||||
Federal Home Loan Bank, 5.11%, 10/3/2006 | $ | 600,000 | 599,829 | |||
Prudential Funding Corp., 5.20%, 10/10/2006 | 500,000 | 499,350 | ||||
Toyota Credit de Puerto Rico Corp., 5.20%, 10/5/2006 | 1,000,000 | 999,423 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $ 2,098,602) | 2,098,602 | |||||
TOTAL INVESTMENTS — 96.74% (Cost $ 23,241,235) | $ | 24,137,409 | ||||
OTHER ASSETS LESS LIABILITIES — 3.26% | 813,231 | |||||
NET ASSETS — 100.00% | $ | 24,950,640 | ||||
Footnote Legend
+ | Non-income producing |
See notes to financial statements.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
Certified Annual Report 19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Global Opportunities Fund
To the Trustees and Class I Shareholders of
Thornburg Global Opportunities 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 Global Opportunities Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2006, and the results of its operations, the changes in its net assets, and the financial highlights for the Class I shares for the period from July 28, 2006 to September 30, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2006
20 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including a 30-day redemption fee on Class I shares;
(2) ongoing costs, including management and administrative fees and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on March 31, 2006 and held until September 30, 2006.
Actual Expenses
The first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 3/31/06 | Ending Account Value 9/30/06 | Expenses Paid During Period† 3/31/06–9/30/06 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,219.32 | $ | 5.50 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for Class I Shares (0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Certified Annual Report 21
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
TOTAL RETURNS*
For periods ended September 30, 2006
Since Inception | |||
I Shares (Inception: 07/28/06) | 7.79 | % | |
MSCI AC World Index (Since: 07/28/06) | 3.73 | % |
* | Not annualized |
Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that upon redemption, investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. For performance data current to the most recent month end, visit www.thornburg.com. The performance data does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.
Returns reflect the reinvestment of dividends and capital gains. There is no up front sales charge for this class of shares. Class I shares are subject to a 1% 30-day redemption fee.
The Morgan Stanley Capital International All Country World Index (MSCI AC World Index) is a market capitalization weighted index composed of over 2,000 companies, and is representative of the market structure of 48 developed and emerging market countries in North and South America, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars. Investors may not make direct investments into any index.
22 Certified Annual Report
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 60 Chairman of Trustees, Trustee since 1987(3) | CEO, Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor) and Thornburg Securities Corporation (securities dealer); Chairman of Thornburg Limited Term Municipal Fund, Inc. (registered investment company) to 2004; CEO and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); Chairman of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 50 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc.; President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 61 Trustee since 1994, Member of Audit Committee and Governance & Nominating Committee | Principal in Ater & Associates, Santa Fe, NM (developer, planner and broker of residential and commercial real estate); owner, developer and broker for various real estate projects. | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
David D. Chase, 65 Chairman of Audit Committee, Trustee since 2000 | Chairman, President, CEO, and Managing Member of Vestor Associates, LLC, the general partner of Vestor Partners, LP, Santa Fe, NM (private equity fund); Chairman and CEO of Vestor Holdings, Inc., Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 60 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP,Washington, D.C. (law firm) | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 57 Trustee since 2004, Member of Audit Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Owen D. Van Essen, 52 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 47 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 23
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
Steven J. Bohlin, 47 Vice President since 1987, Treasurer since 1989 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
George T. Strickland, 43 Vice President since 1996 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.; Vice President (to 2004) and Treasurer (2003–2004) of Thornburg Limited Term Municipal Fund, Inc. | Not applicable | ||
William V. Fries, 67 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 39 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Kenneth Ziesenheim, 52 Vice President since 1995 | Vice President and Managing Director of Thornburg Investment Management, Inc.; President of Thornburg Securities Corporation; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Alexander Motola, 36 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. since 2001. | Not applicable | ||
Wendy Trevisani, 35 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2002. | Not applicable | ||
Joshua Gonze, 43 Vice President since 1999 | Managing Director since 2004, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc. to 2004. | Not applicable | ||
Brad Kinkelaar, 38 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President since 2000, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 36 Vice President since 2003 | Managing Director since 2006 and Associate Portfolio Manager and Vice President since 2002 of Thornburg Investment Management, Inc.; Vice President of Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 40 Vice President since 2003 | Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 32 Vice President since 2003, Secretary since 2006 | Mutual Fund Support Service Department Manager since 2002 and Associate of Thornburg Investment Management, Inc. | Not applicable |
24 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Ed Maran, 48 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Analyst, USAA 2001–2002. | Not applicable | ||
Vinson Walden, 36 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager since 2002 of Thornburg Investment Management, Inc.; Associate Portfolio Manager, Ibis Management 2002–2004; Associate, Lehman Brothers to 2001. | Not applicable | ||
Van Billops, 40 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 35 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 35 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2004 of Thornburg Investment Management, Inc.; Associate, Enso Capital Management, LLC 2002–2004; Associate, Deutsche Bank 2001–2002. | Not applicable | ||
Connor Browne, 27 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager since 2001 of Thornburg Investment Management, Inc. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of twelve separate investment “Funds” or “series” of Thornburg Investment Trust (the “Trust”), which comprises the Thornburg mutual fund complex and is organized as a Massachusetts business trust. The Trust currently has twelve active Funds.Thornburg Investment Management, Inc. is the investment advisor to, and manages, the twelve Funds of the Trust. Each Trustee oversees the twelve Funds of the Trust. |
(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 advisor to the twelve active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor 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 serve 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.
Certified Annual Report 25
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
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 August 31, 2004, information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information 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.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
TRUSTEES DELIBERATIONS RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Global Opportunities Fund pursuant to an investment advisory agreement. The advisory agreement for the Fund was initially approved for the Fund by the Trustees at their meeting on April 19, 2006. The Trustees reviewed and approved the continuance of the agreement again on September 12, 2006.
In connection with their general supervision of the Advisor, the Trustees receive and consider reports throughout the year from the Advisor respecting the Advisor’s management of the Fund’s investments. These reports include information about the Fund’s purchase and sale of portfolio investments and explanations from the Advisor respecting investment selections, the investment performance of the Fund, general appraisals of industry and economic prospects and factors, and other matters affecting the Fund and relating to the Advisor’s performance of services for the Fund.
In anticipation of their initial consideration of the advisory agreement for the Fund, the independent Trustees met in independent session on April 18, 2006 to discuss the proposed agreement for the Fund, the Advisor’s service for other Funds of the Trust, the proposed investment objectives and policies of the Fund, and other matters pertaining to the Fund. The independent Trustees also met with the Advisor’s chief investment officer in a subsequent session to discuss in detail the proposed Fund and the Advisor’s services for the Fund. Following these sessions, the Trustees met on April 19, 2006 to consider an adoption of the proposed investment advisory agreement for the Fund and unanimously approved and adopted the agreement for the Fund. In accordance with their established practice, the Trustees determined (with the Advisor’s concurrence) to place the annual review of the Fund’s advisory agreement on the same cycle for review applicable to the other Funds of the Trust. Accordingly, the independent Trustees met in independent session again on September 11, 2006 to review the Advisor’s services for the Fund, and the Trustees approved a continuance of the advisory agreement on September 12, 2006 with the other Funds of the Trust.
The information below summarizes certain factors considered by the Trustees in connection with the determination to initially approve and renew the advisory agreement. In determining to approve and renew the advisory agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. In considering the nature, extent and quality of services proposed to be provided by the Advisor to the new Fund, the Trustees primarily considered the Advisor’s adherence to the stated objectives and policies of the Trust’s other Funds, its execution of strategies for the other Funds and the investment performance of the Trust’s other equity Funds, noting specifically their deliberations in September 2005 when they considered the renewal of the agreements for the other Funds, and supplemental performance information which was provided to and reviewed by the independent Trustees on April 18, 2006. The Trustees noted in particular the Advisor’s success in executing a variety of investment strategies, and particularly its success in selecting securities issued by foreign companies. The Trustees considered the proposed investment strategies for the Fund and the Advisor’s ability to pursue those strategies, as demonstrated by the Advisor’s services for the other Funds, the Advisor’s creation of a synthetic portfolio to evaluate the proposed strategies, the proposed staffing for the Fund and the Advisor’s other resources. The Trustees concluded, based upon these and other considerations, that Thornburg was prepared to pursue actively and competently the Fund’s stated investment objective in accordance with the Fund’s investment policies to be stated in the Fund’s prospectuses. On September 12, 2006, the Trustees reconsidered their previous deliberations at the time
26 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2006 (Unaudited) |
they initially approved the advisory agreement for the Fund in April 2006. The Trustees considered limited investment performance information, because the Fund had only commenced investment operations on July 28, 2006. The Trustees determined that the Advisor had faithfully pursued the Fund’s stated objectives, as demonstrated by the Advisor’s selection of investments.
Fees and Expenses; Profitability of Advisor. The Trustees also considered in their April 2006 deliberations the fees proposed to be charged by Thornburg to the Fund. In this regard, the Trustees primarily considered the proposed fees in relation to the expected nature and quality of services to be provided, the fees charged to the Trust’s other equity Funds in relation to the services provided by Thornburg to those Funds, comparison of the proposed fees and expected expenses for the Fund against fees and expenses charged to categories of similar funds, and the Advisor’s proposed waivers of fees and reimbursement of expenses. The Trustees observed in their discussions that the proposed fees and expected expenses, after Thornburg’s waivers of fees and reimbursement of expenses, were generally comparable to average and median expense ratios for different categories of Funds. The Trustees concluded that the fees proposed to be charged to the Fund by the Advisor were fair and reasonable in view of the services to be provided, fees and expenses charged to other mutual funds and the Advisor’s proposed fee waivers and expense reimbursements. The Trustees further concluded in April 2006 that Thornburg’s profitability was not a significant factor in this regard, because it was unlikely to enjoy any profitability from its services for the Fund in the initial period of its operations.
The Trustees noted the proposed breakpoint structure for advisory fees chargeable to the Fund, demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size and economies of scale realized by other mutual funds, and concluded that the Fund may reasonably be expected to realize economies of scale for the benefit of its shareholders as it grows in size.
On September 12, 2006, the Trustees again noted the matters considered in their initial review and approval of the proposed fees and estimated expenses of the Fund in April 2006, the Advisor’s reports respecting the services provided by the Advisor since the commencement of the Fund’s investment operations on July 28, 2006, and the Advisor’s intended waivers of fees and reimbursement of Fund expenses consistent with its past practice for new funds. The Trustees did not consider the profitability of the Advisor relative to the Fund, in view of the likelihood that the Advisor would not enjoy any profit from the Fund’s initial operations and the Advisor’s intended waivers of fees and reimbursement of expenses in accordance with its historical practices.
Certified Annual Report 27
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005
The Trustees are concerned that recent commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
28 This page is not part of the Annual Report.
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our web site at www.thornburg.com/ira.
SEP IRAs – Simplified Employee Pension (SEP) IRAs are established by employers. The employer is allowed a tax deduction for contributions made to the SEP Plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis.
SIMPLE IRAs – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is designed to give small business owners a simplified method to establish and contribute to a retirement plan for employees. The employer is allowed a tax deduction for contributions and makes either matching or non-elective contributions to each eligible employee’s SIMPLE IRA. Employees may make salary deferral contributions.
403(b)
A special, tax-advantaged savings vehicle available only to employees of 501(c)(3) organizations, such as charitable, educational, scientific and religious organizations. 403(b) plans are also available to employees of public schools and universities.
Coverdell Education Savings Account
These savings accounts are designed to provide a way to save money for higher education expenses. In an Education Savings Account, earnings and interest grow tax free, and qualified withdrawals used to pay for eligible higher-education expenses are tax- and penalty-free.
Funds Available
The following funds are available in the accounts listed above:
• | Thornburg International Value Fund |
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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30 This page is not part of the Annual Report.
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The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $27 billion. Founded in 1982, the firm manages five equity funds, seven bond funds, and separate portfolios for select institutions and individuals.
Investment Philosophy
We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses.We’re committed to disciplined investing and controlling risk in all market environments through laddered bond and focused equity portfolios.
Portfolio Holdings Disclosure
We believe you should know about your portfolio. Our web site keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings.
Co-Ownership of Funds
We invest side-by-side with the Funds’ shareholders. Our employees have invested over $130 million in Thornburg Funds.
Investment Manager: | Distributor: | |
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119 East Marcy Street | 119 East Marcy Street | |
Santa Fe, New Mexico 87501 | Santa Fe, New Mexico 87501 | |
800.847.0200 | 800.847.0200 |
TH1246
Item 2. Code of Ethics
Thornburg Investment Trust (the “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 understandings of the definition of “audit committee financial expert” and current interpretations of the definition. 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 website (www.sec.gov).
Item 4. Principal Accountant Fees and Services
Audit Fees
The aggregate fees billed to Thornburg Investment Trust in each of the last two fiscal years ended September 30, 2005 and September 30, 2006, for the audit of the Trust’s financial statements and for services that are normally provided by PricewaterhouseCoopers LLP, registered independent public accounting firm (“PWC”) in connection with statutory and regulatory filings or requirements for those fiscal years are set out below.
Year Ended September 30, 2005 | Year Ended September 30, 2006 | |||||
Thornburg Investment Trust | $ | 49,000 | $ | 313,000 |
The difference in the relative sizes of the figures shown above for the two years principally due to the fact that the figures show fees as billed to the Trust in the periods shown, in accordance with regulatory requirements, and a given fee may not be shown for the year or period to which it relates (and be shown in a different year) depending upon the date the Trust receives an invoice. Fees reflected in the Funds’ financial statements are accounted for on an accrual basis.
Audit-Related Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years for assurance and related services that are reasonably related to the audit or review of the Trust’s financial statements are set out below.
Year Ended September 30, 2005 | Year Ended September 30, 2006 | |||||
Thornburg Investment Trust | $ | 3,550 | $ | -0- |
The audit-related fees billed to the Trust in the year ended September 30, 2005 related to preparation for and attendance at audit committee meetings.
Tax Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years ended September 30, 2005 and September 30, 2006 for professional services rendered by PWC for tax compliance, tax advice or tax planning are set out below.
Year Ended September 30, 2005 | Year Ended September 30, 2006 | |||||
Thornburg Investment Trust | $ | 103,900 | $ | 89,800 |
The tax fees billed to the Trust in each of the last two fiscal years were primarily for tax return preparation. The difference in the relative sizes of the figures shown for the two years is due principally to the fact that the figures reflect fees and costs as billed to the Trust in the periods shown, in accordance with regulatory requirements, and a given fee or cost may not be shown for the year to which it relates (and be shown in a different year) depending upon the date the Trust receives an invoice. Fees and costs reflected in the Funds’ financial statements are accounted for on an accrual basis.
All Other Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years ended September 30, 2005 and September 30, 2006 for all other services rendered by PWC to the Trust are set out below.
Year Ended September 30, 2005 | Year Ended September 30, 2006 | |||||
Thornburg Investment Trust | $ | 9,954 | $ | 2,443 |
The figure shown for the year ended September 30, 2005 pertains to a tax-related training class that was provided to the Trust’s accounting staff in Santa Fe, New Mexico, and includes the fee for the class and the materials prepared by PWC staff members. The figure shown for the year ended September 30, 2006 pertains to travel expenses for the training class that was provided to the Trust’s accounting staff.
PWC performs no services for the investment advisor, the Funds’ principal underwriter or any other person controlling, controlled by, or under common control with the investment advisor which provides ongoing services to the Funds, except that PWC has provided to the investment advisor, Thornburg Investment Management, Inc., attestation of its investment performance presentations. This attestation of the investment advisor’s presentations did not relate directly to the Trust’s operations or financial reporting. The fees billed by PWC for these services were $27,000 and $-0- for the fiscal years ended September 30, 2005 and September 30, 2006, respectively. The Audit Committee has determined that PWC’s performance of the described services for the investment advisor is compatible with PWC’s independence in its audit of the Funds.
Audit Committee Pre-Approval Policies and Procedures
As of September 30, 2006, the Trust’s Audit Committee has not adopted pre-approval policies and procedures. Accordingly, all services provided by PWC to the Funds must be approved beforehand by the Audit Committee.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
The authority to consider candidates recommended by the shareholders in accordance with the Trust’s Procedure for Shareholder Communications is committed to the Governance and Nominating Committee.
Item 11. Controls and Procedures
(a) The principal executive officer and the principal financial officer have concluded that Thornburg Investment Trust’s disclosure controls and procedures 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 was no change in Thornburg Investment Trust’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter of the period covered by this report (that is, the registrant’s fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) (1) | Code of Business Conduct and Ethics. | |
(a) (2) | Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 70.30a-2(a)) attached hereto as Exhibit 99.CERT. | |
(a) (3) | Not Applicable | |
(b) | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 70.30a-2(b)) 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 Limited Term Municipal Fund, Thornburg California Limited Term Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg New Mexico Intermediate Municipal Fund, Thornburg New York 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, Thornburg Investment Income Builder Fund, and Thornburg Global Opportunities Fund (herein referred to as the “Funds”).
By: | /s/ Brian J. McMahon | |
Brian J. McMahon | ||
President and principal executive officer | ||
Date: | November 21, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Brian J. McMahon | |
Brian J. McMahon | ||
President and principal executive officer | ||
Date: | November 21, 2006 | |
By: | /s/ Steven J. Bohlin | |
Steven J. Bohlin | ||
Treasurer and principal financial officer | ||
Date: | November 21, 2006 |