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, 2007
Date of reporting period: September 30, 2007
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 Mexico Intermediate Municipal Fund Class I
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 International Growth Fund
Thornburg International Growth 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 normally less than five years. 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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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. |
Thornburg Limited Term Municipal Fund
September 30, 2007
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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 | 3 |
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, 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.
Investments 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
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.
4 | This page is not part of the Annual Report. |
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.
Consumer Price Index – 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. 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.
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.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Certified Annual Report | 5 |
George Strickland Co-Portfolio Manager
Josh Gonze Co-Portfolio Manager
Christopher Ihlefeld Co-Portfolio Manager | October 18, 2007
Dear Fellow Shareholder:
We are pleased to present the Annual Report for the Thornburg Limited Term Municipal Fund. The
The past year has been one of the more interesting in recent memory. Municipal bonds traded
Meanwhile, quality spreads (the difference in yield between the highest quality bonds and lower
Since the end of August, the bond market has been gradually regaining its composure. A calmer,
The Class A shares of your Fund produced a total return of 3.18% over the twelve-month period
Your Thornburg Limited Term Municipal Fund is a laddered portfolio of over 470 municipal |
6 | Certified Annual Report |
mediate 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.
We were able to take advantage of the late summer market weakness to restructure the Fund somewhat. Early in 2007, the Fund’s ladder was a bit overweighted in the early years, which led to an average maturity of 4.3 years and duration of 3.4 years. As interest rates rose, we invested primarily in the later years of the Fund’s ladder so that it is now more evenly distributed. Consequently, at fiscal year end (September 30, 2007), the Fund had an average maturity of 4.75 and duration of 3.77 years. We also added incrementally to lower rated investment grade bonds, although we continue to maintain a AA average quality.
% of portfolio | Cumulative % | |
1 years = 10.9% | Year 1 = 10.9% | |
1 to 2 years = 8.4% | Year 2 = 19.3% | |
2 to 3 years = 11.1% | Year 3 = 30.4% | |
3 to 4 years = 12.3% | Year 4 = 42.7% | |
4 to 5 years = 8.8% | Year 5 = 51.5% | |
5 to 6 years = 10.2% | Year 6 = 61.7% | |
6 to 7 years = 9.5% | Year 7 = 71.2% | |
7 to 8 years = 9.2% | Year 8 = 80.4% | |
8 to 9 years = 10.1% | Year 9 = 90.5% | |
Over 9 years = 9.5% | Over 9 years = 100.0% |
Percentages can and do vary. Data as of 9/30/07.
Looking forward, we do expect U.S. economic growth to slow from the second quarter’s healthy 3.8% rate. However, consumer spending seems to be holding up well, and exports are surging. These factors, along with new job growth of about 100,000 per month, should keep the U.S. economy out of recession territory. However, the dismal housing sector and the dislocation in financial markets will probably cap future growth at a relatively low rate. This should allow the Fed to continue easing monetary conditions, but with a close eye on what happens to inflation. Market unease about the depreciating dollar and the long-term inflation outlook should keep long-term interest rates from dropping precipitously, which, in turn, should lead to a steeper yield curve going forward. We believe that a steepening yield curve would be advantageous for the laddering style employed by this Fund.
State tax revenues have slowed from the double digit growth rates that prevailed in 2005 and early 2006, but are still increasing a solid 6.1% through June of 2007. Other sectors of the municipal bond market are also generally performing well, with credit rating upgrades continuing to greatly outnumber downgrades. While the current trend is positive, we expect the depressed housing market and slower economic growth to create a tougher environment for municipal bonds to show further credit improvement. We did add marginally to the Fund’s exposure to lower investment grade bonds recently, but we do believe it is prudent to keep overall credit quality high in the current environment. Your Fund is broadly diversified and 90% 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 | Josh Gonze | Christopher Ihlefeld | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager |
Certified Annual Report | 7 |
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $1,053,413,389) (Note 2) | $ | 1,070,576,863 | ||
Cash | 207,318 | |||
Receivable for investments sold | 7,988,440 | |||
Receivable for fund shares sold | 2,460,233 | |||
Interest receivable | 13,795,600 | |||
Prepaid expenses and other assets | 22,408 | |||
Total Assets | 1,095,050,862 | |||
LIABILITIES | ||||
Payable for securities purchased | 2,865,591 | |||
Payable for fund shares redeemed | 3,468,998 | |||
Payable to investment advisor and other affiliates (Note 3) | 664,027 | |||
Accounts payable and accrued expenses | 166,291 | |||
Dividends payable | 889,285 | |||
Total Liabilities | 8,054,192 | |||
NET ASSETS | $ | 1,086,996,670 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (3,894 | ) | |
Net unrealized appreciation on investments | 17,162,817 | |||
Accumulated net realized gain (loss) | (9,637,355 | ) | ||
Net capital paid in on shares of beneficial interest | 1,079,475,102 | |||
$ | 1,086,996,670 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($696,716,791 applicable to 51,652,175 shares of beneficial interest outstanding - Note 4) | $ | 13.49 | ||
Maximum sales charge, 1.50% of offering price | 0.21 | |||
Maximum offering price per share | $ | 13.70 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($86,563,998 applicable to 6,405,928 shares of beneficial interest outstanding - Note 4) | $ | 13.51 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($303,715,881 applicable to 22,513,725 shares of beneficial interest outstanding - Note 4) | $ | 13.49 | ||
* | 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, 2007 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $8,593,349) | $ | 49,796,503 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 4,943,763 | |||
Administration fees (Note 3) | ||||
Class A Shares | 949,124 | |||
Class C Shares | 117,076 | |||
Class I Shares | 147,481 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,898,247 | |||
Class C Shares | 934,928 | |||
Transfer agent fees | ||||
Class A Shares | 393,230 | |||
Class C Shares | 61,273 | |||
Class I Shares | 102,185 | |||
Registration and filing fees | ||||
Class A Shares | 33,898 | |||
Class C Shares | 20,890 | |||
Class I Shares | 25,191 | |||
Custodian fees (Note 3) | 264,045 | |||
Professional fees | 57,847 | |||
Accounting fees | 31,803 | |||
Trustee fees | 17,608 | |||
Other expenses | 120,879 | |||
Total Expenses | 10,119,468 | |||
Less: | ||||
Distribution fees waived (Note 3) | (467,464 | ) | ||
Fees paid indirectly (Note 3) | (14,720 | ) | ||
Net Expenses | 9,637,284 | |||
Net Investment Income | $ | 40,159,219 | ||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (1,146,124 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | (3,013,630 | ) | ||
Net Realized and Unrealized Loss on Investments | (4,159,754 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 35,999,465 | ||
See notes to financial statements.
Certified Annual Report | 9 |
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Limited Term Municipal Fund |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 40,159,219 | $ | 42,819,933 | ||||
Net realized loss on investments | (1,146,124 | ) | (3,027,220 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (3,013,630 | ) | (3,959,006 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 35,999,465 | 35,833,707 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (26,069,081 | ) | (28,968,791 | ) | ||||
Class C Shares | (2,952,660 | ) | (3,602,082 | ) | ||||
Class I Shares | (11,137,478 | ) | (10,249,060 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (133,561,208 | ) | (129,601,272 | ) | ||||
Class C Shares | (18,529,049 | ) | (34,410,880 | ) | ||||
Class I Shares | 18,744,294 | (3,124,294 | ) | |||||
Net Decrease in Net Assets | (137,505,717 | ) | (174,122,672 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 1,224,502,387 | 1,398,625,059 | ||||||
End of year | $ | 1,086,996,670 | $ | 1,224,502,387 | ||||
See notes to financial statements.
10 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’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 seek to reduce 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 Securities: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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 depending on the Fund’s asset size. The Trust also has entered into administrative services agreements 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, 2007, the Distributor has advised the Fund that it earned commissions aggregating $2,288 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $2,603 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 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% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by the Distributor for 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, 2007, are set forth in the Statement of Operations. Distribution fees in the amount of $467,464 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, 2007, fees paid indirectly were $14,720. 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, 2007 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 4,907,768 | $ | 66,014,807 | 7,002,507 | $ | 94,383,822 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,327,844 | 17,870,751 | 1,451,447 | 19,553,941 | ||||||||||
Shares repurchased | (16,162,702 | ) | (217,446,766 | ) | (18,068,444 | ) | (243,539,035 | ) | ||||||
Net Increase (Decrease) | (9,927,090 | ) | $ | (133,561,208 | ) | (9,614,490 | ) | $ | (129,601,272 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 638,787 | $ | 8,601,275 | 720,729 | $ | 9,723,762 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 146,274 | 1,972,339 | 179,128 | 2,417,463 | ||||||||||
Shares repurchased | (2,157,502 | ) | (29,102,663 | ) | (3,447,634 | ) | (46,552,105 | ) | ||||||
Net Increase (Decrease) | (1,372,441 | ) | $ | (18,529,049 | ) | (2,547,777 | ) | $ | (34,410,880 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 7,495,756 | $ | 100,902,857 | 6,913,539 | $ | 93,207,821 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 632,992 | 8,518,497 | 583,980 | 7,867,045 | ||||||||||
Shares repurchased | (6,741,062 | ) | (90,677,060 | ) | (7,732,221 | ) | (104,199,160 | ) | ||||||
Net Increase (Decrease) | 1,387,686 | $ | 18,744,294 | (234,702 | ) | $ | (3,124,294 | ) | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $240,103,810 and $383,959,545, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 1,053,418,196 | ||
Gross unrealized appreciation on a tax basis | $ | 18,463,308 | ||
Gross unrealized depreciation on a tax basis | (1,304,641 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 17,158,667 | ||
At September 30, 2007, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2007, 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:
2008 | $ | 3,565,103 | |
2013 | 30,614 | ||
2014 | 2,276,013 | ||
2015 | 2,811,143 | ||
$ | 8,682,873 | ||
During the year ending September 30, 2007, $1,013,153 of capital loss carry forwards expired.
As of September 30, 2007, the Fund had deferred capital losses occurring subsequent to October 31, 2006 of $949,675. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
Certified Annual Report | 13 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $1,013,153, increased over-distributed investment income by $1,890 and decreased accumulated net realized investment loss by $1,015,043. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from expired capital loss carry forwards and market discount.
All dividends paid by the Fund for the year ended September 30, 2007 and September 30, 2006, represent exempt interest dividends, which are excludable by shareholders from gross income for federal income tax purposes.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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, | ||||||||||||||||||||||
Class A Shares: | 2007 | 2006 | 2005 | 2004(c) | 2004 | 2003 | ||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | $ | 13.65 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.46 | 0.44 | 0.40 | 0.09 | 0.40 | 0.45 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.04 | ) | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | ||||||||||||||
Total from investment operations | 0.42 | 0.38 | 0.16 | 0.24 | 0.07 | 0.81 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.46 | ) | (0.44 | ) | (0.40 | ) | (0.09 | ) | (0.40 | ) | (0.45 | ) | ||||||||||||
Change in net asset value | (0.04 | ) | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 13.49 | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.18 | % | 2.87 | % | 1.16 | % | 1.78 | % | 0.47 | % | 5.99 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.43 | % | 3.28 | % | 2.91 | % | 2.69 | %(b) | 2.85 | % | 3.20 | % | ||||||||||||
Expenses, after expense reductions | 0.90 | % | 0.91 | % | 0.90 | % | 0.89 | %(b) | 0.91 | % | 0.93 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.90 | % | 0.90 | % | 0.90 | % | 0.89 | %(b) | 0.91 | % | 0.93 | % | ||||||||||||
Expenses, before expense reductions | 0.90 | % | 0.91 | % | 0.90 | % | 0.89 | %(b) | 0.91 | % | 0.93 | % | ||||||||||||
Portfolio turnover rate | 21.35 | % | 23.02 | % | 27.80 | % | 4.57 | % | 21.37 | % | 15.81 | % | ||||||||||||
Net assets at end of period (000) | $ | 696,717 | $ | 833,189 | $ | 967,650 | $ | 1,039,050 | $ | 1,047,482 | $ | 998,878 |
(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. |
See notes to financial statements.
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, | ||||||||||||||||||||||
Class C Shares: | 2007 | 2006 | 2005 | 2004(c) | 2004 | 2003 | ||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.55 | $ | 13.62 | $ | 13.86 | $ | 13.70 | $ | 14.04 | $ | 13.67 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.43 | 0.41 | 0.36 | 0.08 | 0.36 | 0.41 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.04 | ) | (0.07 | ) | (0.24 | ) | 0.16 | (0.34 | ) | 0.37 | ||||||||||||||
Total from investment operations | 0.39 | 0.34 | 0.12 | 0.24 | 0.02 | 0.78 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.43 | ) | (0.41 | ) | (0.36 | ) | (0.08 | ) | (0.36 | ) | (0.41 | ) | ||||||||||||
Change in net asset value | (0.04 | ) | (0.07 | ) | (0.24 | ) | 0.16 | (0.34 | ) | 0.37 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 13.51 | $ | 13.55 | $ | 13.62 | $ | 13.86 | $ | 13.70 | $ | 14.04 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 2.90 | % | 2.52 | % | 0.89 | % | 1.79 | % | 0.12 | % | 5.78 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.15 | % | 3.00 | % | 2.63 | % | 2.43 | %(b) | 2.56 | % | 2.89 | % | ||||||||||||
Expenses, after expense reductions | 1.19 | % | 1.18 | % | 1.18 | % | 1.15 | %(b) | 1.19 | % | 1.18 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 1.18 | % | 1.18 | % | 1.18 | % | 1.15 | %(b) | 1.19 | % | 1.18 | % | ||||||||||||
Expenses, before expense reductions | 1.68 | % | 1.68 | % | 1.68 | % | 1.65 | %(b) | 1.69 | % | 1.68 | % | ||||||||||||
Portfolio turnover rate | 21.35 | % | 23.02 | % | 27.80 | % | 4.57 | % | 21.37 | % | 15.81 | % | ||||||||||||
Net assets at end of period (000) | $ | 86,564 | $ | 105,436 | $ | 140,606 | $ | 156,870 | $ | 155,458 | $ | 137,559 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
See notes to the financial statements.
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, | ||||||||||||||||||||||
Class I Shares: | 2007 | 2006 | 2005 | 2004(c) | 2004 | 2003 | ||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | $ | 13.65 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.51 | 0.49 | 0.44 | 0.11 | 0.44 | 0.49 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.04 | ) | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | ||||||||||||||
Total from investment operations | 0.47 | 0.43 | 0.20 | 0.26 | 0.11 | 0.85 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.51 | ) | (0.49 | ) | (0.44 | ) | (0.11 | ) | (0.44 | ) | (0.49 | ) | ||||||||||||
Change in net asset value | (0.04 | ) | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 13.49 | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.53 | % | 3.22 | % | 1.50 | % | 1.87 | % | 0.80 | % | 6.36 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.78 | % | 3.62 | % | 3.25 | % | 3.02 | %(b) | 3.18 | % | 3.54 | % | ||||||||||||
Expenses, after expense reductions | 0.57 | % | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.57 | % | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | ||||||||||||
Expenses, before expense reductions | 0.57 | % | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | ||||||||||||
Portfolio turnover rate | 21.35 | % | 23.02 | % | 27.80 | % | 4.57 | % | 21.37 | % | 15.81 | % | ||||||||||||
Net assets at end of period (000) | $ | 303,716 | $ | 285,878 | $ | 290,369 | $ | 238,589 | $ | 222,760 | $ | 197,367 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
See notes to the financial statements.
Certified Annual Report | 17 |
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
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 — 0.27% | ||||||||
Mobile GO Warrants, 4.50% due 8/15/2016 | NR/NR | $ | 2,875,000 | $ | 2,887,535 | |||
ALASKA — 0.83% | ||||||||
Alaska Energy Authority Power, 6.00% due 7/1/2011 (Bradley Lake Hydroelectric; Insured: FSA) | Aaa/AAA | 955,000 | 1,032,737 | |||||
Alaska Municipal Bond Bank, 5.00% due 6/1/2014 (Insured: MBIA) | Aaa/AAA | 1,175,000 | 1,265,416 | |||||
Alaska Student Loan Corp., 5.25% due 1/1/2012 (Insured: FSA) | NR/AAA | 3,000,000 | 3,196,080 | |||||
North Slope Boro, 5.00% due 6/30/2015 (Insured: MBIA) | Aaa/AAA | 3,250,000 | 3,516,468 | |||||
ARIZONA — 1.25% | ||||||||
Agricultural Impact & Power Distribution, 5.00% due 1/1/2020 (Salt River) | Aa1/AA | 1,205,000 | 1,220,267 | |||||
Glendale IDA, 5.00% due 5/15/2015 (Midwestern University) | NR/A- | 1,000,000 | 1,050,590 | |||||
Glendale IDA, 5.00% due 5/15/2016 (Midwestern University) | NR/A- | 1,325,000 | 1,392,482 | |||||
Glendale IDA, 5.00% due 5/15/2017 (Midwestern University) | NR/A- | 1,440,000 | 1,512,936 | |||||
Mohave County IDA, 5.00% due 4/1/2014 (Mohave Prison LLC; Insured: XLCA) | NR/AAA | 3,135,000 | 3,344,512 | |||||
Pima County IDA, 5.45% due 4/1/2010 (Insured: MBIA) | Aaa/AAA | 2,060,000 | 2,103,754 | |||||
Pima County IDA, 6.40% due 7/1/2013 (Arizona Charter Schools) | Baa3/NR | 990,000 | 1,047,559 | |||||
Pima County IDA Lease Obligation, 7.25% due 7/15/2010 (Insured: FSA) | Aaa/AAA | 390,000 | 400,897 | |||||
Show Low IDA Hospital, 5.25% due 12/1/2010 (Navapache Regional Medical Center; Insured: ACA) | NR/A | 1,000,000 | 1,018,210 | |||||
Tucson Water, 9.75% due 7/1/2008 | Aa3/A+ | 500,000 | 523,000 | |||||
ARKANSAS — 0.37% | ||||||||
Jefferson County Hospital Improvement, 5.50% due 6/1/2010 (Jefferson Hospital Association) | NR/A | 1,000,000 | 1,039,950 | |||||
Jefferson County Hospital Improvement, 5.50% due 6/1/2011 (Jefferson Hospital Association) | NR/A | 1,075,000 | 1,130,782 | |||||
Little Rock Hotel & Restaurant GRT, 7.125% due 8/1/2009 | A3/NR | 1,820,000 | 1,890,561 | |||||
CALIFORNIA — 2.74% | ||||||||
California State Public Works Board, 5.00% due 9/1/2016 (Regents University of California; Insured: FGIC) | Aaa/AAA | 3,000,000 | 3,273,330 | |||||
California HFA, 5.25% due 10/1/2013 (Kaiser Permanente) (ETM) | NR/AAA | 2,620,000 | 2,690,845 | |||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,021,240 | |||||
California State Department of Water Resources Power Supply, 5.50% due 5/1/2012 | A1/A- | 2,600,000 | 2,801,552 | |||||
California State Department of Water Resources Power Supply, 6.00% due 5/1/2013 | A1/A- | 2,550,000 | 2,815,888 | |||||
California State Public Works Board, 5.00% due 9/1/2017 (Regents University of California; Insured: FGIC) | Aaa/AAA | 3,000,000 | 3,257,250 | |||||
Escondido USD, 5.60% due 11/1/2009 (Insured: MBIA) (ETM) | Aaa/AAA | 1,250,000 | 1,264,775 | |||||
Northern California Public Power Agency, 5.00% due 7/1/2009 (Geothermal Number 3) | A2/BBB+ | 11,100,000 | 11,109,657 | |||||
South Orange County Public Financing Authority Special Tax, 8.00% due 8/15/2008 (Foothill Area; Insured: FGIC) | Aaa/AAA | 1,500,000 | 1,558,065 | |||||
COLORADO — 4.47% | ||||||||
Adams County Platte Valley Medical Center, 5.00% due 2/1/2015 (Brighton Community Hospital Association; Insured: FHA, MBIA) | NR/AAA | 1,530,000 | 1,637,284 | |||||
Adams County Platte Valley Medical Center, 5.00% due 8/1/2015 (Brighton Community Hospital Association; Insured: FHA, MBIA) | NR/AAA | 1,565,000 | 1,680,043 | |||||
Central Platte Valley Metropolitan District, 5.00% due 12/1/2031 put 12/1/2009 (LOC: US Bank) | NR/AA | 12,365,000 | 12,607,354 | |||||
Colorado Department of Transportation Anticipation Notes, 6.00% due 6/15/2008 (Insured: AMBAC) | Aaa/AAA | 1,500,000 | 1,526,655 |
18 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Colorado Educational & Cultural Facilities, 4.90% due 4/1/2008 (Nashville Public Radio) (ETM) | NR/BBB+ | $ | 345,000 | $ | 346,787 | |||
Colorado HFA, 5.25% due 10/1/2026 pre-refunded 10/1/2008 (Children’s Hospital; Insured: MBIA) | Aaa/AAA | 2,295,000 | 2,309,642 | |||||
Denver City and County Airport System, 5.00% due 11/15/2016 (Insured: MBIA) | Aaa/AAA | 1,515,000 | 1,636,245 | |||||
Denver City and County Airport System, 5.00% due 11/15/2017 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,080,240 | |||||
Denver Convention Center Hotel, 5.25% due 12/1/2014 (Insured: XLCA) | Aaa/AAA | 3,000,000 | 3,255,480 | |||||
Denver Convention Center Hotel, 5.25% due 12/1/2015 (Insured: XLCA) | Aaa/AAA | 5,000,000 | 5,447,150 | |||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2011 (Insured: XLCA) (ETM) | Aaa/AAA | 3,335,000 | 3,518,292 | |||||
E 470 Public Highway Authority Capital Appreciation, 0% due 9/1/2014 (Insured: MBIA) | Aaa/AAA | 2,110,000 | 1,609,318 | |||||
Highlands Ranch Metropolitan GO District 3, 5.25% due 12/1/2008 (Insured: ACA) | NR/A | 1,520,000 | 1,537,146 | |||||
Highlands Ranch Metropolitan GO District 3, 5.25% due 12/1/2008 (Insured: ACA) | NR/A | 1,760,000 | 1,769,926 | |||||
Pinery West Metropolitan District 3, 4.70% due 12/1/2021 pre-refunded 12/1/2007 (LOC: Compass Bank) | NR/A+ | 1,000,000 | 1,000,650 | |||||
Plaza Metropolitan District 1, 7.60% due 12/1/2016 (Public Improvement Fee/Tax Increment) | NR/NR | 6,000,000 | 6,465,360 | |||||
Southlands Metropolitan GO District 1, 6.75% due 12/1/2016 | NR/NR | 1,000,000 | 1,145,290 | |||||
DELAWARE — 0.58% | ||||||||
Delaware EDA, 5.50% due 7/1/2025 put 7/1/2010 (Delmarva Power & Light) | Baa2/BBB- | 2,045,000 | 2,116,104 | |||||
Delaware HFA, 5.25% due 6/1/2011 (Beebe Medical Center) | Baa1/BBB+ | 1,275,000 | 1,318,006 | |||||
Delaware HFA, 5.25% due 5/1/2012 (Nanticoke Memorial Hospital; Insured: Radian) | NR/AA | 1,370,000 | 1,424,978 | |||||
Delaware HFA, 5.25% due 5/1/2013 (Nanticoke Memorial Hospital; Insured: Radian) | NR/AA | 1,445,000 | 1,499,939 | |||||
DISTRICT OF COLUMBIA — 2.17% | ||||||||
District of Columbia Capital Appreciation, 0% due 4/1/2040 pre-refunded 4/1/2011 (Georgetown University) | Aaa/AAA | 6,685,000 | 1,049,411 | |||||
District of Columbia COP, 5.25% due 1/1/2013 (Insured: AMBAC) | Aaa/AAA | 5,950,000 | 6,286,115 | |||||
District of Columbia COP, 5.25% due 1/1/2015 (Insured: FGIC) | Aaa/AAA | 2,875,000 | 3,123,803 | |||||
District of Columbia COP, 5.25% due 1/1/2016 (Insured: FGIC) | Aaa/AAA | 4,125,000 | 4,499,509 | |||||
District of Columbia Hospital, 5.10% due 8/15/2008 (Medlantic Healthcare) (ETM) | Aaa/AAA | 1,500,000 | 1,520,055 | |||||
District of Columbia Hospital, 5.70% due 8/15/2008 (Medlantic Healthcare) (ETM) | Aaa/AAA | 2,280,000 | 2,306,539 | |||||
District of Columbia Tax Increment, 0% due 7/1/2009 (Mandarin Oriental; Insured: FSA) | Aaa/AAA | 2,000,000 | 1,870,620 | |||||
District of Columbia Tax Increment, 0% due 7/1/2011 (Mandarin Oriental; Insured: FSA) | Aaa/AAA | 1,990,000 | 1,720,474 | |||||
District of Columbia Tax Increment, 0% due 7/1/2012 (Mandarin Oriental; Insured: FSA) | Aaa/AAA | 1,480,000 | 1,226,358 | |||||
FLORIDA — 7.64% | ||||||||
Broward County Airport Systems, 5.00% due 10/1/2014 (Insured: AMBAC) | Aaa/AAA | 4,000,000 | 4,289,080 | |||||
Broward County Resource Recovery, 5.375% due 12/1/2009 (Wheelabrator South) | A3/AA | 5,000,000 | 5,152,400 | |||||
Broward County School Board COP, 5.25% due 7/1/2016 (Insured: FSA) | Aaa/AAA | 7,630,000 | 8,340,200 | |||||
Broward County School Board COP, 5.00% due 7/1/2017 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,077,560 | |||||
Capital Projects Finance Authority, 5.50% due 10/1/2012 (Insured: MBIA) | Aaa/AAA | 1,820,000 | 1,944,488 | |||||
Capital Projects Finance Authority, 5.50% due 10/1/2015 (Insured: MBIA) | Aaa/AAA | 3,260,000 | 3,467,303 | |||||
Capital Trust Agency Multi Family Housing, 5.15% due 11/1/2030 put 11/1/2010 (Shadow Run; Collateralized: FNMA) | Aaa/NR | 2,190,000 | 2,265,380 | |||||
Crossings at Fleming Island Community Development, 5.45% due 5/1/2010 (Insured: MBIA) | Aaa/AAA | 2,340,000 | 2,396,839 | |||||
Escambia County HFA, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB+ | 2,755,000 | 2,798,529 | |||||
Escambia County HFA, 5.00% due 11/1/2028 pre-refunded 11/1/2010 (Charity Obligation Group) | Aaa/NR | 2,500,000 | 2,562,725 | |||||
Flagler County School Board COP, 5.00% due 8/1/2014 (Insured: FSA) | Aaa/AAA | 1,605,000 | 1,716,804 | |||||
Flagler County School Board COP, 5.00% due 8/1/2015 (Insured: FSA) | Aaa/AAA | 1,500,000 | 1,608,180 | |||||
Florida State Correctional Privatization Commission COP, 5.00% due 8/1/2015 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,130,640 | |||||
Florida State Department of Children & Families COP South Florida Evaluation Treatment, 5.00% due 10/1/2015 | NR/AA+ | 925,000 | 990,139 | |||||
Hillsborough County Assessment, 5.00% due 3/1/2015 (Insured: FGIC) | Aaa/AAA | 5,000,000 | 5,337,200 | |||||
Hillsborough County IDA PCR, 5.10% due 10/1/2013 (Tampa Electric Co.) | Baa2/BBB- | 6,410,000 | 6,570,314 |
Certified Annual Report | 19 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2016 (Insured: XLCA) | Aaa/AAA | $ | 2,000,000 | $ | 2,135,460 | |||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2017 (Insured: XLCA) | Aaa/AAA | 2,000,000 | 2,135,780 | |||||
Jacksonville Electric St. John’s River Park Systems, 5.25% due 10/1/2012 | Aa2/AA- | 5,000,000 | 5,295,800 | |||||
Marion County Hospital District, 5.00% due 10/1/2015 (Munroe Regional Health Systems) | A2/NR | 1,000,000 | 1,045,960 | |||||
Miami Dade County Educational Facilities Authority, 5.00% due 4/1/2016 (University of Miami; Insured: AMBAC) | Aaa/AAA | 3,000,000 | 3,231,360 | |||||
Miami Dade County School Board COP, 5.50% due 5/1/2030 put 5/1/2011 (Insured: MBIA) | Aaa/AAA | 1,010,000 | 1,070,933 | |||||
Miami Dade County Special Housing, 5.80% due 10/1/2012 (HUD Section 8) | Baa3/NR | 2,485,000 | 2,559,277 | |||||
Orange County HFA, 6.25% due 10/1/2007 (Orlando Regional Hospital; Insured: MBIA) | Aaa/AAA | 925,000 | 925,204 | |||||
Orange County HFA, 5.80% due 11/15/2009 (Adventist Health System) (ETM) | A1/NR | 1,395,000 | 1,458,793 | |||||
Palm Beach County Public Improvement, 5.00% due 11/1/2030 (Convention Center; Insured: FGIC) | Aaa/AAA | 3,000,000 | 3,139,770 | |||||
Pelican Marsh Community Development District, 5.00% due 5/1/2011 (Insured: Radian) | NR/NR | 2,115,000 | 2,105,461 | |||||
South Miami HFA Hospital, 5.00% due 8/15/2016 (Baptist Health) | Aa3/AA- | 1,560,000 | 1,645,488 | |||||
St. John’s County IDA, 5.50% due 8/1/2014 (Presbyterian Retirement) | NR/NR | 1,755,000 | 1,850,700 | |||||
University of Central Florida Athletics Association Inc. COP, 5.00% due 10/1/2016 (Insured: FGIC) | Aaa/AAA | 1,640,000 | 1,749,700 | |||||
GEORGIA — 0.78% | ||||||||
Atlanta Tax Allocation, 5.25% due 12/1/2016 (Atlantic Station; Insured: Assured Guaranty) | Aaa/AAA | 3,850,000 | 4,213,863 | |||||
Atlanta Water & Wastewater, 5.00% due 11/1/2038 pre-refunded 5/1/2009 (Insured: FGIC) | Aaa/AAA | 1,015,000 | 1,048,536 | |||||
Monroe County Development Authority PCR, 6.75% due 1/1/2010 (Oglethorpe Power; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,133,080 | |||||
Monroe County Development Authority PCR, 6.80% due 1/1/2012 (Oglethorpe Power; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,120,440 | |||||
GUAM — 0.09% | ||||||||
Guam Educational Financing Foundation COP, 5.00% due 10/1/2010 (Guam Public Schools) | NR/A- | 1,000,000 | 1,029,510 | |||||
HAWAII — 0.19% | ||||||||
Hawaii State Department of Budget & Finance Special Purpose, 4.95% due 4/1/2012 (Hawaiian Electric Company; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,097,000 | |||||
IDAHO — 0.28% | ||||||||
Twin Falls Urban Renewal Agency, 4.95% due 8/1/2014 | NR/NR | 1,640,000 | 1,600,689 | |||||
Twin Falls Urban Renewal Agency, 5.15% due 8/1/2017 | NR/NR | 1,455,000 | 1,417,228 | |||||
ILLINOIS — 9.55% | ||||||||
Bolingbrook, 0% due 1/1/2016 (Insured: MBIA) | Aaa/NR | 1,500,000 | 1,058,475 | |||||
Bolingbrook, 0% due 1/1/2017 (Insured: MBIA) | Aaa/NR | 2,000,000 | 1,333,560 | |||||
Champaign County Community School District 116, 0% due 1/1/2009 (ETM) | Aaa/AAA | 1,205,000 | 1,150,245 | |||||
Champaign County Community School District 116, 0% due 1/1/2009 (Insured: FGIC) | Aaa/AAA | 2,140,000 | 2,042,266 | |||||
Chicago, 6.125% due 1/1/2012 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,098,380 | |||||
Chicago, 5.375% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,159,960 | |||||
Chicago Board of Education GO, 6.00% due 12/1/2009 (Insured: FGIC) | Aaa/AAA | 2,000,000 | 2,104,580 | |||||
Chicago Capital Appreciation, 0% due 1/1/2016 (City Colleges; Insured: FGIC) | Aaa/AAA | 2,670,000 | 1,901,921 | |||||
Chicago Gas Supply, 4.75% due 3/1/2030 (Peoples Gas Light & Coke) | A1/A- | 1,500,000 | 1,531,455 | |||||
Chicago Housing Authority Capital Program, 5.25% due 7/1/2010 (ETM) | Aaa/NR | 2,300,000 | 2,402,373 | |||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2015 (Insured: FSA) | Aaa/AAA | 8,460,000 | 9,083,164 | |||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2016 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,151,020 | |||||
Chicago Metropolitan Water Reclamation District, 7.00% due 1/1/2011 (ETM) | Aaa/AAA | 1,070,000 | 1,142,781 | |||||
Chicago Midway Airport, 5.40% due 1/1/2009 (Insured: MBIA) | Aaa/AAA | 1,340,000 | 1,355,035 | |||||
Chicago Midway Airport, 5.50% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | 1,180,000 | 1,279,993 | |||||
Chicago O’Hare International Airport, 5.625% due 1/1/2014 (Insured: AMBAC) | Aaa/AAA | 3,065,000 | 3,079,620 |
20 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Chicago Park District Parking Facility, 5.75% due 1/1/2010 (ETM) | Baa1/A | $ | 1,000,000 | $ | 1,047,060 | |||
Cook County, 6.25% due 11/15/2013 (Insured: MBIA) | Aaa/AAA | 3,995,000 | 4,556,737 | |||||
Cook County Community Consolidated School District GO, 0% due 12/1/2010 (Insured: FSA) | Aaa/NR | 2,000,000 | 1,776,900 | |||||
Cook County Community Consolidated School District GO, 9.00% due 12/1/2016 (Tinley Park; Insured: FGIC) | Aaa/NR | 2,500,000 | 3,408,375 | |||||
Cook County Community School District GO, 9.00% due 12/1/2013 (Insured: FGIC) | Aaa/NR | 2,250,000 | 2,904,458 | |||||
Du Page County Forest Preservation District, 0% due 11/1/2009 (Partial ETM) | Aaa/AAA | 5,000,000 | 4,629,000 | |||||
Illinois DFA, 6.00% due 11/15/2009 (Adventist Health; Insured: MBIA) | Aaa/AAA | 3,635,000 | 3,817,550 | |||||
Illinois DFA, 6.00% due 11/15/2010 (Adventist Health; Insured: MBIA) | Aaa/AAA | 3,860,000 | 4,131,783 | |||||
Illinois DFA Community Rehab Providers, 6.00% due 7/1/2015 | NR/BBB | 1,450,000 | 1,469,082 | |||||
Illinois DFA Multi Family Housing, 5.55% due 7/20/2008 (Collateralized: GNMA) | NR/AAA | 375,000 | 378,094 | |||||
Illinois DFA PCR, 5.70% due 1/15/2009 (Commonwealth Edison Co.; Insured: MBIA) | NR/AAA | 3,000,000 | 3,082,050 | |||||
Illinois Financing Authority Student Housing, 5.00% due 5/1/2014 | Baa3/NR | 3,895,000 | 3,995,919 | |||||
Illinois HFA, 5.50% due 11/15/2007 (OSF Healthcare System) | A2/A | 915,000 | 916,857 | |||||
Illinois HFA, 6.50% due 2/15/2008 (Iowa Health System) | A1/NR | 1,290,000 | 1,302,384 | |||||
Illinois HFA, 6.50% due 2/15/2009 (Iowa Health System) | A1/NR | 1,375,000 | 1,421,214 | |||||
Illinois HFA, 6.50% due 2/15/2010 (Iowa Health System) (ETM) | A1/NR | 1,465,000 | 1,544,227 | |||||
Illinois HFA, 6.00% due 2/15/2011 (Iowa Health System; Insured: AMBAC) (ETM) | Aaa/AAA | 1,560,000 | 1,661,150 | |||||
Illinois HFA, 5.50% due 11/15/2011 (Methodist Medical Center; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,084,870 | |||||
Illinois HFA, 6.00% due 7/1/2017 (Lake Forest Hospital) | A3/A- | 1,500,000 | 1,603,905 | |||||
Illinois Hospital District, 5.50% due 1/1/2010 (Insured: FGIC) | Aaa/AAA | 1,040,000 | 1,083,118 | |||||
Illinois State GO, 5.00% due 10/1/2017 | Aa3/AA | 2,000,000 | 2,123,420 | |||||
Kane County Forest Preservation District, 5.00% due 12/15/2015 (Insured: FGIC) | NR/AAA | 2,780,000 | 3,013,520 | |||||
Lake County Community High School District, 0% due 12/1/2011 (Insured: FGIC) | Aaa/NR | 3,235,000 | 2,765,666 | |||||
McHenry & Kane Counties Community Consolidated School District, 0% due 1/1/2010 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 919,320 | |||||
McHenry & Kane Counties Community Consolidated School District, 0% due 1/1/2012 (Insured: FGIC) | Aaa/AAA | 2,200,000 | 1,871,804 | |||||
Metropolitan Pier & Exposition Authority Dedicated State Tax, 0% due 6/15/2013 (McCormick; Insured: MBIA) | Aaa/AAA | 1,045,000 | 840,452 | |||||
Naperville City, Du Page & Will Counties Economic Development, 6.10% due 5/1/2008 (Hospital & Health System Association; LOC: Bank One N.A.) | NR/AA | 675,000 | 676,181 | |||||
Peoria Public Building Commission School District Facilities, 0% due 12/1/2007 (Insured: FGIC) | Aaa/NR | 1,100,000 | 1,093,059 | |||||
Quincy Hospital, 5.00% due 11/15/2014 | A3/A- | 1,000,000 | 1,042,110 | |||||
Quincy Hospital, 5.00% due 11/15/2016 | A3/A- | 1,000,000 | 1,043,370 | |||||
Southwestern Illinois Development Authority, 5.125% due 8/15/2016 (Anderson Hospital) | Baa2/BBB | 2,375,000 | 2,445,395 | |||||
State of Illinois Waubonsee Community College District GO, 0% due 12/15/2013 (Insured: FGIC) | Aaa/AAA | 3,000,000 | 2,310,420 | |||||
INDIANA — 5.17% | ||||||||
Allen County Economic Development, 5.60% due 12/30/2009 (Indiana Institute of Technology) | NR/NR | 1,110,000 | 1,126,728 | |||||
Allen County Economic Development, 5.00% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 1,370,000 | 1,407,456 | |||||
Allen County Jail Building Corp. First Mortgage, 5.75% due 10/1/2010 (ETM) | Aa3/NR | 1,115,000 | 1,184,732 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2014 (Insured: XLCA) | Aaa/NR | 1,000,000 | 1,072,270 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2015 (Insured: XLCA) | Aaa/NR | 1,480,000 | 1,591,577 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2016 (Insured: XLCA) | Aaa/NR | 1,520,000 | 1,631,538 | |||||
Allen County Redevelopment District, 5.00% due 11/15/2016 | A3/NR | 1,000,000 | 1,040,850 | |||||
Ball State University Student Fee, 5.75% due 7/1/2012 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,082,890 | |||||
Boonville Junior High School Building Corp., 0% due 7/1/2010 (State Aid Withholding) | NR/A | 850,000 | 755,879 | |||||
Boonville Junior High School Building Corp., 0% due 1/1/2011 (State Aid Withholding) | NR/A | 850,000 | 737,613 | |||||
Boonville Junior High School Building Corp., 0% due 7/1/2011 (State Aid Withholding) | NR/A | 950,000 | 806,645 | |||||
Carmel Redevelopment Authority Lease Performing Arts, 0% due 2/1/2015 | Aa2/AA | 1,575,000 | 1,162,381 | |||||
Center Grove 2000 Building First Mortgage, 5.00% due 7/15/2010 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,135,000 | 1,178,709 | |||||
Dekalb County Redevelopment Authority Lease Rental, 5.25% due 1/15/2014 (Mini Mill Local Public Improvement; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,068,680 |
Certified Annual Report | 21 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | ||||
Eagle Union Middle School Building Corp., 5.50% due 7/15/2009 (ETM) | Aaa/AAA | $ | 910,000 $ | 941,704 | |||
Elberfeld J. H. Castle School Building Corp. First Mortgage, 0% due 7/5/2008 (Insured: MBIA) | NR/AAA | 1,860,000 | 1,809,352 | ||||
Evansville Vanderburgh, 5.00% due 7/15/2014 (Insured: AMBAC) | NR/AAA | 1,000,000 | 1,075,510 | ||||
Evansville Vanderburgh, 5.00% due 7/15/2015 (Insured: AMBAC) | NR/AAA | 1,000,000 | 1,079,500 | ||||
Huntington Economic Development, 6.15% due 11/1/2008 (United Methodist Membership) | NR/NR | 535,000 | 543,421 | ||||
Huntington Economic Development, 6.20% due 11/1/2010 (United Methodist Membership) | NR/NR | 790,000 | 809,932 | ||||
Indiana Bond Bank, 5.25% due 10/15/2016 (Special Gas Program) | Aa2/NR | 1,500,000 | 1,583,280 | ||||
Indiana Multi School Building Corp. First Mortgage, 5.00% due 7/15/2016 (Insured: MBIA) | Aaa/AAA | 5,000,000 | 5,405,600 | ||||
Indiana State Educational Facilities Authority, 5.75% due 10/1/2009 (University of Indianapolis) | NR/A- | 670,000 | 695,031 | ||||
Indiana State Finance Authority Facilities, Forensic & Health Science, 5.00% due 7/1/2016 (Insured: MBIA) | Aaa/AAA | 1,030,000 | 1,114,903 | ||||
Indianapolis Local Public Improvement Bond, 5.00% due 1/1/2015 (Waterworks; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,075,440 | ||||
Indianapolis Local Public Improvement Bond, 5.00% due 7/1/2015 (Waterworks; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,079,220 | ||||
Indianapolis Local Public Improvement Bond, 5.00% due 7/1/2016 (Insured: FGIC) | Aaa/AAA | 1,030,000 | 1,105,159 | ||||
Knox Middle School Building Corp. First Mortgage, 6.00% due 7/15/2008 (Insured: FGIC) | Aaa/AAA | 855,000 | 871,741 | ||||
Knox Middle School Building Corp. First Mortgage, 6.00% due 7/15/2009 (Insured: FGIC) | Aaa/AAA | 455,000 | 474,620 | ||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2014 (Insured: FGIC) | Aaa/AAA | 1,200,000 | 1,290,612 | ||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2015 (Insured: FGIC) | Aaa/AAA | 1,250,000 | 1,349,375 | ||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2013 (Insured: MBIA) | Aaa/AAA | 1,055,000 | 1,128,702 | ||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2014 (Insured: MBIA) | Aaa/AAA | 1,135,000 | 1,220,704 | ||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2015 (Insured: MBIA) | Aaa/AAA | 1,140,000 | 1,230,630 | ||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2016 (146th Street Extension A) | NR/A+ | 1,660,000 | 1,750,868 | ||||
Perry Township Multi School Building, 5.00% due 7/10/2014 (Insured: FSA) | Aaa/NR | 2,130,000 | 2,289,367 | ||||
Peru Community School Corp. First Mortgage, 0% due 7/1/2010 (State Aid Withholding) | NR/A | 835,000 | 742,540 | ||||
Plainfield Community High School Building Corp. First Mortgage, 5.00% due 1/15/2015 (Insured: FGIC) | Aaa/AAA | 1,445,000 | 1,554,430 | ||||
Warren Township Vision 2005, 5.00% due 7/10/2015 (Insured: FGIC) | Aaa/AAA | 2,095,000 | 2,252,146 | ||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2010 (State Aid Withholding) (ETM) | NR/AA | 995,000 | 1,046,451 | ||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2011 (State Aid Withholding) (ETM) | NR/AA | 1,095,000 | 1,169,767 | ||||
West Clark 2000 School Building Corp., 5.25% due 1/15/2014 (Insured: MBIA) | Aaa/AAA | 1,335,000 | 1,448,582 | ||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2011 (State Aid Withholding) | Aaa/AAA | 2,080,000 | 2,237,269 | ||||
IOWA — 2.07% | |||||||
Ankeny Community School District Sales & Services Tax, 5.00% due 7/1/2010 | NR/AA- | 2,900,000 | 3,012,491 | ||||
Des Moines Limited Obligation, 4.40% due 12/1/2015 put 12/1/2011 (Des Moines Parking Associates; LOC: Wells Fargo Bank) | NR/NR | 2,985,000 | 2,984,880 | ||||
Dubuque Community School District, 5.00% due 1/1/2013 (1) | NR/NR | 1,600,000 | 1,620,432 | ||||
Dubuque Community School District, 5.00% due 7/1/2013 | NR/NR | 1,640,000 | 1,660,943 | ||||
Iowa Finance Authority, 6.50% due 2/15/2009 (Iowa Health Services) | Aa3/NR | 1,825,000 | 1,892,069 | ||||
Iowa Finance Authority, 6.50% due 2/15/2010 (Iowa Health Services) | Aa3/NR | 2,955,000 | 3,131,354 | ||||
Iowa Finance Authority, 6.00% due 2/15/2011 pre-refunded 2/15/2010 (Iowa Health Services; Insured: AMBAC) | Aaa/AAA | 3,145,000 | 3,347,444 | ||||
Iowa Finance Authority Trinity Health, 5.75% due 12/1/2007 | Aa2/AA- | 1,430,000 | 1,434,905 | ||||
Iowa Finance Authority Trinity Health, 5.75% due 12/1/2010 | Aa2/AA- | 3,295,000 | 3,430,128 | ||||
KENTUCKY — 1.46% | |||||||
Kentucky Economic DFA, 5.35% due 10/1/2009 (Norton Healthcare; Insured: MBIA) (ETM) | Aaa/AAA | 2,835,000 | 2,934,735 | ||||
Kentucky Economic DFA, 5.35% due 10/1/2009 (Norton Healthcare; Insured: MBIA) | Aaa/AAA | 4,565,000 | 4,728,290 | ||||
Kentucky Economic DFA, 5.40% due 10/1/2010 (Norton Healthcare; Insured: MBIA) (ETM) | Aaa/AAA | 3,775,000 | 3,971,489 | ||||
Kentucky Economic DFA, 5.40% due 10/1/2010 (Norton Healthcare; Insured MBIA) | Aaa/AAA | 4,055,000 | 4,266,063 |
22 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
LOUISIANA — 3.25% | ||||||||
East Baton Rouge Sewer Commission, 5.00% due 2/1/2018 (Insured: FSA) | Aaa/AAA | $ | 3,000,000 | $ | 3,193,110 | |||
Jefferson Sales Tax District Special Sales Tax, 5.25% due 12/1/2007 (Insured: AMBAC) | Aaa/AAA | 1,515,000 | 1,519,515 | |||||
Louisiana Environmental Facilities & Community Development Authority Multi Family, 5.00% due 9/1/2012 (Bellemont Apartments) | Baa3/NR | 1,000,000 | 984,980 | |||||
Louisiana Public Facilities Authority, 5.75% due 10/1/2008 (Loyola University) | A1/A+ | 1,000,000 | 1,019,310 | |||||
Louisiana Public Facilities Authority, 5.375% due 12/1/2008 (Wynhoven Health Care Center; Guaranty: Archdiocese of New Orleans) | NR/NR | 975,000 | 974,532 | |||||
Louisiana Public Facilities Authority Hospital, 5.50% due 7/1/2010 (Franciscan Missionaries; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,048,600 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2014 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 1,037,220 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2015 (Ochsner Clinic Foundation) | A3/NR | 1,825,000 | 1,894,387 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2016 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 1,037,770 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2017 (Ochsner Clinic Foundation) | A3/NR | 1,035,000 | 1,072,001 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2018 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 1,027,650 | |||||
Louisiana State, 5.50% due 11/15/2008 (Insured: FGIC) | Aaa/AAA | 1,980,000 | 2,024,312 | |||||
Louisiana State Citizens Property Insurance Corp., 5.00% due 6/1/2015 (Insured: AMBAC) | Aaa/AAA | 5,000,000 | 5,365,650 | |||||
Louisiana State Correctional Facilities Corp. Lease, 5.00% due 12/15/2007 (Insured: Radian) | NR/AA | 3,760,000 | 3,767,106 | |||||
Louisiana State Offshore Terminal Authority, 4.25% due 10/1/2037 put 10/1/2010 (Deepwater Port Loop LLC) | A3/A | 4,200,000 | 4,223,562 | |||||
Monroe Sales Tax Increment Garrett Road Economic Development Area, 5.00% due 3/1/2017 (Insured: Radian) | Aa3/AA | 1,505,000 | 1,532,963 | |||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | Baa3/BBB | 2,400,000 | 2,505,816 | |||||
New Orleans Parish School Board, 0% due 2/1/2008 (ETM) | NR/AAA | 1,115,000 | 1,097,495 | |||||
MASSACHUSETTS — 3.70% | ||||||||
Massachusetts DFA Resource Recovery, 5.50% due 1/1/2011 (Seamass Partnership; Insured: MBIA) | Aaa/AAA | 3,470,000 | 3,663,140 | |||||
Massachusetts GO, 6.00% due 11/1/2008 | Aa2/AA | 1,000,000 | 1,027,490 | |||||
Massachusetts GO Construction Loan, 5.00% due 9/1/2015 | Aa2/AA | 10,000,000 | 10,869,200 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2011 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 2,345,000 | 2,462,953 | |||||
Massachusetts Health & Educational Facilities Authority, 5.375% due 5/15/2012 (New England Medical Center Hospital; Insured: FGIC) | Aaa/AAA | 3,415,000 | 3,659,685 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2012 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 2,330,000 | 2,463,486 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2013 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 3,215,000 | 3,418,735 | |||||
Massachusetts Industrial Finance Agency Biomedical, 0% due 8/1/2008 | Aa2/AA- | �� | 1,000,000 | 969,350 | ||||
Massachusetts Industrial Finance Agency Biomedical, 0% due 8/1/2010 | Aa2/AA- | 13,000,000 | 11,668,150 | |||||
MICHIGAN — 3.44% | ||||||||
Detroit Convention Facility, 5.25% due 9/30/2007 (Cobo Hall Expansion) | NR/A | 1,000,000 | 1,000,080 | |||||
Dickinson County Economic Development Corp. Environmental Impact, 5.75% due 6/1/2016 (International Paper Co.) | Baa3/BBB | 3,715,000 | 3,884,664 | |||||
Dickinson County Healthcare Systems, 5.50% due 11/1/2013 (Insured: ACA) | NR/A | 2,500,000 | 2,572,700 | |||||
Gull Lake Community School District GO, 0% due 5/1/2013 (Insured: FGIC) | Aaa/AAA | 3,000,000 | 2,240,340 | |||||
Michigan HFA, 5.375% due 7/1/2012 (Port Huron Hospital; Insured: FSA) | Aaa/AAA | 1,710,000 | 1,712,138 | |||||
Michigan State Building Authority, 5.00% due 10/15/2015 (Insured: AMBAC) | Aaa/AAA | 6,000,000 | 6,496,800 | |||||
Michigan State COP, 5.00% due 9/1/2031 put 9/1/2011 (Insured: MBIA) | Aaa/AAA | 6,000,000 | 6,271,200 | |||||
Michigan State HFA, 5.00% due 11/15/2017 (Sparrow Memorial Hospital) | A1/A+ | 1,000,000 | 1,051,320 | |||||
Michigan State HFA, 5.375% due 11/15/2033 put 11/15/2007 (Ascension Health Credit) | Aa2/AA | 10,000,000 | 10,014,900 | |||||
Michigan State Strategic Fund Detroit Educational, 4.85% due 9/1/2030 put 9/1/2011 (Detroit Edison Co.; Insured: AMBAC) | Aaa/NR | 2,075,000 | 2,151,401 |
Certified Annual Report | 23 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
MINNESOTA — 1.13% | ||||||||
Dakota County Community Development Agency Multi Family Housing, 5.00% due 11/1/2017 (Commons on Marice) | NR/NR | $ | 1,150,000 | $ | 1,118,870 | |||
Minneapolis & St. Paul Metropolitan Airports, 5.00% due 1/1/2017 (Insured: AMBAC) | NR/AAA | 8,005,000 | 8,618,823 | |||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2012 (Healthpartners Obligated Group) | Baa1/BBB | 1,000,000 | 1,037,580 | |||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2013 (Healthpartners Obligated Group) | Baa1/BBB | 1,500,000 | 1,561,035 | |||||
MISSISSIPPI — 0.54% | ||||||||
Gautier Utility District Systems, 5.50% due 3/1/2012 (Insured: FGIC) | Aaa/NR | 1,020,000 | 1,094,276 | |||||
Mississippi Development Bank Public Improvement GO, 4.75% due 7/1/2017 | NR/NR | 1,565,000 | 1,545,657 | |||||
Mississippi State GO, 6.20% due 2/1/2008 (ETM) | Aaa/AAA | 3,175,000 | 3,197,447 | |||||
MISSOURI — 0.22% | ||||||||
Missouri Development Finance Board Healthcare Facilities, 4.80% due 11/1/2012 (Lutheran Home Aged; LOC: Commerce Bank) | Aa2/NR | 1,275,000 | 1,304,070 | |||||
Missouri State Health & Educational Facilities Authority, 5.00% due 6/1/2011 (SSM Healthcare Corp.) | NR/AA- | 1,000,000 | 1,041,440 | |||||
MONTANA — 1.68% | ||||||||
Forsyth PCR, 5.00% due 10/1/2032 put 12/30/2008 (Avista Corp.; Insured: AMBAC) | Aaa/AAA | 11,440,000 | 11,646,949 | |||||
Forsyth PCR, 5.20% due 5/1/2033 put 5/1/2009 (Portland General) | Baa1/BBB+ | 4,385,000 | 4,461,124 | |||||
Montana Facilities Finance Authority, 5.00% due 1/1/2015 (Benefis Health Systems; Insured: Assured Guaranty) | NR/AAA | 1,000,000 | 1,064,340 | |||||
Montana Facilities Finance Authority, 5.00% due 1/1/2016 (Benefis Health Systems; Insured: Assured Guaranty) | NR/AAA | 1,000,000 | 1,065,340 | |||||
NEBRASKA — 0.78% | ||||||||
Madison County Hospital Authority, 5.25% due 7/1/2010 (Faith Regional Health Services; Insured: Radian) | NR/AA | 1,455,000 | 1,495,944 | |||||
Madison County Hospital Authority, 5.50% due 7/1/2012 (Faith Regional Health Services; Insured: Radian) | NR/AA | 1,625,000 | 1,701,310 | |||||
Omaha Public Power District Electric Systems B, 5.00% due 2/1/2013 | Aa2/AA | 5,000,000 | 5,322,850 | |||||
NEVADA — 1.10% | ||||||||
Clark County District 121, 5.00% due 12/1/2015 (Insured: AMBAC) | Aaa/AAA | 1,960,000 | 2,107,019 | |||||
Clark County School District GO, 5.00% due 6/15/2015 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,067,570 | |||||
Las Vegas Special Local Improvement District 707, 5.125% due 6/1/2011 (Insured: FSA) | Aaa/AAA | 1,645,000 | 1,693,495 | |||||
Nevada Housing Division Multi Family Housing, 4.80% due 4/1/2008 (Collateralized: FNMA) | NR/AAA | 205,000 | 205,156 | |||||
Sparks Redevelopment Agency Tax Allocation, 5.75% due 1/15/2009 (Insured: Radian) | NR/AA | 1,000,000 | 1,021,550 | |||||
Sparks Redevelopment Agency Tax Allocation, 5.75% due 1/15/2010 (Insured: Radian) | NR/AA | 1,000,000 | 1,033,340 | |||||
Sparks Redevelopment Agency Tax Allocation, 5.75% due 1/15/2011 (Insured: Radian) | NR/AA | 1,285,000 | 1,334,588 | |||||
Washoe County School District, 5.50% due 6/1/2008 (Insured: FSA) | Aaa/AAA | 3,500,000 | 3,547,285 | |||||
NEW HAMPSHIRE — 1.24% | ||||||||
Manchester Housing & Redevelopment Authority, 6.05% due 1/1/2012 (Insured: ACA) | NR/A | 1,500,000 | 1,565,475 | |||||
New Hampshire Health & Educational Facilities Medical Centers, 5.00% due 10/1/2016 (Southern NH Health Systems) | NR/A- | 1,260,000 | 1,310,488 | |||||
New Hampshire Health & Educational Facilities Medical Centers, 5.00% due 10/1/2017 (Southern NH Health Systems) | NR/A- | 1,000,000 | 1,037,890 | |||||
New Hampshire IDA, 3.75% due 12/1/2009 (Central Vermont Public Services; LOC: Citizens Bank) | Aa2/AA- | 2,880,000 | 2,896,647 | |||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2016 (Insured: MBIA) | Aaa/AAA | 2,985,000 | 3,242,874 | |||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2017 (Insured: MBIA) | Aaa/AAA | 3,130,000 | 3,404,063 |
24 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
NEW JERSEY — 2.48% | ||||||||
Hudson County COP, 7.00% due 12/1/2012 (Insured: MBIA) | Aaa/AAA | $ | 1,000,000 | $ | 1,152,530 | |||
Hudson County COP, 6.25% due 12/1/2014 (Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,725,750 | |||||
New Jersey EDA, 5.00% due 11/15/2011 (Seabrook Village) | NR/NR | 1,000,000 | 993,690 | |||||
New Jersey EDA, 5.00% due 11/15/2014 (Seabrook Village) | NR/NR | 1,000,000 | 981,150 | |||||
New Jersey EDA Cigarette Tax Revenue, 5.00% due 6/15/2012 (Insured: FGIC) | Aaa/AAA | 7,375,000 | 7,795,965 | |||||
New Jersey State Transportation Corp. COP, 5.25% due 9/15/2013 (Insured: AMBAC) | Aaa/AAA | 5,000,000 | 5,399,050 | |||||
New Jersey State Transportation Corp. COP, 5.50% due 9/15/2013 (Insured: AMBAC) | Aaa/AAA | 7,650,000 | 8,353,418 | |||||
Tobacco Settlement Financing Corp, 6.125% due 6/1/2024 | Aaa/AAA | 500,000 | 534,090 | |||||
NEW MEXICO — 0.84% | ||||||||
Belen Consolidated School District No 2, 4.00% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 1,000,000 | 1,004,650 | |||||
Farmington PCR, 4.06% due 5/1/2024 put 10/1/2007 (LOC: Barclays Bank) (daily demand notes) | VMIG1/A-1+ | 1,600,000 | 1,600,000 | |||||
New Mexico Finance Authority State Office Building Tax, 5.00% due 6/1/2013 pre-refunded 6/1/2011 | Aa1/AAA | 1,325,000 | 1,390,124 | |||||
New Mexico Highway Commission Tax, 5.00% due 6/15/2011 (Insured: AMBAC) (ETM) | Aaa/AAA | 4,865,000 | 5,099,541 | |||||
NEW YORK — 4.70% | ||||||||
Hempstead Town IDA Resource Recovery, 5.00% due 12/1/2008 (American Ref-Fuel; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,016,720 | |||||
Long Island Power Authority Electric Systems, 6.00% due 12/1/2007 (Insured: AMBAC) | Aaa/AAA | 2,285,000 | 2,294,757 | |||||
New York City Housing Development Corp. Multi Family Housing, 5.50% due 11/1/2009 (Insured: FHA) | Aa2/AA | 185,000 | 186,741 | |||||
New York City IDA, 5.25% due 6/1/2011 (Lycee Francais De New York; Insured: ACA) | NR/A | 2,215,000 | 2,275,071 | |||||
New York City IDA, 5.25% due 6/1/2012 (Lycee Francais De New York; Insured: ACA) | NR/A | 2,330,000 | 2,406,051 | |||||
New York City Transitional Finance Authority Facilities, 5.00% due 11/1/2012 | Aa1/AAA | 5,000,000 | 5,325,250 | |||||
New York City Transitional Finance Authority Facilities, 5.00% due 11/1/2014 | Aa1/AAA | 2,000,000 | 2,159,900 | |||||
New York City Transitional Finance Authority Facilities, 5.00% due 11/1/2015 | Aa1/AAA | 1,500,000 | 1,626,825 | |||||
New York Dormitory Authority Mental Health Services Facilities Improvement, 5.00% due 8/15/2010 (Insured: MBIA) | Aaa/AAA | 1,600,000 | 1,661,600 | |||||
New York State Dormitory Authority, 5.50% due 7/1/2012 (South Nassau Community Hospital) | Baa1/NR | 1,820,000 | 1,911,346 | |||||
New York State Dormitory Authority, 5.50% due 7/1/2013 (South Nassau Community Hospital) | Baa1/NR | 1,500,000 | 1,585,365 | |||||
New York State Dormitory Authority, 5.25% due 11/15/2026 put 5/15/2012 (Insured: AMBAC) | Aaa/AAA | 4,000,000 | 4,269,680 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2012 (Insured: SONYMA) | Aa1/NR | 2,000,000 | 2,069,320 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2013 (Insured: SONYMA) | Aa1/NR | 4,600,000 | 4,759,436 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2014 (Insured: SONYMA) | Aa1/NR | 1,500,000 | 1,551,990 | |||||
New York State Dormitory Authority Hospital, 5.25% due 8/15/2013 (Presbyterian Hospital; Insured: FHA & FSA) | Aaa/AAA | 3,650,000 | 3,944,372 | |||||
New York State Thruway Authority Service Contract, 5.50% due 4/1/2013 (Local Highway & Bridge; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,076,260 | |||||
Oneida County IDA, 6.00% due 1/1/2009 (Faxton Hospital; Insured: Radian) | NR/AA | 710,000 | 728,084 | |||||
Port Authority 148th, 5.00% due 8/15/2017 (Insured: FSA) | Aaa/AAA | 4,725,000 | 5,150,817 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2012 (Secured: State Contingency Contract) | A1/AA- | 40,000 | 40,058 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2013 | A1/AA- | 3,050,000 | 3,077,816 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2013 (Insured: XLCA) | Aaa/AAA | 2,000,000 | 2,017,960 | |||||
NORTH CAROLINA — 2.84% | ||||||||
Charlotte Mecklenberg Hospital Authority Health Care Systems, 5.00% due 1/15/2016 | Aa3/AA- | 3,420,000 | 3,614,461 | |||||
Charlotte Mecklenberg Hospital Authority Health Care Systems, 5.00% due 1/15/2017 | Aa3/AA- | 2,000,000 | 2,106,240 | |||||
North Carolina Eastern Municipal Power Agency, 5.375% due 1/1/2011 | Baa1/BBB | 3,000,000 | 3,123,720 | |||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2012 | Baa1/BBB | 650,000 | 680,706 |
Certified Annual Report | 25 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
North Carolina Eastern Municipal Power Agency, 5.50% due 1/1/2012 | Baa1/BBB | $ | 1,100,000 | $ | 1,162,623 | |||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2013 | Baa1/BBB | 1,055,000 | 1,113,331 | |||||
North Carolina Infrastructure Finance Corp. COP, 5.00% due 2/1/2017 (Correctional Facilities) | Aa1/AA+ | 2,400,000 | 2,532,864 | |||||
North Carolina Municipal Power Agency, 6.00% due 1/1/2008 (Catawba Electric; Insured: MBIA) | Aaa/AAA | 3,900,000 | 3,925,077 | |||||
North Carolina Municipal Power Agency, 6.00% due 1/1/2010 (Catawba Electric; Insured: MBIA) | Aaa/AAA | 2,400,000 | 2,527,440 | |||||
North Carolina Municipal Power Agency, 5.50% due 1/1/2013 (Catawba Electric) | A3/BBB+ | 2,505,000 | 2,672,860 | |||||
North Carolina Municipal Power Agency, 6.375% due 1/1/2013 (Catawba Electric) | A3/BBB+ | 1,000,000 | 1,054,530 | |||||
North Carolina State Infrastructure Finance Corp. COP, 5.00% due 2/1/2016 (Correctional Facilities) | Aa1/AA+ | 5,000,000 | 5,299,800 | |||||
University of North Carolina Systems Pool, 5.00% due 4/1/2012 (Insured: AMBAC) | Aaa/AAA | 1,030,000 | 1,091,718 | |||||
NORTH DAKOTA — 0.15% | ||||||||
Ward County Health Care Facilities, 5.00% due 7/1/2013 (Trinity Obligated Group) | NR/BBB+ | 1,560,000 | 1,607,050 | |||||
OHIO — 2.53% | ||||||||
Akron COP, 5.00% due 12/1/2013 (Insured: Assured Guaranty) | NR/AAA | 3,000,000 | 3,210,300 | |||||
Akron COP, 5.00% due 12/1/2014 (Insured: Assured Guaranty) | NR/AAA | 2,000,000 | 2,149,640 | |||||
Cleveland Cuyahoga County Port Authority, 6.00% due 11/15/2010 | NR/NR | 2,555,000 | 2,635,227 | |||||
Greater Cleveland Regional Transportation Authority GO, 5.00% due 12/1/2015 (Insured: MBIA) | Aaa/NR | 1,000,000 | 1,085,940 | |||||
Hudson City Library Improvement, 6.35% due 12/1/2011 | Aa1/NR | 1,400,000 | 1,533,812 | |||||
Lorain County Hospital, 6.00% due 9/1/2008 (Catholic Healthcare Partners; Insured: MBIA) | Aaa/AAA | 1,200,000 | 1,224,396 | |||||
Mahoning Valley Sanitary District, 5.85% due 11/15/2008 (Insured: FSA) | Aaa/AAA | 1,300,000 | 1,334,268 | |||||
Mahoning Valley Sanitary District, 5.90% due 11/15/2009 (Insured: FSA) | Aaa/AAA | 770,000 | 808,038 | |||||
Montgomery County, 6.00% due 12/1/2008 (Catholic Health Initiatives) | Aa2/AA | 2,250,000 | 2,311,447 | |||||
Montgomery County, 6.00% due 12/1/2009 (Catholic Health Initiatives) | Aa2/AA | 2,385,000 | 2,502,557 | |||||
Montgomery County, 6.00% due 12/1/2010 (Catholic Health Initiatives) | Aa2/AA | 1,530,000 | 1,633,030 | |||||
Ohio State Unlimited Tax GO, 5.75% due 6/15/2010 pre-refunded 6/15/2009 | Aa1/AA+ | 5,000,000 | 5,187,150 | |||||
Plain Local School District, 0% due 12/1/2007 (Insured: FGIC) | Aaa/NR | 845,000 | 839,710 | |||||
Reading Development, 6.00% due 2/1/2009 (St. Mary’s Educational Institute; Insured: Radian) | NR/AA | 975,000 | 999,814 | |||||
OKLAHOMA — 1.15% | ||||||||
Comanche County Hospital Authority, 5.00% due 7/1/2011 (Insured: Radian) | Aa3/AA | 1,000,000 | 1,026,780 | |||||
Comanche County Hospital Authority, 5.25% due 7/1/2015 (Insured: Radian) | Aa3/AA | 1,340,000 | 1,406,893 | |||||
Grand River Dam Authority, 5.50% due 6/1/2010 | A2/BBB+ | 1,200,000 | 1,258,836 | |||||
Jenks Aquarium Authority First Mortgage, 5.50% due 7/1/2010 (ETM) | Aaa/NR | 325,000 | 334,149 | |||||
Oklahoma DFA Health Facilities, 5.75% due 6/1/2011 (Insured: AMBAC) | Aaa/AAA | 740,000 | 794,131 | |||||
Oklahoma DFA Hospital, 5.25% due 12/1/2011 (Duncan Regional Hospital) | NR/A- | 1,215,000 | 1,268,047 | |||||
Oklahoma DFA Hospital, 5.00% due 10/1/2012 (Unity Health Center) | NR/A- | 1,070,000 | 1,110,007 | |||||
Oklahoma DFA Hospital, 5.25% due 12/1/2012 (Duncan Regional Hospital) | NR/A- | 1,330,000 | 1,396,287 | |||||
Oklahoma DFA Hospital, 5.25% due 12/1/2013 (Duncan Regional Hospital) | NR/A- | 1,350,000 | 1,423,534 | |||||
Oklahoma State Industrial Health Authority, 6.00% due 8/15/2010 pre-refunded 8/15/2009 (Integris | ||||||||
Health Systems; Insured: MBIA) | Aaa/AAA | 190,000 | 200,308 | |||||
Oklahoma State Industrial Health Authority, 6.00% due 8/15/2010 (Integris Health Systems; Insured: MBIA) | Aaa/AAA | 2,150,000 | 2,264,229 | |||||
OREGON — 0.57% | ||||||||
Clackamas County HFA, 5.00% due 5/1/2008 (Legacy Health Systems) | A1/AA- | 4,000,000 | 4,030,960 | |||||
Oregon State Department Administrative Services COP, 5.00% due 11/1/2014 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,075,430 | |||||
Oregon State Department Administrative Services COP, 5.00% due 11/1/2015 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,078,770 | |||||
PENNSYLVANIA — 2.18% | ||||||||
Allegheny County Hospital Development, 6.30% due 5/1/2009 (South Hills Health System) | Baa1/NR | 795,000 | 816,680 | |||||
Chester County School Authority, 5.00% due 4/1/2016 (Intermediate School; Insured: AMBAC) | NR/AAA | 1,915,000 | 2,058,012 | |||||
Delaware County Authority, 5.50% due 11/15/2007 (Catholic Health East; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,002,510 |
26 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Geisinger Authority Health Systems, 5.50% due 8/15/2009 | Aa2/AA | $ | 1,000,000 | $ | 1,025,090 | |||
Northampton County IDA, 5.35% due 7/1/2010 (Moravian Hall Square; Insured: Radian) | NR/AA | 1,200,000 | 1,201,068 | |||||
Pennsylvania Higher Educational Facilities, 5.00% due 8/15/2008 (University of Pennsylvania Health Systems) | A1/A+ | 1,250,000 | 1,263,787 | |||||
Philadelphia Gas Works, 5.00% due 9/1/2014 (Insured: FSA) | Aaa/AAA | 3,000,000 | 3,220,530 | |||||
Philadelphia Gas Works, 5.00% due 9/1/2015 (Insured: FSA) | Aaa/AAA | 3,315,000 | 3,542,011 | |||||
Pittsburgh, 5.00% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 3,415,000 | 3,630,521 | |||||
Pittsburgh, 5.50% due 9/1/2014 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,119,200 | |||||
Sayre HFA, 5.00% due 7/1/2008 (Latrobe Area Hospital; Insured: AMBAC) | Aaa/AAA | 1,255,000 | 1,269,282 | |||||
Sayre HFA, 5.25% due 7/1/2011 (Latrobe Area Hospital; Insured: AMBAC) (1) | Aaa/AAA | 1,400,000 | 1,480,948 | |||||
Sayre HFA, 5.25% due 7/1/2012 (Latrobe Area Hospital; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,067,900 | |||||
PUERTO RICO — 0.09% | ||||||||
Puerto Rico Commonwealth Highway & Transportation Authority, 5.00% due 7/1/2008 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,011,530 | |||||
RHODE ISLAND — 0.87% | ||||||||
Providence GO, 5.50% due 1/15/2012 (Insured: FGIC) | Aaa/AAA | 1,880,000 | 2,024,817 | |||||
Providence Public Building Authority, 5.75% due 12/15/2007 (Insured: FSA) | Aaa/AAA | 1,075,000 | 1,080,117 | |||||
Rhode Island State, 5.00% due 10/1/2014 (Providence Plantations; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,069,100 | |||||
Rhode Island State Economic Development Corp., 5.75% due 7/1/2010 (Providence Place Mall; Insured: Radian) | NR/AA | 1,560,000 | 1,604,320 | |||||
Rhode Island State Health & Education Building Corp., 4.50% due 9/1/2009 (Butler Hospital; LOC: Fleet National Bank) | NR/AA+ | 1,960,000 | 1,989,184 | |||||
Rhode Island State Health & Education Building Corp., 5.25% due 7/1/2014 (Memorial Hospital; LOC: Fleet Bank) | NR/AA+ | 1,565,000 | 1,662,155 | |||||
SOUTH CAROLINA — 2.17% | ||||||||
Charleston County COP, 6.00% due 12/1/2007 (Insured: MBIA) | Aaa/AAA | 1,045,000 | 1,049,514 | |||||
Georgetown County Environmental Improvement, 5.70% due 4/1/2014 (International Paper Co.) | Baa3/BBB | 7,975,000 | 8,475,511 | |||||
Greenville County School District Building Equity Sooner Tomorrow, 5.25% due 12/1/2015 | Aa3/AA- | 1,000,000 | 1,072,940 | |||||
Greenwood County Hospital Facilities, 5.00% due 10/1/2013 (Self Regional Healthcare; Insured: FSA) | Aaa/AAA | 2,000,000 | 2,134,480 | |||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2015 (Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,078,640 | |||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2016 (Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,080,260 | |||||
South Carolina Jobs EDA, 5.50% due 4/1/2027 put 10/5/2007 (Episcopal Convention Center; Insured: Radian) (weekly demand notes) | A-1+/F1+ | 8,750,000 | 8,750,000 | |||||
SOUTH DAKOTA — 0.11% | ||||||||
South Dakota State Health & Educational Facilities Authority, 5.50% due 9/1/2011 (Rapid City Regional Hospital; Insured: MBIA) | Aaa/AAA | 1,100,000 | 1,174,591 | |||||
TENNESSEE — 0.98% | ||||||||
Franklin County Health & Educational Facilities Board, 4.75% due 9/1/2009 (University of the South) | NR/A+ | 685,000 | 693,165 | |||||
Metro Government Nashville Multi Family, 7.50% due 11/15/2010 pre-refunded 5/15/2010 | Aaa/AAA | 2,000,000 | 2,195,560 | |||||
Metro Government Nashville Water & Sewer, 6.50% due 12/1/2014 (ETM) | Aaa/AAA | 1,240,000 | 1,460,385 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2018 | Aa3/AA- | 5,000,000 | 5,241,400 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2020 | Aa3/AA- | 1,000,000 | 1,041,950 | |||||
TEXAS — 14.19% | ||||||||
Amarillo Health Facilities Corp., 5.50% due 1/1/2011 (St. Anthony’s Hospital Corp.; Insured: FSA) | Aaa/NR | 1,350,000 | 1,427,260 | |||||
Austin Water & Wastewater, 5.00% due 5/15/2014 (Insured: AMBAC) | Aaa/AAA | 2,890,000 | 3,105,999 | |||||
Austin Water & Wastewater, 5.00% due 5/15/2015 (Insured: AMBAC) | Aaa/AAA | 1,520,000 | 1,640,080 |
Certified Annual Report | 27 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Bell County Health Facilities Development Corp., 6.25% due 8/15/2010 (Scott & White Memorial Hospital; Insured: MBIA) | Aaa/AAA | $ | 1,000,000 | $ | 1,070,030 | |||
Bexar County Housing Finance Corp. Multi Family Housing, 5.00% due 1/1/2011 (Insured: MBIA) | Aaa/NR | 1,800,000 | 1,862,154 | |||||
Cedar Hill ISD, 0% due 8/15/2010 (Guaranty: PSF) | NR/AAA | 440,000 | 387,099 | |||||
Clint ISD, 5.50% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 1,700,000 | 1,802,986 | |||||
Clint ISD, 5.50% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,155,000 | 1,222,325 | |||||
Collin County Limited Tax Improvement, 5.00% due 2/15/2016 | Aaa/AAA | 1,465,000 | 1,583,328 | |||||
Corpus Christi Business & Job Development Corp., 5.00% due 9/1/2012 (Refunding & Improvement Arena; Insured: AMBAC) | Aaa/AAA | 1,025,000 | 1,088,734 | |||||
Corpus Christi Utility Systems, 5.50% due 7/15/2008 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,031,540 | |||||
Corpus Christi Utility Systems, 5.50% due 7/15/2009 (Insured: FSA) | Aaa/AAA | 4,780,000 | 4,945,675 | |||||
Duncanville ISD, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 4,945,000 | 4,354,122 | |||||
Duncanville ISD, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,245,000 | 1,053,917 | |||||
Fort Worth Water & Sewer, 5.25% due 2/15/2011 (Tarrant & Denton County) | Aa2/AA | 1,390,000 | 1,462,780 | |||||
Fort Worth Water & Sewer, 5.25% due 2/15/2011 pre-refunded 2/15/2008 | Aa2/NR | 3,800,000 | 3,824,738 | |||||
Grapevine Colleyville ISD, 0% due 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 7,350,000 | 6,351,061 | |||||
Grapevine GO, 5.25% due 2/15/2012 (Insured: FGIC) | Aaa/AAA | 2,005,000 | 2,007,586 | |||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2011 (Bayport Area Systems; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,052,580 | |||||
Harris County GO, 0% due 8/1/2008 | Aa1/AA+ | 7,000,000 | 6,790,700 | |||||
Harris County Health Facilities Development Corp. Thermal Utility, 5.45% due 2/15/2011 (Teco; Insured: AMBAC) | Aaa/AAA | 3,385,000 | 3,503,949 | |||||
Harris County Health Facilities Development Corp. Thermal Utility, 5.00% due 11/15/2015 (Teco; Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,585,200 | |||||
Harris County Hospital District, 5.75% due 2/15/2011 (Insured: MBIA) | Aaa/AAA | 10,000,000 | 10,594,100 | |||||
Harris County Hospital District, 5.75% due 2/15/2012 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,118,820 | |||||
Harris County Hospital District Mortgage, 7.40% due 2/15/2010 (Insured: AMBAC) | Aaa/AAA | 1,265,000 | 1,324,683 | |||||
Harris County Hospital District Senior Lien, 5.00% due 2/15/2014 (Insured: MBIA) (2) | Aaa/AAA | 1,275,000 | 1,360,540 | |||||
Harris County Hospital District Senior Lien, 5.00% due 2/15/2017 (Insured: MBIA) (2) | Aaa/AAA | 1,500,000 | 1,605,390 | |||||
Harris County Sports Authority Senior Lien, 0% due 11/15/2010 (Insured: MBIA) | Aaa/AAA | 3,260,000 | 2,898,499 | |||||
Houston ISD Public West Side, 0% due 9/15/2014 (Insured: AMBAC) | Aaa/AAA | 6,190,000 | 4,704,400 | |||||
Irving ISD GO, 0% due 2/15/2017 (Guaranty: PSF) | Aaa/AAA | 1,000,000 | 657,780 | |||||
Keller ISD, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,250,000 | 1,038,225 | |||||
Laredo Certificate of Obligation, 5.00% due 2/15/2018 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,150,040 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2012 (Insured: AMBAC) | Aaa/AAA | 1,660,000 | 1,754,321 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2013 (Insured: AMBAC) | Aaa/AAA | 1,745,000 | 1,861,601 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2014 (Insured: AMBAC) | Aaa/AAA | 1,835,000 | 1,969,469 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2015 (Insured: AMBAC) | Aaa/AAA | 1,930,000 | 2,080,038 | |||||
Mesquite ISD, 0% due 2/15/2008 (Guaranty: PSF) (ETM) | Aaa/NR | 1,055,000 | 1,040,589 | |||||
Mesquite ISD, 0% due 2/15/2008 (Guaranty: PSF) | Aaa/NR | 360,000 | 355,093 | |||||
Mesquite ISD, 0% due 2/15/2009 (Guaranty: PSF) (ETM) | Aaa/NR | 570,000 | 541,574 | |||||
Mesquite ISD, 0% due 2/15/2009 (Guaranty: PSF) | Aaa/NR | 630,000 | 598,664 | |||||
Mesquite ISD, 0% due 8/15/2011 (Guaranty: PSF) | NR/AAA | 3,065,000 | 2,612,943 | |||||
Midtown Redevelopment Authority Texas, 6.00% due 1/1/2010 (Insured: Radian) | Aa3/AA | 700,000 | 726,516 | |||||
Midtown Redevelopment Authority Texas, 6.00% due 1/1/2011 (Insured: Radian) | Aa3/AA | 740,000 | 778,732 | |||||
North Central Health Facility Development Hospital Baylor Health Care System, 5.00% due 5/15/2017 | Aa3/AA- | 5,000,000 | 5,092,150 | |||||
North East ISD, 5.00% due 8/1/2016 | Aaa/AAA | 2,000,000 | 2,167,440 | |||||
Red River Education Finance Corp., 2.10% due 12/1/2034 put 12/1/2007 (Parish Episcopal School; LOC: Allied Irish Banks plc) | AA2/NR | 2,500,000 | 2,487,825 | |||||
Richardson Refunding & Improvement GO, 5.00% due 2/15/2014 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,217,620 | |||||
Sam Rayburn Municipal Power Agency, 5.50% due 10/1/2012 | Baa2/NR | 6,000,000 | 6,184,980 | |||||
Socorro ISD, 5.75% due 2/15/2011 pre-refunded 2/15/2008 (Guaranty: PSF) | NR/AAA | 1,970,000 | 1,986,509 | |||||
Spring Branch ISD, 7.50% due 2/1/2011 (Guaranty: PSF) | Aaa/AAA | 500,000 | 559,760 | |||||
Tarrant County Health Facilities Development Corp., 5.875% due 11/15/2007 (Adventist/Sunbelt Health System) (ETM) | A1/NR | 580,000 | 581,583 |
28 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Tarrant County Health Facilities Development Corp., 5.75% due 2/15/2008 (Texas Health Resources Systems; Insured: MBIA) | Aaa/AAA | $ | 3,000,000 | $ | 3,024,780 | |||
Tarrant County Health Facilities Development Corp., 5.75% due 2/15/2009 (Texas Health Resources Systems; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,084,000 | |||||
Tarrant County Health Facilities Development Corp., 6.00% due 11/15/2009 (Adventist/Sunbelt Health System) (ETM) | A1/NR | 650,000 | 681,961 | |||||
Tarrant County Health Facilities Development Corp., 5.75% due 2/15/2011 (Texas Health Resources Systems; Insured: MBIA) | Aaa/AAA | 1,400,000 | 1,439,200 | |||||
Tarrant County Health Facilities Development Corp., 6.10% due 11/15/2011 pre-refunded 11/15/2010 (Adventist/Sunbelt Health System) | A1/NR | 730,000 | 790,291 | |||||
Tarrant County Health Facilities Development Corp., 5.25% due 2/15/2017 (Texas Health Resources Systems; Insured: MBIA) | Aaa/AAA | 5,000,000 | 5,130,050 | |||||
Texarkana Health Facilities Development Corp., 5.75% due 10/1/2008 (Wadley Regional Medical Center; Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,533,000 | |||||
Texas Municipal Power Agency, 0% due 9/1/2013 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 795,450 | |||||
Texas State Affordable Housing Corp., 4.85% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 1,945,000 | 1,948,890 | |||||
Texas State Public Finance Authority, 6.00% due 8/1/2011 pre-refunded 8/1/2009 (State Preservation; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,043,980 | |||||
Texas State Public Finance Authority, 5.00% due 10/15/2014 (Stephen F. Austin University Financing; Insured: MBIA) | Aaa/NR | 1,305,000 | 1,407,195 | |||||
Texas State Public Finance Authority, 5.00% due 10/15/2015 (Stephen F. Austin University Financing; Insured: MBIA) | Aaa/NR | 1,450,000 | 1,569,016 | |||||
Tomball Hospital Authority, 5.00% due 7/1/2013 | Baa3/NR | 1,460,000 | 1,486,922 | |||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2008 (Ascension Health; Insured: MBIA) | Aaa/AAA | 2,300,000 | 2,356,511 | |||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2010 (Ascension Health; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,105,880 | |||||
Washington County Health Facilities Development Corp., 5.35% due 6/1/2009 (Trinity Medical Center; Insured: ACA) | NR/A | 870,000 | 881,806 | |||||
Weslaco Certificates of Obligation Waterworks & Sewer System, 5.25% due 2/15/2019 (Insured: MBIA) | Aaa/AAA | 2,835,000 | 3,088,704 | |||||
West Harris County Regional Water, 5.25% due 12/15/2012 (Insured: FSA) | Aaa/AAA | 2,435,000 | 2,623,104 | |||||
UTAH — 0.69% | ||||||||
Intermountain Power Agency Supply, 5.00% due 7/1/2012 (ETM) | Aaa/AAA | 4,355,000 | 4,359,573 | |||||
Salt Lake County Municipal Building Authority, 5.50% due 10/1/2009 | Aa1/AA+ | 1,500,000 | 1,558,275 | |||||
Utah State Board of Regents Auxiliary Systems & Student Fee, 5.00% due 5/1/2010 | NR/AA | 510,000 | 527,243 | |||||
Utah State University Hospital Board of Regents, 5.25% due 8/1/2008 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,014,590 | |||||
VIRGINIA — 0.99% | ||||||||
Alexandria IDA, 5.75% due 10/1/2007 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,010,000 | 1,010,172 | |||||
Alexandria IDA, 5.75% due 10/1/2008 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,070,000 | 1,094,182 | |||||
Alexandria IDA, 5.75% due 10/1/2009 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,130,000 | 1,179,788 | |||||
Alexandria IDA, 5.75% due 10/1/2010 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,195,000 | 1,270,440 | |||||
Chesterfield County IDA PCR, 5.50% due 10/1/2009 (Vepco) | Baa1/BBB | 1,500,000 | 1,516,725 | |||||
Norton IDA Hospital Improvement, 5.75% due 12/1/2012 (Norton Community Hospital; Insured: ACA) | NR/A | 1,460,000 | 1,543,643 | |||||
Suffolk Redevelopment Housing Authority, 4.85% due 7/1/2031 put 7/1/2011 (Windsor at Potomac; Collateralized: FNMA) | Aaa/NR | 3,000,000 | 3,118,260 | |||||
WASHINGTON — 2.82% | ||||||||
Energy Northwest Washington Electric, 4.95% due 7/1/2008 (Wind) | A3/A- | 1,760,000 | 1,778,445 | |||||
Energy Northwest Washington Electric, 4.95% due 7/1/2008 (Wind) | A3/A- | 705,000 | 711,542 | |||||
Energy Northwest Washington Electric, 5.375% due 7/1/2013 (Number 1; Insured: FSA) | Aaa/AAA | 2,000,000 | 2,127,320 |
Certified Annual Report | 29 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Energy Northwest Washington Electric, 5.00% due 7/1/2017 (Number 3) | Aaa/AA- | $ | 5,470,000 | $ | 5,912,632 | |||
Goat Hill Properties Lease, 5.00% due 12/1/2012 (Government Office Building; Insured: MBIA) | Aaa/AAA | 2,055,000 | 2,180,663 | |||||
Snohomish County Public Utilities District 1 Electric, 5.00% due 12/1/2015 (Insured: FSA) | Aaa/AAA | 5,015,000 | 5,367,204 | |||||
Spokane Regional Solid Waste, 5.25% due 12/1/2007 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,002,660 | |||||
Washington Public Power Supply, 5.00% due 7/1/2011 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,029,720 | |||||
Washington State HFA, 5.50% due 12/1/2009 (Providence Services; Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,561,590 | |||||
Washington State HFA, 5.00% due 7/1/2013 (Overlake Hospital Medical Center A; Credit Support: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,060,420 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2008 (Nuclear Number 3) | Aaa/AA- | 830,000 | 807,723 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2008 (Nuclear Number 3) | Aaa/AA- | 1,140,000 | 1,109,243 | |||||
Washington State Public Power Supply Systems, 6.00% due 7/1/2008 (Nuclear Number 1; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,018,180 | |||||
Washington State Public Power Supply Systems, 5.40% due 7/1/2012 (Nuclear Number 2; Insured: FSA) | Aaa/AAA | 1,300,000 | 1,401,413 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2013 (Insured: MBIA-IBC) | Aaa/AAA | 1,760,000 | 1,409,021 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2015 (Insured: MBIA-IBC) | Aaa/AAA | 3,000,000 | 2,197,140 | |||||
WEST VIRGINIA — 0.17% | ||||||||
Harrison County Nursing Facility, 5.625% due 9/1/2010 (Salem Health Care Corp.; LOC: Fleet Bank) | NR/NR | 245,000 | 246,247 | |||||
Kanawha, Mercer, Nicholas, Counties Single Family Mortgage, 0% due 2/1/2015 pre-refunded 2/1/2014 | Aaa/NR | 2,260,000 | 1,574,610 | |||||
WISCONSIN — 0.61% | ||||||||
Bradley PCR, 6.75% due 7/1/2009 (Owens Illinois Waste) (ETM) | NR/B | 1,500,000 | 1,581,015 | |||||
Wisconsin State Health & Educational Facilities Authority, 5.50% due 8/15/2008 (Aurora Health Care Inc.; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,042,900 | |||||
Wisconsin State Health & Educational Facilities Authority, 5.50% due 9/1/2036 put 10/5/2007 (Watertown Memorial Hospital Inc.; Insured: Radian) (weekly demand notes) | Aa3/A-1+ | 3,000,000 | 3,000,000 | |||||
WYOMING — 0.37% | ||||||||
West Park Hospital District, 5.90% due 7/1/2010 (Insured: ACA) | NR/A | 1,615,000 | 1,616,986 | |||||
Wyoming Farm Loan Board, 0% due 4/1/2009 | NR/AA | 2,500,000 | 2,363,751 | |||||
TOTAL INVESTMENTS — 98.49% (Cost $1,053,413,389) | $ | 1,070,576,863 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.51% | 16,419,807 | |||||||
NET ASSETS — 100.00% | $ | 1,086,996,670 | ||||||
30 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. |
(1) | Segregated as collateral for a when-issued security. |
(2) | 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. | |
COP | Certificates of Participation | |
DFA | Development Finance Authority | |
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 | |
GRT | Gross Receipts Tax | |
HFA | Health Facilities Authority | |
HUD | Housing Urban Development | |
IDA | Industrial Development Authority | |
ISD | Independent School District | |
LOC | Line of Credit | |
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 | |
USD | Unified School District | |
XLCA | Insured by XL Capital Assurance |
See notes to financial statements.
SUMMARY OF SECURITY CREDIT RATINGS† | ||
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We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings. |
Certified Annual Report | 31 |
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
32 | Certified Annual Report |
EXPENSE EXAMPLE | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
Beginning Account Value 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,018.30 | $ | 4.53 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.58 | $ | 4.53 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,016.90 | $ | 5.93 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,019.19 | $ | 5.94 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,020.00 | $ | 2.83 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,022.26 | $ | 2.83 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.90%; C: 1.17%; and I: 0.56%) 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. |
Actual Expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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 for each class of shares 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 Limited Term Municipal Fund | September 30, 2007 (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 28, 1984 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 9/28/84) | 1.61 | % | 2.18 | % | 3.56 | % | 5.59 | % | ||||
C Shares (Incep: 9/01/94) | 2.40 | % | 2.20 | % | 3.37 | % | 3.72 | % |
FUND ATTRIBUTES
as of September 30, 2007
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 9/28/84) | 3.56 | % | 3.05 | % | $ | 13.49 | $ | 13.70 | ||||
C Shares (Incep: 9/01/94) | 3.31 | % | 2.84 | % | $ | 13.51 | $ | 13.51 |
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.
34 | Certified Annual Report |
TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
36 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thorn-burg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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 Limited Term Municipal Fund | September 30, 2007 (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.
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, 2007, 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, 2007.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007, the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 recalled their observations that the value of comparisons of the Fund’s investment performance to fund categories, and in particular to broad based securities indices, is limited because the Fund’s investment strategies, as described in its prospectuses, likely will vary from the parameters for selecting investments for other funds and indices, and the largely theoretical character of fixed income security indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s above average or better investment returns over most periods relative to two categories of municipal debt mutual funds selected by independent
38 | Certified Annual Report |
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 (Unaudited) |
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 satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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, a 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 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 similar mutual funds. The Trustees considered that the management fee charged by the Advisor to the Fund was higher to a small degree than the average and median fee rates charged to the group 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 reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund grows in size, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor from its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report | 39 |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
40 | 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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. | 41 |
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
Investment Manager: | Distributor: | |
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119 East Marcy Street Santa Fe, New Mexico 8750 1 800.847.0200 | 119 East Marcy Street Santa Fe, New Mexico 87501 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 normally less than five years. 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 |
• | 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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Thornburg Limited Term Municipal Fund
I Shares – September 30, 2007
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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 | 3 |
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.
Investments 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
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.
4 | Certified Annual Report |
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.
Consumer Price Index – 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. 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.
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.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Certified Annual Report | 5 |
George Strickland Co-Portfolio Manager
Josh Gonze Co-Portfolio Manager
Christopher Ihlefeld Co-Portfolio Manager | October 18, 2007
Dear Fellow Shareholder:
We are pleased to present the Annual Report for the Thornburg Limited Term Municipal Fund. The net asset value of the Class I shares decreased by 4 cents per share to $13.49 during the twelve months ended September 30, 2007. If you were with us for the entire period, you received dividends of 50.8 cents per share. If you reinvested your dividends, you received 51.7 cents per share.
The past year has been one of the more interesting in recent memory. Municipal bonds traded within a fairly tight trading range until May. Then, as the Federal Reserve raised the targeted Fed Funds rate to 5.0%, the bond market started to worry about an overheated economy and excess inflation. This drove up market yields for bonds by 0.30% to 0.40% and led to a somewhat steeper yield curve. Next, the sordid world of subprime mortgage bonds and derivatives based upon them started to unravel. Though subprime problems didn’t directly affect the municipal bond market, they did set off a panic-stricken flight to quality. As investors piled into Treasury notes and bonds, they drove their yields back down to levels that prevailed toward the beginning of 2007. However, investors mostly bypassed the municipal bond market, leaving rates there relatively unchanged. This created a rare event during which municipal bond yields were extremely attractive relative to Treasury yields. By late summer, ten-year high quality municipal bonds were routinely yielding 90% or more of ten-year Treasury yields, and trades over 100% were occasionally happening.
Meanwhile, quality spreads (the difference in yield between the highest quality bonds and lower quality bonds) were getting wider. Some investors, who had been comfortable taking credit risk at very tight spreads to AAA rated bonds, suddenly became a lot less comfortable. Those who sold typically had to sell their bonds at significantly wider spreads than those that prevailed earlier in the year. This led to an environment where investors could finally get compensated for taking incremental credit risk in bonds rated lower than AAA.
Since the end of August, the bond market has been gradually regaining its composure. A calmer, lower volatility environment has helped fuel a renewed appetite for risk. This has led to some retrenchment of the spread widening that occurred in May. It also has led to a wholesale re-pricing of the municipal bond market so that it is no longer extremely attractive relative to the Treasury market. However, credit spreads on most bonds are still wider than they were just a few months ago, and municipal bonds are still somewhat attractive relative to Treasury notes, particularly if you expect marginal tax rates to go up (we do).
The Class I shares of your Fund produced a total return of 3.53% over the twelve-month period ended September 30, 2007, compared to a 3.81% return for the Lehman Five-Year Municipal Bond Index. Over the last year, five-year municipal bonds have performed better than longer and shorter maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next ten years, so it has significant exposure to bonds that mature before and after five years. Since those bonds generally underperformed five-year bonds and the index, the Fund underperformed the index.
Your Thornburg Limited Term Municipal Fund is a laddered portfolio of over 470 municipal obligations from 45 states. 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 |
6 | Certified Annual Report |
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.
We were able to take advantage of the late summer market weakness to restructure the Fund somewhat. Early in 2007, the Fund’s ladder was a bit overweighted in the early years, which led to an average maturity of 4.3 years and duration of 3.4 years. As interest rates rose, we invested primarily in the later years of the Fund’s ladder so that it is now more evenly distributed. Consequently, at fiscal year end (September 30, 2007), the Fund had an average maturity of 4.75 and duration of 3.77 years. We also added incrementally to lower rated investment grade bonds, although we continue to maintain a AA average quality.
% of portfolio maturing | Cumulative % maturing | |||||||||
1 years = | 10.9 | % | Year 1 = | 10.9 | % | |||||
1 to 2 years = | 8.4 | % | Year 2 = | 19.3 | % | |||||
2 to 3 years = | 11.1 | % | Year 3 = | 30.4 | % | |||||
3 to 4 years = | 12.3 | % | Year 4 = | 42.7 | % | |||||
4 to 5 years = | 8.8 | % | Year 5 = | 51.5 | % | |||||
5 to 6 years = | 10.2 | % | Year 6 = | 61.7 | % | |||||
6 to 7 years = | 9.5 | % | Year 7 = | 71.2 | % | |||||
7 to 8 years = | 9.2 | % | Year 8 = | 80.4 | % | |||||
8 to 9 years = | 10.1 | % | Year 9 = | 90.5 | % | |||||
Over 9 years = | 9.5 | % | Over 9 years = | 100.0 | % |
Percentages can and do vary. Data as of 9/30/07.
Looking forward, we do expect U.S. economic growth to slow from the second quarter’s healthy 3.8% rate. However, consumer spending seems to be holding up well, and exports are surging. These factors, along with new job growth of about 100,000 per month, should keep the U.S. economy out of recession territory. However, the dismal housing sector and the dislocation in financial markets will probably cap future growth at a relatively low rate. This should allow the Fed to continue easing monetary conditions, but with a close eye on what happens to inflation. Market unease about the depreciating dollar and the long-term inflation outlook should keep long-term interest rates from dropping precipitously, which, in turn, should lead to a steeper yield curve going forward. We believe that a steepening yield curve would be advantageous for the laddering style employed by this Fund.
State tax revenues have slowed from the double digit growth rates that prevailed in 2005 and early 2006, but are still increasing a solid 6.1% through June of 2007. Other sectors of the municipal bond market are also generally performing well, with credit rating upgrades continuing to greatly outnumber downgrades. While the current trend is positive, we expect the depressed housing market and slower economic growth to create a tougher environment for municipal bonds to show further credit improvement. We did add marginally to the Fund’s exposure to lower investment grade bonds recently, but we do believe it is prudent to keep overall credit quality high in the current environment. Your Fund is broadly diversified and 90% 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 | Josh Gonze | Christopher Ihlefeld | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager |
Certified Annual Report | 7 |
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $1,053,413,389) (Note 2) | $ | 1,070,576,863 | ||
Cash | 207,318 | |||
Receivable for investments sold | 7,988,440 | |||
Receivable for fund shares sold | 2,460,233 | |||
Interest receivable | 13,795,600 | |||
Prepaid expenses and other assets | 22,408 | |||
Total Assets | 1,095,050,862 | |||
LIABILITIES | ||||
Payable for securities purchased | 2,865,591 | |||
Payable for fund shares redeemed | 3,468,998 | |||
Payable to investment advisor and other affiliates (Note 3) | 664,027 | |||
Accounts payable and accrued expenses | 166,291 | |||
Dividends payable | 889,285 | |||
Total Liabilities | 8,054,192 | |||
NET ASSETS | $ | 1,086,996,670 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (3,894 | ) | |
Net unrealized appreciation on investments | 17,162,817 | |||
Accumulated net realized gain (loss) | (9,637,355 | ) | ||
Net capital paid in on shares of beneficial interest | 1,079,475,102 | |||
$ | 1,086,996,670 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($696,716,791 applicable to 51,652,175 shares of beneficial interest outstanding - Note 4) | $ | 13.49 | ||
Maximum sales charge, 1.50% of offering price | 0.21 | |||
Maximum offering price per share | $ | 13.70 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($86,563,998 applicable to 6,405,928 shares of beneficial interest outstanding - Note 4) | $ | 13.51 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($303,715,881 applicable to 22,513,725 shares of beneficial interest outstanding - Note 4) | $ | 13.49 | ||
* | 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, 2007 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $8,593,349) | $ | 49,796,503 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 4,943,763 | |||
Administration fees (Note 3) | ||||
Class A Shares | 949,124 | |||
Class C Shares | 117,076 | |||
Class I Shares | 147,481 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,898,247 | |||
Class C Shares | 934,928 | |||
Transfer agent fees | ||||
Class A Shares | 393,230 | |||
Class C Shares | 61,273 | |||
Class I Shares | 102,185 | |||
Registration and filing fees | ||||
Class A Shares | 33,898 | |||
Class C Shares | 20,890 | |||
Class I Shares | 25,191 | |||
Custodian fees (Note 3) | 264,045 | |||
Professional fees | 57,847 | |||
Accounting fees | 31,803 | |||
Trustee fees | 17,608 | |||
Other expenses | 120,879 | |||
Total Expenses | 10,119,468 | |||
Less: | ||||
Distribution fees waived (Note 3) | (467,464 | ) | ||
Fees paid indirectly (Note 3) | (14,720 | ) | ||
Net Expenses | 9,637,284 | |||
Net Investment Income | $ | 40,159,219 | ||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (1,146,124 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | (3,013,630 | ) | ||
Net Realized and Unrealized Loss on Investments | (4,159,754 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 35,999,465 | ||
See notes to financial statements.
Certified Annual Report | 9 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Limited Term Municipal Fund
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 40,159,219 | $ | 42,819,933 | ||||
Net realized loss on investments | (1,146,124 | ) | (3,027,220 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (3,013,630 | ) | (3,959,006 | ) | ||||
Net Increase (Decrease) in Net Assets | 35,999,465 | 35,833,707 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (26,069,081 | ) | (28,968,791 | ) | ||||
Class C Shares | (2,952,660 | ) | (3,602,082 | ) | ||||
Class I Shares | (11,137,478 | ) | (10,249,060 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (133,561,208 | ) | (129,601,272 | ) | ||||
Class C Shares | (18,529,049 | ) | (34,410,880 | ) | ||||
Class I Shares | 18,744,294 | (3,124,294 | ) | |||||
Net Decrease in Net Assets | (137,505,717 | ) | (174,122,672 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 1,224,502,387 | 1,398,625,059 | ||||||
End of year | $ | 1,086,996,670 | $ | 1,224,502,387 | ||||
See notes to financial statements.
10 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’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 seek to reduce 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 Securities: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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 depending on the Fund’s asset size. The Trust also has entered into administrative services agreements 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, 2007, the Distributor has advised the Fund that it earned commissions aggregating $2,288 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $2,603 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 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% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by the Distributor for 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, 2007, are set forth in the Statement of Operations. Distribution fees in the amount of $467,464 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, 2007, fees paid indirectly were $14,720. 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, 2007 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 4,907,768 | $ | 66,014,807 | 7,002,507 | $ | 94,383,822 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,327,844 | 17,870,751 | 1,451,447 | 19,553,941 | ||||||||||
Shares repurchased | (16,162,702 | ) | (217,446,766 | ) | (18,068,444 | ) | (243,539,035 | ) | ||||||
Net Increase (Decrease) | (9,927,090 | ) | $ | (133,561,208 | ) | (9,614,490 | ) | $ | (129,601,272 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 638,787 | $ | 8,601,275 | 720,729 | $ | 9,723,762 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 146,274 | 1,972,339 | 179,128 | 2,417,463 | ||||||||||
Shares repurchased | (2,157,502 | ) | (29,102,663 | ) | (3,447,634 | ) | (46,552,105 | ) | ||||||
Net Increase (Decrease) | (1,372,441 | ) | $ | (18,529,049 | ) | (2,547,777 | ) | $ | (34,410,880 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 7,495,756 | $ | 100,902,857 | 6,913,539 | $ | 93,207,821 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 632,992 | 8,518,497 | 583,980 | 7,867,045 | ||||||||||
Shares repurchased | (6,741,062 | ) | (90,677,060 | ) | (7,732,221 | ) | (104,199,160 | ) | ||||||
Net Increase (Decrease) | 1,387,686 | $ | 18,744,294 | (234,702 | ) | $ | (3,124,294 | ) | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $240,103,810 and $383,959,545, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 1,053,418,196 | ||
Gross unrealized appreciation on a tax basis | $ | 18,463,308 | ||
Gross unrealized depreciation on a tax basis | (1,304,641 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 17,158,667 | ||
At September 30, 2007, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2007, 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:
2008 | $ | 3,565,103 | |
2013 | 30,614 | ||
2014 | 2,276,013 | ||
2015 | 2,811,143 | ||
$ | 8,682,873 | ||
During the year ending September 30, 2007, $1,013,153 of capital loss carry forwards expired.
As of September 30, 2007, the Fund had deferred capital losses occurring subsequent to October 31, 2006 of $949,675. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
Certified Annual Report | 13 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $1,013,153, increased over-distributed investment income by $1,890 and decreased accumulated net realized investment loss by $1,015,043. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from expired capital loss carry forwards and market discount.
All dividends paid by the Fund for the year ended September 30, 2007 and September 30, 2006, represent exempt interest dividends, which are excludable by shareholders from gross income for federal income tax purposes.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 Sept. 30, | Year Ended June 30, | ||||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||||||
Class I Shares: | ||||||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | $ | 13.65 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.51 | 0.49 | 0.44 | 0.11 | 0.44 | 0.49 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.04 | ) | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | ||||||||||||||
Total from investment operations | 0.47 | 0.43 | 0.20 | 0.26 | 0.11 | 0.85 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.51 | ) | (0.49 | ) | (0.44 | ) | (0.11 | ) | (0.44 | ) | (0.49 | ) | ||||||||||||
Change in net asset value | (0.04 | ) | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | 0.36 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 13.49 | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.53 | % | 3.22 | % | 1.50 | % | 1.87 | % | 0.80 | % | 6.36 | % | ||||||||||||
Ratios to average net assets: | �� | |||||||||||||||||||||||
Net investment income | 3.78 | % | 3.62 | % | 3.25 | % | 3.02 | %(b) | 3.18 | % | 3.54 | % | ||||||||||||
Expenses, after expense reductions | 0.57 | % | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.57 | % | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | ||||||||||||
Expenses, before expense reductions | 0.57 | % | 0.57 | % | 0.57 | % | 0.55 | %(b) | 0.57 | % | 0.58 | % | ||||||||||||
Portfolio turnover rate | 21.35 | % | 23.02 | % | 27.80 | % | 4.57 | % | 21.37 | % | 15.81 | % | ||||||||||||
Net assets at end of period (000) | $ | 303,716 | $ | 285,878 | $ | 290,369 | $ | 238,589 | $ | 222,760 | $ | 197,367 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
See notes to the financial statements.
Certified Annual Report | 15 |
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
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 — 0.27% | ||||||||
Mobile GO Warrants, 4.50% due 8/15/2016 | NR/NR | $ | 2,875,000 | $ | 2,887,535 | |||
ALASKA — 0.83% | ||||||||
Alaska Energy Authority Power, 6.00% due 7/1/2011 (Bradley Lake Hydroelectric; Insured: FSA) | Aaa/AAA | 955,000 | 1,032,737 | |||||
Alaska Municipal Bond Bank, 5.00% due 6/1/2014 (Insured: MBIA) | Aaa/AAA | 1,175,000 | 1,265,416 | |||||
Alaska Student Loan Corp., 5.25% due 1/1/2012 (Insured: FSA) | NR/AAA | 3,000,000 | 3,196,080 | |||||
North Slope Boro, 5.00% due 6/30/2015 (Insured: MBIA) | Aaa/AAA | 3,250,000 | 3,516,468 | |||||
ARIZONA — 1.25% | ||||||||
Agricultural Impact & Power Distribution, 5.00% due 1/1/2020 (Salt River) | Aa1/AA | 1,205,000 | 1,220,267 | |||||
Glendale IDA, 5.00% due 5/15/2015 (Midwestern University) | NR/A- | 1,000,000 | 1,050,590 | |||||
Glendale IDA, 5.00% due 5/15/2016 (Midwestern University) | NR/A- | 1,325,000 | 1,392,482 | |||||
Glendale IDA, 5.00% due 5/15/2017 (Midwestern University) | NR/A- | 1,440,000 | 1,512,936 | |||||
Mohave County IDA, 5.00% due 4/1/2014 (Mohave Prison LLC; Insured: XLCA) | NR/AAA | 3,135,000 | 3,344,512 | |||||
Pima County IDA, 5.45% due 4/1/2010 (Insured: MBIA) | Aaa/AAA | 2,060,000 | 2,103,754 | |||||
Pima County IDA, 6.40% due 7/1/2013 (Arizona Charter Schools) | Baa3/NR | 990,000 | 1,047,559 | |||||
Pima County IDA Lease Obligation, 7.25% due 7/15/2010 (Insured: FSA) | Aaa/AAA | 390,000 | 400,897 | |||||
Show Low IDA Hospital, 5.25% due 12/1/2010 (Navapache Regional Medical Center; Insured: ACA) | NR/A | 1,000,000 | 1,018,210 | |||||
Tucson Water, 9.75% due 7/1/2008 | Aa3/A+ | 500,000 | 523,000 | |||||
ARKANSAS — 0.37% | ||||||||
Jefferson County Hospital Improvement, 5.50% due 6/1/2010 (Jefferson Hospital Association) | NR/A | 1,000,000 | 1,039,950 | |||||
Jefferson County Hospital Improvement, 5.50% due 6/1/2011 (Jefferson Hospital Association) | NR/A | 1,075,000 | 1,130,782 | |||||
Little Rock Hotel & Restaurant GRT, 7.125% due 8/1/2009 | A3/NR | 1,820,000 | 1,890,561 | |||||
CALIFORNIA — 2.74% | ||||||||
California State Public Works Board, 5.00% due 9/1/2016 (Regents University of California; Insured: FGIC) | Aaa/AAA | 3,000,000 | 3,273,330 | |||||
California HFA, 5.25% due 10/1/2013 (Kaiser Permanente) (ETM) | NR/AAA | 2,620,000 | 2,690,845 | |||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,021,240 | |||||
California State Department of Water Resources Power Supply, 5.50% due 5/1/2012 | A1/A- | 2,600,000 | 2,801,552 | |||||
California State Department of Water Resources Power Supply, 6.00% due 5/1/2013 | A1/A- | 2,550,000 | 2,815,888 | |||||
California State Public Works Board, 5.00% due 9/1/2017 (Regents University of California; Insured: FGIC) | Aaa/AAA | 3,000,000 | 3,257,250 | |||||
Escondido USD, 5.60% due 11/1/2009 (Insured: MBIA) (ETM) | Aaa/AAA | 1,250,000 | 1,264,775 | |||||
Northern California Public Power Agency, 5.00% due 7/1/2009 (Geothermal Number 3) | A2/BBB+ | 11,100,000 | 11,109,657 | |||||
South Orange County Public Financing Authority Special Tax, 8.00% due 8/15/2008 (Foothill Area; Insured: FGIC) | Aaa/AAA | 1,500,000 | 1,558,065 | |||||
COLORADO — 4.47% | ||||||||
Adams County Platte Valley Medical Center, 5.00% due 2/1/2015 (Brighton Community Hospital Association; Insured: FHA, MBIA) | NR/AAA | 1,530,000 | 1,637,284 | |||||
Adams County Platte Valley Medical Center, 5.00% due 8/1/2015 (Brighton Community Hospital Association; Insured: FHA, MBIA) | NR/AAA | 1,565,000 | 1,680,043 | |||||
Central Platte Valley Metropolitan District, 5.00% due 12/1/2031 put 12/1/2009 (LOC: US Bank) | NR/AA | 12,365,000 | 12,607,354 | |||||
Colorado Department of Transportation Anticipation Notes, 6.00% due 6/15/2008 (Insured: AMBAC) | Aaa/AAA | 1,500,000 | 1,526,655 |
16 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Colorado Educational & Cultural Facilities, 4.90% due 4/1/2008 (Nashville Public Radio) (ETM) | NR/BBB+ | $ | 345,000 | $ | 346,787 | |||
Colorado HFA, 5.25% due 10/1/2026 pre-refunded 10/1/2008 (Children’s Hospital; Insured: MBIA) | Aaa/AAA | 2,295,000 | 2,309,642 | |||||
Denver City and County Airport System, 5.00% due 11/15/2016 (Insured: MBIA) | Aaa/AAA | 1,515,000 | 1,636,245 | |||||
Denver City and County Airport System, 5.00% due 11/15/2017 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,080,240 | |||||
Denver Convention Center Hotel, 5.25% due 12/1/2014 (Insured: XLCA) | Aaa/AAA | 3,000,000 | 3,255,480 | |||||
Denver Convention Center Hotel, 5.25% due 12/1/2015 (Insured: XLCA) | Aaa/AAA | 5,000,000 | 5,447,150 | |||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2011 (Insured: XLCA) (ETM) | Aaa/AAA | 3,335,000 | 3,518,292 | |||||
E 470 Public Highway Authority Capital Appreciation, 0% due 9/1/2014 (Insured: MBIA) | Aaa/AAA | 2,110,000 | 1,609,318 | |||||
Highlands Ranch Metropolitan GO District 3, 5.25% due 12/1/2008 (Insured: ACA) | NR/A | 1,520,000 | 1,537,146 | |||||
Highlands Ranch Metropolitan GO District 3, 5.25% due 12/1/2008 (Insured: ACA) | NR/A | 1,760,000 | 1,769,926 | |||||
Pinery West Metropolitan District 3, 4.70% due 12/1/2021 pre-refunded 12/1/2007 (LOC: Compass Bank) | NR/A+ | 1,000,000 | 1,000,650 | |||||
Plaza Metropolitan District 1, 7.60% due 12/1/2016 (Public Improvement Fee/Tax Increment) | NR/NR | 6,000,000 | 6,465,360 | |||||
Southlands Metropolitan GO District 1, 6.75% due 12/1/2016 | NR/NR | 1,000,000 | 1,145,290 | |||||
DELAWARE — 0.58% | ||||||||
Delaware EDA, 5.50% due 7/1/2025 put 7/1/2010 (Delmarva Power & Light) | Baa2/BBB- | 2,045,000 | 2,116,104 | |||||
Delaware HFA, 5.25% due 6/1/2011 (Beebe Medical Center) | Baa1/BBB+ | 1,275,000 | 1,318,006 | |||||
Delaware HFA, 5.25% due 5/1/2012 (Nanticoke Memorial Hospital; Insured: Radian) | NR/AA | 1,370,000 | 1,424,978 | |||||
Delaware HFA, 5.25% due 5/1/2013 (Nanticoke Memorial Hospital; Insured: Radian) | NR/AA | 1,445,000 | 1,499,939 | |||||
DISTRICT OF COLUMBIA — 2.17% | ||||||||
District of Columbia Capital Appreciation, 0% due 4/1/2040 pre-refunded 4/1/2011 (Georgetown University) | Aaa/AAA | 6,685,000 | 1,049,411 | |||||
District of Columbia COP, 5.25% due 1/1/2013 (Insured: AMBAC) | Aaa/AAA | 5,950,000 | 6,286,115 | |||||
District of Columbia COP, 5.25% due 1/1/2015 (Insured: FGIC) | Aaa/AAA | 2,875,000 | 3,123,803 | |||||
District of Columbia COP, 5.25% due 1/1/2016 (Insured: FGIC) | Aaa/AAA | 4,125,000 | 4,499,509 | |||||
District of Columbia Hospital, 5.10% due 8/15/2008 (Medlantic Healthcare) (ETM) | Aaa/AAA | 1,500,000 | 1,520,055 | |||||
District of Columbia Hospital, 5.70% due 8/15/2008 (Medlantic Healthcare) (ETM) | Aaa/AAA | 2,280,000 | 2,306,539 | |||||
District of Columbia Tax Increment, 0% due 7/1/2009 (Mandarin Oriental; Insured: FSA) | Aaa/AAA | 2,000,000 | 1,870,620 | |||||
District of Columbia Tax Increment, 0% due 7/1/2011 (Mandarin Oriental; Insured: FSA) | Aaa/AAA | 1,990,000 | 1,720,474 | |||||
District of Columbia Tax Increment, 0% due 7/1/2012 (Mandarin Oriental; Insured: FSA) | Aaa/AAA | 1,480,000 | 1,226,358 | |||||
FLORIDA — 7.64% | ||||||||
Broward County Airport Systems, 5.00% due 10/1/2014 (Insured: AMBAC) | Aaa/AAA | 4,000,000 | 4,289,080 | |||||
Broward County Resource Recovery, 5.375% due 12/1/2009 (Wheelabrator South) | A3/AA | 5,000,000 | 5,152,400 | |||||
Broward County School Board COP, 5.25% due 7/1/2016 (Insured: FSA) | Aaa/AAA | 7,630,000 | 8,340,200 | |||||
Broward County School Board COP, 5.00% due 7/1/2017 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,077,560 | |||||
Capital Projects Finance Authority, 5.50% due 10/1/2012 (Insured: MBIA) | Aaa/AAA | 1,820,000 | 1,944,488 | |||||
Capital Projects Finance Authority, 5.50% due 10/1/2015 (Insured: MBIA) | Aaa/AAA | 3,260,000 | 3,467,303 | |||||
Capital Trust Agency Multi Family Housing, 5.15% due 11/1/2030 put 11/1/2010 (Shadow Run; Collateralized: FNMA) | Aaa/NR | 2,190,000 | 2,265,380 | |||||
Crossings at Fleming Island Community Development, 5.45% due 5/1/2010 (Insured: MBIA) | Aaa/AAA | 2,340,000 | 2,396,839 | |||||
Escambia County HFA, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB+ | 2,755,000 | 2,798,529 | |||||
Escambia County HFA, 5.00% due 11/1/2028 pre-refunded 11/1/2010 (Charity Obligation Group) | Aaa/NR | 2,500,000 | 2,562,725 | |||||
Flagler County School Board COP, 5.00% due 8/1/2014 (Insured: FSA) | Aaa/AAA | 1,605,000 | 1,716,804 | |||||
Flagler County School Board COP, 5.00% due 8/1/2015 (Insured: FSA) | Aaa/AAA | 1,500,000 | 1,608,180 | |||||
Florida State Correctional Privatization Commission COP, 5.00% due 8/1/2015 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,130,640 | |||||
Florida State Department of Children & Families COP South Florida Evaluation Treatment, 5.00% due 10/1/2015 | NR/AA+ | 925,000 | 990,139 | |||||
Hillsborough County Assessment, 5.00% due 3/1/2015 (Insured: FGIC) | Aaa/AAA | 5,000,000 | 5,337,200 | |||||
Hillsborough County IDA PCR, 5.10% due 10/1/2013 (Tampa Electric Co.) | Baa2/BBB- | 6,410,000 | 6,570,314 |
Certified Annual Report | 17 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2016 (Insured: XLCA) | Aaa/AAA | $ | 2,000,000 | $ | 2,135,460 | |||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2017 (Insured: XLCA) | Aaa/AAA | 2,000,000 | 2,135,780 | |||||
Jacksonville Electric St. John’s River Park Systems, 5.25% due 10/1/2012 | Aa2/AA- | 5,000,000 | 5,295,800 | |||||
Marion County Hospital District, 5.00% due 10/1/2015 (Munroe Regional Health Systems) | A2/NR | 1,000,000 | 1,045,960 | |||||
Miami Dade County Educational Facilities Authority, 5.00% due 4/1/2016 (University of Miami; Insured: AMBAC) | Aaa/AAA | 3,000,000 | 3,231,360 | |||||
Miami Dade County School Board COP, 5.50% due 5/1/2030 put 5/1/2011 (Insured: MBIA) | Aaa/AAA | 1,010,000 | 1,070,933 | |||||
Miami Dade County Special Housing, 5.80% due 10/1/2012 (HUD Section 8) | Baa3/NR | 2,485,000 | 2,559,277 | |||||
Orange County HFA, 6.25% due 10/1/2007 (Orlando Regional Hospital; Insured: MBIA) | Aaa/AAA | 925,000 | 925,204 | |||||
Orange County HFA, 5.80% due 11/15/2009 (Adventist Health System) (ETM) | A1/NR | 1,395,000 | 1,458,793 | |||||
Palm Beach County Public Improvement, 5.00% due 11/1/2030 (Convention Center; Insured: FGIC) | Aaa/AAA | 3,000,000 | 3,139,770 | |||||
Pelican Marsh Community Development District, 5.00% due 5/1/2011 (Insured: Radian) | NR/NR | 2,115,000 | 2,105,461 | |||||
South Miami HFA Hospital, 5.00% due 8/15/2016 (Baptist Health) | Aa3/AA- | 1,560,000 | 1,645,488 | |||||
St. John’s County IDA, 5.50% due 8/1/2014 (Presbyterian Retirement) | NR/NR | 1,755,000 | 1,850,700 | |||||
University of Central Florida Athletics Association Inc. COP, 5.00% due 10/1/2016 (Insured: FGIC) | Aaa/AAA | 1,640,000 | 1,749,700 | |||||
GEORGIA — 0.78% | ||||||||
Atlanta Tax Allocation, 5.25% due 12/1/2016 (Atlantic Station; Insured: Assured Guaranty) | Aaa/AAA | 3,850,000 | 4,213,863 | |||||
Atlanta Water & Wastewater, 5.00% due 11/1/2038 pre-refunded 5/1/2009 (Insured: FGIC) | Aaa/AAA | 1,015,000 | 1,048,536 | |||||
Monroe County Development Authority PCR, 6.75% due 1/1/2010 (Oglethorpe Power; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,133,080 | |||||
Monroe County Development Authority PCR, 6.80% due 1/1/2012 (Oglethorpe Power; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,120,440 | |||||
GUAM — 0.09% | ||||||||
Guam Educational Financing Foundation COP, 5.00% due 10/1/2010 (Guam Public Schools) | NR/A- | 1,000,000 | 1,029,510 | |||||
HAWAII — 0.19% | ||||||||
Hawaii State Department of Budget & Finance Special Purpose, 4.95% due 4/1/2012 (Hawaiian Electric Company; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,097,000 | |||||
IDAHO — 0.28% | ||||||||
Twin Falls Urban Renewal Agency, 4.95% due 8/1/2014 | NR/NR | 1,640,000 | 1,600,689 | |||||
Twin Falls Urban Renewal Agency, 5.15% due 8/1/2017 | NR/NR | 1,455,000 | 1,417,228 | |||||
ILLINOIS — 9.55% | ||||||||
Bolingbrook, 0% due 1/1/2016 (Insured: MBIA) | Aaa/NR | 1,500,000 | 1,058,475 | |||||
Bolingbrook, 0% due 1/1/2017 (Insured: MBIA) | Aaa/NR | 2,000,000 | 1,333,560 | |||||
Champaign County Community School District 116, 0% due 1/1/2009 (ETM) | Aaa/AAA | 1,205,000 | 1,150,245 | |||||
Champaign County Community School District 116, 0% due 1/1/2009 (Insured: FGIC) | Aaa/AAA | 2,140,000 | 2,042,266 | |||||
Chicago, 6.125% due 1/1/2012 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,098,380 | |||||
Chicago, 5.375% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,159,960 | |||||
Chicago Board of Education GO, 6.00% due 12/1/2009 (Insured: FGIC) | Aaa/AAA | 2,000,000 | 2,104,580 | |||||
Chicago Capital Appreciation, 0% due 1/1/2016 (City Colleges; Insured: FGIC) | Aaa/AAA | 2,670,000 | 1,901,921 | |||||
Chicago Gas Supply, 4.75% due 3/1/2030 (Peoples Gas Light & Coke) | A1/A- | 1,500,000 | 1,531,455 | |||||
Chicago Housing Authority Capital Program, 5.25% due 7/1/2010 (ETM) | Aaa/NR | 2,300,000 | 2,402,373 | |||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2015 (Insured: FSA) | Aaa/AAA | 8,460,000 | 9,083,164 | |||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2016 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,151,020 | |||||
Chicago Metropolitan Water Reclamation District, 7.00% due 1/1/2011 (ETM) | Aaa/AAA | 1,070,000 | 1,142,781 | |||||
Chicago Midway Airport, 5.40% due 1/1/2009 (Insured: MBIA) | Aaa/AAA | 1,340,000 | 1,355,035 | |||||
Chicago Midway Airport, 5.50% due 1/1/2013 (Insured: MBIA) | Aaa/AAA | 1,180,000 | 1,279,993 | |||||
Chicago O’Hare International Airport, 5.625% due 1/1/2014 (Insured: AMBAC) | Aaa/AAA | 3,065,000 | 3,079,620 |
18 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Chicago Park District Parking Facility, 5.75% due 1/1/2010 (ETM) | Baa1/A | $ | 1,000,000 | $ | 1,047,060 | |||
Cook County, 6.25% due 11/15/2013 (Insured: MBIA) | Aaa/AAA | 3,995,000 | 4,556,737 | |||||
Cook County Community Consolidated School District GO, 0% due 12/1/2010 (Insured: FSA) | Aaa/NR | 2,000,000 | 1,776,900 | |||||
Cook County Community Consolidated School District GO, 9.00% due 12/1/2016 (Tinley Park; Insured: FGIC) | Aaa/NR | 2,500,000 | 3,408,375 | |||||
Cook County Community School District GO, 9.00% due 12/1/2013 (Insured: FGIC) | Aaa/NR | 2,250,000 | 2,904,458 | |||||
Du Page County Forest Preservation District, 0% due 11/1/2009 (Partial ETM) | Aaa/AAA | 5,000,000 | 4,629,000 | |||||
Illinois DFA, 6.00% due 11/15/2009 (Adventist Health; Insured: MBIA) | Aaa/AAA | 3,635,000 | 3,817,550 | |||||
Illinois DFA, 6.00% due 11/15/2010 (Adventist Health; Insured: MBIA) | Aaa/AAA | 3,860,000 | 4,131,783 | |||||
Illinois DFA Community Rehab Providers, 6.00% due 7/1/2015 | NR/BBB | 1,450,000 | 1,469,082 | |||||
Illinois DFA Multi Family Housing, 5.55% due 7/20/2008 (Collateralized: GNMA) | NR/AAA | 375,000 | 378,094 | |||||
Illinois DFA PCR, 5.70% due 1/15/2009 (Commonwealth Edison Co.; Insured: MBIA) | NR/AAA | 3,000,000 | 3,082,050 | |||||
Illinois Financing Authority Student Housing, 5.00% due 5/1/2014 | Baa3/NR | 3,895,000 | 3,995,919 | |||||
Illinois HFA, 5.50% due 11/15/2007 (OSF Healthcare System) | A2/A | 915,000 | 916,857 | |||||
Illinois HFA, 6.50% due 2/15/2008 (Iowa Health System) | A1/NR | 1,290,000 | 1,302,384 | |||||
Illinois HFA, 6.50% due 2/15/2009 (Iowa Health System) | A1/NR | 1,375,000 | 1,421,214 | |||||
Illinois HFA, 6.50% due 2/15/2010 (Iowa Health System) (ETM) | A1/NR | 1,465,000 | 1,544,227 | |||||
Illinois HFA, 6.00% due 2/15/2011 (Iowa Health System; Insured: AMBAC) (ETM) | Aaa/AAA | 1,560,000 | 1,661,150 | |||||
Illinois HFA, 5.50% due 11/15/2011 (Methodist Medical Center; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,084,870 | |||||
Illinois HFA, 6.00% due 7/1/2017 (Lake Forest Hospital) | A3/A- | 1,500,000 | 1,603,905 | |||||
Illinois Hospital District, 5.50% due 1/1/2010 (Insured: FGIC) | Aaa/AAA | 1,040,000 | 1,083,118 | |||||
Illinois State GO, 5.00% due 10/1/2017 | Aa3/AA | 2,000,000 | 2,123,420 | |||||
Kane County Forest Preservation District, 5.00% due 12/15/2015 (Insured: FGIC) | NR/AAA | 2,780,000 | 3,013,520 | |||||
Lake County Community High School District, 0% due 12/1/2011 (Insured: FGIC) | Aaa/NR | 3,235,000 | 2,765,666 | |||||
McHenry & Kane Counties Community Consolidated School District, 0% due 1/1/2010 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 919,320 | |||||
McHenry & Kane Counties Community Consolidated School District, 0% due 1/1/2012 (Insured: FGIC) | Aaa/AAA | 2,200,000 | 1,871,804 | |||||
Metropolitan Pier & Exposition Authority Dedicated State Tax, 0% due 6/15/2013 (McCormick; Insured: MBIA) | Aaa/AAA | 1,045,000 | 840,452 | |||||
Naperville City, Du Page & Will Counties Economic Development, 6.10% due 5/1/2008 (Hospital & Health System Association; LOC: Bank One N.A.) | NR/AA | 675,000 | 676,181 | |||||
Peoria Public Building Commission School District Facilities, 0% due 12/1/2007 (Insured: FGIC) | Aaa/NR | 1,100,000 | 1,093,059 | |||||
Quincy Hospital, 5.00% due 11/15/2014 | A3/A- | 1,000,000 | 1,042,110 | |||||
Quincy Hospital, 5.00% due 11/15/2016 | A3/A- | 1,000,000 | 1,043,370 | |||||
Southwestern Illinois Development Authority, 5.125% due 8/15/2016 (Anderson Hospital) | Baa2/BBB | 2,375,000 | 2,445,395 | |||||
State of Illinois Waubonsee Community College District GO, 0% due 12/15/2013 (Insured: FGIC) | Aaa/AAA | 3,000,000 | 2,310,420 | |||||
INDIANA — 5.17% | ||||||||
Allen County Economic Development, 5.60% due 12/30/2009 (Indiana Institute of Technology) | NR/NR | 1,110,000 | 1,126,728 | |||||
Allen County Economic Development, 5.00% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 1,370,000 | 1,407,456 | |||||
Allen County Jail Building Corp. First Mortgage, 5.75% due 10/1/2010 (ETM) | Aa3/NR | 1,115,000 | 1,184,732 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2014 (Insured: XLCA) | Aaa/NR | 1,000,000 | 1,072,270 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2015 (Insured: XLCA) | Aaa/NR | 1,480,000 | 1,591,577 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2016 (Insured: XLCA) | Aaa/NR | 1,520,000 | 1,631,538 | |||||
Allen County Redevelopment District, 5.00% due 11/15/2016 | A3/NR | 1,000,000 | 1,040,850 | |||||
Ball State University Student Fee, 5.75% due 7/1/2012 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,082,890 | |||||
Boonville Junior High School Building Corp., 0% due 7/1/2010 (State Aid Withholding) | NR/A | 850,000 | 755,879 | |||||
Boonville Junior High School Building Corp., 0% due 1/1/2011 (State Aid Withholding) | NR/A | 850,000 | 737,613 | |||||
Boonville Junior High School Building Corp., 0% due 7/1/2011 (State Aid Withholding) | NR/A | 950,000 | 806,645 | |||||
Carmel Redevelopment Authority Lease Performing Arts, 0% due 2/1/2015 | Aa2/AA | 1,575,000 | 1,162,381 | |||||
Center Grove 2000 Building First Mortgage, 5.00% due 7/15/2010 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,135,000 | 1,178,709 | |||||
Dekalb County Redevelopment Authority Lease Rental, 5.25% due 1/15/2014 (Mini Mill Local Public Improvement; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,068,680 |
Certified Annual Report | 19 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Eagle Union Middle School Building Corp., 5.50% due 7/15/2009 (ETM) | Aaa/AAA | $ | 910,000 | $ | 941,704 | |||
Elberfeld J. H. Castle School Building Corp. First Mortgage, 0% due 7/5/2008 (Insured: MBIA) | NR/AAA | 1,860,000 | 1,809,352 | |||||
Evansville Vanderburgh, 5.00% due 7/15/2014 (Insured: AMBAC) | NR/AAA | 1,000,000 | 1,075,510 | |||||
Evansville Vanderburgh, 5.00% due 7/15/2015 (Insured: AMBAC) | NR/AAA | 1,000,000 | 1,079,500 | |||||
Huntington Economic Development, 6.15% due 11/1/2008 (United Methodist Membership) | NR/NR | 535,000 | 543,421 | |||||
Huntington Economic Development, 6.20% due 11/1/2010 (United Methodist Membership) | NR/NR | 790,000 | 809,932 | |||||
Indiana Bond Bank, 5.25% due 10/15/2016 (Special Gas Program) | Aa2/NR | 1,500,000 | 1,583,280 | |||||
Indiana Multi School Building Corp. First Mortgage, 5.00% due 7/15/2016 (Insured: MBIA) | Aaa/AAA | 5,000,000 | 5,405,600 | |||||
Indiana State Educational Facilities Authority, 5.75% due 10/1/2009 (University of Indianapolis) | NR/A- | 670,000 | 695,031 | |||||
Indiana State Finance Authority Facilities, Forensic & Health Science, 5.00% due 7/1/2016 (Insured: MBIA) | Aaa/AAA | 1,030,000 | 1,114,903 | |||||
Indianapolis Local Public Improvement Bond, 5.00% due 1/1/2015 (Waterworks; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,075,440 | |||||
Indianapolis Local Public Improvement Bond, 5.00% due 7/1/2015 (Waterworks; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,079,220 | |||||
Indianapolis Local Public Improvement Bond, 5.00% due 7/1/2016 (Insured: FGIC) | Aaa/AAA | 1,030,000 | 1,105,159 | |||||
Knox Middle School Building Corp. First Mortgage, 6.00% due 7/15/2008 (Insured: FGIC) | Aaa/AAA | 855,000 | 871,741 | |||||
Knox Middle School Building Corp. First Mortgage, 6.00% due 7/15/2009 (Insured: FGIC) | Aaa/AAA | 455,000 | 474,620 | |||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2014 (Insured: FGIC) | Aaa/AAA | 1,200,000 | 1,290,612 | |||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2015 (Insured: FGIC) | Aaa/AAA | 1,250,000 | 1,349,375 | |||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2013 (Insured: MBIA) | Aaa/AAA | 1,055,000 | 1,128,702 | |||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2014 (Insured: MBIA) | Aaa/AAA | 1,135,000 | 1,220,704 | |||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2015 (Insured: MBIA) | Aaa/AAA | 1,140,000 | 1,230,630 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2016 (146th Street Extension A) | NR/A+ | 1,660,000 | 1,750,868 | |||||
Perry Township Multi School Building, 5.00% due 7/10/2014 (Insured: FSA) | Aaa/NR | 2,130,000 | 2,289,367 | |||||
Peru Community School Corp. First Mortgage, 0% due 7/1/2010 (State Aid Withholding) | NR/A | 835,000 | 742,540 | |||||
Plainfield Community High School Building Corp. First Mortgage, 5.00% due 1/15/2015 (Insured: FGIC) | Aaa/AAA | 1,445,000 | 1,554,430 | |||||
Warren Township Vision 2005, 5.00% due 7/10/2015 (Insured: FGIC) | Aaa/AAA | 2,095,000 | 2,252,146 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2010 (State Aid Withholding) (ETM) | NR/AA | 995,000 | 1,046,451 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2011 (State Aid Withholding) (ETM) | NR/AA | 1,095,000 | 1,169,767 | |||||
West Clark 2000 School Building Corp., 5.25% due 1/15/2014 (Insured: MBIA) | Aaa/AAA | 1,335,000 | 1,448,582 | |||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2011 (State Aid Withholding) | Aaa/AAA | 2,080,000 | 2,237,269 | |||||
IOWA — 2.07% | ||||||||
Ankeny Community School District Sales & Services Tax, 5.00% due 7/1/2010 | NR/AA- | 2,900,000 | 3,012,491 | |||||
Des Moines Limited Obligation, 4.40% due 12/1/2015 put 12/1/2011 (Des Moines Parking Associates; LOC: Wells Fargo Bank) | NR/NR | 2,985,000 | 2,984,880 | |||||
Dubuque Community School District, 5.00% due 1/1/2013 (1) | NR/NR | 1,600,000 | 1,620,432 | |||||
Dubuque Community School District, 5.00% due 7/1/2013 | NR/NR | 1,640,000 | 1,660,943 | |||||
Iowa Finance Authority, 6.50% due 2/15/2009 (Iowa Health Services) | Aa3/NR | 1,825,000 | 1,892,069 | |||||
Iowa Finance Authority, 6.50% due 2/15/2010 (Iowa Health Services) | Aa3/NR | 2,955,000 | 3,131,354 | |||||
Iowa Finance Authority, 6.00% due 2/15/2011 pre-refunded 2/15/2010 (Iowa Health Services; Insured: AMBAC) | Aaa/AAA | 3,145,000 | 3,347,444 | |||||
Iowa Finance Authority Trinity Health, 5.75% due 12/1/2007 | Aa2/AA- | 1,430,000 | 1,434,905 | |||||
Iowa Finance Authority Trinity Health, 5.75% due 12/1/2010 | Aa2/AA- | 3,295,000 | 3,430,128 | |||||
KENTUCKY — 1.46% | ||||||||
Kentucky Economic DFA, 5.35% due 10/1/2009 (Norton Healthcare; Insured: MBIA) (ETM) | Aaa/AAA | 2,835,000 | 2,934,735 | |||||
Kentucky Economic DFA, 5.35% due 10/1/2009 (Norton Healthcare; Insured: MBIA) | Aaa/AAA | 4,565,000 | 4,728,290 | |||||
Kentucky Economic DFA, 5.40% due 10/1/2010 (Norton Healthcare; Insured: MBIA) (ETM) | Aaa/AAA | 3,775,000 | 3,971,489 | |||||
Kentucky Economic DFA, 5.40% due 10/1/2010 (Norton Healthcare; Insured MBIA) | Aaa/AAA | 4,055,000 | 4,266,063 |
20 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
LOUISIANA — 3.25% | ||||||||
East Baton Rouge Sewer Commission, 5.00% due 2/1/2018 (Insured: FSA) | Aaa/AAA | $ | 3,000,000 | $ | 3,193,110 | |||
Jefferson Sales Tax District Special Sales Tax, 5.25% due 12/1/2007 (Insured: AMBAC) | Aaa/AAA | 1,515,000 | 1,519,515 | |||||
Louisiana Environmental Facilities & Community Development Authority Multi Family, 5.00% due 9/1/2012 (Bellemont Apartments) | Baa3/NR | 1,000,000 | 984,980 | |||||
Louisiana Public Facilities Authority, 5.75% due 10/1/2008 (Loyola University) | A1/A+ | 1,000,000 | 1,019,310 | |||||
Louisiana Public Facilities Authority, 5.375% due 12/1/2008 (Wynhoven Health Care Center; Guaranty: Archdiocese of New Orleans) | NR/NR | 975,000 | 974,532 | |||||
Louisiana Public Facilities Authority Hospital, 5.50% due 7/1/2010 (Franciscan Missionaries; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,048,600 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2014 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 1,037,220 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2015 (Ochsner Clinic Foundation) | A3/NR | 1,825,000 | 1,894,387 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2016 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 1,037,770 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2017 (Ochsner Clinic Foundation) | A3/NR | 1,035,000 | 1,072,001 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2018 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 1,027,650 | |||||
Louisiana State, 5.50% due 11/15/2008 (Insured: FGIC) | Aaa/AAA | 1,980,000 | 2,024,312 | |||||
Louisiana State Citizens Property Insurance Corp., 5.00% due 6/1/2015 (Insured: AMBAC) | Aaa/AAA | 5,000,000 | 5,365,650 | |||||
Louisiana State Correctional Facilities Corp. Lease, 5.00% due 12/15/2007 (Insured: Radian) | NR/AA | 3,760,000 | 3,767,106 | |||||
Louisiana State Offshore Terminal Authority, 4.25% due 10/1/2037 put 10/1/2010 (Deepwater Port Loop LLC) | A3/A | 4,200,000 | 4,223,562 | |||||
Monroe Sales Tax Increment Garrett Road Economic Development Area, 5.00% due 3/1/2017 (Insured: Radian) | Aa3/AA | 1,505,000 | 1,532,963 | |||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | Baa3/BBB | 2,400,000 | 2,505,816 | |||||
New Orleans Parish School Board, 0% due 2/1/2008 (ETM) | NR/AAA | 1,115,000 | 1,097,495 | |||||
MASSACHUSETTS — 3.70% | ||||||||
Massachusetts DFA Resource Recovery, 5.50% due 1/1/2011 (Seamass Partnership; Insured: MBIA) | Aaa/AAA | 3,470,000 | 3,663,140 | |||||
Massachusetts GO, 6.00% due 11/1/2008 | Aa2/AA | 1,000,000 | 1,027,490 | |||||
Massachusetts GO Construction Loan, 5.00% due 9/1/2015 | Aa2/AA | 10,000,000 | 10,869,200 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2011 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 2,345,000 | 2,462,953 | |||||
Massachusetts Health & Educational Facilities Authority, 5.375% due 5/15/2012 (New England Medical Center Hospital; Insured: FGIC) | Aaa/AAA | 3,415,000 | 3,659,685 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2012 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 2,330,000 | 2,463,486 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2013 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 3,215,000 | 3,418,735 | |||||
Massachusetts Industrial Finance Agency Biomedical, 0% due 8/1/2008 | Aa2/AA- | 1,000,000 | 969,350 | |||||
Massachusetts Industrial Finance Agency Biomedical, 0% due 8/1/2010 | Aa2/AA- | 13,000,000 | 11,668,150 | |||||
MICHIGAN — 3.44% | ||||||||
Detroit Convention Facility, 5.25% due 9/30/2007 (Cobo Hall Expansion) | NR/A | 1,000,000 | 1,000,080 | |||||
Dickinson County Economic Development Corp. Environmental Impact, 5.75% due 6/1/2016 (International Paper Co.) | Baa3/BBB | 3,715,000 | 3,884,664 | |||||
Dickinson County Healthcare Systems, 5.50% due 11/1/2013 (Insured: ACA) | NR/A | 2,500,000 | 2,572,700 | |||||
Gull Lake Community School District GO, 0% due 5/1/2013 (Insured: FGIC) | Aaa/AAA | 3,000,000 | 2,240,340 | |||||
Michigan HFA, 5.375% due 7/1/2012 (Port Huron Hospital; Insured: FSA) | Aaa/AAA | 1,710,000 | 1,712,138 | |||||
Michigan State Building Authority, 5.00% due 10/15/2015 (Insured: AMBAC) | Aaa/AAA | 6,000,000 | 6,496,800 | |||||
Michigan State COP, 5.00% due 9/1/2031 put 9/1/2011 (Insured: MBIA) | Aaa/AAA | 6,000,000 | 6,271,200 | |||||
Michigan State HFA, 5.00% due 11/15/2017 (Sparrow Memorial Hospital) | A1/A+ | 1,000,000 | 1,051,320 | |||||
Michigan State HFA, 5.375% due 11/15/2033 put 11/15/2007 (Ascension Health Credit) | Aa2/AA | 10,000,000 | 10,014,900 | |||||
Michigan State Strategic Fund Detroit Educational, 4.85% due 9/1/2030 put 9/1/2011 (Detroit Edison Co.; Insured: AMBAC) | Aaa/NR | 2,075,000 | 2,151,401 |
Certified Annual Report | 21 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
MINNESOTA — 1.13% | ||||||||
Dakota County Community Development Agency Multi Family Housing, 5.00% due 11/1/2017 (Commons on Marice) | NR/NR | $ | 1,150,000 | $ | 1,118,870 | |||
Minneapolis & St. Paul Metropolitan Airports, 5.00% due 1/1/2017 (Insured: AMBAC) | NR/AAA | 8,005,000 | 8,618,823 | |||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2012 (Healthpartners Obligated Group) | Baa1/BBB | 1,000,000 | 1,037,580 | |||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2013 (Healthpartners Obligated Group) | Baa1/BBB | 1,500,000 | 1,561,035 | |||||
MISSISSIPPI — 0.54% | ||||||||
Gautier Utility District Systems, 5.50% due 3/1/2012 (Insured: FGIC) | Aaa/NR | 1,020,000 | 1,094,276 | |||||
Mississippi Development Bank Public Improvement GO, 4.75% due 7/1/2017 | NR/NR | 1,565,000 | 1,545,657 | |||||
Mississippi State GO, 6.20% due 2/1/2008 (ETM) | Aaa/AAA | 3,175,000 | 3,197,447 | |||||
MISSOURI — 0.22% | ||||||||
Missouri Development Finance Board Healthcare Facilities, 4.80% due 11/1/2012 (Lutheran Home Aged; LOC: Commerce Bank) | Aa2/NR | 1,275,000 | 1,304,070 | |||||
Missouri State Health & Educational Facilities Authority, 5.00% due 6/1/2011 (SSM Healthcare Corp.) | NR/AA- | 1,000,000 | 1,041,440 | |||||
MONTANA — 1.68% | ||||||||
Forsyth PCR, 5.00% due 10/1/2032 put 12/30/2008 (Avista Corp.; Insured: AMBAC) | Aaa/AAA | 11,440,000 | 11,646,949 | |||||
Forsyth PCR, 5.20% due 5/1/2033 put 5/1/2009 (Portland General) | Baa1/BBB+ | 4,385,000 | 4,461,124 | |||||
Montana Facilities Finance Authority, 5.00% due 1/1/2015 (Benefis Health Systems; Insured: Assured Guaranty) | NR/AAA | 1,000,000 | 1,064,340 | |||||
Montana Facilities Finance Authority, 5.00% due 1/1/2016 (Benefis Health Systems; Insured: Assured Guaranty) | NR/AAA | 1,000,000 | 1,065,340 | |||||
NEBRASKA — 0.78% | ||||||||
Madison County Hospital Authority, 5.25% due 7/1/2010 (Faith Regional Health Services; Insured: Radian) | NR/AA | 1,455,000 | 1,495,944 | |||||
Madison County Hospital Authority, 5.50% due 7/1/2012 (Faith Regional Health Services; Insured: Radian) | NR/AA | 1,625,000 | 1,701,310 | |||||
Omaha Public Power District Electric Systems B, 5.00% due 2/1/2013 | Aa2/AA | 5,000,000 | 5,322,850 | |||||
NEVADA — 1.10% | ||||||||
Clark County District 121, 5.00% due 12/1/2015 (Insured: AMBAC) | Aaa/AAA | 1,960,000 | 2,107,019 | |||||
Clark County School District GO, 5.00% due 6/15/2015 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,067,570 | |||||
Las Vegas Special Local Improvement District 707, 5.125% due 6/1/2011 (Insured: FSA) | Aaa/AAA | 1,645,000 | 1,693,495 | |||||
Nevada Housing Division Multi Family Housing, 4.80% due 4/1/2008 (Collateralized: FNMA) | NR/AAA | 205,000 | 205,156 | |||||
Sparks Redevelopment Agency Tax Allocation, 5.75% due 1/15/2009 (Insured: Radian) | NR/AA | 1,000,000 | 1,021,550 | |||||
Sparks Redevelopment Agency Tax Allocation, 5.75% due 1/15/2010 (Insured: Radian) | NR/AA | 1,000,000 | 1,033,340 | |||||
Sparks Redevelopment Agency Tax Allocation, 5.75% due 1/15/2011 (Insured: Radian) | NR/AA | 1,285,000 | 1,334,588 | |||||
Washoe County School District, 5.50% due 6/1/2008 (Insured: FSA) | Aaa/AAA | 3,500,000 | 3,547,285 | |||||
NEW HAMPSHIRE — 1.24% | ||||||||
Manchester Housing & Redevelopment Authority, 6.05% due 1/1/2012 (Insured: ACA) | NR/A | 1,500,000 | 1,565,475 | |||||
New Hampshire Health & Educational Facilities Medical Centers, 5.00% due 10/1/2016 (Southern NH Health Systems) | NR/A- | 1,260,000 | 1,310,488 | |||||
New Hampshire Health & Educational Facilities Medical Centers, 5.00% due 10/1/2017 (Southern NH Health Systems) | NR/A- | 1,000,000 | 1,037,890 | |||||
New Hampshire IDA, 3.75% due 12/1/2009 (Central Vermont Public Services; LOC: Citizens Bank) | Aa2/AA- | 2,880,000 | 2,896,647 | |||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2016 (Insured: MBIA) | Aaa/AAA | 2,985,000 | 3,242,874 | |||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2017 (Insured: MBIA) | Aaa/AAA | 3,130,000 | 3,404,063 |
22 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
NEW JERSEY — 2.48% | ||||||||
Hudson County COP, 7.00% due 12/1/2012 (Insured: MBIA) | Aaa/AAA | $ | 1,000,000 | $ | 1,152,530 | |||
Hudson County COP, 6.25% due 12/1/2014 (Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,725,750 | |||||
New Jersey EDA, 5.00% due 11/15/2011 (Seabrook Village) | NR/NR | 1,000,000 | 993,690 | |||||
New Jersey EDA, 5.00% due 11/15/2014 (Seabrook Village) | NR/NR | 1,000,000 | 981,150 | |||||
New Jersey EDA Cigarette Tax Revenue, 5.00% due 6/15/2012 (Insured: FGIC) | Aaa/AAA | 7,375,000 | 7,795,965 | |||||
New Jersey State Transportation Corp. COP, 5.25% due 9/15/2013 (Insured: AMBAC) | Aaa/AAA | 5,000,000 | 5,399,050 | |||||
New Jersey State Transportation Corp. COP, 5.50% due 9/15/2013 (Insured: AMBAC) | Aaa/AAA | 7,650,000 | 8,353,418 | |||||
Tobacco Settlement Financing Corp, 6.125% due 6/1/2024 | Aaa/AAA | 500,000 | 534,090 | |||||
NEW MEXICO — 0.84% | ||||||||
Belen Consolidated School District No 2, 4.00% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 1,000,000 | 1,004,650 | |||||
Farmington PCR, 4.06% due 5/1/2024 put 10/1/2007 (LOC: Barclays Bank) (daily demand notes) | VMIG1/A-1+ | 1,600,000 | 1,600,000 | |||||
New Mexico Finance Authority State Office Building Tax, 5.00% due 6/1/2013 pre-refunded 6/1/2011 | Aa1/AAA | 1,325,000 | 1,390,124 | |||||
New Mexico Highway Commission Tax, 5.00% due 6/15/2011 (Insured: AMBAC) (ETM) | Aaa/AAA | 4,865,000 | 5,099,541 | |||||
NEW YORK — 4.70% | ||||||||
Hempstead Town IDA Resource Recovery, 5.00% due 12/1/2008 (American Ref-Fuel; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,016,720 | |||||
Long Island Power Authority Electric Systems, 6.00% due 12/1/2007 (Insured: AMBAC) | Aaa/AAA | 2,285,000 | 2,294,757 | |||||
New York City Housing Development Corp. Multi Family Housing, 5.50% due 11/1/2009 (Insured: FHA) | Aa2/AA | 185,000 | 186,741 | |||||
New York City IDA, 5.25% due 6/1/2011 (Lycee Francais De New York; Insured: ACA) | NR/A | 2,215,000 | 2,275,071 | |||||
New York City IDA, 5.25% due 6/1/2012 (Lycee Francais De New York; Insured: ACA) | NR/A | 2,330,000 | 2,406,051 | |||||
New York City Transitional Finance Authority Facilities, 5.00% due 11/1/2012 | Aa1/AAA | 5,000,000 | 5,325,250 | |||||
New York City Transitional Finance Authority Facilities, 5.00% due 11/1/2014 | Aa1/AAA | 2,000,000 | 2,159,900 | |||||
New York City Transitional Finance Authority Facilities, 5.00% due 11/1/2015 | Aa1/AAA | 1,500,000 | 1,626,825 | |||||
New York Dormitory Authority Mental Health Services Facilities Improvement, 5.00% due 8/15/2010 (Insured: MBIA) | Aaa/AAA | 1,600,000 | 1,661,600 | |||||
New York State Dormitory Authority, 5.50% due 7/1/2012 (South Nassau Community Hospital) | Baa1/NR | 1,820,000 | 1,911,346 | |||||
New York State Dormitory Authority, 5.50% due 7/1/2013 (South Nassau Community Hospital) | Baa1/NR | 1,500,000 | 1,585,365 | |||||
New York State Dormitory Authority, 5.25% due 11/15/2026 put 5/15/2012 (Insured: AMBAC) | Aaa/AAA | 4,000,000 | 4,269,680 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2012 (Insured: SONYMA) | Aa1/NR | 2,000,000 | 2,069,320 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2013 (Insured: SONYMA) | Aa1/NR | 4,600,000 | 4,759,436 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2014 (Insured: SONYMA) | Aa1/NR | 1,500,000 | 1,551,990 | |||||
New York State Dormitory Authority Hospital, 5.25% due 8/15/2013 (Presbyterian Hospital; Insured: FHA & FSA) | Aaa/AAA | 3,650,000 | 3,944,372 | |||||
New York State Thruway Authority Service Contract, 5.50% due 4/1/2013 (Local Highway & Bridge; Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,076,260 | |||||
Oneida County IDA, 6.00% due 1/1/2009 (Faxton Hospital; Insured: Radian) | NR/AA | 710,000 | 728,084 | |||||
Port Authority 148th, 5.00% due 8/15/2017 (Insured: FSA) | Aaa/AAA | 4,725,000 | 5,150,817 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2012 (Secured: State Contingency Contract) | A1/AA- | 40,000 | 40,058 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2013 | A1/AA- | 3,050,000 | 3,077,816 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2013 (Insured: XLCA) | Aaa/AAA | 2,000,000 | 2,017,960 | |||||
NORTH CAROLINA — 2.84% | ||||||||
Charlotte Mecklenberg Hospital Authority Health Care Systems, 5.00% due 1/15/2016 | Aa3/AA- | 3,420,000 | 3,614,461 | |||||
Charlotte Mecklenberg Hospital Authority Health Care Systems, 5.00% due 1/15/2017 | Aa3/AA- | 2,000,000 | 2,106,240 | |||||
North Carolina Eastern Municipal Power Agency, 5.375% due 1/1/2011 | Baa1/BBB | 3,000,000 | 3,123,720 | |||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2012 | Baa1/BBB | 650,000 | 680,706 |
Certified Annual Report | 23 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
North Carolina Eastern Municipal Power Agency, 5.50% due 1/1/2012 | Baa1/BBB | $ | 1,100,000 | $ | 1,162,623 | |||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2013 | Baa1/BBB | 1,055,000 | 1,113,331 | |||||
North Carolina Infrastructure Finance Corp. COP, 5.00% due 2/1/2017 (Correctional Facilities) | Aa1/AA+ | 2,400,000 | 2,532,864 | |||||
North Carolina Municipal Power Agency, 6.00% due 1/1/2008 (Catawba Electric; Insured: MBIA) | Aaa/AAA | 3,900,000 | 3,925,077 | |||||
North Carolina Municipal Power Agency, 6.00% due 1/1/2010 (Catawba Electric; Insured: MBIA) | Aaa/AAA | 2,400,000 | 2,527,440 | |||||
North Carolina Municipal Power Agency, 5.50% due 1/1/2013 (Catawba Electric) | A3/BBB+ | 2,505,000 | 2,672,860 | |||||
North Carolina Municipal Power Agency, 6.375% due 1/1/2013 (Catawba Electric) | A3/BBB+ | 1,000,000 | 1,054,530 | |||||
North Carolina State Infrastructure Finance Corp. COP, 5.00% due 2/1/2016 (Correctional Facilities) | Aa1/AA+ | 5,000,000 | 5,299,800 | |||||
University of North Carolina Systems Pool, 5.00% due 4/1/2012 (Insured: AMBAC) | Aaa/AAA | 1,030,000 | 1,091,718 | |||||
NORTH DAKOTA — 0.15% | ||||||||
Ward County Health Care Facilities, 5.00% due 7/1/2013 (Trinity Obligated Group) | NR/BBB+ | 1,560,000 | 1,607,050 | |||||
OHIO — 2.53% | ||||||||
Akron COP, 5.00% due 12/1/2013 (Insured: Assured Guaranty) | NR/AAA | 3,000,000 | 3,210,300 | |||||
Akron COP, 5.00% due 12/1/2014 (Insured: Assured Guaranty) | NR/AAA | 2,000,000 | 2,149,640 | |||||
Cleveland Cuyahoga County Port Authority, 6.00% due 11/15/2010 | NR/NR | 2,555,000 | 2,635,227 | |||||
Greater Cleveland Regional Transportation Authority GO, 5.00% due 12/1/2015 (Insured: MBIA) | Aaa/NR | 1,000,000 | 1,085,940 | |||||
Hudson City Library Improvement, 6.35% due 12/1/2011 | Aa1/NR | 1,400,000 | 1,533,812 | |||||
Lorain County Hospital, 6.00% due 9/1/2008 (Catholic Healthcare Partners; Insured: MBIA) | Aaa/AAA | 1,200,000 | 1,224,396 | |||||
Mahoning Valley Sanitary District, 5.85% due 11/15/2008 (Insured: FSA) | Aaa/AAA | 1,300,000 | 1,334,268 | |||||
Mahoning Valley Sanitary District, 5.90% due 11/15/2009 (Insured: FSA) | Aaa/AAA | 770,000 | 808,038 | |||||
Montgomery County, 6.00% due 12/1/2008 (Catholic Health Initiatives) | Aa2/AA | 2,250,000 | 2,311,447 | |||||
Montgomery County, 6.00% due 12/1/2009 (Catholic Health Initiatives) | Aa2/AA | 2,385,000 | 2,502,557 | |||||
Montgomery County, 6.00% due 12/1/2010 (Catholic Health Initiatives) | Aa2/AA | 1,530,000 | 1,633,030 | |||||
Ohio State Unlimited Tax GO, 5.75% due 6/15/2010 pre-refunded 6/15/2009 | Aa1/AA+ | 5,000,000 | 5,187,150 | |||||
Plain Local School District, 0% due 12/1/2007 (Insured: FGIC) | Aaa/NR | 845,000 | 839,710 | |||||
Reading Development, 6.00% due 2/1/2009 (St. Mary’s Educational Institute; Insured: Radian) | NR/AA | 975,000 | 999,814 | |||||
OKLAHOMA — 1.15% | ||||||||
Comanche County Hospital Authority, 5.00% due 7/1/2011 (Insured: Radian) | Aa3/AA | 1,000,000 | 1,026,780 | |||||
Comanche County Hospital Authority, 5.25% due 7/1/2015 (Insured: Radian) | Aa3/AA | 1,340,000 | 1,406,893 | |||||
Grand River Dam Authority, 5.50% due 6/1/2010 | A2/BBB+ | 1,200,000 | 1,258,836 | |||||
Jenks Aquarium Authority First Mortgage, 5.50% due 7/1/2010 (ETM) | Aaa/NR | 325,000 | 334,149 | |||||
Oklahoma DFA Health Facilities, 5.75% due 6/1/2011 (Insured: AMBAC) | Aaa/AAA | 740,000 | 794,131 | |||||
Oklahoma DFA Hospital, 5.25% due 12/1/2011 (Duncan Regional Hospital) | NR/A- | 1,215,000 | 1,268,047 | |||||
Oklahoma DFA Hospital, 5.00% due 10/1/2012 (Unity Health Center) | NR/A- | 1,070,000 | 1,110,007 | |||||
Oklahoma DFA Hospital, 5.25% due 12/1/2012 (Duncan Regional Hospital) | NR/A- | 1,330,000 | 1,396,287 | |||||
Oklahoma DFA Hospital, 5.25% due 12/1/2013 (Duncan Regional Hospital) | NR/A- | 1,350,000 | 1,423,534 | |||||
Oklahoma State Industrial Health Authority, 6.00% due 8/15/2010 pre-refunded 8/15/2009 (Integris Health Systems; Insured: MBIA) | Aaa/AAA | 190,000 | 200,308 | |||||
Oklahoma State Industrial Health Authority, 6.00% due 8/15/2010 (Integris Health Systems; Insured: MBIA) | Aaa/AAA | 2,150,000 | 2,264,229 | |||||
OREGON — 0.57% | ||||||||
Clackamas County HFA, 5.00% due 5/1/2008 (Legacy Health Systems) | A1/AA- | 4,000,000 | 4,030,960 | |||||
Oregon State Department Administrative Services COP, 5.00% due 11/1/2014 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,075,430 | |||||
Oregon State Department Administrative Services COP, 5.00% due 11/1/2015 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,078,770 | |||||
PENNSYLVANIA — 2.18% | ||||||||
Allegheny County Hospital Development, 6.30% due 5/1/2009 (South Hills Health System) | Baa1/NR | 795,000 | 816,680 | |||||
Chester County School Authority, 5.00% due 4/1/2016 (Intermediate School; Insured: AMBAC) | NR/AAA | 1,915,000 | 2,058,012 | |||||
Delaware County Authority, 5.50% due 11/15/2007 (Catholic Health East; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,002,510 |
24 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Geisinger Authority Health Systems, 5.50% due 8/15/2009 | Aa2/AA | $ | 1,000,000 | $ | 1,025,090 | |||
Northampton County IDA, 5.35% due 7/1/2010 (Moravian Hall Square; Insured: Radian) | NR/AA | 1,200,000 | 1,201,068 | |||||
Pennsylvania Higher Educational Facilities, 5.00% due 8/15/2008 (University of Pennsylvania Health Systems) | A1/A+ | 1,250,000 | 1,263,787 | |||||
Philadelphia Gas Works, 5.00% due 9/1/2014 (Insured: FSA) | Aaa/AAA | 3,000,000 | 3,220,530 | |||||
Philadelphia Gas Works, 5.00% due 9/1/2015 (Insured: FSA) | Aaa/AAA | 3,315,000 | 3,542,011 | |||||
Pittsburgh, 5.00% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 3,415,000 | 3,630,521 | |||||
Pittsburgh, 5.50% due 9/1/2014 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,119,200 | |||||
Sayre HFA, 5.00% due 7/1/2008 (Latrobe Area Hospital; Insured: AMBAC) | Aaa/AAA | 1,255,000 | 1,269,282 | |||||
Sayre HFA, 5.25% due 7/1/2011 (Latrobe Area Hospital; Insured: AMBAC) (1) | Aaa/AAA | 1,400,000 | 1,480,948 | |||||
Sayre HFA, 5.25% due 7/1/2012 (Latrobe Area Hospital; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,067,900 | |||||
PUERTO RICO — 0.09% | ||||||||
Puerto Rico Commonwealth Highway & Transportation Authority, 5.00% due 7/1/2008 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,011,530 | |||||
RHODE ISLAND — 0.87% | ||||||||
Providence GO, 5.50% due 1/15/2012 (Insured: FGIC) | Aaa/AAA | 1,880,000 | 2,024,817 | |||||
Providence Public Building Authority, 5.75% due 12/15/2007 (Insured: FSA) | Aaa/AAA | 1,075,000 | 1,080,117 | |||||
Rhode Island State, 5.00% due 10/1/2014 (Providence Plantations; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,069,100 | |||||
Rhode Island State Economic Development Corp., 5.75% due 7/1/2010 (Providence Place Mall; Insured: Radian) | NR/AA | 1,560,000 | 1,604,320 | |||||
Rhode Island State Health & Education Building Corp., 4.50% due 9/1/2009 (Butler Hospital; LOC: Fleet National Bank) | NR/AA+ | 1,960,000 | 1,989,184 | |||||
Rhode Island State Health & Education Building Corp., 5.25% due 7/1/2014 (Memorial Hospital; LOC: Fleet Bank) | NR/AA+ | 1,565,000 | 1,662,155 | |||||
SOUTH CAROLINA — 2.17% | ||||||||
Charleston County COP, 6.00% due 12/1/2007 (Insured: MBIA) | Aaa/AAA | 1,045,000 | 1,049,514 | |||||
Georgetown County Environmental Improvement, 5.70% due 4/1/2014 (International Paper Co.) | Baa3/BBB | 7,975,000 | 8,475,511 | |||||
Greenville County School District Building Equity Sooner Tomorrow, 5.25% due 12/1/2015 | Aa3/AA- | 1,000,000 | 1,072,940 | |||||
Greenwood County Hospital Facilities, 5.00% due 10/1/2013 (Self Regional Healthcare; Insured: FSA) | Aaa/AAA | 2,000,000 | 2,134,480 | |||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2015 (Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,078,640 | |||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2016 (Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,080,260 | |||||
South Carolina Jobs EDA, 5.50% due 4/1/2027 put 10/5/2007 (Episcopal Convention Center; Insured: Radian) (weekly demand notes) | A-1+/F1+ | 8,750,000 | 8,750,000 | |||||
SOUTH DAKOTA — 0.11% | ||||||||
South Dakota State Health & Educational Facilities Authority, 5.50% due 9/1/2011 (Rapid City Regional Hospital; Insured: MBIA) | Aaa/AAA | 1,100,000 | 1,174,591 | |||||
TENNESSEE — 0.98% | ||||||||
Franklin County Health & Educational Facilities Board, 4.75% due 9/1/2009 (University of the South) | NR/A+ | 685,000 | 693,165 | |||||
Metro Government Nashville Multi Family, 7.50% due 11/15/2010 pre-refunded 5/15/2010 | Aaa/AAA | 2,000,000 | 2,195,560 | |||||
Metro Government Nashville Water & Sewer, 6.50% due 12/1/2014 (ETM) | Aaa/AAA | 1,240,000 | 1,460,385 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2018 | Aa3/AA- | 5,000,000 | 5,241,400 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2020 | Aa3/AA- | 1,000,000 | 1,041,950 | |||||
TEXAS — 14.19% | ||||||||
Amarillo Health Facilities Corp., 5.50% due 1/1/2011 (St. Anthony’s Hospital Corp.; Insured: FSA) | Aaa/NR | 1,350,000 | 1,427,260 | |||||
Austin Water & Wastewater, 5.00% due 5/15/2014 (Insured: AMBAC) | Aaa/AAA | 2,890,000 | 3,105,999 | |||||
Austin Water & Wastewater, 5.00% due 5/15/2015 (Insured: AMBAC) | Aaa/AAA | 1,520,000 | 1,640,080 |
Certified Annual Report | 25 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Bell County Health Facilities Development Corp., 6.25% due 8/15/2010 (Scott & White Memorial Hospital; Insured: MBIA) | Aaa/AAA | $ | 1,000,000 | $ | 1,070,030 | |||
Bexar County Housing Finance Corp. Multi Family Housing, 5.00% due 1/1/2011 (Insured: MBIA) | Aaa/NR | 1,800,000 | 1,862,154 | |||||
Cedar Hill ISD, 0% due 8/15/2010 (Guaranty: PSF) | NR/AAA | 440,000 | 387,099 | |||||
Clint ISD, 5.50% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 1,700,000 | 1,802,986 | |||||
Clint ISD, 5.50% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,155,000 | 1,222,325 | |||||
Collin County Limited Tax Improvement, 5.00% due 2/15/2016 | Aaa/AAA | 1,465,000 | 1,583,328 | |||||
Corpus Christi Business & Job Development Corp., 5.00% due 9/1/2012 (Refunding & Improvement Arena; Insured: AMBAC) | Aaa/AAA | 1,025,000 | 1,088,734 | |||||
Corpus Christi Utility Systems, 5.50% due 7/15/2008 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,031,540 | |||||
Corpus Christi Utility Systems, 5.50% due 7/15/2009 (Insured: FSA) | Aaa/AAA | 4,780,000 | 4,945,675 | |||||
Duncanville ISD, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 4,945,000 | 4,354,122 | |||||
Duncanville ISD, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,245,000 | 1,053,917 | |||||
Fort Worth Water & Sewer, 5.25% due 2/15/2011 (Tarrant & Denton County) | Aa2/AA | 1,390,000 | 1,462,780 | |||||
Fort Worth Water & Sewer, 5.25% due 2/15/2011 pre-refunded 2/15/2008 | Aa2/NR | 3,800,000 | 3,824,738 | |||||
Grapevine Colleyville ISD, 0% due 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 7,350,000 | 6,351,061 | |||||
Grapevine GO, 5.25% due 2/15/2012 (Insured: FGIC) | Aaa/AAA | 2,005,000 | 2,007,586 | |||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2011 (Bayport Area Systems; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,052,580 | |||||
Harris County GO, 0% due 8/1/2008 | Aa1/AA+ | 7,000,000 | 6,790,700 | |||||
Harris County Health Facilities Development Corp. Thermal Utility, 5.45% due 2/15/2011 (Teco; Insured: AMBAC) | Aaa/AAA | 3,385,000 | 3,503,949 | |||||
Harris County Health Facilities Development Corp. Thermal Utility, 5.00% due 11/15/2015 (Teco; Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,585,200 | |||||
Harris County Hospital District, 5.75% due 2/15/2011 (Insured: MBIA) | Aaa/AAA | 10,000,000 | 10,594,100 | |||||
Harris County Hospital District, 5.75% due 2/15/2012 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,118,820 | |||||
Harris County Hospital District Mortgage, 7.40% due 2/15/2010 (Insured: AMBAC) | Aaa/AAA | 1,265,000 | 1,324,683 | |||||
Harris County Hospital District Senior Lien, 5.00% due 2/15/2014 (Insured: MBIA) (2) | Aaa/AAA | 1,275,000 | 1,360,540 | |||||
Harris County Hospital District Senior Lien, 5.00% due 2/15/2017 (Insured: MBIA) (2) | Aaa/AAA | 1,500,000 | 1,605,390 | |||||
Harris County Sports Authority Senior Lien, 0% due 11/15/2010 (Insured: MBIA) | Aaa/AAA | 3,260,000 | 2,898,499 | |||||
Houston ISD Public West Side, 0% due 9/15/2014 (Insured: AMBAC) | Aaa/AAA | 6,190,000 | 4,704,400 | |||||
Irving ISD GO, 0% due 2/15/2017 (Guaranty: PSF) | Aaa/AAA | 1,000,000 | 657,780 | |||||
Keller ISD, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,250,000 | 1,038,225 | |||||
Laredo Certificate of Obligation, 5.00% due 2/15/2018 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,150,040 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2012 (Insured: AMBAC) | Aaa/AAA | 1,660,000 | 1,754,321 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2013 (Insured: AMBAC) | Aaa/AAA | 1,745,000 | 1,861,601 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2014 (Insured: AMBAC) | Aaa/AAA | 1,835,000 | 1,969,469 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2015 (Insured: AMBAC) | Aaa/AAA | 1,930,000 | 2,080,038 | |||||
Mesquite ISD, 0% due 2/15/2008 (Guaranty: PSF) (ETM) | Aaa/NR | 1,055,000 | 1,040,589 | |||||
Mesquite ISD, 0% due 2/15/2008 (Guaranty: PSF) | Aaa/NR | 360,000 | 355,093 | |||||
Mesquite ISD, 0% due 2/15/2009 (Guaranty: PSF) (ETM) | Aaa/NR | 570,000 | 541,574 | |||||
Mesquite ISD, 0% due 2/15/2009 (Guaranty: PSF) | Aaa/NR | 630,000 | 598,664 | |||||
Mesquite ISD, 0% due 8/15/2011 (Guaranty: PSF) | NR/AAA | 3,065,000 | 2,612,943 | |||||
Midtown Redevelopment Authority Texas, 6.00% due 1/1/2010 (Insured: Radian) | Aa3/AA | 700,000 | 726,516 | |||||
Midtown Redevelopment Authority Texas, 6.00% due 1/1/2011 (Insured: Radian) | Aa3/AA | 740,000 | 778,732 | |||||
North Central Health Facility Development Hospital Baylor Health Care System, 5.00% due 5/15/2017 | Aa3/AA- | 5,000,000 | 5,092,150 | |||||
North East ISD, 5.00% due 8/1/2016 | Aaa/AAA | 2,000,000 | 2,167,440 | |||||
Red River Education Finance Corp., 2.10% due 12/1/2034 put 12/1/2007 (Parish Episcopal School; LOC: Allied Irish Banks plc) | AA2/NR | 2,500,000 | 2,487,825 | |||||
Richardson Refunding & Improvement GO, 5.00% due 2/15/2014 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,217,620 | |||||
Sam Rayburn Municipal Power Agency, 5.50% due 10/1/2012 | Baa2/NR | 6,000,000 | 6,184,980 | |||||
Socorro ISD, 5.75% due 2/15/2011 pre-refunded 2/15/2008 (Guaranty: PSF) | NR/AAA | 1,970,000 | 1,986,509 | |||||
Spring Branch ISD, 7.50% due 2/1/2011 (Guaranty: PSF) | Aaa/AAA | 500,000 | 559,760 | |||||
Tarrant County Health Facilities Development Corp., 5.875% due 11/15/2007 (Adventist/Sunbelt Health System) (ETM) | A1/NR | 580,000 | 581,583 |
26 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Tarrant County Health Facilities Development Corp., 5.75% due 2/15/2008 (Texas Health Resources Systems; Insured: MBIA) | Aaa/AAA | $ | 3,000,000 | $ | 3,024,780 | |||
Tarrant County Health Facilities Development Corp., 5.75% due 2/15/2009 (Texas Health Resources Systems; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,084,000 | |||||
Tarrant County Health Facilities Development Corp., 6.00% due 11/15/2009 (Adventist/Sunbelt Health System) (ETM) | A1/NR | 650,000 | 681,961 | |||||
Tarrant County Health Facilities Development Corp., 5.75% due 2/15/2011 (Texas Health Resources Systems; Insured: MBIA) | Aaa/AAA | 1,400,000 | 1,439,200 | |||||
Tarrant County Health Facilities Development Corp., 6.10% due 11/15/2011 pre-refunded 11/15/2010 (Adventist/Sunbelt Health System) | A1/NR | 730,000 | 790,291 | |||||
Tarrant County Health Facilities Development Corp., 5.25% due 2/15/2017 (Texas Health Resources Systems; Insured: MBIA) | Aaa/AAA | 5,000,000 | 5,130,050 | |||||
Texarkana Health Facilities Development Corp., 5.75% due 10/1/2008 (Wadley Regional Medical Center; Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,533,000 | |||||
Texas Municipal Power Agency, 0% due 9/1/2013 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 795,450 | |||||
Texas State Affordable Housing Corp., 4.85% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 1,945,000 | 1,948,890 | |||||
Texas State Public Finance Authority, 6.00% due 8/1/2011 pre-refunded 8/1/2009 (State Preservation; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,043,980 | |||||
Texas State Public Finance Authority, 5.00% due 10/15/2014 (Stephen F. Austin University Financing; Insured: MBIA) | Aaa/NR | 1,305,000 | 1,407,195 | |||||
Texas State Public Finance Authority, 5.00% due 10/15/2015 (Stephen F. Austin University Financing; Insured: MBIA) | Aaa/NR | 1,450,000 | 1,569,016 | |||||
Tomball Hospital Authority, 5.00% due 7/1/2013 | Baa3/NR | 1,460,000 | 1,486,922 | |||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2008 | Aaa/AAA | 2,300,000 | 2,356,511 | |||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2010 | Aaa/AAA | 2,000,000 | 2,105,880 | |||||
Washington County Health Facilities Development Corp., 5.35% due 6/1/2009 (Trinity Medical Center; Insured: ACA) | NR/A | 870,000 | 881,806 | |||||
Weslaco Certificates of Obligation Waterworks & Sewer System, 5.25% due 2/15/2019 (Insured: MBIA) | Aaa/AAA | 2,835,000 | 3,088,704 | |||||
West Harris County Regional Water, 5.25% due 12/15/2012 (Insured: FSA) | Aaa/AAA | 2,435,000 | 2,623,104 | |||||
UTAH — 0.69% | ||||||||
Intermountain Power Agency Supply, 5.00% due 7/1/2012 (ETM) | Aaa/AAA | 4,355,000 | 4,359,573 | |||||
Salt Lake County Municipal Building Authority, 5.50% due 10/1/2009 | Aa1/AA+ | 1,500,000 | 1,558,275 | |||||
Utah State Board of Regents Auxiliary Systems & Student Fee, 5.00% due 5/1/2010 | NR/AA | 510,000 | 527,243 | |||||
Utah State University Hospital Board of Regents, 5.25% due 8/1/2008 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,014,590 | |||||
VIRGINIA — 0.99% | ||||||||
Alexandria IDA, 5.75% due 10/1/2007 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,010,000 | 1,010,172 | |||||
Alexandria IDA, 5.75% due 10/1/2008 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,070,000 | 1,094,182 | |||||
Alexandria IDA, 5.75% due 10/1/2009 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,130,000 | 1,179,788 | |||||
Alexandria IDA, 5.75% due 10/1/2010 (Insured: AMBAC) (ETM) | Aaa/AAA | 1,195,000 | 1,270,440 | |||||
Chesterfield County IDA PCR, 5.50% due 10/1/2009 (Vepco) | Baa1/BBB | 1,500,000 | 1,516,725 | |||||
Norton IDA Hospital Improvement, 5.75% due 12/1/2012 | ||||||||
(Norton Community Hospital; Insured: ACA) | NR/A | 1,460,000 | 1,543,643 | |||||
Suffolk Redevelopment Housing Authority, 4.85% due 7/1/2031 put 7/1/2011 (Windsor at Potomac; Collateralized: FNMA) | Aaa/NR | 3,000,000 | 3,118,260 | |||||
WASHINGTON — 2.82% | ||||||||
Energy Northwest Washington Electric, 4.95% due 7/1/2008 (Wind) | A3/A- | 1,760,000 | 1,778,445 | |||||
Energy Northwest Washington Electric, 4.95% due 7/1/2008 (Wind) | A3/A- | 705,000 | 711,542 | |||||
Energy Northwest Washington Electric, 5.375% due 7/1/2013 (Number 1; Insured: FSA) | Aaa/AAA | 2,000,000 | 2,127,320 |
Certified Annual Report | 27 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Energy Northwest Washington Electric, 5.00% due 7/1/2017 (Number 3) | Aaa/AA- | $ | 5,470,000 | $ | 5,912,632 | |||
Goat Hill Properties Lease, 5.00% due 12/1/2012 (Government Office Building; Insured: MBIA) | Aaa/AAA | 2,055,000 | 2,180,663 | |||||
Snohomish County Public Utilities District 1 Electric, 5.00% due 12/1/2015 (Insured: FSA) | Aaa/AAA | 5,015,000 | 5,367,204 | |||||
Spokane Regional Solid Waste, 5.25% due 12/1/2007 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,002,660 | |||||
Washington Public Power Supply, 5.00% due 7/1/2011 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,029,720 | |||||
Washington State HFA, 5.50% due 12/1/2009 (Providence Services; Insured: MBIA) | Aaa/AAA | 1,500,000 | 1,561,590 | |||||
Washington State HFA, 5.00% due 7/1/2013 (Overlake Hospital Medical Center A; Credit Support: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,060,420 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2008 (Nuclear Number 3) | Aaa/AA- | 830,000 | 807,723 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2008 (Nuclear Number 3) | Aaa/AA- | 1,140,000 | 1,109,243 | |||||
Washington State Public Power Supply Systems, 6.00% due 7/1/2008 (Nuclear Number 1; Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,018,180 | |||||
Washington State Public Power Supply Systems, 5.40% due 7/1/2012 (Nuclear Number 2; Insured: FSA) | Aaa/AAA | 1,300,000 | 1,401,413 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2013 (Insured: MBIA-IBC) | Aaa/AAA | 1,760,000 | 1,409,021 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2015 (Insured: MBIA-IBC) | Aaa/AAA | 3,000,000 | 2,197,140 | |||||
WEST VIRGINIA — 0.17% | ||||||||
Harrison County Nursing Facility, 5.625% due 9/1/2010 (Salem Health Care Corp.; LOC: Fleet Bank) | NR/NR | 245,000 | 246,247 | |||||
Kanawha, Mercer, Nicholas, Counties Single Family Mortgage, 0% due 2/1/2015 pre-refunded 2/1/2014 | Aaa/NR | 2,260,000 | 1,574,610 | |||||
WISCONSIN — 0.61% | ||||||||
Bradley PCR, 6.75% due 7/1/2009 (Owens Illinois Waste) (ETM) | NR/B | 1,500,000 | 1,581,015 | |||||
Wisconsin State Health & Educational Facilities Authority, 5.50% due 8/15/2008 (Aurora Health Care Inc.; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,042,900 | |||||
Wisconsin State Health & Educational Facilities Authority, 5.50% due 9/1/2036 put 10/5/2007 (Watertown Memorial Hospital Inc.; Insured: Radian) (weekly demand notes) | Aa3/A-1+ | 3,000,000 | 3,000,000 | |||||
WYOMING — 0.37% | ||||||||
West Park Hospital District, 5.90% due 7/1/2010 (Insured: ACA) | NR/A | 1,615,000 | 1,616,986 | |||||
Wyoming Farm Loan Board, 0% due 4/1/2009 | NR/AA | 2,500,000 | 2,363,751 | |||||
TOTAL INVESTMENTS — 98.49% (Cost $1,053,413,389) | $ | 1,070,576,863 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.51% | 16,419,807 | |||||||
NET ASSETS — 100.00% | $ | 1,086,996,670 | ||||||
28 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. |
(1) | Segregated as collateral for a when-issued security. |
(2) | 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. | |
COP | Certificates of Participation | |
DFA | Development Finance Authority | |
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 | |
GRT | Gross Receipts Tax | |
HFA | Health Facilities Authority | |
HUD | Housing Urban Development | |
IDA | Industrial Development Authority | |
ISD | Independent School District | |
LOC | Line of Credit | |
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 | |
USD | Unified School District | |
XLCA | Insured by XL Capital Assurance |
SUMMARY OF SECURITY CREDIT RATINGS†
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We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings. |
See notes to financial statements.
Certified Annual Report | 29 |
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
30 | Certified Annual Report |
EXPENSE EXAMPLE | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,020.00 | $ | 2.83 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,022.26 | $ | 2.83 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.56%) 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 | 31 |
Thornburg Limited Term Municipal Fund | September 30, 2007 (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, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
I Shares (Incep: 7/5/96) | 3.53 | % | 2.82 | % | 4.08 | % | 4.37 | % |
FUND ATTRIBUTES
as of September 30, 2007
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 7/5/96) | 3.90 | % | 3.43 | % | $ | 13.49 | $ | 13.49 |
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.
32 | Certified Annual Report |
Thornburg Limited Term Municipal Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 Chairman of Audit Committee, | 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, 61 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, 58 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, 53 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, 48 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 Limited Term Municipal Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
34 | Certified Annual Report |
TRUSTEE AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thorn-burg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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 |
OTHER INFORMATION | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 (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.
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, 2007, 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, 2007.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007, the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 recalled their observations that the value of comparisons of the Fund’s investment performance to fund categories, and in particular to broad based securities indices, is limited because the Fund’s investment strategies, as described in its prospectuses, likely will vary from the parameters for selecting investments for other funds and indices, and the largely theoretical character of fixed income security indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s above average or better investment returns over most periods relative to two categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and the Fund’s relative performance against comparative measures of portfolio volatility and return.
36 | Certified Annual Report |
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2007 (Unaudited) |
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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, a 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 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 similar mutual funds. The Trustees considered that the management fee charged by the Advisor to the Fund was higher to a small degree than the average and median fee rates charged to the group 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 reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund grows in size, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor from its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report | 37 |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
38 | 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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
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 $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 California 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 and California state 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 longer intermediate and long-term bond portfolios.
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 normally less than five years. 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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Thornburg California Limited Term Municipal Fund
September 30, 2007
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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 3
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, 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.
Investments 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
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.
4 Certified Annual Report
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.
Consumer Price Index – 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. 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.
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.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Certified Annual Report 5
![]() | October 18, 2007 | |
Dear Fellow Shareholder: | ||
We are 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 4 cents per share to $12.73 during the twelve months ended September 30, 2007. If you were with us for the entire period, you received dividends of 42.9 cents per share. If you reinvested your dividends, you received 43.5 cents per share. Investors who owned Class C shares received dividends of 39.8 and 40.4 cents per share, respectively. | ||
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The past year has been one of the more interesting in recent memory. Municipal bonds traded within a fairly tight trading range until May. Then, as the Federal Reserve raised the targeted Fed Funds rate to 5.0%, the bond market started to worry about an overheated economy and excess inflation. This drove up market yields for bonds by 0.30% to 0.40% and led to a some-what steeper yield curve. Next, the sordid world of subprime mortgage bonds and derivatives based upon them started to unravel. Though subprime problems didn’t directly affect the municipal bond market, they did set off a panic-stricken flight to quality. As investors piled into Treasury notes and bonds, they drove their yields back down to levels that prevailed toward the beginning of 2007. However, investors mostly bypassed the municipal bond market, leaving rates there relatively unchanged. This created a rare event during which municipal bond yields were extremely attractive relative to Treasury yields. By late summer, ten-year high quality municipal bonds were routinely yielding 90% or more of ten-year Treasury yields, and trades over 100% were occasionally happening. | |
Meanwhile, quality spreads (the difference in yield between the highest quality bonds and lower quality bonds) were getting wider. Some investors, who had been comfortable taking credit risk at very tight spreads to AAA rated bonds, suddenly became a lot less comfortable. Those who sold typically had to sell their bonds at significantly wider spreads than those that prevailed earlier in the year. This led to an environment where investors could finally get compensated for taking incremental credit risk in bonds rated lower than AAA. | ||
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Since the end of August, the bond market has been gradually regaining its composure. A calmer, lower volatility environment has helped fuel a renewed appetite for risk. This has led to some retrenchment of the spread widening that occurred in May. It also has led to a whole-sale re-pricing of the municipal bond market so that it is no longer extremely attractive relative to the Treasury market. However, credit spreads on most bonds are still wider than they were just a few months ago, and municipal bonds are still somewhat attractive relative to Treasury notes, particularly if you expect marginal tax rates to go up (we do). | |
The Class A shares of your Fund produced a total return of 3.10% over the twelve-month period ended September 30, 2007, compared to a 3.81% return for the Lehman Five-Year Municipal Bond Index. Over the last year, five-year municipal bonds have performed better than longer and shorter maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next ten years, so it has significant exposure to bonds that mature before and after five years. Since those bonds generally underperformed five-year bonds and the index, the Fund underperformed the index. | ||
Your Thornburg California Limited Term Municipal Fund is a laddered portfolio of over 85 municipal obligations from all over California. 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 |
6 Certified Annual Report
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.
We were able to take advantage of the late summer market weakness to restructure the Fund somewhat. Early in 2007, the Fund’s ladder was a bit overweighted in the early years. As interest rates rose, we invested primarily in the later years of the Fund’s ladder so that it is now more evenly distributed. Consequently, at fiscal year end (September 30, 2007), the Fund had an average maturity of 4.82 and duration of 3.69 years. We also added incrementally to lower rated investment grade bonds, although we continue to maintain a AA average quality.
% of portfolio maturing | Cumulative % maturing | |||||||||||
1 years | = | 8.1 | % | Year 1 | = | 8.1 | % | |||||
1 to 2 years | = | 13.5 | % | Year 2 | = | 21.6 | % | |||||
2 to 3 years | = | 8.8 | % | Year 3 | = | 30.4 | % | |||||
3 to 4 years | = | 6.3 | % | Year 4 | = | 36.7 | % | |||||
4 to 5 years | = | 14.8 | % | Year 5 | = | 51.5 | % | |||||
5 to 6 years | = | 7.0 | % | Year 6 | = | 58.5 | % | |||||
6 to 7 years | = | 9.2 | % | Year 7 | = | 67.7 | % | |||||
7 to 8 years | = | 9.7 | % | Year 8 | = | 77.4 | % | |||||
8 to 9 years | = | 9.2 | % | Year 9 | = | 86.6 | % | |||||
Over 9 years | = | 13.4 | % | Over 9 years | = | 100.0 | % |
Percentages can and do vary. Data as of 9/30/07.
Looking forward, we do expect U.S. economic growth to slow from the second quarter’s healthy 3.8% rate. However, consumer spending seems to be holding up well, and exports are surging. These factors, along with new job growth of about 100,000 per month, should keep the U.S. economy out of recession territory. However, the dismal housing sector and the dislocation in financial markets will probably cap future growth at a relatively low rate. This should allow the Fed to continue easing monetary conditions, but with a close eye on what happens to inflation. Market unease about the depreciating dollar and the long-term inflation outlook should keep long-term interest rates from dropping precipitously, which, in turn, should lead to a steeper yield curve going forward. We believe that a steepening yield curve would be advantageous for the laddering style employed by this Fund.
California state tax revenues have been better than expected the last few years allowing the state to rebuild budget reserves to $4.1 billion. However, the recent housing downturn has hit the state hard. State tax revenues are already $1 billion behind budget just two months into the 2008 fiscal year. Debt levels are only slightly above average, but new bond measures totaling $43 billion were authorized in 2006. Added to this is the State’s recently estimated actuarial accrued liability of other post employment benefits (OPEB) totaling $47.9 billion. Given these challenges, we do believe it is prudent to keep overall credit quality high in the current environment. Your Fund is broadly 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 | Josh Gonze | Christopher Ihlefeld | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager |
Certified Annual Report 7
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $110,172,405) (Note 2) | $ | 111,872,757 | ||
Cash | 424,252 | |||
Receivable for fund shares sold | 370,205 | |||
Interest receivable | 1,563,858 | |||
Prepaid expenses and other assets | 166 | |||
Total Assets | 114,231,238 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 482,261 | |||
Payable to investment advisor and other affiliates (Note 3) | 76,333 | |||
Accounts payable and accrued expenses | 34,968 | |||
Dividends payable | 87,226 | |||
Total Liabilities | 680,788 | |||
NET ASSETS | $ | 113,550,450 | ||
NET ASSETS CONSIST OF: | ||||
Net unrealized appreciation on investments | $ | 1,700,352 | ||
Accumulated net realized gain (loss) | (1,032,397 | ) | ||
Net capital paid in on shares of beneficial interest | 112,882,495 | |||
$ | 113,550,450 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 12.73 | ||
Maximum sales charge, 1.50% of offering price | 0.19 | |||
Maximum offering price per share | $ | 12.92 | ||
Class C Shares: | ||||
Net asset value and offering price per share * | $ | 12.74 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 12.74 | ||
* | 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 California Limited Term Municipal Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $935,766) | $ | 5,081,268 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 582,820 | |||
Administration fees (Note 3) | ||||
Class A Shares | 92,457 | |||
Class C Shares | 18,824 | |||
Class I Shares | 13,770 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 184,913 | |||
Class C Shares | 150,359 | |||
Transfer agent fees | ||||
Class A Shares | 31,462 | |||
Class C Shares | 11,108 | |||
Class I Shares | 11,812 | |||
Registration and filing fees | ||||
Class A Shares | 64 | |||
Class C Shares | 64 | |||
Class I Shares | 64 | |||
Custodian fees (Note 3) | 54,948 | |||
Professional fees | 27,422 | |||
Accounting fees | 4,270 | |||
Trustee fees | 1,371 | |||
Other expenses | 18,972 | |||
Total expenses | 1,204,700 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (25,017 | ) | ||
Distribution fees waived (Note 3) | (75,180 | ) | ||
Fees paid indirectly (Note 3) | (9,825 | ) | ||
Net Expenses | 1,094,678 | |||
Net Investment Income | 3,986,590 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (164,310 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | (238,410 | ) | ||
Net Realized and Unrealized Loss on Investments | (402,720 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 3,583,870 | ||
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, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 3,986,590 | $ | 4,438,506 | ||||
Net realized loss on investments | (164,310 | ) | (480,334 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (238,410 | ) | 11,918 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,583,870 | 3,970,090 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,494,459 | ) | (2,931,630 | ) | ||||
Class C Shares | (471,252 | ) | (529,444 | ) | ||||
Class I Shares | (1,020,879 | ) | (977,432 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (13,105,346 | ) | (30,148,546 | ) | ||||
Class C Shares | (2,300,630 | ) | (3,174,793 | ) | ||||
Class I Shares | 3,635,455 | (2,450,712 | ) | |||||
Net Decrease in Net Assets | (12,173,241 | ) | (36,242,467 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 125,723,691 | 161,966,158 | ||||||
End of year | $ | 113,550,450 | $ | 125,723,691 | ||||
See notes to financial statements.
10 Certified Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary 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’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 Securities: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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
Certified Annual Report 11
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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 depending on the Fund’s asset size. The Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $11,040 for Class A shares, $7,811 for Class C shares, and $6,166 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, 2007, the Distributor has advised the Fund that it earned commissions aggregating $1,891 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $952 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 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% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by the Distributor for 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, 2007, are set forth in the Statement of Operations. Distribution fees in the amount of $75,180 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, 2007, fees paid indirectly were $9,825. 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, 2007 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 414,862 | $ | 5,274,076 | 500,010 | $ | 6,354,937 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 131,772 | 1,673,749 | 157,167 | 1,996,487 | ||||||||||
Shares repurchased | (1,579,257 | ) | (20,053,171 | ) | (3,033,930 | ) | (38,499,970 | ) | ||||||
Net Increase (Decrease) | (1,032,623 | ) | $ | (13,105,346 | ) | (2,376,753 | ) | $ | (30,148,546 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 86,180 | $ | 1,093,229 | 144,307 | $ | 1,835,245 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 28,501 | 362,296 | 30,762 | 391,006 | ||||||||||
Shares repurchased | (295,057 | ) | (3,756,155 | ) | (424,743 | ) | (5,401,044 | ) | ||||||
Net Increase (Decrease) | (180,376 | ) | $ | (2,300,630 | ) | (249,674 | ) | $ | (3,174,793 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 1,133,498 | $ | 14,373,498 | 917,264 | $ | 11,673,302 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 66,177 | 841,375 | 61,670 | 784,049 | ||||||||||
Shares repurchased | (910,981 | ) | (11,579,418 | ) | (1,171,724 | ) | (14,908,063 | ) | ||||||
Net Increase (Decrease) | 288,694 | $ | 3,635,455 | (192,790 | ) | $ | (2,450,712 | ) | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $25,702,338 and $29,831,714, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 110,172,405 | ||
Gross unrealized appreciation on a tax basis | $ | 1,799,580 | ||
Gross unrealized depreciation on a tax basis | (99,228 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 1,700,352 | ||
At September 30, 2007, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2007, 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:
2008 | $ | 214,571 | |
2012 | 33,844 | ||
2014 | 148,124 | ||
2015 | 471,548 | ||
$ | 868,087 | ||
At September 30, 2007 the Fund had deferred capital losses occurring subsequent to October 31, 2006 of $164,310. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
During the year ending September 30, 2007, $205,990 of capital loss carry forwards from prior years expired.
All dividends paid by the Fund for the year ended September 30, 2007 and September 30, 2006, 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, 2007 |
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized loss by $205,990 and decreased net capital paid in on shares of beneficial interest by $205,990. This reclassification has no impact on the net asset value of the Fund. Reclassifications resulted from expired capital loss carry forwards.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.77 | $ | 12.79 | $ | 13.02 | $ | 12.87 | $ | 13.20 | $ | 12.96 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.43 | 0.40 | 0.36 | 0.08 | 0.35 | 0.38 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | 0.24 | ||||||||||||||
Total from investment operations | 0.39 | 0.38 | 0.13 | 0.23 | 0.02 | 0.62 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.43 | ) | (0.40 | ) | (0.36 | ) | (0.08 | ) | (0.35 | ) | (0.38 | ) | ||||||||||||
Change in net asset value | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | 0.24 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 12.73 | $ | 12.77 | $ | 12.79 | $ | 13.02 | $ | 12.87 | $ | 13.20 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.10 | % | 3.06 | % | 0.98 | % | 1.81 | % | 0.13 | % | 4.83 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.37 | % | 3.17 | % | 2.75 | % | 2.53 | %(b) | 2.66 | % | 2.87 | % | ||||||||||||
Expenses, after expense reductions | 0.99 | % | 0.92 | % | 1.00 | % | 0.99 | %(b) | 0.99 | % | 0.99 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.87 | % | 0.99 | % | 0.99 | %(b) | 0.99 | % | 0.99 | % | ||||||||||||
Expenses, before expense reductions | 1.01 | % | 1.01 | % | 1.02 | % | 1.05 | %(b) | 1.04 | % | 1.02 | % | ||||||||||||
Portfolio turnover rate | 22.71 | % | 25.77 | % | 26.33 | % | 4.18 | % | 23.80 | % | 26.03 | % | ||||||||||||
Net assets at end of period (000) | $ | 67,183 | $ | 80,589 | $ | 111,102 | $ | 134,588 | $ | 131,158 | $ | 149,269 |
(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. |
See notes to the financial statements.
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: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.88 | $ | 13.21 | $ | 12.97 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.40 | 0.37 | 0.32 | 0.07 | 0.32 | 0.34 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | 0.24 | ||||||||||||||
Total from investment operations | 0.36 | 0.35 | 0.09 | 0.22 | (0.01 | ) | 0.58 | |||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.40 | ) | (0.37 | ) | (0.32 | ) | (0.07 | ) | (0.32 | ) | (0.34 | ) | ||||||||||||
Change in net asset value | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | 0.24 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 12.74 | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.88 | $ | 13.21 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 2.85 | % | 2.80 | % | 0.73 | % | 1.75 | % | (0.12 | )% | 4.51 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.13 | % | 2.92 | % | 2.50 | % | 2.28 | %(b) | 2.41 | % | 2.56 | % | ||||||||||||
Expenses, after expense reductions | 1.24 | % | 1.18 | % | 1.25 | % | 1.24 | %(b) | 1.24 | % | 1.30 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 1.23 | % | 1.13 | % | 1.24 | % | 1.24 | %(b) | 1.24 | % | 1.30 | % | ||||||||||||
Expenses, before expense reductions | 1.79 | % | 1.83 | % | 1.82 | % | 1.87 | %(b) | 1.86 | % | 1.80 | % | ||||||||||||
Portfolio turnover rate | 22.71 | % | 25.77 | % | 26.33 | % | 4.18 | % | 23.80 | % | 26.03 | % | ||||||||||||
Net assets at end of period (000) | $ | 14,449 | $ | 16,801 | $ | 20,021 | $ | 21,941 | $ | 22,363 | $ | 22,487 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
See notes to the financial statements.
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: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.89 | $ | 13.22 | $ | 12.97 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.47 | 0.44 | 0.40 | 0.09 | 0.39 | 0.42 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.14 | (0.33 | ) | 0.25 | ||||||||||||||
Total from investment operations | 0.43 | 0.42 | 0.17 | 0.23 | 0.06 | 0.67 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.47 | ) | (0.44 | ) | (0.40 | ) | (0.09 | ) | (0.39 | ) | (0.42 | ) | ||||||||||||
Change in net asset value | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.14 | (0.33 | ) | 0.25 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 12.74 | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.89 | $ | 13.22 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.44 | % | 3.39 | % | 1.31 | % | 1.81 | % | 0.46 | % | 5.27 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.71 | % | 3.50 | % | 3.09 | % | 2.85 | %(b) | 2.99 | % | 3.20 | % | ||||||||||||
Expenses, after expense reductions | 0.66 | % | 0.66 | % | 0.68 | % | 0.67 | %(b) | 0.67 | % | 0.65 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.65 | % | 0.55 | % | 0.67 | % | 0.67 | %(b) | 0.67 | % | 0.65 | % | ||||||||||||
Expenses, before expense reductions | 0.68 | % | 0.71 | % | 0.73 | % | 0.77 | %(b) | 0.78 | % | 0.75 | % | ||||||||||||
Portfolio turnover rate | 22.71 | % | 25.77 | % | 26.33 | % | 4.18 | % | 23.80 | % | 26.03 | % | ||||||||||||
Net assets at end of period (000) | $ | 31,918 | $ | 28,334 | $ | 30,843 | $ | 25,728 | $ | 22,929 | $ | 20,592 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
See notes to the financial statements.
Certified Annual Report 17
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
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) | A3/NR | $ | 435,000 | $ | 448,759 | |||
ABAG Finance Authority, 4.75% due 10/1/2012 (California School of Mechanical Arts) | A3/NR | 455,000 | 471,394 | |||||
Alameda County COP, 5.625% due 12/1/2016 (Santa Rita Jail; Insured: AMBAC) | NR/AAA | 1,830,000 | 2,077,617 | |||||
Bay Area Toll Bridge Revenue, 5.00% due 4/1/2016 | Aa3/AA | 2,075,000 | 2,257,392 | |||||
California HFA, 5.25% due 10/1/2013 (Kaiser Permanente) (ETM) | A3/AAA | 2,000,000 | 2,054,080 | |||||
California Housing Finance Agency, 9.875% due 2/1/2017 | Aa2/AA- | 670,000 | 686,113 | |||||
California Mobile Home Park Financing Authority, 4.75% due 11/15/2010 (Rancho Vallecitos; Insured: ACA) | NR/A | 500,000 | 506,210 | |||||
California Mobile Home Park Financing Authority, 5.00% due 11/15/2013 | ||||||||
(Rancho Vallecitos; Insured: ACA) | NR/A | 570,000 | 587,032 | |||||
California PCR Authority Solid Waste Disposal, 6.75% due 7/1/2011 (ETM) | Aaa/NR | 1,890,000 | 1,982,610 | |||||
California PCR Authority Solid Waste Disposal, 5.00% due 6/1/2018 put 6/1/2008 | NR/BBB | 1,100,000 | 1,104,928 | |||||
California PCR Solid Waste Disposal, 4.85% due 12/1/2027 put 11/30/2007 (Waste Management, Inc.) (AMT) | NR/BBB | 1,000,000 | 1,000,600 | |||||
California State, 5.75% due 10/1/2010 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,064,010 | |||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,042,480 | |||||
California State GO, 7.50% due 10/1/2007 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,000,640 | |||||
California State GO, 6.60% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 560,000 | 598,018 | |||||
California State GO, 5.50% due 3/1/2012 (Insured: FGIC) | Aaa/AAA | 230,000 | 231,911 | |||||
California State GO, 6.25% due 9/1/2012 | A1/A+ | 3,000,000 | 3,317,160 | |||||
California State GO Economic Recovery, 5.25% due 7/1/2013 | Aa3/AA+ | 2,500,000 | 2,712,675 | |||||
California State Public Works, 5.00% due 6/1/2017 (University of California Regents; Insured FGIC) | Aaa/AAA | 2,000,000 | 2,181,180 | |||||
California State Public Works Board, 5.00% due 9/1/2017 (Insured: FGIC) | Aaa/AAA | 1,235,000 | 1,340,901 | |||||
California State Public Works Board Lease, 5.00% due 1/1/2015 (Department of Corrections; Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,165,380 | |||||
California State Public Works Board Lease, 5.50% due 6/1/2010 (Various Universities) | Aa2/AA- | 780,000 | 805,709 | |||||
California State Public Works Board Lease, 5.00% due 11/1/2015 | Aa2/AA- | 1,000,000 | 1,071,580 | |||||
California State Veterans Bonds, 9.50% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,131,760 | |||||
California Statewide Community Development Authority, 5.125% due 6/1/2008 (Louisiana Orthopedic Hospital Foundation; Insured: AMBAC) | Aaa/AAA | 595,000 | 601,485 | |||||
California Statewide Community Development Authority, 5.25% due 8/1/2014 (EAH-East Campus Apartments; Insured: ACA) | NR/A | 1,215,000 | 1,255,241 | |||||
California Statewide Community Development Authority, 4.70% due 11/1/2036 put 6/1/2009 (Kaiser Permanente) | NR/A+ | 2,000,000 | 2,033,140 | |||||
California Statewide Community Development Authority COP, 6.50% due 8/1/2012 (Cedars Sinai Center Hospital; Insured: MBIA) | Aaa/AAA | 660,000 | 700,854 | |||||
California Statewide Community Development Authority COP, 5.30% due 12/1/2015 (Kaiser Permanente) (ETM) | Aaa/AAA | 2,785,000 | 2,878,771 | |||||
Central Union High School District Imperial Count, 5.00% due 8/1/2012 (Insured: FGIC) | Aaa/AAA | 830,000 | 884,971 | |||||
Cerritos California Public Financing Authority, 5.00% due 11/1/2014 (Tax Allocation Redevelopment; Insured: AMBAC) | Aaa/AAA | 1,260,000 | 1,362,375 | |||||
Corona Norco USD Capital Appreciation, 0% due 9/1/2017 (Insured: FSA) | Aaa/AAA | 1,595,000 | 1,061,297 | |||||
East Palo Alto Public Financing, 5.00% due 10/1/2014 (University Circle Gateway/101; Insured: Radian) | Aa3/AA | 670,000 | 696,679 | |||||
East Palo Alto Public Financing, 5.00% due 10/1/2016 (University Circle Gateway/101; Insured: Radian) | Aa3/AA | 735,000 | 762,518 | |||||
El Monte COP Senior Department Public Services Facility Phase II, 5.00% due 1/1/2009 (Insured: AMBAC) | Aaa/AAA | 1,865,000 | 1,883,408 | |||||
Fillmore Public Financing Authority, 5.00% due 5/1/2016 (Water Recycling; Insured: CIFG) | Aaa/AAA | 735,000 | 796,145 | |||||
Fresno County Housing Authority Multi Family, 4.90% due 11/1/2027 mandatory put 11/1/2007 (Creek Park Apartments; Collateralized: FNMA) | NR/AAA | 1,400,000 | 1,401,400 | |||||
Fresno USD, 5.00% due 8/1/2009 (Insured: FSA) (ETM) | Aaa/AAA | 545,000 | 551,785 | |||||
Hawaiian Gardens Redevelopment Agency, 5.50% due 12/1/2008 | NR/BBB+ | 575,000 | 584,901 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
High Desert California Mental Health Care, 5.40% due 10/1/2011 | NR/NR | $ | 2,500,000 | $ | 2,504,350 | |||
Kern High School District, 7.00% due 8/1/2010 (ETM) | A1/NR | 165,000 | 180,622 | |||||
Los Angeles Community Redevelopment Agency, 5.00% due 7/1/2009 (Cinerama Dome Public Parking; Insured: ACA) | NR/A | 835,000 | 845,730 | |||||
Los Angeles Community Redevelopment Agency, 5.75% due 7/1/2010 (Cinerama Dome Public Parking; Insured: ACA) | NR/A | 435,000 | 450,978 | |||||
Los Angeles COP, 5.00% due 2/1/2012 (Insured: MBIA) | Aaa/AAA | 1,400,000 | 1,479,212 | |||||
Los Angeles County Capital Asset Leasing Corp., 5.00% due 4/1/2008 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,015,480 | |||||
Los Angeles County Schools, 5.00% due 6/1/2016 (Pooled Financing; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,083,770 | |||||
Los Angeles County Schools, 5.00% due 6/1/2017 (Pooled Financing; Insured: MBIA) | Aaa/AAA | 1,010,000 | 1,094,699 | |||||
Los Angeles Department of Water & Power, 5.25% due 7/1/2011 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,183,210 | |||||
Los Angeles Multi Family, 5.85% due 12/1/2027 put 12/01/2007 (Collateralized: FNMA) (AMT) | NR/AAA | 490,000 | 491,176 | |||||
Los Angeles Regional Airport Improvement Corporate Lease, 5.00% due 1/1/2017 (LAX Fuel Corp.; Insured: FSA) | Aaa/AAA | 1,120,000 | 1,171,206 | |||||
Los Angeles USD, 5.50% due 7/1/2012 (Insured: MBIA) | Aaa/AAA | 2,500,000 | 2,717,275 | |||||
Milpitas California Agency Tax Allocation Area No 1, 5.00% due 9/1/2015 (Redevelopment; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,137,920 | |||||
Moorpark Mobile Home Park, 5.80% due 5/15/2010 (Villa Del Arroyo; Insured: ACA) | NR/A | 765,000 | 787,476 | |||||
Northern California Power Agency, 5.00% due 7/1/2009 (Geothermal Number 3) | A2/BBB+ | 4,000,000 | 4,003,480 | |||||
Norwalk California Redevelopment Agency Tax Allocation, 5.00% due 10/1/2014 (Insured: MBIA) | Aaa/AAA | 625,000 | 677,362 | |||||
Oxnard Financing Authority Solid Waste, 5.00% due 5/1/2013 (Insured: AMBAC) (AMT) | NR/AAA | 2,115,000 | 2,225,699 | |||||
Pomona USD, 6.10% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 320,000 | 338,621 | |||||
Richmond Joint Powers Financing Authority Lease & Gas Tax, 5.25% due 5/15/2013 | NR/A- | 2,000,000 | 2,016,220 | |||||
Roseville Natural Gas Financing Authority, 5.00% due 2/15/2017 | Aa3/AA- | 1,000,000 | 1,035,550 | |||||
Sacramento City Financing Authority, 0% due 11/1/2014 (Insured: MBIA) | Aaa/AAA | 3,310,000 | 2,523,941 | |||||
Sacramento County Sanitation District Financing Authority, 5.75% due 12/1/2009 | Aa3/AA | 560,000 | 586,376 | |||||
Sacramento Municipal Utility District Electric, 5.75% due 11/15/2007 (ETM) | Aaa/AAA | 1,870,000 | 1,874,394 | |||||
San Bernardino County Multi Family Housing, 4.75% due 12/15/2031 put 12/15/2011 (Collateralized: FNMA) | Aaa/NR | 3,100,000 | 3,225,767 | |||||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.10% due 9/1/2011 | NR/NR | 190,000 | 193,424 | |||||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.20% due 9/1/2012 | NR/NR | 205,000 | 210,195 | |||||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.30% due 9/1/2013 | NR/NR | 300,000 | 309,360 | |||||
San Bernardino County Transportation Authority Sales Tax, 6.00% due 3/1/2010 (ETM) | Aaa/AAA | 555,000 | 571,256 | |||||
San Diego County COP, 5.625% due 9/1/2012 (Insured: AMBAC) | Aaa/AAA | 500,000 | 520,485 | |||||
San Diego County COP Developmental Services Foundation, 5.50% due 9/1/2017 | Baa3/BBB- | 2,000,000 | 2,068,660 | |||||
San Diego Public Facilities Financing Authority, 5.00% due 5/15/2020 (Insured: FGIC) | Aaa/AAA | 500,000 | 500,490 | |||||
San Francisco, 5.00% due 6/15/2014 (Laguna Honda Hospital; Insured: FSA) | Aaa/AAA | 2,320,000 | 2,495,717 | |||||
San Francisco City & County Redevelopment Agency, 0% due 7/1/2010 (George R Moscone) | A1/AA- | 1,380,000 | 1,243,559 | |||||
San Jose Evergreen Community College District, 0% due 9/1/2011 crossover refunded 9/1/2010 (Insured: AMBAC) | Aaa/AAA | 2,200,000 | 1,861,948 | |||||
Seal Beach Redevelopment Agency Mobile Home Park, 5.20% due 12/15/2013 (Insured: ACA) | NR/A | 575,000 | 598,494 | |||||
Southeast Resources Recovery Facilities Authority Lease, 5.375% due 12/1/2013 (Insured: AMBAC) | Aaa/AAA | 1,060,000 | 1,141,991 | |||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Insured: AMBAC) | Aaa/AAA | 350,000 | 382,456 | |||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Insured: AMBAC) | Aaa/AAA | 250,000 | 273,183 | |||||
Stanton Multi Family Housing, 5.625% due 8/1/2029 put 8/1/2009 (Continental Gardens; Collateralized: FNMA) | NR/AAA | 4,385,000 | 4,476,953 | |||||
Val Verde USD COP, 5.00% due 1/1/2014 (Insured: FGIC) (ETM) | Aaa/AAA | 445,000 | 480,645 | |||||
Val Verde USD COP, 5.00% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | 430,000 | 461,695 | |||||
Victorville Redevelopment Agency, 5.00% due 12/1/2014 (Bear Valley Road Special Escrow Fund; Insured: FSA) | Aaa/AAA | 380,000 | 393,893 | |||||
Walnut Valley USD, 6.90% due 2/1/2008 (Insured: MBIA) | Aaa/AAA | 250,000 | 252,873 | |||||
Walnut Valley USD, 7.00% due 8/1/2008 (Insured: MBIA) | Aaa/AAA | 100,000 | 102,905 | |||||
Walnut Valley USD, 8.75% due 8/1/2010 (Insured: MBIA) (ETM) | Aaa/AAA | 1,000,000 | 1,140,290 | |||||
Washington Township Health Care District, 5.00% due 7/1/2009 | A3/NR | 450,000 | 458,766 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Washington USD, 5.00% due 8/1/2017 (New High School; Insured: AMBAC) | NR/AAA | $ | 725,000 | $ | 786,415 | |||
Whittier Solid Waste, 5.375% due 8/1/2014 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,001,481 | |||||
TOTAL INVESTMENTS — 98.52% (Cost $110,172,405) | $ | 111,872,757 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.48% | 1,677,693 | |||||||
NET ASSETS — 100.00% | $ | 113,550,450 | ||||||
Footnote Legend
† | 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:
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 |
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 | Health Facilities Authority |
MBIA | Insured by Municipal Bond Investors Assurance |
PCR | Pollution Control Revenue Bond |
RADIAN | Insured by Radian Asset Assurance |
USD | Unified School District |
See notes to financial statements.
20 Certified Annual Report
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, 2007, 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, 2007 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
Certified Annual Report 21
Thornburg California Limited Term Municipal Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
Actual expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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 3/31/07 | Ending Account Value | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,018.80 | $ | 4.97 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.14 | $ | 4.97 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,017.50 | $ | 6.17 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.95 | $ | 6.17 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,019.70 | $ | 3.24 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.86 | $ | 3.24 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.98%; C: 1.22%; and I: 0.64%) 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 for each class of shares 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.
22 Certified Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2007 (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 19, 1987 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 2/19/87) | 1.59 | % | 1.84 | % | 3.29 | % | 4.77 | % | ||||
C Shares (Incep: 9/1/94) | 2.35 | % | 1.88 | % | 3.11 | % | 3.55 | % |
FUND ATTRIBUTES as of September 30, 2007 | ||||||||||||
Annualized (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 2/19/87) | 3.42 | % | 3.10 | % | $ | 12.73 | $ | 12.92 | ||||
C Shares (Incep: 9/1/94) | 3.16 | % | 2.88 | % | $ | 12.74 | $ | 12.74 |
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.
Certified Annual Report 23
Thornburg California Limited Term Municipal Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 |
24 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 25
TRUSTEES AND OFFICERS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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.
26 Certified Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2007 (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.
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, 2007, 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, 2007.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met on September 11, 2007 to consider a renewal of the advisory agreement, and determined to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to two categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income securities indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s average or better
Certified Annual Report 27
OTHER INFORMATION, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2007 (Unaudited) |
investment returns over most measuring periods relative to a category of mutual funds selected by an independent mutual fund analyst firm and appearing 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 also noted in their evaluation that while the Fund had exhibited lower total returns (and lower portfolio volatility) than a second category comprised of longer duration municipal debt funds during periods of declining interest rates, the Fund had outperformed that category of longer term funds in the last year as interest rates increased.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, also considered the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 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. The Trustees observed that the management fee and overall expense ratios for the Fund were higher than average and median fees and expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, but that the differences were not significant in view of their degree and the Fund’s investment performance. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of research services from broker dealer firms, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
28 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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. 29
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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
30 This page is not part of the Annual Report.
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 |
TH859
Thornburg California 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 and California state 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 longer intermediate and long-term bond portfolios.
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 normally less than five years. 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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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
Reduce paper clutter. 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.
Thornburg California Limited Term Municipal Fund
I Shares – September 30, 2007
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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 3
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.
Investments 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
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.
4 Certified Annual Report
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.
Consumer Price Index – 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. 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.
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.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Certified Annual Report 5
| October 18, 2007
Dear Fellow Shareholder:
We are pleased to present the Annual Report for the Thornburg California Limited Term Municipal Fund. The net asset value of the Class I shares decreased by 4 cents per share to $12.74 during the twelve months ended September 30, 2007. If you were with us for the entire period, you received dividends of 47.1 cents per share. If you reinvested your dividends, you received 47.9 cents per share. | |
The past year has been one of the more interesting in recent memory. Municipal bonds traded within a fairly tight trading range until May. Then, as the Federal Reserve raised the targeted Fed Funds rate to 5.0%, the bond market started to worry about an overheated economy and excess inflation. This drove up market yields for bonds by 0.30% to 0.40% and led to a some-what steeper yield curve. Next, the sordid world of subprime mortgage bonds and derivatives based upon them started to unravel. Though subprime problems didn’t directly affect the municipal bond market, they did set off a panic-stricken flight to quality. As investors piled into Treasury notes and bonds, they drove their yields back down to levels that prevailed toward the beginning of 2007. However, investors mostly bypassed the municipal bond market, leaving rates there relatively unchanged. This created a rare event during which municipal bond yields were extremely attractive relative to Treasury yields. By late summer, ten-year high quality municipal bonds were routinely yielding 90% or more of ten-year Treasury yields, and trades over 100% were occasionally happening.
Meanwhile, quality spreads (the difference in yield between the highest quality bonds and lower quality bonds) were getting wider. Some investors, who had been comfortable taking credit risk at very tight spreads to AAA rated bonds, suddenly became a lot less comfortable. Those who sold typically had to sell their bonds at significantly wider spreads than those that prevailed earlier in the year. This led to an environment where investors could finally get compensated for taking incremental credit risk in bonds rated lower than AAA. | ||
Since the end of August, the bond market has been gradually regaining its composure. A calmer, lower volatility environment has helped fuel a renewed appetite for risk. This has led to some retrenchment of the spread widening that occurred in May. It also has led to a wholesale re-pricing of the municipal bond market so that it is no longer extremely attractive relative to the Treasury market. However, credit spreads on most bonds are still wider than they were just a few months ago, and municipal bonds are still somewhat attractive relative to Treasury notes, particularly if you expect marginal tax rates to go up (we do).
The Class I shares of your Fund produced a total return of 3.44% over the twelve-month period ended September 30, 2007, compared to a 3.81% return for the Lehman Five-Year Municipal Bond Index. Over the last year, five-year municipal bonds have performed better than longer and shorter maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next ten years, so it has significant exposure to bonds that mature before and after five years. Since those bonds generally underperformed five-year bonds and the index, the Fund underperformed the index.
Your Thornburg California Limited Term Municipal Fund is a laddered portfolio of over 85 municipal obligations from all over California. 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 |
6 Certified Annual Report
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.
We were able to take advantage of the late summer market weakness to restructure the Fund somewhat. Early in 2007, the Fund’s ladder was a bit overweighted in the early years. As interest rates rose, we invested primarily in the later years of the Fund’s ladder so that it is now more evenly distributed. Consequently, at fiscal year end (September 30, 2007), the Fund had an average maturity of 4.82 and duration of 3.69 years. We also added incrementally to lower rated investment grade bonds, although we continue to maintain a AA average quality.
% of portfolio maturing | Cumulative % maturing | |||||||||||
1 years | = | 8.1 | % | Year 1 | = | 8.1 | % | |||||
1 to 2 years | = | 13.5 | % | Year 2 | = | 21.6 | % | |||||
2 to 3 years | = | 8.8 | % | Year 3 | = | 30.4 | % | |||||
3 to 4 years | = | 6.3 | % | Year 4 | = | 36.7 | % | |||||
4 to 5 years | = | 14.8 | % | Year 5 | = | 51.5 | % | |||||
5 to 6 years | = | 7.0 | % | Year 6 | = | 58.5 | % | |||||
6 to 7 years | = | 9.2 | % | Year 7 | = | 67.7 | % | |||||
7 to 8 years | = | 9.7 | % | Year 8 | = | 77.4 | % | |||||
8 to 9 years | = | 9.2 | % | Year 9 | = | 86.6 | % | |||||
Over 9 years | = | 13.4 | % | Over 9 years | = | 100.0 | % |
Percentages can and do vary. Data as of 9/30/07.
Looking forward, we do expect U.S. economic growth to slow from the second quarter’s healthy 3.8% rate. However, consumer spending seems to be holding up well, and exports are surging. These factors, along with new job growth of about 100,000 per month, should keep the U.S. economy out of recession territory. However, the dismal housing sector and the dislocation in financial markets will probably cap future growth at a relatively low rate. This should allow the Fed to continue easing monetary conditions, but with a close eye on what happens to inflation. Market unease about the depreciating dollar and the long-term inflation outlook should keep long-term interest rates from dropping precipitously, which, in turn, should lead to a steeper yield curve going forward. We believe that a steepening yield curve would be advantageous for the laddering style employed by this Fund.
California state tax revenues have been better than expected the last few years allowing the state to rebuild budget reserves to $4.1 billion. However, the recent housing downturn has hit the state hard. State tax revenues are already $1 billion behind budget just two months into the 2008 fiscal year. Debt levels are only slightly above average, but new bond measures totaling $43 billion were authorized in 2006. Added to this is the State’s recently estimated actuarial accrued liability of other post employment benefits (OPEB) totaling $47.9 billion. Given these challenges, we do believe it is prudent to keep overall credit quality high in the current environment. Your Fund is broadly 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 Co-Portfolio Manager | Josh Gonze Co-Portfolio Manager | Christopher Ihlefeld Co-Portfolio Manager |
Certified Annual Report 7
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $110,172,405) (Note 2) | $ | 111,872,757 | ||
Cash | 424,252 | |||
Receivable for fund shares sold | 370,205 | |||
Interest receivable | 1,563,858 | |||
Prepaid expenses and other assets | 166 | |||
Total Assets | 114,231,238 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 482,261 | |||
Payable to investment advisor and other affiliates (Note 3) | 76,333 | |||
Accounts payable and accrued expenses | 34,968 | |||
Dividends payable | 87,226 | |||
Total Liabilities | 680,788 | |||
NET ASSETS | $ | 113,550,450 | ||
NET ASSETS CONSIST OF: | ||||
Net unrealized appreciation on investments | $ | 1,700,352 | ||
Accumulated net realized gain (loss) | (1,032,397 | ) | ||
Net capital paid in on shares of beneficial interest | 112,882,495 | |||
$ | 113,550,450 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 12.73 | ||
Maximum sales charge, 1.50% of offering price | 0.19 | |||
Maximum offering price per share | $ | 12.92 | ||
Class C Shares: | ||||
Net asset value and offering price per share * | $ | 12.74 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 12.74 | ||
* | 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, 2007 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $935,766) | $ | 5,081,268 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 582,820 | |||
Administration fees (Note 3) | ||||
Class A Shares | 92,457 | |||
Class C Shares | 18,824 | |||
Class I Shares | 13,770 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 184,913 | |||
Class C Shares | 150,359 | |||
Transfer agent fees | ||||
Class A Shares | 31,462 | |||
Class C Shares | 11,108 | |||
Class I Shares | 11,812 | |||
Registration and filing fees | ||||
Class A Shares | 64 | |||
Class C Shares | 64 | |||
Class I Shares | 64 | |||
Custodian fees (Note 3) | 54,948 | |||
Professional fees | 27,422 | |||
Accounting fees | 4,270 | |||
Trustee fees | 1,371 | |||
Other expenses | 18,972 | |||
Total Expenses | 1,204,700 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (25,017 | ) | ||
Distribution fees waived (Note 3) | (75,180 | ) | ||
Fees paid indirectly (Note 3) | (9,825 | ) | ||
Net Expenses | 1,094,678 | |||
Net Investment Income | 3,986,590 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (164,310 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | (238,410 | ) | ||
Net Realized and Unrealized Loss on Investments | (402,720 | ) | ||
Net Increase in net Assets Resulting From operations | $ | 3,583,870 | ||
See notes to financial statements.
Certified Annual Report 9
Thornburg California Limited Term Municipal Fund |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 3,986,590 | $ | 4,438,506 | ||||
Net realized loss on investments | (164,310 | ) | (480,334 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (238,410 | ) | 11,918 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,583,870 | 3,970,090 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,494,459 | ) | (2,931,630 | ) | ||||
Class C Shares | (471,252 | ) | (529,444 | ) | ||||
Class I Shares | (1,020,879 | ) | (977,432 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (13,105,346 | ) | (30,148,546 | ) | ||||
Class C Shares | (2,300,630 | ) | (3,174,793 | ) | ||||
Class I Shares | 3,635,455 | (2,450,712 | ) | |||||
Net Decrease in Net Assets | (12,173,241 | ) | (36,242,467 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 125,723,691 | 161,966,158 | ||||||
End of year | $ | 113,550,450 | $ | 125,723,691 | ||||
See notes to financial statements.
10 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary 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’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 Securities: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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
Certified Annual Report 11
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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 depending on the Fund’s asset size. The Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $11,040 for Class A shares, $7,811 for Class C shares, and $6,166 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, 2007, the Distributor has advised the Fund that it earned commissions aggregating $1,891 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $952 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 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% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by the Distributor for 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, 2007, are set forth in the Statement of Operations. Distribution fees in the amount of $75,180 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, 2007, fees paid indirectly were $9,825. 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, 2007 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 414,862 | $ | 5,274,076 | 500,010 | $ | 6,354,937 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 131,772 | 1,673,749 | 157,167 | 1,996,487 | ||||||||||
Shares repurchased | (1,579,257 | ) | (20,053,171 | ) | (3,033,930 | ) | (38,499,970 | ) | ||||||
Net Increase (Decrease) | (1,032,623 | ) | $ | (13,105,346 | ) | (2,376,753 | ) | $ | (30,148,546 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 86,180 | $ | 1,093,229 | 144,307 | $ | 1,835,245 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 28,501 | 362,296 | 30,762 | 391,006 | ||||||||||
Shares repurchased | (295,057 | ) | (3,756,155 | ) | (424,743 | ) | (5,401,044 | ) | ||||||
Net Increase (Decrease) | (180,376 | ) | $ | (2,300,630 | ) | (249,674 | ) | $ | (3,174,793 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 1,133,498 | $ | 14,373,498 | 917,264 | $ | 11,673,302 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 66,177 | 841,375 | 61,670 | 784,049 | ||||||||||
Shares repurchased | (910,981 | ) | (11,579,418 | ) | (1,171,724 | ) | (14,908,063 | ) | ||||||
Net Increase (Decrease) | 288,694 | $ | 3,635,455 | (192,790 | ) | $ | (2,450,712 | ) | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $25,702,338 and $29,831,714, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 110,172,405 | ||
Gross unrealized appreciation on a tax basis | $ | 1,799,580 | ||
Gross unrealized depreciation on a tax basis | (99,228 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 1,700,352 | ||
At September 30, 2007, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2007, 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:
2008 | $ | 214,571 | |
2012 | 33,844 | ||
2014 | 148,124 | ||
2015 | 471,548 | ||
$ | 868,087 | ||
At September 30, 2007 the Fund had deferred capital losses occurring subsequent to October 31, 2006 of $164,310. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
During the year ending September 30, 2007, $205,990 of capital loss carry forwards from prior years expired.
All dividends paid by the Fund for the year ended September 30, 2007 and September 30, 2006, 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, 2007 |
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized loss by $205,990 and decreased net capital paid in on shares of beneficial interest by $205,990. This reclassification has no impact on the net asset value of the Fund. Reclassifications resulted from expired capital loss carry forwards.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 |
3 Months Ended Sept. 30, | Year Ended June 30, | |||||||||||||||||||||||
Year Ended Sept. 30, | ||||||||||||||||||||||||
Class I Shares: | 2007 | 2006 | 2005 | 2004(c) | 2004 | 2003 | ||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding through out the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.89 | $ | 13.22 | $ | 12.97 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.47 | 0.44 | 0.40 | 0.09 | 0.39 | 0.42 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.14 | (0.33 | ) | 0.25 | ||||||||||||||
Total from investment operations | 0.43 | 0.42 | 0.17 | 0.23 | 0.06 | 0.67 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.47 | ) | (0.44 | ) | (0.40 | ) | (0.09 | ) | (0.39 | ) | (0.42 | ) | ||||||||||||
Change in net asset value | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.14 | (0.33 | ) | 0.25 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 12.74 | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.89 | $ | 13.22 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.44 | % | 3.39 | % | 1.31 | % | 1.81 | % | 0.46 | % | 5.27 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.71 | % | 3.50 | % | 3.09 | % | 2.85 | %(b) | 2.99 | % | 3.20 | % | ||||||||||||
Expenses, after expense reductions | 0.66 | % | 0.66 | % | 0.68 | % | 0.67 | %(b) | 0.67 | % | 0.65 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.65 | % | 0.55 | % | 0.67 | % | 0.67 | %(b) | 0.67 | % | 0.65 | % | ||||||||||||
Expenses, before expense reductions | 0.68 | % | 0.71 | % | 0.73 | % | 0.77 | %(b) | 0.78 | % | 0.75 | % | ||||||||||||
Portfolio turnover rate | 22.71 | % | 25.77 | % | 26.33 | % | 4.18 | % | 23.80 | % | 26.03 | % | ||||||||||||
Net assets at end of period (000) | $ | 31,918 | $ | 28,334 | $ | 30,843 | $ | 25,728 | $ | 22,929 | $ | 20,592 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | The Fund’s fiscal year-end changed to September 30. |
See notes to the financial statements.
Certified Annual Report 15
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
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) | A3/NR | $ | 435,000 | $ | 448,759 | |||
ABAG Finance Authority, 4.75% due 10/1/2012 (California School of Mechanical Arts) | A3/NR | 455,000 | 471,394 | |||||
Alameda County COP, 5.625% due 12/1/2016 (Santa Rita Jail; Insured: AMBAC) | NR/AAA | 1,830,000 | 2,077,617 | |||||
Bay Area Toll Bridge Revenue, 5.00% due 4/1/2016 | Aa3/AA | 2,075,000 | 2,257,392 | |||||
California HFA, 5.25% due 10/1/2013 (Kaiser Permanente) (ETM) | A3/AAA | 2,000,000 | 2,054,080 | |||||
California Housing Finance Agency, 9.875% due 2/1/2017 | Aa2/AA- | 670,000 | 686,113 | |||||
California Mobile Home Park Financing Authority, 4.75% due 11/15/2010 (Rancho Vallecitos; Insured: ACA) | NR/A | 500,000 | 506,210 | |||||
California Mobile Home Park Financing Authority, 5.00% due 11/15/2013 (Rancho Vallecitos; Insured: ACA) | NR/A | 570,000 | 587,032 | |||||
California PCR Authority Solid Waste Disposal, 6.75% due 7/1/2011 (ETM) | Aaa/NR | 1,890,000 | 1,982,610 | |||||
California PCR Authority Solid Waste Disposal, 5.00% due 6/1/2018 put 6/1/2008 | NR/BBB | 1,100,000 | 1,104,928 | |||||
California PCR Solid Waste Disposal, 4.85% due 12/1/2027 put 11/30/2007 (Waste Management, Inc.) (AMT) | NR/BBB | 1,000,000 | 1,000,600 | |||||
California State, 5.75% due 10/1/2010 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,064,010 | |||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,042,480 | |||||
California State GO, 7.50% due 10/1/2007 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,000,640 | |||||
California State GO, 6.60% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 560,000 | 598,018 | |||||
California State GO, 5.50% due 3/1/2012 (Insured: FGIC) | Aaa/AAA | 230,000 | 231,911 | |||||
California State GO, 6.25% due 9/1/2012 | A1/A+ | 3,000,000 | 3,317,160 | |||||
California State GO Economic Recovery, 5.25% due 7/1/2013 | Aa3/AA+ | 2,500,000 | 2,712,675 | |||||
California State Public Works, 5.00% due 6/1/2017 (University of California Regents; Insured FGIC) | Aaa/AAA | 2,000,000 | 2,181,180 | |||||
California State Public Works Board, 5.00% due 9/1/2017 (Insured: FGIC) | Aaa/AAA | 1,235,000 | 1,340,901 | |||||
California State Public Works Board Lease, 5.00% due 1/1/2015 (Department of Corrections; Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,165,380 | |||||
California State Public Works Board Lease, 5.50% due 6/1/2010 (Various Universities) | Aa2/AA- | 780,000 | 805,709 | |||||
California State Public Works Board Lease, 5.00% due 11/1/2015 | Aa2/AA- | 1,000,000 | 1,071,580 | |||||
California State Veterans Bonds, 9.50% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,131,760 | |||||
California Statewide Community Development Authority, 5.125% due 6/1/2008 (Louisiana Orthopedic Hospital Foundation; Insured: AMBAC) | Aaa/AAA | 595,000 | 601,485 | |||||
California Statewide Community Development Authority, 5.25% due 8/1/2014 (EAH-East Campus Apartments; Insured: ACA) | NR/A | 1,215,000 | 1,255,241 | |||||
California Statewide Community Development Authority, 4.70% due 11/1/2036 put 6/1/2009 (Kaiser Permanente) | NR/A+ | 2,000,000 | 2,033,140 | |||||
California Statewide Community Development Authority COP, 6.50% due 8/1/2012 (Cedars Sinai Center Hospital; Insured: MBIA) | Aaa/AAA | 660,000 | 700,854 | |||||
California Statewide Community Development Authority COP, 5.30% due 12/1/2015 (Kaiser Permanente) (ETM) | Aaa/AAA | 2,785,000 | 2,878,771 | |||||
Central Union High School District Imperial Count, 5.00% due 8/1/2012 (Insured: FGIC) | Aaa/AAA | 830,000 | 884,971 | |||||
Cerritos California Public Financing Authority, 5.00% due 11/1/2014 (Tax Allocation Redevelopment; Insured: AMBAC) | Aaa/AAA | 1,260,000 | 1,362,375 | |||||
Corona Norco USD Capital Appreciation, 0% due 9/1/2017 (Insured: FSA) | Aaa/AAA | 1,595,000 | 1,061,297 | |||||
East Palo Alto Public Financing, 5.00% due 10/1/2014 (University Circle Gateway/101; Insured: Radian) | Aa3/AA | 670,000 | 696,679 | |||||
East Palo Alto Public Financing, 5.00% due 10/1/2016 (University Circle Gateway/101; Insured: Radian) | Aa3/AA | 735,000 | 762,518 | |||||
El Monte COP Senior Department Public Services Facility Phase II, 5.00% due 1/1/2009 (Insured: AMBAC) | Aaa/AAA | 1,865,000 | 1,883,408 | |||||
Fillmore Public Financing Authority, 5.00% due 5/1/2016 (Water Recycling; Insured: CIFG) | Aaa/AAA | 735,000 | 796,145 | |||||
Fresno County Housing Authority Multi Family, 4.90% due 11/1/2027 mandatory put 11/1/2007 (Creek Park Apartments; Collateralized: FNMA) | NR/AAA | 1,400,000 | 1,401,400 | |||||
Fresno USD, 5.00% due 8/1/2009 (Insured: FSA) (ETM) | Aaa/AAA | 545,000 | 551,785 | |||||
Hawaiian Gardens Redevelopment Agency, 5.50% due 12/1/2008 | NR/BBB+ | 575,000 | 584,901 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
High Desert California Mental Health Care, 5.40% due 10/1/2011 | NR/NR | $ | 2,500,000 | $ | 2,504,350 | |||
Kern High School District, 7.00% due 8/1/2010 (ETM) | A1/NR | 165,000 | 180,622 | |||||
Los Angeles Community Redevelopment Agency, 5.00% due 7/1/2009 (Cinerama Dome Public Parking; Insured: ACA) | NR/A | 835,000 | 845,730 | |||||
Los Angeles Community Redevelopment Agency, 5.75% due 7/1/2010 (Cinerama Dome Public Parking; Insured: ACA) | NR/A | 435,000 | 450,978 | |||||
Los Angeles COP, 5.00% due 2/1/2012 (Insured: MBIA) | Aaa/AAA | 1,400,000 | 1,479,212 | |||||
Los Angeles County Capital Asset Leasing Corp., 5.00% due 4/1/2008 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,015,480 | |||||
Los Angeles County Schools, 5.00% due 6/1/2016 (Pooled Financing; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,083,770 | |||||
Los Angeles County Schools, 5.00% due 6/1/2017 (Pooled Financing; Insured: MBIA) | Aaa/AAA | 1,010,000 | 1,094,699 | |||||
Los Angeles Department of Water & Power, 5.25% due 7/1/2011 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,183,210 | |||||
Los Angeles Multi Family, 5.85% due 12/1/2027 put 12/01/2007 (Collateralized: FNMA) (AMT) | NR/AAA | 490,000 | 491,176 | |||||
Los Angeles Regional Airport Improvement Corporate Lease, 5.00% due 1/1/2017 (LAX Fuel Corp.; Insured: FSA) | Aaa/AAA | 1,120,000 | 1,171,206 | |||||
Los Angeles USD, 5.50% due 7/1/2012 (Insured: MBIA) | Aaa/AAA | 2,500,000 | 2,717,275 | |||||
Milpitas California Agency Tax Allocation Area No 1, 5.00% due 9/1/2015 (Redevelopment; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,137,920 | |||||
Moorpark Mobile Home Park, 5.80% due 5/15/2010 (Villa Del Arroyo; Insured: ACA) | NR/A | 765,000 | 787,476 | |||||
Northern California Power Agency, 5.00% due 7/1/2009 (Geothermal Number 3) | A2/BBB+ | 4,000,000 | 4,003,480 | |||||
Norwalk California Redevelopment Agency Tax Allocation, 5.00% due 10/1/2014 (Insured: MBIA) | Aaa/AAA | 625,000 | 677,362 | |||||
Oxnard Financing Authority Solid Waste, 5.00% due 5/1/2013 (Insured: AMBAC) (AMT) | NR/AAA | 2,115,000 | 2,225,699 | |||||
Pomona USD, 6.10% due 2/1/2010 (Insured: MBIA) | Aaa/AAA | 320,000 | 338,621 | |||||
Richmond Joint Powers Financing Authority Lease & Gas Tax, 5.25% due 5/15/2013 | NR/A- | 2,000,000 | 2,016,220 | |||||
Roseville Natural Gas Financing Authority, 5.00% due 2/15/2017 | Aa3/AA- | 1,000,000 | 1,035,550 | |||||
Sacramento City Financing Authority, 0% due 11/1/2014 (Insured: MBIA) | Aaa/AAA | 3,310,000 | 2,523,941 | |||||
Sacramento County Sanitation District Financing Authority, 5.75% due 12/1/2009 | Aa3/AA | 560,000 | 586,376 | |||||
Sacramento Municipal Utility District Electric, 5.75% due 11/15/2007 (ETM) | Aaa/AAA | 1,870,000 | 1,874,394 | |||||
San Bernardino County Multi Family Housing, 4.75% due 12/15/2031 put 12/15/2011 (Collateralized: FNMA) | Aaa/NR | 3,100,000 | 3,225,767 | |||||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.10% due 9/1/2011 | NR/NR | 190,000 | 193,424 | |||||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.20% due 9/1/2012 | NR/NR | 205,000 | 210,195 | |||||
San Bernardino County Special Taxes Community Facilities District 2002-1, 5.30% due 9/1/2013 | NR/NR | 300,000 | 309,360 | |||||
San Bernardino County Transportation Authority Sales Tax, 6.00% due 3/1/2010 (ETM) | Aaa/AAA | 555,000 | 571,256 | |||||
San Diego County COP, 5.625% due 9/1/2012 (Insured: AMBAC) | Aaa/AAA | 500,000 | 520,485 | |||||
San Diego County COP Developmental Services Foundation, 5.50% due 9/1/2017 | Baa3/BBB- | 2,000,000 | 2,068,660 | |||||
San Diego Public Facilities Financing Authority, 5.00% due 5/15/2020 (Insured: FGIC) | Aaa/AAA | 500,000 | 500,490 | |||||
San Francisco, 5.00% due 6/15/2014 (Laguna Honda Hospital; Insured: FSA) | Aaa/AAA | 2,320,000 | 2,495,717 | |||||
San Francisco City & County Redevelopment Agency, 0% due 7/1/2010 (George R Moscone) | A1/AA- | 1,380,000 | 1,243,559 | |||||
San Jose Evergreen Community College District, 0% due 9/1/2011 crossover refunded 9/1/2010 (Insured: AMBAC) | Aaa/AAA | 2,200,000 | 1,861,948 | |||||
Seal Beach Redevelopment Agency Mobile Home Park, 5.20% due 12/15/2013 (Insured: ACA) | NR/A | 575,000 | 598,494 | |||||
Southeast Resources Recovery Facilities Authority Lease, 5.375% due 12/1/2013 (Insured: AMBAC) | Aaa/AAA | 1,060,000 | 1,141,991 | |||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Insured: AMBAC) | Aaa/AAA | 350,000 | 382,456 | |||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Insured: AMBAC) | Aaa/AAA | 250,000 | 273,183 | |||||
Stanton Multi Family Housing, 5.625% due 8/1/2029 put 8/1/2009 (Continental Gardens; Collateralized: FNMA) | NR/AAA | 4,385,000 | 4,476,953 | |||||
Val Verde USD COP, 5.00% due 1/1/2014 (Insured: FGIC) (ETM) | Aaa/AAA | 445,000 | 480,645 | |||||
Val Verde USD COP, 5.00% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | 430,000 | 461,695 | |||||
Victorville Redevelopment Agency, 5.00% due 12/1/2014 (Bear Valley Road Special Escrow Fund; Insured: FSA) | Aaa/AAA | 380,000 | 393,893 | |||||
Walnut Valley USD, 6.90% due 2/1/2008 (Insured: MBIA) | Aaa/AAA | 250,000 | 252,873 | |||||
Walnut Valley USD, 7.00% due 8/1/2008 (Insured: MBIA) | Aaa/AAA | 100,000 | 102,905 | |||||
Walnut Valley USD, 8.75% due 8/1/2010 (Insured: MBIA) (ETM) | Aaa/AAA | 1,000,000 | 1,140,290 | |||||
Washington Township Health Care District, 5.00% due 7/1/2009 | A3/NR | 450,000 | 458,766 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Washington USD, 5.00% due 8/1/2017 (New High School; Insured: AMBAC) | NR/AAA | $ | 725,000 | $ | 786,415 | |||
Whittier Solid Waste, 5.375% due 8/1/2014 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,001,481 | |||||
TOTAL INVESTMENTS — 98.52% (Cost $110,172,405) | $ | 111,872,757 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.48% | 1,677,693 | |||||||
NET ASSETS — 100.00% | $ | 113,550,450 | ||||||
Footnote Legend
|
† 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:
| ||
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 | |
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 | Health Facilities Authority | |
MBIA | Insured by Municipal Bond Investors Assurance | |
PCR | Pollution Control Revenue Bond | |
RADIAN | Insured by Radian Asset Assurance | |
USD | Unified School District |
See notes to financial statements.
18 Certified Annual Report
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, 2007, 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, 2007 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
Certified Annual Report 19
Thornburg California Limited Term Municipal Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,019.70 | $ | 3.24 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.86 | $ | 3.24 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.64%) 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. |
20 Certified Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2007 (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, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
I Shares (Incep: 4/1/97) | 3.44 | % | 2.49 | % | 3.81 | % | 4.02 | % |
FUND ATTRIBUTES
as of September 30, 2007
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 4/1/97) | 3.75 | % | 3.47 | % | $ | 12.74 | $ | 12.74 |
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.
Certified Annual Report 21
Thornburg California Limited Term Municipal Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 |
22 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 23
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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.
24 Certified Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2007 (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.
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, 2007, 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, 2007.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met on September 11, 2007 to consider a renewal of the advisory agreement, and determined to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to two categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income securities indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s average or better
Certified Annual Report 25
OTHER INFORMATION, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2007 (Unaudited) |
investment returns over most measuring periods relative to a category of mutual funds selected by an independent mutual fund analyst firm and appearing 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 also noted in their evaluation that while the Fund had exhibited lower total returns (and lower portfolio volatility) than a second category comprised of longer duration municipal debt funds during periods of declining interest rates, the Fund had outperformed that category of longer term funds in the last year as interest rates increased.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, also considered the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 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. The Trustees observed that the management fee and overall expense ratios for the Fund were higher than average and median fees and expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, but that the differences were not significant in view of their degree and the Fund’s investment performance. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of research services from broker dealer firms, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
26 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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. 27
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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
28 This page is not part of the Annual Report.
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 |
TH867
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 normally three to ten years. 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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Thornburg Intermediate Municipal Fund
September 30, 2007
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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 3
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, 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.
Investments 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
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.
4 Certified Annual Report
Glossary
The Merrill Lynch 7-12 Year Municipal Bond Index – The Merrill Lynch 7-12 Year Municipal Bond Index representing a broad measure of market performance. It is a model portfolio of municipal obligations throughout the U.S., with an average maturity which ranges from seven to twelve years.
Consumer Price Index – 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. Also known as the cost-of-living index.
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.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Certified Annual Report 5
George Strickland Co-Portfolio Manager
Josh Gonze Co-Portfolio Manager
Christopher Ihlefeld Co-Portfolio Manager | October 18, 2007
Dear Fellow Shareholder:
We are pleased to present the Annual Report for the Thornburg Intermediate Municipal Fund. The net asset value of the Class A shares decreased by 15 cents to $13.15 during the twelve months ended September 30, 2007. If you were with us for the entire period, you received dividends of 50.7 cents per share. If you reinvested your dividends, you received 51.6 cents per share. Investors who owned Class C shares received dividends of 47.4 and 48.2 cents per share, respectively.
The past year has been one of the more interesting in recent memory. Municipal bonds traded within a fairly tight trading range until May. Then, as the Federal Reserve raised the targeted Fed Funds rate to 5.0%, the bond market started to worry about an overheated economy and excess inflation. This drove up market yields for bonds by 0.30% to 0.40% and led to a somewhat steeper yield curve. Next, the sordid world of subprime mortgage bonds and derivatives based upon them started to unravel. Though subprime problems didn’t directly affect the municipal bond market, they did set off a panic-stricken flight to quality. As investors piled into Treasury notes and bonds, they drove their yields back down to levels that prevailed toward the beginning of 2007. However, investors mostly bypassed the municipal bond market, leaving rates there relatively unchanged. This created a rare event during which municipal bond yields were extremely attractive relative to Treasury yields. By late summer, ten-year high-quality municipal bonds were routinely yielding 90% or more of ten-year Treasury yields, and trades over 100% were occasionally happening.
Meanwhile, quality spreads (the difference in yield between the highest quality bonds and lower quality bonds) were getting wider. Some investors, who had been comfortable taking credit risk at very tight spreads to AAA rated bonds, suddenly became a lot less comfortable. Those who sold typically had to sell their bonds at significantly wider spreads than those that prevailed earlier in the year. This led to an environment where investors could finally get compensated for taking incremental credit risk in bonds rated lower than AAA.
Since the end of August, the bond market has been gradually regaining its composure. A calmer, lower volatility environment has helped fuel a renewed appetite for risk. This has led to some retrenchment of the spread widening that occurred in May. It also has led to a wholesale re-pricing of the municipal bond market so that it is no longer extremely attractive relative to the Treasury market. However, credit spreads on most bonds are still wider than they were just a few months ago, and municipal bonds are still somewhat attractive relative to Treasury notes, particularly if you expect marginal tax rates to go up (we do).
The Class A shares of your Fund produced a total return of 2.74% over the twelve-month period ended September 30, 2007, compared to a 3.82% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Over the last year, intermediate municipal bonds have performed better than longer and shorter maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next eighteen years, so it has significant exposure to shorter and longer term bonds. Since those bonds generally underperformed intermediate bonds and the index, the Fund underperformed the index.
Your Thornburg Intermediate Municipal Fund is a laddered portfolio of over 340 municipal obligations from 44 states. 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 |
6 | Certified Annual Report |
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.
We were able to take advantage of the late summer market weakness to restructure the Fund somewhat. Early in 2007, the Fund’s ladder was a bit overweighted in the early years, which led to an average maturity of 7.5 years and duration of 4.25 years. As interest rates rose, we invested primarily in the later years of the Fund’s ladder so that it is now more evenly distributed. Consequently, at fiscal year end (September 30, 2007), the Fund had an average maturity of 8.12 and duration of 4.68 years. We also added incrementally to lower rated investment grade bonds, although we continue to maintain a AA average quality.
% of portfolio maturing | Cumulative % maturing | |
2 years = 10.4% | Year 2 = 10.4% | |
2 to 4 years = 13.5% | Year 4 = 23.9% | |
4 to 6 years = 10.0% | Year 6 = 33.9% | |
6 to 8 years = 10.9% | Year 8 = 44.8% | |
8 to 10 years = 11.6% | Year 10 = 56.4% | |
10 to 12 years = 12.6% | Year 12 = 69.0% | |
12 to 14 years = 13.4% | Year 14 = 82.4% | |
14 to 16 years = 11.7% | Year 16 = 94.1% | |
16 to 18 years = 0.5% | Year 18 = 94.6% | |
Over 18 years = 5.4% | Over 18 years = 100.0% |
Percentages can and do vary. Data as of 9/30/07.
Looking forward, we do expect U.S. economic growth to slow from the second quarter’s healthy 3.8% rate. However, consumer spending seems to be holding up well, and exports are surging. These factors, along with new job growth of about 100,000 per month, should keep the U.S. economy out of recession territory. However, the dismal housing sector and the dislocation in financial markets will probably cap future growth at a relatively low rate. This should allow the Fed to continue easing monetary conditions, but with a close eye on what happens to inflation. Market unease about the depreciating dollar and the long-term inflation outlook should keep long-term interest rates from dropping precipitously, which, in turn, should lead to a steeper yield curve going forward. We believe that a steepening yield curve would be advantageous for the laddering style employed by this Fund.
State tax revenues have slowed from the double digit growth rates that prevailed in 2005 and early 2006, but are still increasing a solid 6.1% through June of 2007. Other sectors of the municipal bond market are also generally performing well, with credit rating upgrades continuing to greatly outnumber downgrades. While the current trend is positive, we expect the depressed housing market and slower economic growth to create a tougher environment for municipal bonds to show further credit improvement. We did add marginally to the Fund’s exposure to lower rated investment grade bonds recently, but we do believe it is prudent to keep overall credit quality high in the current environment. Your Fund is broadly diversified and 87% 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 | Josh Gonze | Christopher Ihlefeld | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager |
Certified Annual Report 7
STATEMENT OF ASSETS AND LIABILITIES
Thornburg Intermediate Municipal Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $494,464,922) (Note 2) | $ | 507,761,647 | ||
Cash | 248,750 | |||
Receivable for investments sold | 3,101,449 | |||
Receivable for fund shares sold | 518,856 | |||
Interest receivable | 7,168,903 | |||
Prepaid expenses and other assets | 26,494 | |||
Total Assets | 518,826,099 | |||
LIABILITIES | ||||
Payable for securities purchased | 2,883,332 | |||
Payable for fund shares redeemed | 1,340,115 | |||
Payable to investment advisor and other affiliates (Note 3) | 338,213 | |||
Accounts payable and accrued expenses | 95,495 | |||
Dividends payable | 589,152 | |||
Total Liabilities | 5,246,307 | |||
NET ASSETS | $ | 513,579,792 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (4,864 | ) | |
Net unrealized appreciation on investments | 13,296,725 | |||
Accumulated net realized gain (loss) | (8,965,737 | ) | ||
Net capital paid in on shares of beneficial interest | 509,253,668 | |||
$ | 513,579,792 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($333,800,015 applicable to 25,387,198 shares of beneficial interest outstanding - Note 4) | $ | 13.15 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
Maximum offering price per share | $ | 13.42 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($53,890,221 applicable to 4,093,455 shares of beneficial interest outstanding - Note 4) | $ | 13.16 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($125,889,556 applicable to 9,587,974 shares of beneficial interest outstanding - Note 4) | $ | 13.13 | ||
* | 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, 2007 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $2,260,307) | $ | 24,508,545 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 2,534,522 | |||
Administration fees (Note 3) | ||||
Class A Shares | 442,151 | |||
Class C Shares | 67,183 | |||
Class I Shares | 50,115 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 884,302 | |||
Class C Shares | 537,450 | |||
Transfer agent fees | ||||
Class A Shares | 163,850 | |||
Class C Shares | 30,322 | |||
Class I Shares | 95,831 | |||
Registration and filing fees | ||||
Class A Shares | 30,134 | |||
Class C Shares | 20,858 | |||
Class I Shares | 27,699 | |||
Custodian fees (Note 3) | 160,377 | |||
Professional fees | 44,094 | |||
Accounting fees | 20,612 | |||
Trustee fees | 7,804 | |||
Other expenses | 73,739 | |||
Total expenses | 5,191,043 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (146,279 | ) | ||
Distribution fees waived (Note 3) | (214,980 | ) | ||
Fees paid indirectly (Note 3) | (12,237 | ) | ||
Net expenses | 4,817,547 | |||
Net Investment Income | 19,690,998 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 563,541 | |||
Net change in unrealized appreciation (depreciation) of investments | (6,072,467 | ) | ||
Net realized and Unrealized Loss on Investments | (5,508,926 | ) | ||
Net Increase in net assets resulting from Operations | $ | 14,182,072 | ||
See notes to financial statements.
Certified Annual Report 9
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Intermediate Municipal Fund |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 19,690,998 | $ | 17,791,019 | ||||
Net realized gain (loss) on investments sold | 563,541 | (346,753 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (6,072,467 | ) | 147,221 | |||||
Net Increase (Decrease) in net Assets | ||||||||
Resulting from operations | 14,182,072 | 17,591,487 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (13,591,786 | ) | (12,934,370 | ) | ||||
Class C Shares | (1,928,153 | ) | (1,899,154 | ) | ||||
Class I Shares | (4,171,059 | ) | (2,957,495 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (28,841,157 | ) | 4,082,240 | |||||
Class C Shares | (1,015,192 | ) | 242,860 | |||||
Class I Shares | 37,157,553 | 37,459,390 | ||||||
Net Increase in net Assets | 1,792,278 | 41,584,958 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 511,787,514 | 470,202,556 | ||||||
End of year | $ | 513,579,792 | $ | 511,787,514 | ||||
See notes to financial statements.
10 Certified Annual Report
Thornburg Intermediate Municipal Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s 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 secondary goal of the Fund 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 Securities: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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
Certified Annual Report 11
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
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 liabilities 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, 2007, 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 depending on the Fund’s asset size. The Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $10,863 for Class A shares, $73,871 for Class C shares, and $61,545 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, 2007, the Distributor has advised the Fund that it earned net commissions aggregating $2,163 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $1,714 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 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% per annum of the average daily net assets attributable to Class C 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, 2007, are set forth in the Statement of Operations. Distribution fees in the amount of $214,980 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, 2007, fees paid indirectly were $12,237. 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, 2007 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 2,977,070 | $ | 39,306,041 | 3,869,378 | $ | 51,196,659 | ||||||||
Shares exchanged from merger | — | — | 3,161,332 | 41,919,263 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 616,657 | 8,138,336 | 561,102 | 7,415,384 | ||||||||||
Shares repurchased | (5,785,000 | ) | (76,285,534 | ) | (7,234,114 | ) | (96,449,066 | ) | ||||||
Net Increase (Decrease) | (2,191,273 | ) | $ | (28,841,157 | ) | 357,698 | $ | 4,082,240 | ||||||
Class C Shares | ||||||||||||||
Shares sold | 698,647 | $ | 9,209,025 | 809,528 | $ | 10,710,147 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 96,425 | 1,274,036 | 93,262 | 1,233,844 | ||||||||||
Shares repurchased | (870,144 | ) | (11,498,253 | ) | (884,612 | ) | (11,701,131 | ) | ||||||
Net Increase (Decrease) | (75,072 | ) | $ | (1,015,192 | ) | 18,178 | $ | 242,860 | ||||||
Class I Shares | ||||||||||||||
Shares sold | 4,284,001 | $ | 56,206,181 | 3,700,160 | $ | 48,854,476 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 217,243 | 2,861,145 | 135,815 | 1,791,684 | ||||||||||
Shares repurchased | (1,660,657 | ) | (21,909,773 | ) | (998,806 | ) | (13,186,770 | ) | ||||||
Net Increase (Decrease) | 2,840,587 | $ | 37,157,553 | 2,837,169 | $ | 37,459,390 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $116,587,482 and $111,959,154, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 494,462,451 | ||
Gross unrealized appreciation on a tax basis | $ | 14,627,073 | ||
Gross unrealized depreciation on a tax basis | (1,327,877 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 13,299,196 | ||
At September 30, 2007, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2007, 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 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:
2008 | $ | 2,244,545 | |
2009 | 2,374,508 | ||
2011 | 11,597 | ||
2012 | 4,297,982 | ||
2013 | 39,577 | ||
$ | 8,968,209 | ||
The Fund utilized $207,214 of capital loss carry forwards during the year ended September 30, 2007.
During the year ending September 30, 2007, $160,845 of capital loss carry forwards from prior years expired.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
In order to account for book/tax differences, the Fund decreased accumulated net realized investment loss by $161,506, increased over-distributed net investment income by $661, and decreased net capital paid in on shares of beneficial interest by $160,845. Reclassifications result primarily from expired capital loss carry forwards and market discount.
All dividends paid by the Fund for the year ended September 30, 2007 and September 30, 2006 represent tax exempt interest dividends, which are excludable by shareholders from gross income for federal income tax purposes.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 Intermediate Municipal Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.30 | $ | 13.33 | $ | 13.48 | $ | 13.56 | $ | 13.67 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.51 | 0.49 | 0.49 | 0.52 | 0.52 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | ||||||||||
Total from investment operations | 0.36 | 0.46 | 0.34 | 0.44 | 0.41 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.51 | ) | (0.49 | ) | (0.49 | ) | (0.52 | ) | (0.52 | ) | ||||||||||
Change in net asset value | (0.15 | ) | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | ||||||||||
NET ASSET VALUE, end of year | $ | 13.15 | $ | 13.30 | $ | 13.33 | $ | 13.48 | $ | 13.56 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 2.74 | % | 3.57 | % | 2.57 | % | 3.29 | % | 3.11 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.84 | % | 3.74 | % | 3.66 | % | 3.83 | % | 3.87 | % | ||||||||||
Expenses, after expense reductions | 0.99 | % | 0.99 | % | 0.99 | % | 0.98 | % | 0.99 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.98 | % | 0.99 | % | 0.99 | % | 0.98 | % | 0.99 | % | ||||||||||
Expenses, before expense reductions | 0.99 | % | 1.00 | % | 1.01 | % | 0.98 | % | 1.00 | % | ||||||||||
Portfolio turnover rate | 22.55 | % | 18.95 | % | 20.06 | % | 11.81 | % | 15.13 | % | ||||||||||
Net assets at end of year (000) | $ | 333,800 | $ | 366,702 | $ | 362,783 | $ | 370,227 | $ | 390,080 |
(a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
Certified Annual Report 15
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Intermediate Municipal Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.31 | $ | 13.34 | $ | 13.50 | $ | 13.58 | $ | 13.69 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.47 | 0.46 | 0.46 | 0.48 | 0.47 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.03 | ) | (0.16 | ) | (0.08 | ) | (0.11 | ) | ||||||||||
Total from investment operations | 0.32 | 0.43 | 0.30 | 0.40 | 0.36 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.47 | ) | (0.46 | ) | (0.46 | ) | (0.48 | ) | (0.47 | ) | ||||||||||
Change in net asset value | (0.15 | ) | (0.03 | ) | (0.16 | ) | (0.08 | ) | (0.11 | ) | ||||||||||
NET ASSET VALUE, end of year | $ | 13.16 | $ | 13.31 | $ | 13.34 | $ | 13.50 | $ | 13.58 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 2.48 | % | 3.31 | % | 2.24 | % | 3.02 | % | 2.73 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.59 | % | 3.49 | % | 3.41 | % | 3.57 | % | 3.50 | % | ||||||||||
Expenses, after expense reductions | 1.24 | % | 1.24 | % | 1.25 | % | 1.24 | % | 1.35 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.24 | % | 1.24 | % | 1.24 | % | 1.24 | % | 1.35 | % | ||||||||||
Expenses, before expense reductions | 1.78 | % | 1.78 | % | 1.80 | % | 1.78 | % | 1.80 | % | ||||||||||
Portfolio turnover rate | 22.55 | % | 18.95 | % | 20.06 | % | 11.81 | % | 15.13 | % | ||||||||||
Net assets at end of year (000) | $ | 53,890 | $ | 55,497 | $ | 55,382 | $ | 57,979 | $ | 60,707 |
See notes to financial statements.
16 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Intermediate Municipal Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.28 | $ | 13.31 | $ | 13.46 | $ | 13.54 | $ | 13.65 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.55 | 0.54 | 0.53 | 0.56 | 0.57 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | ||||||||||
Total from investment operations | 0.40 | 0.51 | 0.38 | 0.48 | 0.46 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.55 | ) | (0.54 | ) | (0.53 | ) | (0.56 | ) | (0.57 | ) | ||||||||||
Change in net asset value | (0.15 | ) | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | ||||||||||
NET ASSET VALUE, end of year | $ | 13.13 | $ | 13.28 | $ | 13.31 | $ | 13.46 | $ | 13.54 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 3.06 | % | 3.90 | % | 2.90 | % | 3.61 | % | 3.49 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.16 | % | 4.07 | % | 3.98 | % | 4.12 | % | 4.23 | % | ||||||||||
Expenses, after expense reductions | 0.67 | % | 0.67 | % | 0.67 | % | 0.67 | % | 0.62 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.67 | % | 0.67 | % | 0.67 | % | 0.67 | % | 0.62 | % | ||||||||||
Expenses, before expense reductions | 0.73 | % | 0.75 | % | 0.77 | % | 0.75 | % | 0.80 | % | ||||||||||
Portfolio turnover rate | 22.55 | % | 18.95 | % | 20.06 | % | 11.81 | % | 15.13 | % | ||||||||||
Net assets at end of year (000) | $ | 125,890 | $ | 89,589 | $ | 52,037 | $ | 33,079 | $ | 19,333 |
See notes to financial statements.
Certified Annual Report 17
Thornburg Intermediate Municipal Fund | September 30, 2007 |
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 — 0.48% | ||||||||
Alabama Docks Revenue, 6.00% due 10/1/2008 (Insured: MBIA) | Aaa/AAA | $ | 800,000 | $ | 819,880 | |||
Lauderdale County & Florence Health Group, 5.75% due 7/1/2013 (Insured: MBIA) | Aaa/AAA | 1,600,000 | 1,667,456 | |||||
ALASKA — 0.62% | ||||||||
Alaska Municipal Bond Bank, 5.00% due 10/1/2017 (Insured: FGIC) | Aaa/AAA | 2,470,000 | 2,634,601 | |||||
Anchorage School, 6.00% due 10/1/2012 (Insured: FGIC) | Aaa/AAA | 500,000 | 536,765 | |||||
ARIZONA — 1.58% | ||||||||
Phoenix Civic Improvement Corp., 5.00% due 7/1/2016 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,084,750 | |||||
Phoenix Civic Improvement Corp., 5.00% due 7/1/2017 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,085,970 | |||||
Pima County Industrial Development Authority, 6.70% due 7/1/2021 (Arizona Charter Schools) | Baa3/NR | 2,675,000 | 2,804,711 | |||||
Tucson GO, 9.75% due 7/1/2012 (ETM) | NR/AA | 400,000 | 504,896 | |||||
Tucson GO, 9.75% due 7/1/2013 (ETM) | NR/AA | 500,000 | 654,690 | |||||
Yavapai County Industrial Development Authority, 4.45% due 3/1/2028 put 3/1/2008 (Waste Management, Inc.) (AMT) | NR/BBB | 2,000,000 | 1,999,620 | |||||
ARKANSAS — 0.48% | ||||||||
Jefferson County Hospital Improvement, 5.75% due 6/1/2012 (Jefferson Hospital Association) | NR/A | 1,135,000 | 1,200,592 | |||||
Jefferson County Hospital Improvement, 5.75% due 6/1/2013 (Jefferson Hospital Association) | NR/A | 1,200,000 | 1,267,260 | |||||
CALIFORNIA — 2.56% | ||||||||
California Housing Finance Agency, 9.875% due 2/1/2017 | Aa2/AA- | 675,000 | 691,234 | |||||
California Statewide Community Development Authority COP, 5.50% due 10/1/2007 (Unihealth America) (ETM) | Aaa/AAA | 4,500,000 | 4,500,675 | |||||
East Palo Alto Public Financing, 5.00% due 10/1/2017 (University Circle Gateway 101; Insured: Radian) | Aa3/AA | 770,000 | 796,357 | |||||
El Camino Hospital District, 6.25% due 8/15/2017 (ETM) | Aaa/AAA | 1,000,000 | 1,132,860 | |||||
Golden West Schools Financing Authority, 0% due 8/1/2018 (Insured: MBIA) | Aaa/AAA | 2,140,000 | 1,217,938 | |||||
Redwood City Redevelopment Project Area 2a, 0% due 7/15/2023 (Insured: AMBAC) | Aaa/AAA | 2,060,000 | 1,002,726 | |||||
San Jose USD COP, 5.00% due 6/1/2021 (Insured: FGIC) | Aaa/AAA | 1,580,000 | 1,665,478 | |||||
Washington USD, 5.00% due 8/1/2022 (New High School; Insured: AMBAC) | NR/AAA | 2,010,000 | 2,115,223 | |||||
COLORADO — 5.04% | ||||||||
Adams County Communication Center COP, 5.75% due 12/1/2016 | Baa1/NR | 1,265,000 | 1,322,988 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 8/1/2014 (Insured: FHA 242; MBIA) | NR/AAA | 1,000,000 | 1,070,900 | |||||
Arvada IDRB, 5.60% due 12/1/2012 (Wanco, Inc.; LOC: US Bank, N.A.) | NR/NR | 450,000 | 450,437 | |||||
Central Platte Valley Metropolitan District, 5.15% due 12/1/2013 pre-refunded 12/1/2009 | NR/AAA | 1,000,000 | 1,043,920 | |||||
Central Platte Valley Metropolitan District, 5.00% due 12/1/2031 put 12/1/2009 (LOC: US Bank) | NR/AA | 4,000,000 | 4,078,400 | |||||
Colorado Educational & Cultural Facilities, 5.25% due 8/15/2019 (Peak to Peak Charter School; Insured: XLCA) | Aaa/AAA | 1,475,000 | 1,570,639 | |||||
Colorado Educational & Cultural Facilities, 6.00% due 4/1/2021 (Cherry Creek Charter School) | Baa2/NR | 500,000 | 514,450 | |||||
Denver Convention Center Hotel Authority, 5.125% due 12/1/2017 (Insured: XLCA) | Aaa/AAA | 4,215,000 | 4,537,321 | |||||
El Paso County GO School District 11, 7.10% due 12/1/2013 (State Aid Withholding) | Aa3/AA- | 500,000 | 593,350 | |||||
Madre Metropolitan District 2, 5.375% due 12/1/2026 | NR/NR | 2,220,000 | 2,004,482 | |||||
Murphy Creek Metropolitan District 3, 6.00% due 12/1/2026 | NR/NR | 2,000,000 | 1,916,380 | |||||
North Range Metropolitan District 1, 5.00% due 12/15/2021 | NR/A | 1,500,000 | 1,499,880 | |||||
Northwest Parkway Public Highway Authority Senior Convertible C, 0% due 6/15/2014 (Insured: FSA) | Aaa/AAA | 1,005,000 | 905,073 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Plaza Metropolitan District 1 Public Improvement Fee/Tax Increment, 7.70% due 12/1/2017 | NR/NR | $ | 2,500,000 | $ | 2,700,275 | |||
Southlands Metropolitan District 1 GO, 7.00% due 12/1/2024 | NR/NR | 1,370,000 | 1,647,726 | |||||
DELAWARE — 0.30% | ||||||||
Delaware State HFA, 5.25% due 5/1/2016 (Nanticoke Memorial Hospital; Insured: Radian) | NR/AA | 1,500,000 | 1,543,185 | |||||
DISTRICT OF COLUMBIA — 2.42% | ||||||||
District of Columbia, 6.00% due 6/1/2015 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,436,050 | |||||
District of Columbia Association of American Medical Colleges, 5.00% due 2/15/2017 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,073,320 | |||||
District of Columbia COP, 5.25% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | 2,000,000 | 2,161,220 | |||||
District of Columbia COP, 5.00% due 1/1/2020 (Insured: FGIC) | Aaa/AAA | 3,900,000 | 4,098,900 | |||||
District of Columbia COP, 5.00% due 1/1/2023 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,041,100 | |||||
District of Columbia Hospital, 5.375% due 8/15/2015 (Medlantic Healthcare) (ETM) | Aaa/AAA | 600,000 | 612,810 | |||||
FLORIDA — 11.56% | ||||||||
Broward County HFA Multi Family Housing, 5.40% due 10/1/2011 (Pembroke Park Apartments; Guaranty: Florida Housing Finance Corp.) (AMT) | NR/NR | 480,000 | 489,254 | |||||
Broward County Resource Recovery, 5.00% due 12/1/2007 (Wheelabrator South) | A3/AA | 1,775,000 | 1,779,366 | |||||
Broward County Resource Recovery, 5.50% due 12/1/2008 (Wheelabrator South) | A3/AA | 500,000 | 511,155 | |||||
Broward County School Board, 5.00% due 7/1/2020 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,052,060 | |||||
Capital Trust Agency Multi Family Housing, 5.15% due 11/1/2030 put 11/1/2010 (Shadow Run; Collateralized: FNMA) | Aaa/NR | 1,000,000 | 1,034,420 | |||||
Collier County HFA Multi Family A-1, 4.90% due 2/15/2032 put 2/15/2012 (Goodlette Arms; Collateralized: FNMA) | Aaa/NR | 1,000,000 | 1,045,980 | |||||
Cooper City Utility Systems, 0% due 10/1/2013 (Insured: AMBAC) | Aaa/AAA | 2,440,000 | 1,579,266 | |||||
Crossings at Fleming Island Community Development, 5.60% due 5/1/2012 (Insured: MBIA) | Aaa/AAA | 265,000 | 280,275 | |||||
Enterprise Community Development District Assessment Bonds, 6.00% due 5/1/2010 (Insured: MBIA) | Aaa/AAA | 870,000 | 871,653 | |||||
Escambia County HFA, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB+ | 1,000,000 | 1,015,800 | |||||
Escambia County HFA, 5.95% due 7/1/2020 (Florida Health Care Facility Loan; Insured: AMBAC) | Aaa/NR | 560,000 | 580,686 | |||||
Flagler County School Board COP, 5.00% due 8/1/2020 (Insured: FSA) | Aaa/AAA | 2,560,000 | 2,678,067 | |||||
Florida Board of Education GO Capital Outlay, 9.125% due 6/1/2014 | Aa1/AAA | 905,000 | 1,062,760 | |||||
Florida Board of Education GO Capital Outlay, 5.75% due 6/1/2018 | Aa1/AAA | 1,460,000 | 1,548,330 | |||||
Florida Housing Finance Agency, 3.90% due 12/1/2007 (Multi Family Guaranteed Mortgage; LOC: Wachovia Bank) | NR/AA- | 1,000,000 | 1,000,440 | |||||
Florida Housing Finance Corp., 5.40% due 4/1/2014 pre-refunded 10/1/2010 (Augustine Club Apartments; Insured: MBIA) | Aaa/NR | 415,000 | 444,067 | |||||
Florida Housing Finance Corp. Homeowner Mortgage, 4.80% due 1/1/2016 | Aa1/AA+ | 300,000 | 309,159 | |||||
Florida Municipal Loan Council, 5.00% due 10/1/2024 (Insured: MBIA) | NR/AAA | 2,235,000 | 2,333,407 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2018 (South Florida Evaluation Treatment) | NR/AA+ | 2,090,000 | 2,201,690 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2019 (South Florida Evaluation Treatment) | NR/AA+ | 2,255,000 | 2,364,570 | |||||
Florida State Department of Environmental Protection, 5.00% due 7/1/2017 (Florida Forever; Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,072,420 | |||||
Grand Haven Community Development District Florida Special Assessment, 6.90% due 5/1/2019 | NR/NR | 275,000 | 275,300 | |||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | A1/A+ | 1,100,000 | 1,138,566 | |||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | A1/A+ | 1,000,000 | 1,035,060 | |||||
Hillsborough County Assessment Capacity, 5.00% due 3/1/2017 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,062,590 | |||||
Hillsborough County Industrial Development Authority PCR, 5.10% due 10/1/2013 (Tampa Electric Co.) | Baa2/BBB- | 1,000,000 | 1,025,010 | |||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2021 (Insured: XLCA) | Aaa/AAA | 3,000,000 | 3,139,920 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Jacksonville HFA Hospital, 5.75% due 8/15/2014 pre-refunded 8/15/2011 | Aa2/NR | $ | 1,000,000 | $ | 1,048,250 | |||
Jacksonville Water & Sewer District COP, 5.00% due 10/1/2020 pre-refunded 10/1/2008 | Aaa/AAA | 1,000,000 | 1,011,060 | |||||
Manatee County Florida, 5.00% due 10/1/2016 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,067,200 | |||||
Marion County Hospital District, 5.00% due 10/1/2022 | A2/NR | 1,000,000 | 1,018,930 | |||||
Miami, 5.375% due 9/1/2015 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,075,220 | |||||
Miami Dade County School Board COP, 5.00% due 10/1/2021 (Insured: AMBAC) | Aaa/AAA | 3,035,000 | 3,256,798 | |||||
Miami Dade County Special Housing, 5.80% due 10/1/2012 (HUD Section 8) | Baa3/NR | 645,000 | 664,279 | |||||
North Miami HFA, 6.00% due 8/15/2024 (Catholic Health Services Obligation Group; LOC: Suntrust Bank) | Aa2/NR | 300,000 | 307,725 | |||||
Orange County HFA, 6.25% due 10/1/2013 (Orlando Regional Hospital; Insured: MBIA) | Aaa/AAA | 440,000 | 496,668 | |||||
Orange County HFA, 5.125% due 6/1/2014 (Mayflower Retirement; Insured: Radian) | NR/AA | 1,000,000 | 1,021,140 | |||||
Orange County HFA, 6.25% due 10/1/2016 (Orlando Regional Hospital; Insured: MBIA) | Aaa/AAA | 280,000 | 322,781 | |||||
Orange County HFA, 6.375% due 11/15/2020 pre-refunded 11/15/10 (Adventist Health Systems) | A1/NR | 1,000,000 | 1,090,040 | |||||
Orange County School Board COP, 6.00% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 1,580,000 | 1,611,331 | |||||
Orange County School Board COP, 5.50% due 8/1/2017 pre-refunded 8/01/2012 (Insured: MBIA) | Aaa/AAA | 735,000 | 797,181 | |||||
Port Everglades Authority, 5.00% due 9/1/2016 (Insured: FSA) | Aaa/AAA | 5,635,000 | 5,649,369 | |||||
South Miami HFA, 5.00% due 8/15/2022 (Baptist Health Group) | Aa3/AA- | 1,500,000 | 1,533,975 | |||||
St. John’s County Industrial Development Authority, 5.50% due 8/1/2014 (Presbyterian Retirement) | NR/NR | 1,000,000 | 1,054,530 | |||||
Tampa Health Systems, 5.50% due 11/15/2013 (Baycare Health Group; Insured: MBIA) | Aaa/AAA | 1,050,000 | 1,147,051 | |||||
University of Central Florida COP Convocation Corp., 5.00% due 10/1/2019 (Insured: FGIC) | Aaa/AAA | 1,135,000 | 1,194,860 | |||||
USF Financing Corp. COP Master Lease Program, 5.00% due 7/1/2018 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,052,100 | |||||
GEORGIA — 1.12% | ||||||||
Atlanta Tax Allocation, 5.00% due 12/1/2015 (Atlantic Station; Insured: Assured Guaranty) | Aaa/AAA | 4,120,000 | 4,423,067 | |||||
Georgia Municipal Electric Authority Power 2005, 10.00% due 1/1/2010 | A1/A+ | 230,000 | 261,414 | |||||
Main Street Natural Gas Inc., 5.50% due 9/15/2022 (Georgia Gas) (1) | Aa3/AA- | 1,000,000 | 1,060,900 | |||||
HAWAII — 0.42% | ||||||||
Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Kapiolani Health Care; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,178,760 | |||||
IDAHO — 0.39% | ||||||||
Boise City IDRB Corp., 5.00% due 5/15/2020 (Western Trailer Co.; LOC: Wells Fargo) | Aaa/NR | 2,000,000 | 2,018,560 | |||||
ILLINOIS — 8.72% | ||||||||
Champaign County Community School District GO, 0% due 1/1/2011 pre-refunded 1/1/2010 | Aaa/AAA | 800,000 | 696,272 | |||||
Chicago Housing Authority, 5.00% due 7/1/2008 (ETM) | Aaa/NR | 3,020,000 | 3,053,462 | |||||
Chicago Midway Airport Second Lien, 5.00% due 1/1/2019 (Insured: AMBAC) | Aaa/AAA | 1,210,000 | 1,250,051 | |||||
Chicago Tax Increment, 6.25% due 11/15/2013 (Near South Redevelopment; Insured: ACA) | NR/A | 1,500,000 | 1,598,025 | |||||
Chicago Tax Increment Allocation, 6.50% due 12/1/2008 (Sub Central Loop Redevelopment; Insured ACA) | NR/A | 1,500,000 | 1,537,830 | |||||
Chicago Tax Increment Allocation, 5.30% due 1/1/2014 (Lincoln Belmont; Insured: ACA) | NR/A | 2,285,000 | 2,321,720 | |||||
Cook County Capital Improvement GO, 5.50% due 11/15/2008 (Insured: FGIC) | Aaa/AAA | 500,000 | 505,755 | |||||
Cook County School District GO, 0% due 12/1/2022 | NR/NR | 2,000,000 | 1,011,980 | |||||
Illinois DFA, 6.00% due 11/15/2012 (Adventist Health Group; Insured: MBIA) | Aaa/AAA | 2,860,000 | 3,068,465 | |||||
Illinois DFA Community Rehab Providers A, 5.90% due 7/1/2009 | NR/BBB | 325,000 | 329,517 | |||||
Illinois Educational Facilities Authority, 5.50% due 5/15/2018 (Midwestern State University; Insured: ACA) | NR/A | 1,500,000 | 1,521,090 | |||||
Illinois Educational Facilities Authority, 4.75% due 11/1/2036 put 11/1/2016 (Field Museum) | A2/A | 1,160,000 | 1,185,740 | |||||
Illinois Finance Authority, 5.00% due 8/1/2022 (Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,051,530 | |||||
Illinois Finance Authority, 5.00% due 2/1/2027 (Newman Foundation; Insured: Radian) | NR/AA | 1,220,000 | 1,221,720 | |||||
Illinois HFA, 6.00% due 7/1/2011 (Loyola University Health Systems; Insured: MBIA) | Aaa/AAA | 1,370,000 | 1,482,518 | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola University Health Systems; Insured: MBIA) (ETM) | Aaa/AAA | 230,000 | 253,821 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola University Health Systems; Insured: MBIA) | Aaa/AAA | $ | 1,080,000 | $ | 1,185,916 | |||
Illinois HFA, 6.25% due 11/15/2019 pre-refunded 11/15/2009 (OSF Healthcare) | A2/A | 1,250,000 | 1,331,000 | |||||
Illinois HFA, 5.70% due 2/20/2021 (Midwest Care Center; Collateralized: GNMA) | Aaa/NR | 950,000 | 1,002,972 | |||||
Illinois HFA Series A, 5.75% due 8/15/2013 pre-refunded 8/15/2009 (Children’s Memorial Hospital; Insured: AMBAC) | Aaa/AAA | 1,900,000 | 1,994,164 | |||||
Illinois University, 5.25% due 1/15/2018 (UIC South Campus Development; Insured: FGIC) | Aaa/AAA | 1,205,000 | 1,293,592 | |||||
Melrose Park Tax Increment, 6.50% due 12/15/2015 (Insured: FSA) | Aaa/AAA | 1,015,000 | 1,101,265 | |||||
Sangamon County School District, 5.875% due 8/15/2018 (Hay Edwards; Insured: ACA) | NR/A | 2,400,000 | 2,516,232 | |||||
Sherman Mortgage, 6.10% due 10/1/2014 (Villa Vianney Health Care; Collateralized: GNMA) | NR/AAA | 1,170,000 | 1,231,004 | |||||
Sherman Mortgage, 6.20% due 10/1/2019 (Villa Vianney Health Care; Collateralized: GNMA) | NR/AAA | 1,600,000 | 1,679,600 | |||||
Southern Illinois University, 0% due 4/1/2014 (Insured: MBIA) | Aaa/AAA | 1,425,000 | 1,106,142 | |||||
Southwestern Illinois Development Authority, 0% due 12/1/2024 (Local Govt.; Insured: FSA) | NR/AAA | 3,500,000 | 1,562,820 | |||||
Tazewell County School District No 51, 9.00% due 12/1/2024 (Insured: FGIC) | Aaa/NR | 1,205,000 | 1,825,912 | |||||
University of Illinois, 0% due 4/1/2014 (Insured: MBIA) | Aaa/AAA | 1,590,000 | 1,235,001 | |||||
Will & Kendall Counties Community, 5.125% due 1/1/2014 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,043,930 | |||||
Will County Community School District 365-U, 0% due 11/1/2011 (Insured: FSA) | Aaa/AAA | 3,000,000 | 2,572,800 | |||||
INDIANA — 5.91% | ||||||||
Allen County Economic Development, 5.80% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 895,000 | 922,709 | |||||
Allen County Economic Development, 5.75% due 12/30/2015 (Indiana Institute of Technology) | NR/NR | 1,355,000 | 1,440,839 | |||||
Allen County Jail Building Corp. GO, 5.00% due 4/1/2018 (Insured: XLCA) | Aaa/AAA | 2,495,000 | 2,650,863 | |||||
Allen County Redevelopment District Tax, 5.00% due 11/15/2018 | A3/NR | 1,560,000 | 1,635,660 | |||||
Boone County Hospital Association, 5.625% due 1/15/2015 pre-refunded 7/15/2011 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,071,950 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2016 (Performing Arts Center) | Aa2/AA | 1,730,000 | 1,217,038 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2021 (Performing Arts Center) | Aa2/AA | 2,000,000 | 1,063,560 | |||||
Dyer Redevelopment Authority, 6.40% due 7/15/2015 pre-refunded 7/15/2009 | NR/A- | 1,515,000 | 1,604,476 | |||||
Dyer Redevelopment Authority, 6.50% due 7/15/2016 pre-refunded 7/15/2009 | NR/A- | 1,910,000 | 2,026,090 | |||||
East Chicago Elementary School Building First Mortgage, 6.25% due 7/5/2008 (State Aid Withholding) | NR/A | 180,000 | 182,291 | |||||
Fishers Redevelopment Authority, 5.25% due 2/1/2018 (Insured: XLCA) | Aaa/AAA | 1,500,000 | 1,621,740 | |||||
Fishers Redevelopment Authority, 5.25% due 2/1/2020 (Insured: XLCA) | Aaa/AAA | 1,025,000 | 1,100,768 | |||||
Goshen Chandler School Building, 0% due 1/15/2011 (Insured: MBIA) | Aaa/AAA | 1,020,000 | 901,231 | |||||
Huntington Economic Development, 6.40% due 5/1/2015 (United Methodist Memorial) | NR/NR | 1,000,000 | 1,023,470 | |||||
Indiana Bond Bank Special Programs, 5.25% due 4/1/2023 (Hendricks Regional; Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,189,620 | |||||
Indiana Health Facility Hospital, 5.75% due 9/1/2015 (Methodist Hospital) (ETM) | NR/AAA | 575,000 | 581,032 | |||||
Indiana State Educational Facilities Authority, 5.65% due 10/1/2015 (University of Indianapolis) | NR/A- | 1,065,000 | 1,105,161 | |||||
Indiana State Educational Facilities Authority, 5.70% due 10/1/2016 (University of Indianapolis) | NR/A- | 1,025,000 | 1,063,981 | |||||
Indianapolis Local Public Improvement Bond Bank, 0% due 7/1/2009 (ETM) | Aa2/AA- | 740,000 | 693,439 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2017 (146th Street Extension) | NR/A+ | 1,000,000 | 1,050,230 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2020 (146th Street Extension) | NR/A+ | 1,000,000 | 1,039,040 | |||||
Vanderburgh County Redevelopment District Tax Increment, 5.00% due 2/1/2020 | NR/A- | 1,000,000 | 1,025,810 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2012 pre-refunded 1/15/2012 | NR/AA | 1,200,000 | 1,301,244 | |||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2017 (Insured: FGIC) | Aaa/AAA | 1,685,000 | 1,829,337 | |||||
IOWA — 1.89% | ||||||||
Coralville COP, 5.25% due 6/1/2022 | A2/NR | 2,980,000 | 3,084,717 | |||||
Iowa Finance Authority, 5.75% due 12/1/2015 (Trinity Health) | Aa2/AA- | 1,250,000 | 1,315,613 | |||||
Iowa Finance Authority, 6.00% due 12/1/2018 (Catholic Health Initiatives) | Aa2/AA | 2,000,000 | 2,113,680 | |||||
Iowa Finance Authority Health Care Facilities, 6.00% due 7/1/2013 (Genesis Medical Center) | A1/NR | 1,000,000 | 1,049,270 | |||||
Iowa Finance Authority Hospital Facility, 6.00% due 7/1/2012 (Trinity Regional Hospital; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,058,210 | |||||
Iowa Finance Authority Hospital Facility, 6.75% due 2/15/2016 pre-refunded 2/15/2010 (Iowa Health Services) | Aa3/NR | 1,000,000 | 1,081,340 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
KANSAS — 1.31% | ||||||||
Olathe Tax Increment Special Obligation, 5.45% due 9/1/2022 (West Village Center) | NR/NR | $ | 1,155,000 | $ | 1,138,726 | |||
Wichita Hospital Improvement, 6.75% due 11/15/2019 (Via Christi Health System) | NR/A+ | 4,200,000 | 4,452,504 | |||||
Wyandotte County School District 204, 5.00% due 9/1/2014 (Insured: FGIC) | Aaa/NR | 1,030,000 | 1,112,225 | |||||
KENTUCKY — 0.98% | ||||||||
Kentucky Finance EDA, 5.85% due 10/1/2015 pre-refunded 10/1/2013 (Norton Healthcare; Insured: MBIA) | Aaa/AAA | 1,335,000 | 1,502,916 | |||||
Kentucky Finance EDA, 5.85% due 10/1/2015 (Norton Healthcare; Insured: MBIA) | Aaa/AAA | 2,665,000 | 2,958,310 | |||||
Wilmore Housing Facilities, 5.55% due 7/1/2013 (Wesley Methodist Village; LOC: Allied Irish Bank plc) | NR/NR | 530,000 | 544,914 | |||||
LOUISIANA — 1.88% | ||||||||
Jefferson Sales Tax District, 5.50% due 12/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,595,000 | 1,631,876 | |||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2021 (Archdiocese of New Orleans; Insured: CIFG) | Aaa/AAA | 980,000 | 1,030,147 | |||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2023 (Archdiocese of New Orleans; Insured: CIFG) | Aaa/AAA | 1,000,000 | 1,043,890 | |||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | Baa3/BBB | 3,000,000 | 3,132,270 | |||||
Orleans Levee District Trust Receipts, 5.95% due 11/1/2007 (Insured: FSA) | Aaa/AAA | 360,000 | 360,752 | |||||
St. Tammany Parish Sales Tax District No. 03 Sales & Use Tax, 5.00% due 6/1/2019 (Insured: CIFG) | NR/AAA | 1,300,000 | 1,388,452 | |||||
St. Tammany Parish Sales Tax District No. 03 Sales & Use Tax, 5.00% due 6/1/2020 (Insured: CIFG) | NR/AAA | 1,000,000 | 1,063,820 | |||||
MASSACHUSETTS — 0.29% | ||||||||
Massachusetts Housing Finance Agency, 6.125% due 12/1/2011 (Insured: MBIA) (AMT) | Aaa/AAA | 950,000 | 967,708 | |||||
Massachusetts Housing Finance Agency Housing Development, 5.05% due 6/1/2010 (Insured: MBIA) (AMT) | Aaa/AAA | 515,000 | 523,704 | |||||
MICHIGAN — 2.18% | ||||||||
Kalamazoo Hospital Finance Authority, 6.25% due 6/1/2014 (Borgess Medical Center) (ETM) | Aaa/AAA | 650,000 | 746,376 | |||||
Kent Hospital Finance Authority, 7.25% due 1/15/2013 (Spectrum Health; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,085,220 | |||||
Michigan Public Educational Facilities Authority, 5.50% due 9/1/2022 (Black River School) (2) | NR/NR | 1,110,000 | 1,085,647 | |||||
Michigan State Building Authority Facilities Program, 5.25% due 10/15/2017 (Insured: FSA) | Aaa/AAA | 2,450,000 | 2,636,175 | |||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Obligation Group A) | A2/A | 3,650,000 | 3,694,858 | |||||
Michigan State Hospital Finance Authority, 5.375% due 11/15/2033 put 11/15/2007 (Ascension Health Credit) | Aa2/AA | 1,000,000 | 1,001,490 | |||||
Southfield Economic Development Corp., 7.25% due 12/1/2010 (N.W. 12 Limited Partnership Transcon Builders) | NR/NR | 965,000 | 964,961 | |||||
MINNESOTA — 0.75% | ||||||||
Minneapolis St. Paul Health, 6.00% due 12/1/2018 (Healthpartners Obligation Group) | Baa1/BBB | 1,000,000 | 1,063,390 | |||||
Southern Minnesota Municipal Power Agency Supply, 5.75% due 1/1/2018 pre-refunded to various dates (Insured: MBIA) | Aaa/AAA | 700,000 | 776,930 | |||||
St. Paul Housing & Redevelopment Authority Health Care Facility, 5.25% due 5/15/2020 (Healthpartners Obligation Group) | Baa1/BBB | 1,965,000 | 2,012,121 | |||||
MISSISSIPPI — 1.06% | ||||||||
Mississippi Development Bank Special Obligation, 5.00% due 7/1/2022 (Canton Public Improvement) | NR/NR | 1,935,000 | 1,895,313 | |||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply, 5.00% due 3/1/2018 (Insured: XLCA) | Aaa/AAA | 920,000 | 972,946 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply, 5.00% due 3/1/2020 (Insured: XLCA) | Aaa/AAA | $ | 1,000,000 | $ | 1,046,840 | |||
Mississippi Higher Educational Authority, 7.50% due 9/1/2009 (Guaranty: Student Loans) (AMT) | A2/NR | 1,500,000 | 1,503,690 | |||||
MISSOURI — 1.54% | ||||||||
Kansas City Tax Increment Financing Commission, 5.00% due 3/1/2012 (Maincor) | NR/NR | 600,000 | 596,454 | |||||
Missouri Development Finance Board, 5.00% due 4/1/2019 (Eastland Center) | NR/A+ | 1,000,000 | 1,032,080 | |||||
Missouri Development Finance Board, 5.00% due 4/1/2021 (Eastland Center) | NR/A+ | 2,000,000 | 2,045,580 | |||||
Missouri Development Finance Board Healthcare, 5.40% due 11/1/2018 (Lutheran Home for the Aged; LOC: Commerce Bank) | Aa2/NR | 2,025,000 | 2,084,697 | |||||
Springfield Public Utilities, 5.00% due 12/1/2013 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,150,480 | |||||
MONTANA — 0.27% | ||||||||
Montana Facilities Financing Authority, 5.00% due 1/1/2022 (St. Luke Community Healthcare) | Aa3/NR | 1,345,000 | 1,379,997 | |||||
NEBRASKA — 0.17% | ||||||||
Madison County Hospital Authority 1, 5.50% due 7/1/2014 (Faith Regional Health Services; Insured: Radian) | NR/AA | 845,000 | 881,005 | |||||
NEVADA — 0.86% | ||||||||
Las Vegas Special Improvement District, 5.375% due 6/1/2013 (Insured: FSA) | Aaa/AAA | 1,135,000 | 1,168,948 | |||||
Reno Sparks Indian Colony, 5.00% due 6/1/2021 (LOC: U.S. Bank NA) | NR/NR | 1,000,000 | 1,013,000 | |||||
Washoe County Reno Sparks GO, 0% due 7/1/2011 (Insured: FSA) | Aaa/AAA | 2,600,000 | 2,257,008 | |||||
NEW HAMPSHIRE — 1.57% | ||||||||
Manchester Housing & Redevelopment Authority, 0% due 1/1/2016 (Insured: Radian ACA) | Baa3/AA | 4,990,000 | 3,321,993 | |||||
New Hampshire Health & Education Facilities, 5.25% due 10/1/2023 (Southern New Hampshire Medical Center) | NR/A- | 1,000,000 | 1,028,220 | |||||
New Hampshire PCR, 5.375% due 5/1/2014 (Central Maine Power Co.) | A3/BBB+ | 3,500,000 | 3,705,590 | |||||
NEW JERSEY — 0.30% | ||||||||
New Jersey EDA, 7.50% due 12/1/2019 (Spectrum for Living Development) | NR/NR | 200,000 | 200,612 | |||||
New Jersey EDA School Facilities Construction, 5.00% due 3/1/2019 | A1/AA- | 1,280,000 | 1,349,542 | |||||
NEW MEXICO — 1.00% | ||||||||
Albuquerque Airport, 5.00% due 7/1/2008 (Insured: AMBAC) (AMT) | Aaa/AAA | 1,000,000 | 1,010,250 | |||||
Farmington PCR, 4.00% due 9/1/2024 put 10/1/2007 (LOC: Barclays Bank) (daily demand notes) | P1/A-1+ | 500,000 | 500,000 | |||||
Sandoval County Incentive Payment, 5.00% due 6/1/2020 (Intel Corp.) | NR/A+ | 2,000,000 | 2,090,580 | |||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation) | NR/NR | 1,515,000 | 1,528,332 | |||||
NEW YORK — 0.80% | ||||||||
Nassau Health Care Corp., 6.00% due 8/1/2011 pre-refunded 8/1/2009 | Aaa/AAA | 1,000,000 | 1,062,920 | |||||
New York City Industrial Development Agency, 5.00% due 6/1/2010 (Lycee Francais De New York; Insured: ACA) | NR/A | 1,175,000 | 1,193,130 | |||||
New York City Trust Cultural Resources, 5.75% due 7/1/2015 (Museum of American Folk Art; Insured: ACA) | NR/A | 875,000 | 923,571 | |||||
New York State Dormitory Authority, 5.00% due 7/1/2017 (Bishop Henry B. Hucles Nursing; Insured: SONYMA) | Aa1/NR | 850,000 | 909,959 | |||||
NORTH CAROLINA — 1.10% | ||||||||
Charlotte-Mecklenberg Hospital Authority, 5.00% due 1/15/2022 | Aa3/AA- | 2,000,000 | 2,050,700 |
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Franklin County COP, 5.00% due 9/1/2022 (Public Facilities; Insured: MBIA) | Aaa/AAA | $ | 1,500,000 | $ | 1,580,340 | |||
North Carolina Housing Finance Agency SFMR, 6.50% due 9/1/2026 | Aa2/AA | 940,000 | 960,849 | |||||
North Carolina Medical Care, 5.00% due 9/1/2013 (Rowan Regional Medical Center; Insured: FSA & FHA 242) | Aaa/AAA | 1,000,000 | 1,067,090 | |||||
NORTH DAKOTA — 0.46% | ||||||||
North Dakota State Housing Finance Agency, 5.20% due 7/1/2022 | Aa1/NR | 1,000,000 | 1,022,780 | |||||
North Dakota State Housing Finance Agency Home Mortgage, 5.70% due 7/1/2030 | Aa1/NR | 310,000 | 312,185 | |||||
Ward County Health Care Facilities, 5.125% due 7/1/2021 (Trinity Obligated Group) | NR/BBB+ | 1,000,000 | 1,012,950 | |||||
OHIO — 2.69% | ||||||||
Butler County Transportation Improvement, 6.00% due 4/1/2010 pre-refunded 4/1/2008 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,032,290 | |||||
Central Ohio Solid Waste Authority, 5.00% due 12/1/2008 | Aa2/AA+ | 2,530,000 | 2,574,073 | |||||
Cleveland Cuyahoga County Development Bond Fund A, 6.25% due 5/15/2016 (LOC: FifthThird Bank) | NR/NR | 1,255,000 | 1,329,961 | |||||
Cuyahoga County Hospital, 4.75% due 2/15/2008 (Metrohealth Systems; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,004,730 | |||||
Franklin County Health Care, 6.00% due 11/1/2010 (Heinzerling Foundation; LOC: Banc One) | AAA/NR | 780,000 | 781,505 | |||||
Hamilton Wastewater Systems, 5.25% due 10/1/2017 (Insured: FSA) | Aaa/NR | 1,500,000 | 1,644,840 | |||||
Marysville School District COP, 5.25% due 12/1/2017 pre-refunded 6/1/2015 (School Facilities; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,197,240 | |||||
North Ridgeville Economic Development, 0% due 2/1/2015 (Collateralized: FHA) | NR/AAA | 300,000 | 164,316 | |||||
Ohio State Higher Educational Facilities, 5.05% due 7/1/2037 put 7/1/2016 (Kenyon College) | A1/A+ | 2,200,000 | 2,319,218 | |||||
Reynoldsburg Health Care Facilities Bonds, 5.70% due 10/20/2012 (Collateralized: GNMA) | Aaa/NR | 760,000 | 783,796 | |||||
OKLAHOMA — 2.18% | ||||||||
Alva Hospital Authority Hospital Sales Tax, 5.25% due 6/1/2025 (Insured: Radian) | Aa3/AA | 1,505,000 | 1,527,665 | |||||
Comanche County Hospital Authority, 5.25% due 7/1/2019 (Insured: Radian) | Aa3/AA | 3,345,000 | 3,456,623 | |||||
Oklahoma City Municipal Improvement Authority, 0% due 7/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,020,000 | 992,848 | |||||
Oklahoma City Municipal Water & Sewer, 0% due 7/1/2011 (Insured: AMBAC) | Aaa/AAA | 1,125,000 | 978,030 | |||||
Oklahoma City Municipal Water & Sewer, 0% due 7/1/2013 (Insured: AMBAC) | Aaa/AAA | 1,485,000 | 1,192,232 | |||||
Oklahoma DFA Hospital Association Pooled Hospital, 5.40% due 6/1/2013 (Insured: AMBAC) | Aaa/AAA | 825,000 | 871,662 | |||||
Tulsa Industrial Authority, 5.00% due 12/15/2015 (St. Francis Health Systems) | Aa3/AA | 750,000 | 796,140 | |||||
Tulsa Industrial Authority, 6.00% due 10/1/2016 (University of Tulsa; Insured: MBIA) | Aaa/AAA | 1,250,000 | 1,400,925 | |||||
OREGON — 0.48% | ||||||||
Forest Grove Campus Improvement, 6.00% due 5/1/2015 pre-refunded 5/1/2010 (Pacific University; Insured: Radian) | NR/AA | 800,000 | 848,296 | |||||
Oregon State Housing & Community Services Department SFMR, 5.35% due 7/1/2018 (AMT) | Aa2/NR | 620,000 | 627,254 | |||||
Portland Housing Authority, 4.75% due 5/1/2022 (Yards Union Station) (AMT) | Aa2/NR | 1,000,000 | 985,470 | |||||
PENNSYLVANIA — 1.34% | ||||||||
Allegheny County Hospital Development, 6.50% due 5/1/2012 pre-refunded 5/1/2010 (South Hills Health Systems) | Baa1/NR | 1,400,000 | 1,497,048 | |||||
Carbon County Industrial Development Authority, 6.65% due 5/1/2010 (Panther Creek Partners) | NR/BBB- | 1,140,000 | 1,183,331 | |||||
Chartiers Valley Industrial & Community Development Authority, 5.75% due 12/1/2022 (Asbury Health Center) | NR/NR | 900,000 | 906,930 | |||||
Lancaster County, 0% due 5/1/2014 (Insured: FGIC) | Aaa/NR | 795,000 | 611,196 | |||||
Lancaster County, 0% due 5/1/2015 (Insured: FGIC) | Aaa/NR | 800,000 | 579,600 | |||||
Lehigh County GO, 6.00% due 11/15/2007 (Good Shepard Rehab. Hospital; Insured: AMBAC) | Aaa/AAA | 785,000 | 787,473 |
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Pennsylvania Higher Education University, 0% due 7/1/2020 (Insured: AMBAC) | Aaa/AAA | $ | 2,032,839 | $ | 794,840 | |||
Pennsylvania State Higher Educational Facilities, 5.60% due 11/15/2009 (Allegheny United Hospitals; Insured: MBIA) | Aaa/AAA | 500,000 | 521,355 | |||||
RHODE ISLAND — 0.69% | ||||||||
Rhode Island Health & Education Building Corp., 5.00% due 3/15/2014 (Salve Regina University; Insured: Radian) | NR/AA | 1,065,000 | 1,114,831 | |||||
Rhode Island Health & Education Building Corp., 6.00% due 8/1/2014 (Credit Support: FHA) | NR/AA | 1,000,000 | 1,046,220 | |||||
Rhode Island Health & Education Building Corp. Hospital Financing, 5.25% due 7/1/2015 (Memorial Hospital; LOC: Fleet Bank) | NR/AA+ | 1,325,000 | 1,400,976 | |||||
SOUTH CAROLINA — 5.71% | ||||||||
Berkeley County School District Installment Lease, 5.00% due 12/1/2019 | A3/A- | 2,000,000 | 2,092,740 | |||||
Charleston Educational Excellence Financing Corp., 5.25% due 12/1/2020 (Charleston County School District) | A1/AA- | 1,855,000 | 1,970,010 | |||||
Darlington County IDRB, 6.00% due 4/1/2026 (Sonoco Products Co.) (AMT) | Baa1/BBB+ | 3,255,000 | 3,265,774 | |||||
Greenwood School Facilities, Inc., 5.00% due 12/1/2025 (Greenwood School District 50; Insured: Assured Guaranty) | Aaa/AAA | 2,400,000 | 2,508,936 | |||||
Lexington One School Facilities Corp. School District 1, 5.00% due 12/1/2019 | A1/NR | 1,000,000 | 1,051,000 | |||||
Lexington One School Facilities Corp. School District 1, 5.25% due 12/1/2021 | A1/NR | 1,700,000 | 1,782,739 | |||||
Scago Educational Facilities Corp., 5.00% due 12/1/2017 (Colleton School District; Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,073,890 | |||||
Scago Educational Facilities Corp. School District 5 Spartanburg County, 5.00% due 4/1/2019 (Insured: FSA) | Aaa/AAA | 2,740,000 | 2,893,111 | |||||
Scago Educational Facilities Corp. School District 5 Spartanburg County, 5.00% due 4/1/2021 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,047,690 | |||||
South Carolina Housing Finance & Development Authority, 5.30% due 7/1/2023 | Aa1/NR | 1,000,000 | 1,025,970 | |||||
South Carolina Jobs EDA, 5.50% due 4/1/2027 put 10/5/2007 (Episcopal Convention Center; Insured: Radian) (weekly demand notes) | Aa3/A-1+ | 7,610,000 | 7,610,000 | |||||
Sumter School Facilities Inc. Sumter County School District 2, 5.00% due 12/1/2021 (Insured: Assured Guaranty) | Aaa/AAA | 2,855,000 | 3,020,533 | |||||
TENNESSEE — 2.30% | ||||||||
Knox County Health, 4.90% due 6/1/2031 put 6/1/2011 (Collateralized: FNMA) | NR/AAA | 1,995,000 | 2,072,007 | |||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2023 | Aa3/AA- | 2,500,000 | 2,513,150 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2023 | Aa3/AA- | 7,000,000 | 7,229,250 | |||||
TEXAS — 16.12% | ||||||||
Bexar County Health Facilities Development Corp., 6.125% due 7/1/2022 pre-refunded 7/1/2012 (Army Retirement Residence) | NR/BBB | 1,250,000 | 1,395,037 | |||||
Bexar County Health Facilities Development Corp., 6.10% due 11/15/2023 (Incarnate Word Health Services; Insured: FSA) (ETM) | Aaa/AAA | 1,000,000 | 1,039,460 | |||||
Bexar County Health Facilities Development Corp., 5.00% due 7/1/2027 (Army Retirement Residence) | NR/BBB | 1,000,000 | 970,600 | |||||
Bexar County Housing Finance Corp., 5.40% due 8/1/2012 (Dymaxion & Marrach Park Apartments; Insured: MBIA) | Aaa/NR | 755,000 | 781,697 | |||||
Bexar County Housing Finance Corp., 5.875% due 4/1/2014 (Honey Creek Apartments; Insured: MBIA) | Aaa/NR | 975,000 | 1,022,551 | |||||
Bexar County Housing Finance Corp., 5.50% due 1/1/2016 (American Opportunity Housing & Colinas; Insured: MBIA) | Aaa/NR | 600,000 | 633,774 |
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Bexar County Housing Finance Corp., 6.125% due 4/1/2020 (Honey Creek Apartments; Insured: MBIA) | Aaa/NR | $ | 800,000 | $ | 827,544 | |||
Bexar County Housing Finance Corp., 5.95% due 8/1/2020 (Dymaxion & Marrach Park Apartments; Insured: MBIA) | Aaa/NR | 1,270,000 | 1,339,291 | |||||
Bexar County Housing Finance Corp., 5.70% due 1/1/2021 (American Opportunity Housing & Colinas; Insured: MBIA) | Aaa/NR | 1,035,000 | 1,089,689 | |||||
Bexar County Housing Finance Corp., 6.50% due 12/1/2021 (American Opportunity Housing-Waterford) | Baa2/NR | 2,000,000 | 2,107,600 | |||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2021 (Insured: XLCA) | Aaa/AAA | 1,300,000 | 1,372,956 | |||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2022 (Insured: XLCA) | Aaa/AAA | 2,300,000 | 2,417,967 | |||||
Birdville ISD, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 2,800,000 | 2,370,256 | |||||
Carroll ISD, 0% due 2/15/2011 pre-refunded 2/15/2008 (Guaranty: PSF) | �� | Aaa/AAA | 785,000 | 674,072 | ||||
Carroll ISD, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 345,000 | 295,969 | |||||
Cedar Park Improvement, 5.00% due 2/15/2016 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,063,190 | |||||
Coppell ISD, 0% due 8/15/2013 (Insured: PSF-GTD) | NR/AAA | 1,495,000 | 1,111,488 | |||||
Coppell ISD, 0% due 8/15/2013 pre-refunded 8/15/2009 (Insured: PSF-GTD) | NR/AAA | 3,505,000 | 2,615,992 | |||||
Duncanville ISD, 0% due 2/15/2016 pre-refunded 2/15/2012 (Insured: PSF) | Aaa/AAA | 2,985,000 | 2,009,532 | |||||
Duncanville ISD, 0% due 2/15/2016 (Insured: PSF) | Aaa/AAA | 15,000 | 9,960 | |||||
El Paso ISD, 0% due 8/15/2010 (Guaranty: PSF) | Aaa/AAA | 3,750,000 | 3,270,825 | |||||
El Paso ISD, 0% due 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 2,500,000 | 2,062,525 | |||||
Ennis ISD, 0% due 8/15/2012 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,625,000 | 1,322,068 | |||||
Ennis ISD, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/NR | 835,000 | 674,747 | |||||
Ennis ISD, 0% due 8/15/2013 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,645,000 | 1,256,023 | |||||
Ennis ISD, 0% due 8/15/2013 (Guaranty: PSF) | Aaa/NR | 845,000 | 640,831 | |||||
Ennis ISD, 0% due 8/15/2014 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,670,000 | 1,195,520 | |||||
Ennis ISD, 0% due 8/15/2014 (Guaranty: PSF) | Aaa/NR | 855,000 | 607,939 | |||||
Gulf Coast Center, 6.75% due 9/1/2020 (Mental Health Retardation Center) | NR/BBB | 1,320,000 | 1,409,298 | |||||
Hays Consolidated C, 0% due 8/15/2013 pre-refunded 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 6,245,000 | 4,844,122 | |||||
Laredo Sports Venue Sales Improvement, 5.00% due 3/15/2018 (Insured: AMBAC) | Aaa/AAA | 2,040,000 | 2,166,154 | |||||
Lewisville Combination Contract Special Assessment District 2, 4.75% due 9/1/2012 (Insured: ACA) | NR/A | 2,055,000 | 2,081,016 | |||||
Mesquite ISD, 0% due 8/15/2012 (Guaranty: PSF) | NR/AAA | 1,420,000 | 1,145,897 | |||||
Midlothian ISD, 0% due 2/15/2012 (ETM) | Aaa/NR | 500,000 | 423,260 | |||||
Midlothian ISD, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/NR | 500,000 | 423,260 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2012 (Insured: Radian) | Aa3/AA | 735,000 | 772,331 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2013 (Insured: Radian) | Aa3/AA | 500,000 | 524,775 | |||||
Richardson Improvement, 5.00% due 2/15/2019 (Insured: MBIA) | Aaa/AAA | 2,145,000 | 2,278,934 | |||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2016 | Baa2/NR | 3,000,000 | 3,134,160 | |||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2021 | Baa2/NR | 675,000 | 703,060 | |||||
San Antonio Hotel Occupancy, 5.00% due 8/15/2034 put 8/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,650,000 | 1,671,070 | |||||
Stafford Economic Development, 6.00% due 9/1/2017 (Insured: FGIC) | Aaa/AAA | 1,775,000 | 2,033,866 | |||||
Tarrant County Health Facilities, 6.625% due 11/15/2020 pre-refunded 11/15/2010 (Adventist/Sunbelt) | A1/NR | 3,500,000 | 3,843,000 | |||||
Tarrant County Limited Tax, 5.00% due 7/15/2023 | Aaa/AAA | 1,000,000 | 1,050,520 | |||||
Texarkana Health Facilities Hospital, 5.75% due 10/1/2011 (Wadely Regional Medical Center; Insured: MBIA) | Aaa/AAA | 2,500,000 | 2,696,050 | |||||
Texas City Industrial Development Corp., 7.375% due 10/1/2020 (Arco Pipe Line Company) | Aa1/AA+ | 2,450,000 | 3,114,170 | |||||
Texas State Public Finance Authority, 5.00% due 8/15/2023 (Idea Public School; Insured: ACA) | NR/A | 3,100,000 | 3,066,365 | |||||
Travis County GO, 5.25% due 3/1/2021 | Aaa/AAA | 1,000,000 | 1,081,810 | |||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2010 (Ascension Health; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,105,880 | |||||
Travis County Health Facilities Development Corp., 6.25% due 11/15/2014 pre-refunded 11/15/2009 (Ascension Health; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,192,480 | |||||
Upper Trinity Regional Water District Treated Water Supply Systems, 7.125% due 8/1/2008 (Insured: FGIC) | Aaa/AAA | 305,000 | 313,381 |
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Waco Health Facilities Development Corp., 6.00% due 11/15/2015 pre-refunded 11/15/2009 (Ascension Health) | Aa2/AAA | $ | 870,000 | $ | 922,130 | |||
Waco Health Facilities Development Corp., 6.00% due 11/15/2016 pre-refunded 11/15/2009 (Ascension Health) | Aa2/AAA | 1,050,000 | 1,112,916 | |||||
West Harris County Municipal Utility, 6.00% due 3/1/2017 (Insured: Radian) | NR/AA | 500,000 | 505,300 | |||||
UTAH — 0.64% | ||||||||
Salt Lake City Municipal Building, 5.30% due 10/15/2012 pre-refunded 10/15/2009 (Insured: AMBAC) | Aaa/AAA | 1,085,000 | 1,133,782 | |||||
Utah County Municipal Building Authority, 5.50% due 11/1/2016 pre-refunded 11/1/2011 (Insured: AMBAC) | Aaa/NR | 1,000,000 | 1,072,440 | |||||
Utah Housing Finance Authority, 6.05% due 7/1/2016 (Credit Support: FHA) | NR/AAA | 405,000 | 413,448 | |||||
Utah Housing Finance Authority SFMR D-2 Class I, 5.85% due 7/1/2015 (Credit Support: FHA) | Aa2/AA | 45,000 | 45,747 | |||||
Utah State Board of Regents Auxiliary, 5.25% due 5/1/2013 | NR/AA | 595,000 | 633,336 | |||||
VIRGINIA — 2.20% | ||||||||
Alexandria IDRB Institute for Defense Analysis, 6.00% due 10/1/2014 pre-refunded 10/1/2010 (Insured: AMBAC) | Aaa/AAA | 1,500,000 | 1,618,815 | |||||
Alexandria IDRB Institute for Defense Analysis, 6.00% due 10/1/2015 pre-refunded 10/1/2010 (Insured: AMBAC) | Aaa/AAA | 1,590,000 | 1,715,944 | |||||
Alexandria IDRB Institute for Defense Analysis, 5.90% due 10/1/2020 pre-refunded 10/1/2010 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,152,760 | |||||
Fauquier County IDRB, 5.50% due 10/1/2016 (Insured: Radian) | NR/AA | 1,000,000 | 1,058,300 | |||||
Hanover County IDRB Medical Facilities, 6.00% due 10/1/2021 (ETM) | Aaa/AAA | 795,000 | 796,534 | |||||
Norton IDRB Hospital, 6.00% due 12/1/2014 (Norton Community Hospital; Insured: ACA) | NR/A | 1,635,000 | 1,738,299 | |||||
Spotsylvania County IDRB, 6.00% due 9/1/2019 put 9/1/2008 (Walter Grinders; LOC: Deutsche Bank) (AMT) | NR/NR | 2,210,000 | 2,212,122 | |||||
WASHINGTON — 3.60% | ||||||||
Port Longview Industrial Development Corp. Solid Waste Disposal, 6.875% due 10/1/2008 (Weyerhaeuser Co.) (AMT) | NR/BBB | 1,500,000 | 1,540,995 | |||||
Skagit County Public Hospital District Capital Improvement, 5.125% due 12/1/2015 (Insured: MBIA) | Aaa/NR | 1,900,000 | 2,075,674 | |||||
Vancouver Downtown Redevelopment Senior, 5.50% due 1/1/2018 (Conference Center; Insured: ACA) | NR/A | 3,500,000 | 3,632,720 | |||||
Washington Health Care Facilities, 5.50% due 12/1/2010 pre-refunded 12/1/2009 (Providence Services; Insured: MBIA) | Aaa/AAA | 2,690,000 | 2,825,388 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2014 (Catholic Health Services; Insured: MBIA) | Aaa/AAA | 1,735,000 | 1,844,964 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2015 (Catholic Health Services; Insured: MBIA) | Aaa/AAA | 1,945,000 | 2,062,167 | |||||
Washington Nonprofit Housing, 5.60% due 7/1/2011 (Kline Galland Center; Insured: Radian) | NR/AA | 500,000 | 516,185 | |||||
Washington Nonprofit Housing, 5.875% due 7/1/2019 (Kline Galland Center; Insured: Radian) | NR/AA | 1,000,000 | 1,029,250 | |||||
Washington Public Power Supply, 0% due 7/1/2010 | Aaa/AA- | 960,000 | 865,785 | |||||
Washington Public Power Supply, 0% due 7/1/2011 | Aaa/AA- | 1,000,000 | 867,440 | |||||
Washington State Health Care Facilities, 4.50% due 12/1/2008 (Kadlec Medical Center; Insured: Assured Guaranty) | Aaa/AAA | 1,200,000 | 1,213,224 | |||||
WEST VIRGINIA — 0.31% | ||||||||
West Virginia State Hospital Finance Authority, 5.00% due 6/1/2020 (United Hospital Center; Insured: AMBAC) | Aaa/AAA | 1,530,000 | 1,604,511 |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
WISCONSIN — 0.60% | ||||||||
Wisconsin Health & Educational Facilities, 5.75% due 8/15/2020 (Eagle River Memorial Hospital Inc.; Insured: Radian) | NR/AA | $ | 1,000,000 | $ | 1,036,120 | |||
Wisconsin Housing & Economic Development, 5.875% due 11/1/2016 (Insured: AMBAC) | Aaa/AAA | 1,980,000 | 2,055,459 | |||||
TOTAL INVESTMENTS — 98.87% (COST $494,464,922) | $ | 507,761,647 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.13% | 5,818,145 | |||||||
NET ASSETS — 100.00% | $ | 513,579,792 | ||||||
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. |
(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. | |
AMT | Alternative Minimum Tax | |
CIFG | CIFG Assurance North America Inc. | |
COP | Certificates of Participation | |
DFA | Development Finance Authority | |
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 | |
ISD | Independent School District | |
LOC | Line of Credit | |
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 | |
USD | Unified School District | |
XLCA | Insured by XL Capital Assurance |
See notes to financial statements.
SUMMARY OF SECURITY CREDIT RATINGS†
We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings.
28 Certified Annual Report
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
Certified Annual Report 29
Thornburg Intermediate Municipal Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
Actual Expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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 | Ending | Expenses Paid | |||||||
Account Value | Account Value | During Period† | |||||||
3/31/07 | 9/30/07 | 3/31/07–9/30/07 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,013.40 | $ | 4.95 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.15 | $ | 4.97 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,011.30 | $ | 6.25 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.85 | $ | 6.28 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,014.90 | $ | 3.38 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.71 | $ | 3.39 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.98%; 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 for each class of shares 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.
30 Certified Annual Report
Thornburg Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 IN VESTMENT
Thornburg Intermediate Municipal Fund Class A Total Returns, versus
Merrill Lynch 7-12 Year Municipal Bond Index and Consumer Price Index
(July 22, 1991 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 7/22/91) | 0.69 | % | 2.64 | % | 3.84 | % | 5.22 | % | ||||
C Shares (Incep: 9/1/94) | 1.89 | % | 2.76 | % | 3.68 | % | 4.28 | % |
FUND ATTRIBUTES
as of September 30, 2007
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 7/22/91) | 3.91 | % | 3.25 | % | $ | 13.15 | $ | 13.42 | ||||
C Shares (Incep: 9/1/94) | 3.66 | % | 3.05 | % | $ | 13.16 | $ | 13.16 |
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 representing a broad measure of market performance. It is a model portfolio of municipal obligations throughout the U.S., with an average maturity which ranges from seven to twelve years.
Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
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.
Certified Annual Report 31
Thornburg Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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 Intermediate Municipal Fund | September 30, 2007 (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.
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, 2007, 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, 2007.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s above average or
Certified Annual Report 35
OTHER INFORMATION, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
better investment returns over most measuring periods, and in particular the most recent three years, relative to two categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and the Fund’s good relative performance against comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of fees, the Trustees 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 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. The Trustees observed that the management fee and expense ratios for the Fund were higher to a small extent than the median and average management fee levels and expense ratios for the group of municipal debt funds assembled by the analyst firm, but that the difference was not significant in view of its degree and the Fund’s investment performance. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as the Fund grows in size, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
36 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
38 This page is not part of the Annual Report.
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 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 normally three to ten years. 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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Thornburg Intermediate Municipal Fund
I Shares – September 30, 2007
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 3
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.
Investments 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
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.
4 Certified Annual Report
Glossary
The Merrill Lynch 7-12 Year Municipal Bond Index – The Merrill Lynch 7-12 Year Municipal Bond Index representing a broad measure of market performance. It is a model portfolio of municipal obligations throughout the U.S., with an average maturity which ranges from seven to twelve years.
Consumer Price Index – 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. Also known as the cost-of-living index.
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.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Certified Annual Report 5
George Strickland Co-Portfolio Manager
Josh Gonze Co-Portfolio Manager
Christopher Ihlefeld Co-Portfolio Manager | October 18, 2007
Dear Fellow Shareholder:
We are pleased to present the Annual Report for the Thornburg Intermediate Municipal Fund. The net asset value of the Class I shares decreased by 15 cents to $13.13 during the twelve months ended September 30, 2007. If you were with us for the entire period, you received dividends of 54.8 cents per share. If you reinvested your dividends, you received 55.8 cents per share.
The past year has been one of the more interesting in recent memory. Municipal bonds traded within a fairly tight trading range until May. Then, as the Federal Reserve raised the targeted Fed Funds rate to 5.0%, the bond market started to worry about an overheated economy and excess inflation. This drove up market yields for bonds by 0.30% to 0.40% and led to a somewhat steeper yield curve. Next, the sordid world of subprime mortgage bonds and derivatives based upon them started to unravel. Though subprime problems didn’t directly affect the municipal bond market, they did set off a panic-stricken flight to quality. As investors piled into Treasury notes and bonds, they drove their yields back down to levels that prevailed toward the beginning of 2007. However, investors mostly bypassed the municipal bond market, leaving rates there relatively unchanged. This created a rare event during which municipal bond yields were extremely attractive relative to Treasury yields. By late summer, ten-year high-quality municipal bonds were routinely yielding 90% or more of ten-year Treasury yields, and trades over 100% were occasionally happening.
Meanwhile, quality spreads (the difference in yield between the highest quality bonds and lower quality bonds) were getting wider. Some investors, who had been comfortable taking credit risk at very tight spreads to AAA rated bonds, suddenly became a lot less comfortable. Those who sold typically had to sell their bonds at significantly wider spreads than those that prevailed earlier in the year. This led to an environment where investors could finally get compensated for taking incremental credit risk in bonds rated lower than AAA.
Since the end of August, the bond market has been gradually regaining its composure. A calmer, lower volatility environment has helped fuel a renewed appetite for risk. This has led to some retrenchment of the spread widening that occurred in May. It also has led to a wholesale re-pricing of the municipal bond market so that it is no longer extremely attractive relative to the Treasury market. However, credit spreads on most bonds are still wider than they were just a few months ago, and municipal bonds are still somewhat attractive relative to Treasury notes, particularly if you expect marginal tax rates to go up (we do).
The Class I shares of your Fund produced a total return of 3.06% over the twelve-month period ended September 30, 2007, compared to a 3.82% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Over the last year, intermediate municipal bonds have performed better than longer and shorter maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next eighteen years, so it has significant exposure to shorter and longer term bonds. Since those bonds generally underperformed intermediate bonds and the index, the Fund underperformed the index.
Your Thornburg Intermediate Municipal Fund is a laddered portfolio of over 340 municipal obligations from 44 states. 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 |
6 Certified Annual Report
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 = 10.4% | Year 2 = 10.4% | |
2 to 4 years = 13.5% | Year 4 = 23.9% | |
4 to 6 years = 10.0% | Year 6 = 33.9% | |
6 to 8 years = 10.9% | Year 8 = 44.8% | |
8 to 10 years = 11.6% | Year 10 = 56.4% | |
10 to 12 years = 12.6% | Year 12 = 69.0% | |
12 to 14 years = 13.4% | Year 14 = 82.4% | |
14 to 16 years = 11.7% | Year 16 = 94.1% | |
16 to 18 years = 0.5% | Year 18 = 94.6% | |
Over 18 years = 5.4% | Over 18 years = 100.0% |
Percentages can and do vary. Data as of 9/30/07.
We were able to take advantage of the late summer market weakness to restructure the Fund somewhat. Early in 2007, the Fund’s ladder was a bit overweighted in the early years, which led to an average maturity of 7.5 years and duration of 4.25 years. As interest rates rose, we invested primarily in the later years of the Fund’s ladder so that it is now more evenly distributed. Consequently, at fiscal year end (September 30, 2007), the Fund had an average maturity of 8.12 and duration of 4.68 years. We also added incrementally to lower rated investment grade bonds, although we continue to maintain a AA average quality.
Looking forward, we do expect U.S. economic growth to slow from the second quarter’s healthy 3.8% rate. However, consumer spending seems to be holding up well, and exports are surging. These factors, along with new job growth of about 100,000 per month, should keep the U.S. economy out of recession territory. However, the dismal housing sector and the dislocation in financial markets will probably cap future growth at a relatively low rate. This should allow the Fed to continue easing monetary conditions, but with a close eye on what happens to inflation. Market unease about the depreciating dollar and the long-term inflation outlook should keep long-term interest rates from dropping precipitously, which, in turn, should lead to a steeper yield curve going forward. We believe that a steepening yield curve would be advantageous for the laddering style employed by this Fund.
State tax revenues have slowed from the double digit growth rates that prevailed in 2005 and early 2006, but are still increasing a solid 6.1% through June of 2007. Other sectors of the municipal bond market are also generally performing well, with credit rating upgrades continuing to greatly outnumber downgrades. While the current trend is positive, we expect the depressed housing market and slower economic growth to create a tougher environment for municipal bonds to show further credit improvement. We did add marginally to the Fund’s exposure to lower rated investment grade bonds recently, but we do believe it is prudent to keep overall credit quality high in the current environment. Your Fund is broadly diversified and 87% 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 | Josh Gonze | Christopher Ihlefeld | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager |
Certified Annual Report 7
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $494,464,922) (Note 2) | $ | 507,761,647 | ||
Cash | 248,750 | |||
Receivable for investments sold | 3,101,449 | |||
Receivable for fund shares sold | 518,856 | |||
Interest receivable | 7,168,903 | |||
Prepaid expenses and other assets | 26,494 | |||
Total Assets | 518,826,099 | |||
LIABILITIES | ||||
Payable for securities purchased | 2,883,332 | |||
Payable for fund shares redeemed | 1,340,115 | |||
Payable to investment advisor and other affiliates (Note 3) | 338,213 | |||
Accounts payable and accrued expenses | 95,495 | |||
Dividends payable | 589,152 | |||
Total Liabilities | 5,246,307 | |||
NET ASSETS | $ | 513,579,792 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (4,864 | ) | |
Net unrealized appreciation on investments | 13,296,725 | |||
Accumulated net realized gain (loss) | (8,965,737 | ) | ||
Net capital paid in on shares of beneficial interest | 509,253,668 | |||
$ | 513,579,792 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($333,800,015 applicable to 25,387,198 shares of beneficial interest outstanding—Note 4) | $ | 13.15 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
Maximum offering price per share | $ | 13.42 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($53,890,221 applicable to 4,093,455 shares of beneficial interest outstanding—Note 4) | $ | 13.16 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($125,889,556 applicable to 9,587,974 shares of beneficial interest outstanding—Note 4) | $ | 13.13 | ||
* | 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, 2007 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $2,260,307) | $ | 24,508,545 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 2,534,522 | |||
Administration fees (Note 3) | ||||
Class A Shares | 442,151 | |||
Class C Shares | 67,183 | |||
Class I Shares | 50,115 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 884,302 | |||
Class C Shares | 537,450 | |||
Transfer agent fees | ||||
Class A Shares | 163,850 | |||
Class C Shares | 30,322 | |||
Class I Shares | 95,831 | |||
Registration and filing fees | ||||
Class A Shares | 30,134 | |||
Class C Shares | 20,858 | |||
Class I Shares | 27,699 | |||
Custodian fees (Note 3) | 160,377 | |||
Professional fees | 44,094 | |||
Accounting fees | 20,612 | |||
Trustee fees | 7,804 | |||
Other expenses | 73,739 | |||
Total expenses | 5,191,043 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (146,279 | ) | ||
Distribution fees waived (Note 3) | (214,980 | ) | ||
Fees paid indirectly (Note 3) | (12,237 | ) | ||
Net Expenses | 4,817,547 | |||
Net Investment Income | 19,690,998 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 563,541 | |||
Net change in unrealized appreciation (depreciation) of investments | (6,072,467 | ) | ||
Net Realized and Unrealized Loss on Investments | (5,508,926 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 14,182,072 | ||
See notes to financial statements.
Certified Annual Report 9
STATEMENTS OF CHANGES IN NET ASSETS |
Thornburg Intermediate Municipal Fund |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 19,690,998 | $ | 17,791,019 | ||||
Net realized gain (loss) on investments sold | 563,541 | (346,753 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (6,072,467 | ) | 147,221 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 14,182,072 | 17,591,487 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (13,591,786 | ) | (12,934,370 | ) | ||||
Class C Shares | (1,928,153 | ) | (1,899,154 | ) | ||||
Class I Shares | (4,171,059 | ) | (2,957,495 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (28,841,157 | ) | 4,082,240 | |||||
Class C Shares | (1,015,192 | ) | 242,860 | |||||
Class I Shares | 37,157,553 | 37,459,390 | ||||||
Net Increase in Net Assets | 1,792,278 | 41,584,958 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 511,787,514 | 470,202,556 | ||||||
End of year | $ | 513,579,792 | $ | 511,787,514 | ||||
See notes to financial statements.
10 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s 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 secondary goal of the Fund 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 Securities: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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
Certified Annual Report 11
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
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 liabilities 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, 2007, 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 depending on the Fund’s asset size. The Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $10,863 for Class A shares, $73,871 for Class C shares, and $61,545 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, 2007, the Distributor has advised the Fund that it earned net commissions aggregating $2,163 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $1,714 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 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% per annum of the average daily net assets attributable to Class C 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, 2007, are set forth in the Statement of Operations. Distribution fees in the amount of $214,980 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, 2007, fees paid indirectly were $12,237. 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, 2007 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year ended September 30, 2007 | Year ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 2,977,070 | $ | 39,306,041 | 3,869,378 | $ | 51,196,659 | ||||||||
Shares exchanged from merger | — | — | 3,161,332 | 41,919,263 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 616,657 | 8,138,336 | 561,102 | 7,415,384 | ||||||||||
Shares repurchased | (5,785,000 | ) | (76,285,534 | ) | (7,234,114 | ) | (96,449,066 | ) | ||||||
Net Increase (Decrease) | (2,191,273 | ) | $ | (28,841,157 | ) | 357,698 | $ | 4,082,240 | ||||||
Class C Shares | ||||||||||||||
Shares sold | 698,647 | $ | 9,209,025 | 809,528 | $ | 10,710,147 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 96,425 | 1,274,036 | 93,262 | 1,233,844 | ||||||||||
Shares repurchased | (870,144 | ) | (11,498,253 | ) | (884,612 | ) | (11,701,131 | ) | ||||||
Net Increase (Decrease) | (75,072 | ) | $ | (1,015,192 | ) | 18,178 | $ | 242,860 | ||||||
Class I Shares | ||||||||||||||
Shares sold | 4,284,001 | $ | 56,206,181 | 3,700,160 | $ | 48,854,476 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 217,243 | 2,861,145 | 135,815 | 1,791,684 | ||||||||||
Shares repurchased | (1,660,657 | ) | (21,909,773 | ) | (998,806 | ) | (13,186,770 | ) | ||||||
Net Increase (Decrease) | 2,840,587 | $ | 37,157,553 | 2,837,169 | $ | 37,459,390 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $116,587,482 and $111,959,154, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 494,462,451 | ||
Gross unrealized appreciation on a tax basis | $ | 14,627,073 | ||
Gross unrealized depreciation on a tax basis | (1,327,877 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 13,299,196 | ||
At September 30, 2007, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2007, 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 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:
2008 | $ | 2,244,545 | |
2009 | 2,374,508 | ||
2011 | 11,597 | ||
2012 | 4,297,982 | ||
2013 | 39,577 | ||
$ | 8,968,209 | ||
The Fund utilized $207,214 of capital loss carry forwards during the year ended September 30, 2007.
During the year ending September 30, 2007, $160,845 of capital loss carry forwards from prior years expired.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
In order to account for book/tax differences, the Fund decreased accumulated net realized investment loss by $161,506, increased over-distributed net investment income by $661, and decreased net capital paid in on shares of beneficial interest by $160,845. Reclassifications result primarily from expired capital loss carry forwards and market discount.
All dividends paid by the Fund for the year ended September 30, 2007 and September 30, 2006 represent tax exempt interest dividends, which are excludable by shareholders from gross income for federal income tax purposes.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 Intermediate Municipal Fund
Year ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.28 | $ | 13.31 | $ | 13.46 | $ | 13.54 | $ | 13.65 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.55 | 0.54 | 0.53 | 0.56 | 0.57 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | ||||||||||
Total from investment operations | 0.40 | 0.51 | 0.38 | 0.48 | 0.46 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.55 | ) | (0.54 | ) | (0.53 | ) | (0.56 | ) | (0.57 | ) | ||||||||||
Change in net asset value | (0.15 | ) | (0.03 | ) | (0.15 | ) | (0.08 | ) | (0.11 | ) | ||||||||||
NET ASSET VALUE, end of year | $ | 13.13 | $ | 13.28 | $ | 13.31 | $ | 13.46 | $ | 13.54 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 3.06 | % | 3.90 | % | 2.90 | % | 3.61 | % | 3.49 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.16 | % | 4.07 | % | 3.98 | % | 4.12 | % | 4.23 | % | ||||||||||
Expenses, after expense reductions | 0.67 | % | 0.67 | % | 0.67 | % | 0.67 | % | 0.62 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.67 | % | 0.67 | % | 0.67 | % | 0.67 | % | 0.62 | % | ||||||||||
Expenses, before expense reductions | 0.73 | % | 0.75 | % | 0.77 | % | 0.75 | % | 0.80 | % | ||||||||||
Portfolio turnover rate | 22.55 | % | 18.95 | % | 20.06 | % | 11.81 | % | 15.13 | % | ||||||||||
Net assets at end of year (000) | $ | 125,890 | $ | 89,589 | $ | 52,037 | $ | 33,079 | $ | 19,333 |
See notes to financial statements.
Certified Annual Report 15
Thornburg Intermediate Municipal Fund | September 30, 2007 |
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 — 0.48% | ||||||||
Alabama Docks Revenue, 6.00% due 10/1/2008 (Insured: MBIA) | Aaa/AAA | $ | 800,000 | $ | 819,880 | |||
Lauderdale County & Florence Health Group, 5.75% due 7/1/2013 (Insured: MBIA) | Aaa/AAA | 1,600,000 | 1,667,456 | |||||
ALASKA — 0.62% | ||||||||
Alaska Municipal Bond Bank, 5.00% due 10/1/2017 (Insured: FGIC) | Aaa/AAA | 2,470,000 | 2,634,601 | |||||
Anchorage School, 6.00% due 10/1/2012 (Insured: FGIC) | Aaa/AAA | 500,000 | 536,765 | |||||
ARIZONA — 1.58% | ||||||||
Phoenix Civic Improvement Corp., 5.00% due 7/1/2016 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,084,750 | |||||
Phoenix Civic Improvement Corp., 5.00% due 7/1/2017 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,085,970 | |||||
Pima County Industrial Development Authority, 6.70% due 7/1/2021 (Arizona Charter Schools) | Baa3/NR | 2,675,000 | 2,804,711 | |||||
Tucson GO, 9.75% due 7/1/2012 (ETM) | NR/AA | 400,000 | 504,896 | |||||
Tucson GO, 9.75% due 7/1/2013 (ETM) | NR/AA | 500,000 | 654,690 | |||||
Yavapai County Industrial Development Authority, 4.45% due 3/1/2028 put 3/1/2008 (Waste Management, Inc.) (AMT) | NR/BBB | 2,000,000 | 1,999,620 | |||||
ARKANSAS — 0.48% | ||||||||
Jefferson County Hospital Improvement, 5.75% due 6/1/2012 (Jefferson Hospital Association) | NR/A | 1,135,000 | 1,200,592 | |||||
Jefferson County Hospital Improvement, 5.75% due 6/1/2013 (Jefferson Hospital Association) | NR/A | 1,200,000 | 1,267,260 | |||||
CALIFORNIA — 2.56% | ||||||||
California Housing Finance Agency, 9.875% due 2/1/2017 | Aa2/AA- | 675,000 | 691,234 | |||||
California Statewide Community Development Authority COP, 5.50% due 10/1/2007 (Unihealth America) (ETM) | Aaa/AAA | 4,500,000 | 4,500,675 | |||||
East Palo Alto Public Financing, 5.00% due 10/1/2017 (University Circle Gateway 101; Insured: Radian) | Aa3/AA | 770,000 | 796,357 | |||||
El Camino Hospital District, 6.25% due 8/15/2017 (ETM) | Aaa/AAA | 1,000,000 | 1,132,860 | |||||
Golden West Schools Financing Authority, 0% due 8/1/2018 (Insured: MBIA) | Aaa/AAA | 2,140,000 | 1,217,938 | |||||
Redwood City Redevelopment Project Area 2a, 0% due 7/15/2023 (Insured: AMBAC) | Aaa/AAA | 2,060,000 | 1,002,726 | |||||
San Jose USD COP, 5.00% due 6/1/2021 (Insured: FGIC) | Aaa/AAA | 1,580,000 | 1,665,478 | |||||
Washington USD, 5.00% due 8/1/2022 (New High School; Insured: AMBAC) | NR/AAA | 2,010,000 | 2,115,223 | |||||
COLORADO — 5.04% | ||||||||
Adams County Communication Center COP, 5.75% due 12/1/2016 | Baa1/NR | 1,265,000 | 1,322,988 | |||||
Adams County Revenue Platte Valley Medical Center, 5.00% due 8/1/2014 (Insured: FHA 242; MBIA) | NR/AAA | 1,000,000 | 1,070,900 | |||||
Arvada IDRB, 5.60% due 12/1/2012 (Wanco, Inc.; LOC: US Bank, N.A.) | NR/NR | 450,000 | 450,437 | |||||
Central Platte Valley Metropolitan District, 5.15% due 12/1/2013 pre-refunded 12/1/2009 | NR/AAA | 1,000,000 | 1,043,920 | |||||
Central Platte Valley Metropolitan District, 5.00% due 12/1/2031 put 12/1/2009 (LOC: US Bank) | NR/AA | 4,000,000 | 4,078,400 | |||||
Colorado Educational & Cultural Facilities, 5.25% due 8/15/2019 (Peak to Peak Charter School; Insured: XLCA) | Aaa/AAA | 1,475,000 | 1,570,639 | |||||
Colorado Educational & Cultural Facilities, 6.00% due 4/1/2021 (Cherry Creek Charter School) | Baa2/NR | 500,000 | 514,450 | |||||
Denver Convention Center Hotel Authority, 5.125% due 12/1/2017 (Insured: XLCA) | Aaa/AAA | 4,215,000 | 4,537,321 | |||||
El Paso County GO School District 11, 7.10% due 12/1/2013 (State Aid Withholding) | Aa3/AA- | 500,000 | 593,350 | |||||
Madre Metropolitan District 2, 5.375% due 12/1/2026 | NR/NR | 2,220,000 | 2,004,482 | |||||
Murphy Creek Metropolitan District 3, 6.00% due 12/1/2026 | NR/NR | 2,000,000 | 1,916,380 | |||||
North Range Metropolitan District 1, 5.00% due 12/15/2021 | NR/A | 1,500,000 | 1,499,880 | |||||
Northwest Parkway Public Highway Authority Senior Convertible C, 0% due 6/15/2014 (Insured: FSA) | Aaa/AAA | 1,005,000 | 905,073 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Plaza Metropolitan District 1 Public Improvement Fee/Tax Increment, 7.70% due 12/1/2017 | NR/NR | $ | 2,500,000 | $ | 2,700,275 | |||
Southlands Metropolitan District 1 GO, 7.00% due 12/1/2024 | NR/NR | 1,370,000 | 1,647,726 | |||||
DELAWARE — 0.30% | ||||||||
Delaware State HFA, 5.25% due 5/1/2016 (Nanticoke Memorial Hospital; Insured: Radian) | NR/AA | 1,500,000 | 1,543,185 | |||||
DISTRICT OF COLUMBIA — 2.42% | ||||||||
District of Columbia, 6.00% due 6/1/2015 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,436,050 | |||||
District of Columbia Association of American Medical Colleges, 5.00% due 2/15/2017 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,073,320 | |||||
District of Columbia COP, 5.25% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | 2,000,000 | 2,161,220 | |||||
District of Columbia COP, 5.00% due 1/1/2020 (Insured: FGIC) | Aaa/AAA | 3,900,000 | 4,098,900 | |||||
District of Columbia COP, 5.00% due 1/1/2023 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,041,100 | |||||
District of Columbia Hospital, 5.375% due 8/15/2015 (Medlantic Healthcare) (ETM) | Aaa/AAA | 600,000 | 612,810 | |||||
FLORIDA — 11.56% | ||||||||
Broward County HFA Multi Family Housing, 5.40% due 10/1/2011 (Pembroke Park Apartments; Guaranty: Florida Housing Finance Corp.) (AMT) | NR/NR | 480,000 | 489,254 | |||||
Broward County Resource Recovery, 5.00% due 12/1/2007 (Wheelabrator South) | A3/AA | 1,775,000 | 1,779,366 | |||||
Broward County Resource Recovery, 5.50% due 12/1/2008 (Wheelabrator South) | A3/AA | 500,000 | 511,155 | |||||
Broward County School Board, 5.00% due 7/1/2020 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,052,060 | |||||
Capital Trust Agency Multi Family Housing, 5.15% due 11/1/2030 put 11/1/2010 (Shadow Run; Collateralized: FNMA) | Aaa/NR | 1,000,000 | 1,034,420 | |||||
Collier County HFA Multi Family A-1, 4.90% due 2/15/2032 put 2/15/2012 (Goodlette Arms; Collateralized: FNMA) | Aaa/NR | 1,000,000 | 1,045,980 | |||||
Cooper City Utility Systems, 0% due 10/1/2013 (Insured: AMBAC) | Aaa/AAA | 2,440,000 | 1,579,266 | |||||
Crossings at Fleming Island Community Development, 5.60% due 5/1/2012 (Insured: MBIA) | Aaa/AAA | 265,000 | 280,275 | |||||
Enterprise Community Development District Assessment Bonds, 6.00% due 5/1/2010 (Insured: MBIA) | Aaa/AAA | 870,000 | 871,653 | |||||
Escambia County HFA, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB+ | 1,000,000 | 1,015,800 | |||||
Escambia County HFA, 5.95% due 7/1/2020 (Florida Health Care Facility Loan; Insured: AMBAC) | Aaa/NR | 560,000 | 580,686 | |||||
Flagler County School Board COP, 5.00% due 8/1/2020 (Insured: FSA) | Aaa/AAA | 2,560,000 | 2,678,067 | |||||
Florida Board of Education GO Capital Outlay, 9.125% due 6/1/2014 | Aa1/AAA | 905,000 | 1,062,760 | |||||
Florida Board of Education GO Capital Outlay, 5.75% due 6/1/2018 | Aa1/AAA | 1,460,000 | 1,548,330 | |||||
Florida Housing Finance Agency, 3.90% due 12/1/2007 (Multi Family Guaranteed Mortgage; LOC: Wachovia Bank) | NR/AA- | 1,000,000 | 1,000,440 | |||||
Florida Housing Finance Corp., 5.40% due 4/1/2014 pre-refunded 10/1/2010 (Augustine Club Apartments; Insured: MBIA) | Aaa/NR | 415,000 | 444,067 | |||||
Florida Housing Finance Corp. Homeowner Mortgage, 4.80% due 1/1/2016 | Aa1/AA+ | 300,000 | 309,159 | |||||
Florida Municipal Loan Council, 5.00% due 10/1/2024 (Insured: MBIA) | NR/AAA | 2,235,000 | 2,333,407 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2018 (South Florida Evaluation Treatment) | NR/AA+ | 2,090,000 | 2,201,690 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2019 (South Florida Evaluation Treatment) | NR/AA+ | 2,255,000 | 2,364,570 | |||||
Florida State Department of Environmental Protection, 5.00% due 7/1/2017 (Florida Forever; Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,072,420 | |||||
Grand Haven Community Development District Florida Special Assessment, 6.90% due 5/1/2019 | NR/NR | 275,000 | 275,300 | |||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | A1/A+ | 1,100,000 | 1,138,566 | |||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | A1/A+ | 1,000,000 | 1,035,060 | |||||
Hillsborough County Assessment Capacity, 5.00% due 3/1/2017 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,062,590 | |||||
Hillsborough County Industrial Development Authority PCR, 5.10% due 10/1/2013 (Tampa Electric Co.) | Baa2/BBB- | 1,000,000 | 1,025,010 | |||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2021 (Insured: XLCA) | Aaa/AAA | 3,000,000 | 3,139,920 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Jacksonville HFA Hospital, 5.75% due 8/15/2014 pre-refunded 8/15/2011 | Aa2/NR | $ | 1,000,000 | $ | 1,048,250 | |||
Jacksonville Water & Sewer District COP, 5.00% due 10/1/2020 pre-refunded 10/1/2008 | Aaa/AAA | 1,000,000 | 1,011,060 | |||||
Manatee County Florida, 5.00% due 10/1/2016 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,067,200 | |||||
Marion County Hospital District, 5.00% due 10/1/2022 | A2/NR | 1,000,000 | 1,018,930 | |||||
Miami, 5.375% due 9/1/2015 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,075,220 | |||||
Miami Dade County School Board COP, 5.00% due 10/1/2021 (Insured: AMBAC) | Aaa/AAA | 3,035,000 | 3,256,798 | |||||
Miami Dade County Special Housing, 5.80% due 10/1/2012 (HUD Section 8) | Baa3/NR | 645,000 | 664,279 | |||||
North Miami HFA, 6.00% due 8/15/2024 (Catholic Health Services Obligation Group; LOC: Suntrust Bank) | Aa2/NR | 300,000 | 307,725 | |||||
Orange County HFA, 6.25% due 10/1/2013 (Orlando Regional Hospital; Insured: MBIA) | Aaa/AAA | 440,000 | 496,668 | |||||
Orange County HFA, 5.125% due 6/1/2014 (Mayflower Retirement; Insured: Radian) | NR/AA | 1,000,000 | 1,021,140 | |||||
Orange County HFA, 6.25% due 10/1/2016 (Orlando Regional Hospital; Insured: MBIA) | Aaa/AAA | 280,000 | 322,781 | |||||
Orange County HFA, 6.375% due 11/15/2020 pre-refunded 11/15/10 (Adventist Health Systems) | A1/NR | 1,000,000 | 1,090,040 | |||||
Orange County School Board COP, 6.00% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 1,580,000 | 1,611,331 | |||||
Orange County School Board COP, 5.50% due 8/1/2017 pre-refunded 8/01/2012 (Insured: MBIA) | Aaa/AAA | 735,000 | 797,181 | |||||
Port Everglades Authority, 5.00% due 9/1/2016 (Insured: FSA) | Aaa/AAA | 5,635,000 | 5,649,369 | |||||
South Miami HFA, 5.00% due 8/15/2022 (Baptist Health Group) | Aa3/AA- | 1,500,000 | 1,533,975 | |||||
St. John’s County Industrial Development Authority, 5.50% due 8/1/2014 (Presbyterian Retirement) | NR/NR | 1,000,000 | 1,054,530 | |||||
Tampa Health Systems, 5.50% due 11/15/2013 (Baycare Health Group; Insured: MBIA) | Aaa/AAA | 1,050,000 | 1,147,051 | |||||
University of Central Florida COP Convocation Corp., 5.00% due 10/1/2019 (Insured: FGIC) | Aaa/AAA | 1,135,000 | 1,194,860 | |||||
USF Financing Corp. COP Master Lease Program, 5.00% due 7/1/2018 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,052,100 | |||||
GEORGIA — 1.12% | ||||||||
Atlanta Tax Allocation, 5.00% due 12/1/2015 (Atlantic Station; Insured: Assured Guaranty) | Aaa/AAA | 4,120,000 | 4,423,067 | |||||
Georgia Municipal Electric Authority Power 2005, 10.00% due 1/1/2010 | A1/A+ | 230,000 | 261,414 | |||||
Main Street Natural Gas Inc., 5.50% due 9/15/2022 (Georgia Gas) (1) | Aa3/AA- | 1,000,000 | 1,060,900 | |||||
HAWAII — 0.42% | ||||||||
Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Kapiolani Health Care; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,178,760 | |||||
IDAHO — 0.39% | ||||||||
Boise City IDRB Corp., 5.00% due 5/15/2020 (Western Trailer Co.; LOC: Wells Fargo) | Aaa/NR | 2,000,000 | 2,018,560 | |||||
ILLINOIS — 8.72% | ||||||||
Champaign County Community School District GO, 0% due 1/1/2011 pre-refunded 1/1/2010 | Aaa/AAA | 800,000 | 696,272 | |||||
Chicago Housing Authority, 5.00% due 7/1/2008 (ETM) | Aaa/NR | 3,020,000 | 3,053,462 | |||||
Chicago Midway Airport Second Lien, 5.00% due 1/1/2019 (Insured: AMBAC) | Aaa/AAA | 1,210,000 | 1,250,051 | |||||
Chicago Tax Increment, 6.25% due 11/15/2013 (Near South Redevelopment; Insured: ACA) | NR/A | 1,500,000 | 1,598,025 | |||||
Chicago Tax Increment Allocation, 6.50% due 12/1/2008 (Sub Central Loop Redevelopment; Insured ACA) | NR/A | 1,500,000 | 1,537,830 | |||||
Chicago Tax Increment Allocation, 5.30% due 1/1/2014 (Lincoln Belmont; Insured: ACA) | NR/A | 2,285,000 | 2,321,720 | |||||
Cook County Capital Improvement GO, 5.50% due 11/15/2008 (Insured: FGIC) | Aaa/AAA | 500,000 | 505,755 | |||||
Cook County School District GO, 0% due 12/1/2022 | NR/NR | 2,000,000 | 1,011,980 | |||||
Illinois DFA, 6.00% due 11/15/2012 (Adventist Health Group; Insured: MBIA) | Aaa/AAA | 2,860,000 | 3,068,465 | |||||
Illinois DFA Community Rehab Providers A, 5.90% due 7/1/2009 | NR/BBB | 325,000 | 329,517 | |||||
Illinois Educational Facilities Authority, 5.50% due 5/15/2018 (Midwestern State University; Insured: ACA) | NR/A | 1,500,000 | 1,521,090 | |||||
Illinois Educational Facilities Authority, 4.75% due 11/1/2036 put 11/1/2016 (Field Museum) | A2/A | 1,160,000 | 1,185,740 | |||||
Illinois Finance Authority, 5.00% due 8/1/2022 (Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,051,530 | |||||
Illinois Finance Authority, 5.00% due 2/1/2027 (Newman Foundation; Insured: Radian) | NR/AA | 1,220,000 | 1,221,720 | |||||
Illinois HFA, 6.00% due 7/1/2011 (Loyola University Health Systems; Insured: MBIA) | Aaa/AAA | 1,370,000 | 1,482,518 | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola University Health Systems; Insured: MBIA) (ETM) | Aaa/AAA | 230,000 | 253,821 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola University Health Systems; Insured: MBIA) | Aaa/AAA | $ | 1,080,000 | $ | 1,185,916 | |||
Illinois HFA, 6.25% due 11/15/2019 pre-refunded 11/15/2009 (OSF Healthcare) | A2/A | 1,250,000 | 1,331,000 | |||||
Illinois HFA, 5.70% due 2/20/2021 (Midwest Care Center; Collateralized: GNMA) | Aaa/NR | 950,000 | 1,002,972 | |||||
Illinois HFA Series A, 5.75% due 8/15/2013 pre-refunded 8/15/2009 (Children’s Memorial Hospital; Insured: AMBAC) | Aaa/AAA | 1,900,000 | 1,994,164 | |||||
Illinois University, 5.25% due 1/15/2018 (UIC South Campus Development; Insured: FGIC) | Aaa/AAA | 1,205,000 | 1,293,592 | |||||
Melrose Park Tax Increment, 6.50% due 12/15/2015 (Insured: FSA) | Aaa/AAA | 1,015,000 | 1,101,265 | |||||
Sangamon County School District, 5.875% due 8/15/2018 (Hay Edwards; Insured: ACA) | NR/A | 2,400,000 | 2,516,232 | |||||
Sherman Mortgage, 6.10% due 10/1/2014 (Villa Vianney Health Care; Collateralized: GNMA) | NR/AAA | 1,170,000 | 1,231,004 | |||||
Sherman Mortgage, 6.20% due 10/1/2019 (Villa Vianney Health Care; Collateralized: GNMA) | NR/AAA | 1,600,000 | 1,679,600 | |||||
Southern Illinois University, 0% due 4/1/2014 (Insured: MBIA) | Aaa/AAA | 1,425,000 | 1,106,142 | |||||
Southwestern Illinois Development Authority, 0% due 12/1/2024 (Local Govt.; Insured: FSA) | NR/AAA | 3,500,000 | 1,562,820 | |||||
Tazewell County School District No 51, 9.00% due 12/1/2024 (Insured: FGIC) | Aaa/NR | 1,205,000 | 1,825,912 | |||||
University of Illinois, 0% due 4/1/2014 (Insured: MBIA) | Aaa/AAA | 1,590,000 | 1,235,001 | |||||
Will & Kendall Counties Community, 5.125% due 1/1/2014 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,043,930 | |||||
Will County Community School District 365-U, 0% due 11/1/2011 (Insured: FSA) | Aaa/AAA | 3,000,000 | 2,572,800 | |||||
INDIANA — 5.91% | ||||||||
Allen County Economic Development, 5.80% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 895,000 | 922,709 | |||||
Allen County Economic Development, 5.75% due 12/30/2015 (Indiana Institute of Technology) | NR/NR | 1,355,000 | 1,440,839 | |||||
Allen County Jail Building Corp. GO, 5.00% due 4/1/2018 (Insured: XLCA) | Aaa/AAA | 2,495,000 | 2,650,863 | |||||
Allen County Redevelopment District Tax, 5.00% due 11/15/2018 | A3/NR | 1,560,000 | 1,635,660 | |||||
Boone County Hospital Association, 5.625% due 1/15/2015 pre-refunded 7/15/2011 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,071,950 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2016 (Performing Arts Center) | Aa2/AA | 1,730,000 | 1,217,038 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2021 (Performing Arts Center) | Aa2/AA | 2,000,000 | 1,063,560 | |||||
Dyer Redevelopment Authority, 6.40% due 7/15/2015 pre-refunded 7/15/2009 | NR/A- | 1,515,000 | 1,604,476 | |||||
Dyer Redevelopment Authority, 6.50% due 7/15/2016 pre-refunded 7/15/2009 | NR/A- | 1,910,000 | 2,026,090 | |||||
East Chicago Elementary School Building First Mortgage, 6.25% due 7/5/2008 (State Aid Withholding) | NR/A | 180,000 | 182,291 | |||||
Fishers Redevelopment Authority, 5.25% due 2/1/2018 (Insured: XLCA) | Aaa/AAA | 1,500,000 | 1,621,740 | |||||
Fishers Redevelopment Authority, 5.25% due 2/1/2020 (Insured: XLCA) | Aaa/AAA | 1,025,000 | 1,100,768 | |||||
Goshen Chandler School Building, 0% due 1/15/2011 (Insured: MBIA) | Aaa/AAA | 1,020,000 | 901,231 | |||||
Huntington Economic Development, 6.40% due 5/1/2015 (United Methodist Memorial) | NR/NR | 1,000,000 | 1,023,470 | |||||
Indiana Bond Bank Special Programs, 5.25% due 4/1/2023 (Hendricks Regional; Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,189,620 | |||||
Indiana Health Facility Hospital, 5.75% due 9/1/2015 (Methodist Hospital) (ETM) | NR/AAA | 575,000 | 581,032 | |||||
Indiana State Educational Facilities Authority, 5.65% due 10/1/2015 (University of Indianapolis) | NR/A- | 1,065,000 | 1,105,161 | |||||
Indiana State Educational Facilities Authority, 5.70% due 10/1/2016 (University of Indianapolis) | NR/A- | 1,025,000 | 1,063,981 | |||||
Indianapolis Local Public Improvement Bond Bank, 0% due 7/1/2009 (ETM) | Aa2/AA- | 740,000 | 693,439 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2017 (146th Street Extension) | NR/A+ | 1,000,000 | 1,050,230 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2020 (146th Street Extension) | NR/A+ | 1,000,000 | 1,039,040 | |||||
Vanderburgh County Redevelopment District Tax Increment, 5.00% due 2/1/2020 | NR/A- | 1,000,000 | 1,025,810 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2012 pre-refunded 1/15/2012 | NR/AA | 1,200,000 | 1,301,244 | |||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2017 (Insured: FGIC) | Aaa/AAA | 1,685,000 | 1,829,337 | |||||
IOWA — 1.89% | ||||||||
Coralville COP, 5.25% due 6/1/2022 | A2/NR | 2,980,000 | 3,084,717 | |||||
Iowa Finance Authority, 5.75% due 12/1/2015 (Trinity Health) | Aa2/AA- | 1,250,000 | 1,315,613 | |||||
Iowa Finance Authority, 6.00% due 12/1/2018 (Catholic Health Initiatives) | Aa2/AA | 2,000,000 | 2,113,680 | |||||
Iowa Finance Authority Health Care Facilities, 6.00% due 7/1/2013 (Genesis Medical Center) | A1/NR | 1,000,000 | 1,049,270 | |||||
Iowa Finance Authority Hospital Facility, 6.00% due 7/1/2012 (Trinity Regional Hospital; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,058,210 | |||||
Iowa Finance Authority Hospital Facility, 6.75% due 2/15/2016 pre-refunded 2/15/2010 (Iowa Health Services) | Aa3/NR | 1,000,000 | 1,081,340 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
KANSAS — 1.31% | ||||||||
Olathe Tax Increment Special Obligation, 5.45% due 9/1/2022 (West Village Center) | NR/NR | $ | 1,155,000 | $ | 1,138,726 | |||
Wichita Hospital Improvement, 6.75% due 11/15/2019 (Via Christi Health System) | NR/A+ | 4,200,000 | 4,452,504 | |||||
Wyandotte County School District 204, 5.00% due 9/1/2014 (Insured: FGIC) | Aaa/NR | 1,030,000 | 1,112,225 | |||||
KENTUCKY — 0.98% | ||||||||
Kentucky Finance EDA, 5.85% due 10/1/2015 pre-refunded 10/1/2013 (Norton Healthcare; Insured: MBIA) | Aaa/AAA | 1,335,000 | 1,502,916 | |||||
Kentucky Finance EDA, 5.85% due 10/1/2015 (Norton Healthcare; Insured: MBIA) | Aaa/AAA | 2,665,000 | 2,958,310 | |||||
Wilmore Housing Facilities, 5.55% due 7/1/2013 (Wesley Methodist Village; LOC: Allied Irish Bank plc) | NR/NR | 530,000 | 544,914 | |||||
LOUISIANA — 1.88% | ||||||||
Jefferson Sales Tax District, 5.50% due 12/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,595,000 | 1,631,876 | |||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2021 (Archdiocese of New Orleans; Insured: CIFG) | Aaa/AAA | 980,000 | 1,030,147 | |||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2023 (Archdiocese of New Orleans; Insured: CIFG) | Aaa/AAA | 1,000,000 | 1,043,890 | |||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | Baa3/BBB | 3,000,000 | 3,132,270 | |||||
Orleans Levee District Trust Receipts, 5.95% due 11/1/2007 (Insured: FSA) | Aaa/AAA | 360,000 | 360,752 | |||||
St. Tammany Parish Sales Tax District No. 03 Sales & Use Tax, 5.00% due 6/1/2019 (Insured: CIFG) | NR/AAA | 1,300,000 | 1,388,452 | |||||
St. Tammany Parish Sales Tax District No. 03 Sales & Use Tax, 5.00% due 6/1/2020 (Insured: CIFG) | NR/AAA | 1,000,000 | 1,063,820 | |||||
MASSACHUSETTS — 0.29% | ||||||||
Massachusetts Housing Finance Agency, 6.125% due 12/1/2011 (Insured: MBIA) (AMT) | Aaa/AAA | 950,000 | 967,708 | |||||
Massachusetts Housing Finance Agency Housing Development, 5.05% due 6/1/2010 (Insured: MBIA) (AMT) | Aaa/AAA | 515,000 | 523,704 | |||||
MICHIGAN — 2.18% | ||||||||
Kalamazoo Hospital Finance Authority, 6.25% due 6/1/2014 (Borgess Medical Center) (ETM) | Aaa/AAA | 650,000 | 746,376 | |||||
Kent Hospital Finance Authority, 7.25% due 1/15/2013 (Spectrum Health; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,085,220 | |||||
Michigan Public Educational Facilities Authority, 5.50% due 9/1/2022 (Black River School) (2) | NR/NR | 1,110,000 | 1,085,647 | |||||
Michigan State Building Authority Facilities Program, 5.25% due 10/15/2017 (Insured: FSA) | Aaa/AAA | 2,450,000 | 2,636,175 | |||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Obligation Group A) | A2/A | 3,650,000 | 3,694,858 | |||||
Michigan State Hospital Finance Authority, 5.375% due 11/15/2033 put 11/15/2007 (Ascension Health Credit) | Aa2/AA | 1,000,000 | 1,001,490 | |||||
Southfield Economic Development Corp., 7.25% due 12/1/2010 (N.W. 12 Limited Partnership Transcon Builders) | NR/NR | 965,000 | 964,961 | |||||
MINNESOTA — 0.75% | ||||||||
Minneapolis St. Paul Health, 6.00% due 12/1/2018 (Healthpartners Obligation Group) | Baa1/BBB | 1,000,000 | 1,063,390 | |||||
Southern Minnesota Municipal Power Agency Supply, 5.75% due 1/1/2018 pre-refunded to various dates (Insured: MBIA) | Aaa/AAA | 700,000 | 776,930 | |||||
St. Paul Housing & Redevelopment Authority Health Care Facility, 5.25% due 5/15/2020 (Healthpartners Obligation Group) | Baa1/BBB | 1,965,000 | 2,012,121 | |||||
MISSISSIPPI — 1.06% | ||||||||
Mississippi Development Bank Special Obligation, 5.00% due 7/1/2022 (Canton Public Improvement) | NR/NR | 1,935,000 | 1,895,313 | |||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply, 5.00% due 3/1/2018 (Insured: XLCA) | Aaa/AAA | 920,000 | 972,946 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply, 5.00% due 3/1/2020 (Insured: XLCA) | Aaa/AAA | $ | 1,000,000 | $ | 1,046,840 | |||
Mississippi Higher Educational Authority, 7.50% due 9/1/2009 (Guaranty: Student Loans) (AMT) | A2/NR | 1,500,000 | 1,503,690 | |||||
MISSOURI — 1.54% | ||||||||
Kansas City Tax Increment Financing Commission, 5.00% due 3/1/2012 (Maincor) | NR/NR | 600,000 | 596,454 | |||||
Missouri Development Finance Board, 5.00% due 4/1/2019 (Eastland Center) | NR/A+ | 1,000,000 | 1,032,080 | |||||
Missouri Development Finance Board, 5.00% due 4/1/2021 (Eastland Center) | NR/A+ | 2,000,000 | 2,045,580 | |||||
Missouri Development Finance Board Healthcare, 5.40% due 11/1/2018 (Lutheran Home for the Aged; LOC: Commerce Bank) | Aa2/NR | 2,025,000 | 2,084,697 | |||||
Springfield Public Utilities, 5.00% due 12/1/2013 (Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,150,480 | |||||
MONTANA — 0.27% | ||||||||
Montana Facilities Financing Authority, 5.00% due 1/1/2022 (St. Luke Community Healthcare) | Aa3/NR | 1,345,000 | 1,379,997 | |||||
NEBRASKA — 0.17% | ||||||||
Madison County Hospital Authority 1, 5.50% due 7/1/2014 (Faith Regional Health Services; Insured: Radian) | NR/AA | 845,000 | 881,005 | |||||
NEVADA — 0.86% | ||||||||
Las Vegas Special Improvement District, 5.375% due 6/1/2013 (Insured: FSA) | Aaa/AAA | 1,135,000 | 1,168,948 | |||||
Reno Sparks Indian Colony, 5.00% due 6/1/2021 (LOC: U.S. Bank NA) | NR/NR | 1,000,000 | 1,013,000 | |||||
Washoe County Reno Sparks GO, 0% due 7/1/2011 (Insured: FSA) | Aaa/AAA | 2,600,000 | 2,257,008 | |||||
NEW HAMPSHIRE — 1.57% | ||||||||
Manchester Housing & Redevelopment Authority, 0% due 1/1/2016 (Insured: Radian ACA) | Baa3/AA | 4,990,000 | 3,321,993 | |||||
New Hampshire Health & Education Facilities, 5.25% due 10/1/2023 (Southern New Hampshire Medical Center) | NR/A- | 1,000,000 | 1,028,220 | |||||
New Hampshire PCR, 5.375% due 5/1/2014 (Central Maine Power Co.) | A3/BBB+ | 3,500,000 | 3,705,590 | |||||
NEW JERSEY — 0.30% | ||||||||
New Jersey EDA, 7.50% due 12/1/2019 (Spectrum for Living Development) | NR/NR | 200,000 | 200,612 | |||||
New Jersey EDA School Facilities Construction, 5.00% due 3/1/2019 | A1/AA- | 1,280,000 | 1,349,542 | |||||
NEW MEXICO — 1.00% | ||||||||
Albuquerque Airport, 5.00% due 7/1/2008 (Insured: AMBAC) (AMT) | Aaa/AAA | 1,000,000 | 1,010,250 | |||||
Farmington PCR, 4.00% due 9/1/2024 put 10/1/2007 (LOC: Barclays Bank) (daily demand notes) | P1/A-1+ | 500,000 | 500,000 | |||||
Sandoval County Incentive Payment, 5.00% due 6/1/2020 (Intel Corp.) | NR/A+ | 2,000,000 | 2,090,580 | |||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation) | NR/NR | 1,515,000 | 1,528,332 | |||||
NEW YORK — 0.80% | ||||||||
Nassau Health Care Corp., 6.00% due 8/1/2011 pre-refunded 8/1/2009 | Aaa/AAA | 1,000,000 | 1,062,920 | |||||
New York City Industrial Development Agency, 5.00% due 6/1/2010 (Lycee Francais De New York; Insured: ACA) | NR/A | 1,175,000 | 1,193,130 | |||||
New York City Trust Cultural Resources, 5.75% due 7/1/2015 (Museum of American Folk Art; Insured: ACA) | NR/A | 875,000 | 923,571 | |||||
New York State Dormitory Authority, 5.00% due 7/1/2017 (Bishop Henry B. Hucles Nursing; Insured: SONYMA) | Aa1/NR | 850,000 | 909,959 | |||||
NORTH CAROLINA — 1.10% | ||||||||
Charlotte-Mecklenberg Hospital Authority, 5.00% due 1/15/2022 | Aa3/AA- | 2,000,000 | 2,050,700 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Franklin County COP, 5.00% due 9/1/2022 (Public Facilities; Insured: MBIA) | Aaa/AAA | $ | 1,500,000 | $ | 1,580,340 | |||
North Carolina Housing Finance Agency SFMR, 6.50% due 9/1/2026 | Aa2/AA | 940,000 | 960,849 | |||||
North Carolina Medical Care, 5.00% due 9/1/2013 (Rowan Regional Medical Center; Insured: FSA & FHA 242) | Aaa/AAA | 1,000,000 | 1,067,090 | |||||
NORTH DAKOTA — 0.46% | ||||||||
North Dakota State Housing Finance Agency, 5.20% due 7/1/2022 | Aa1/NR | 1,000,000 | 1,022,780 | |||||
North Dakota State Housing Finance Agency Home Mortgage, 5.70% due 7/1/2030 | Aa1/NR | 310,000 | 312,185 | |||||
Ward County Health Care Facilities, 5.125% due 7/1/2021 (Trinity Obligated Group) | NR/BBB+ | 1,000,000 | 1,012,950 | |||||
OHIO — 2.69% | ||||||||
Butler County Transportation Improvement, 6.00% due 4/1/2010 pre-refunded 4/1/2008 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,032,290 | |||||
Central Ohio Solid Waste Authority, 5.00% due 12/1/2008 | Aa2/AA+ | 2,530,000 | 2,574,073 | |||||
Cleveland Cuyahoga County Development Bond Fund A, 6.25% due 5/15/2016 (LOC: FifthThird Bank) | NR/NR | 1,255,000 | 1,329,961 | |||||
Cuyahoga County Hospital, 4.75% due 2/15/2008 (Metrohealth Systems; Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,004,730 | |||||
Franklin County Health Care, 6.00% due 11/1/2010 (Heinzerling Foundation; LOC: Banc One) | AAA/NR | 780,000 | 781,505 | |||||
Hamilton Wastewater Systems, 5.25% due 10/1/2017 (Insured: FSA) | Aaa/NR | 1,500,000 | 1,644,840 | |||||
Marysville School District COP, 5.25% due 12/1/2017 pre-refunded 6/1/2015 (School Facilities; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,197,240 | |||||
North Ridgeville Economic Development, 0% due 2/1/2015 (Collateralized: FHA) | NR/AAA | 300,000 | 164,316 | |||||
Ohio State Higher Educational Facilities, 5.05% due 7/1/2037 put 7/1/2016 (Kenyon College) | A1/A+ | 2,200,000 | 2,319,218 | |||||
Reynoldsburg Health Care Facilities Bonds, 5.70% due 10/20/2012 (Collateralized: GNMA) | Aaa/NR | 760,000 | 783,796 | |||||
OKLAHOMA — 2.18% | ||||||||
Alva Hospital Authority Hospital Sales Tax, 5.25% due 6/1/2025 (Insured: Radian) | Aa3/AA | 1,505,000 | 1,527,665 | |||||
Comanche County Hospital Authority, 5.25% due 7/1/2019 (Insured: Radian) | Aa3/AA | 3,345,000 | 3,456,623 | |||||
Oklahoma City Municipal Improvement Authority, 0% due 7/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,020,000 | 992,848 | |||||
Oklahoma City Municipal Water & Sewer, 0% due 7/1/2011 (Insured: AMBAC) | Aaa/AAA | 1,125,000 | 978,030 | |||||
Oklahoma City Municipal Water & Sewer, 0% due 7/1/2013 (Insured: AMBAC) | Aaa/AAA | 1,485,000 | 1,192,232 | |||||
Oklahoma DFA Hospital Association Pooled Hospital, 5.40% due 6/1/2013 (Insured: AMBAC) | Aaa/AAA | 825,000 | 871,662 | |||||
Tulsa Industrial Authority, 5.00% due 12/15/2015 (St. Francis Health Systems) | Aa3/AA | 750,000 | 796,140 | |||||
Tulsa Industrial Authority, 6.00% due 10/1/2016 (University of Tulsa; Insured: MBIA) | Aaa/AAA | 1,250,000 | 1,400,925 | |||||
OREGON — 0.48% | ||||||||
Forest Grove Campus Improvement, 6.00% due 5/1/2015 pre-refunded 5/1/2010 (Pacific University; Insured: Radian) | NR/AA | 800,000 | 848,296 | |||||
Oregon State Housing & Community Services Department SFMR, 5.35% due 7/1/2018 (AMT) | Aa2/NR | 620,000 | 627,254 | |||||
Portland Housing Authority, 4.75% due 5/1/2022 (Yards Union Station) (AMT) | Aa2/NR | 1,000,000 | 985,470 | |||||
PENNSYLVANIA — 1.34% | ||||||||
Allegheny County Hospital Development, 6.50% due 5/1/2012 pre-refunded 5/1/2010 (South Hills Health Systems) | Baa1/NR | 1,400,000 | 1,497,048 | |||||
Carbon County Industrial Development Authority, 6.65% due 5/1/2010 (Panther Creek Partners) | NR/BBB- | 1,140,000 | 1,183,331 | |||||
Chartiers Valley Industrial & Community Development Authority, 5.75% due 12/1/2022 (Asbury Health Center) | NR/NR | 900,000 | 906,930 | |||||
Lancaster County, 0% due 5/1/2014 (Insured: FGIC) | Aaa/NR | 795,000 | 611,196 | |||||
Lancaster County, 0% due 5/1/2015 (Insured: FGIC) | Aaa/NR | 800,000 | 579,600 | |||||
Lehigh County GO, 6.00% due 11/15/2007 (Good Shepard Rehab. Hospital; Insured: AMBAC) | Aaa/AAA | 785,000 | 787,473 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Pennsylvania Higher Education University, 0% due 7/1/2020 (Insured: AMBAC) | Aaa/AAA | $ | 2,032,839 | $ | 794,840 | |||
Pennsylvania State Higher Educational Facilities, 5.60% due 11/15/2009 (Allegheny United Hospitals; Insured: MBIA) | Aaa/AAA | 500,000 | 521,355 | |||||
RHODE ISLAND — 0.69% | ||||||||
Rhode Island Health & Education Building Corp., 5.00% due 3/15/2014 (Salve Regina University; Insured: Radian) | NR/AA | 1,065,000 | 1,114,831 | |||||
Rhode Island Health & Education Building Corp., 6.00% due 8/1/2014 (Credit Support: FHA) | NR/AA | 1,000,000 | 1,046,220 | |||||
Rhode Island Health & Education Building Corp. Hospital Financing, 5.25% due 7/1/2015 (Memorial Hospital; LOC: Fleet Bank) | NR/AA+ | 1,325,000 | 1,400,976 | |||||
SOUTH CAROLINA — 5.71% | ||||||||
Berkeley County School District Installment Lease, 5.00% due 12/1/2019 | A3/A- | 2,000,000 | 2,092,740 | |||||
Charleston Educational Excellence Financing Corp., 5.25% due 12/1/2020 (Charleston County School District) | A1/AA- | 1,855,000 | 1,970,010 | |||||
Darlington County IDRB, 6.00% due 4/1/2026 (Sonoco Products Co.) (AMT) | Baa1/BBB+ | 3,255,000 | 3,265,774 | |||||
Greenwood School Facilities, Inc., 5.00% due 12/1/2025 (Greenwood School District 50; Insured: Assured Guaranty) | Aaa/AAA | 2,400,000 | 2,508,936 | |||||
Lexington One School Facilities Corp. School District 1, 5.00% due 12/1/2019 | A1/NR | 1,000,000 | 1,051,000 | |||||
Lexington One School Facilities Corp. School District 1, 5.25% due 12/1/2021 | A1/NR | 1,700,000 | 1,782,739 | |||||
Scago Educational Facilities Corp., 5.00% due 12/1/2017 (Colleton School District; Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,073,890 | |||||
Scago Educational Facilities Corp. School District 5 Spartanburg County, 5.00% due 4/1/2019 (Insured: FSA) | Aaa/AAA | 2,740,000 | 2,893,111 | |||||
Scago Educational Facilities Corp. School District 5 Spartanburg County, 5.00% due 4/1/2021 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,047,690 | |||||
South Carolina Housing Finance & Development Authority, 5.30% due 7/1/2023 | Aa1/NR | 1,000,000 | 1,025,970 | |||||
South Carolina Jobs EDA, 5.50% due 4/1/2027 put 10/5/2007 (Episcopal Convention Center; Insured: Radian) (weekly demand notes) | Aa3/A-1+ | 7,610,000 | 7,610,000 | |||||
Sumter School Facilities Inc. Sumter County School District 2, 5.00% due 12/1/2021 (Insured: Assured Guaranty) | Aaa/AAA | 2,855,000 | 3,020,533 | |||||
TENNESSEE — 2.30% | ||||||||
Knox County Health, 4.90% due 6/1/2031 put 6/1/2011 (Collateralized: FNMA) | NR/AAA | 1,995,000 | 2,072,007 | |||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2023 | Aa3/AA- | 2,500,000 | 2,513,150 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2023 | Aa3/AA- | 7,000,000 | 7,229,250 | |||||
TEXAS — 16.12% | ||||||||
Bexar County Health Facilities Development Corp., 6.125% due 7/1/2022 pre-refunded 7/1/2012 (Army Retirement Residence) | NR/BBB | 1,250,000 | 1,395,037 | |||||
Bexar County Health Facilities Development Corp., 6.10% due 11/15/2023 (Incarnate Word Health Services; Insured: FSA) (ETM) | Aaa/AAA | 1,000,000 | 1,039,460 | |||||
Bexar County Health Facilities Development Corp., 5.00% due 7/1/2027 (Army Retirement Residence) | NR/BBB | 1,000,000 | 970,600 | |||||
Bexar County Housing Finance Corp., 5.40% due 8/1/2012 (Dymaxion & Marrach Park Apartments; Insured: MBIA) | Aaa/NR | 755,000 | 781,697 | |||||
Bexar County Housing Finance Corp., 5.875% due 4/1/2014 (Honey Creek Apartments; Insured: MBIA) | Aaa/NR | 975,000 | 1,022,551 | |||||
Bexar County Housing Finance Corp., 5.50% due 1/1/2016 (American Opportunity Housing & Colinas; Insured: MBIA) | Aaa/NR | 600,000 | 633,774 | |||||
Bexar County Housing Finance Corp., 6.125% due 4/1/2020 (Honey Creek Apartments; Insured: MBIA) | Aaa/NR | 800,000 | 827,544 |
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Bexar County Housing Finance Corp., 5.95% due 8/1/2020 (Dymaxion & Marrach Park Apartments; Insured: MBIA) | Aaa/NR | $ | 1,270,000 | $ | 1,339,291 | |||
Bexar County Housing Finance Corp., 5.70% due 1/1/2021 (American Opportunity Housing & Colinas; Insured: MBIA) | Aaa/NR | 1,035,000 | 1,089,689 | |||||
Bexar County Housing Finance Corp., 6.50% due 12/1/2021 (American Opportunity Housing-Waterford) | Baa2/NR | 2,000,000 | 2,107,600 | |||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2021 (Insured: XLCA) | Aaa/AAA | 1,300,000 | 1,372,956 | |||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2022 (Insured: XLCA) | Aaa/AAA | 2,300,000 | 2,417,967 | |||||
Birdville ISD, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 2,800,000 | 2,370,256 | |||||
Carroll ISD, 0% due 2/15/2011 pre-refunded 2/15/2008 (Guaranty: PSF) | Aaa/AAA | 785,000 | 674,072 | |||||
Carroll ISD, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 345,000 | 295,969 | |||||
Cedar Park Improvement, 5.00% due 2/15/2016 (Insured: MBIA) | Aaa/AAA | 1,000,000 | 1,063,190 | |||||
Coppell ISD, 0% due 8/15/2013 (Insured: PSF-GTD) | NR/AAA | 1,495,000 | 1,111,488 | |||||
Coppell ISD, 0% due 8/15/2013 pre-refunded 8/15/2009 (Insured: PSF-GTD) | NR/AAA | 3,505,000 | 2,615,992 | |||||
Duncanville ISD, 0% due 2/15/2016 pre-refunded 2/15/2012 (Insured: PSF) | Aaa/AAA | 2,985,000 | 2,009,532 | |||||
Duncanville ISD, 0% due 2/15/2016 (Insured: PSF) | Aaa/AAA | 15,000 | 9,960 | |||||
El Paso ISD, 0% due 8/15/2010 (Guaranty: PSF) | Aaa/AAA | 3,750,000 | 3,270,825 | |||||
El Paso ISD, 0% due 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 2,500,000 | 2,062,525 | |||||
Ennis ISD, 0% due 8/15/2012 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,625,000 | 1,322,068 | |||||
Ennis ISD, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/NR | 835,000 | 674,747 | |||||
Ennis ISD, 0% due 8/15/2013 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,645,000 | 1,256,023 | |||||
Ennis ISD, 0% due 8/15/2013 (Guaranty: PSF) | Aaa/NR | 845,000 | 640,831 | |||||
Ennis ISD, 0% due 8/15/2014 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,670,000 | 1,195,520 | |||||
Ennis ISD, 0% due 8/15/2014 (Guaranty: PSF) | Aaa/NR | 855,000 | 607,939 | |||||
Gulf Coast Center, 6.75% due 9/1/2020 (Mental Health Retardation Center) | NR/BBB | 1,320,000 | 1,409,298 | |||||
Hays Consolidated C, 0% due 8/15/2013 pre-refunded 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 6,245,000 | 4,844,122 | |||||
Laredo Sports Venue Sales Improvement, 5.00% due 3/15/2018 (Insured: AMBAC) | Aaa/AAA | 2,040,000 | 2,166,154 | |||||
Lewisville Combination Contract Special Assessment District 2, 4.75% due 9/1/2012 (Insured: ACA) | NR/A | 2,055,000 | 2,081,016 | |||||
Mesquite ISD, 0% due 8/15/2012 (Guaranty: PSF) | NR/AAA | 1,420,000 | 1,145,897 | |||||
Midlothian ISD, 0% due 2/15/2012 (ETM) | Aaa/NR | 500,000 | 423,260 | |||||
Midlothian ISD, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/NR | 500,000 | 423,260 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2012 (Insured: Radian) | Aa3/AA | 735,000 | 772,331 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2013 (Insured: Radian) | Aa3/AA | 500,000 | 524,775 | |||||
Richardson Improvement, 5.00% due 2/15/2019 (Insured: MBIA) | Aaa/AAA | 2,145,000 | 2,278,934 | |||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2016 | Baa2/NR | 3,000,000 | 3,134,160 | |||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2021 | Baa2/NR | 675,000 | 703,060 | |||||
San Antonio Hotel Occupancy, 5.00% due 8/15/2034 put 8/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,650,000 | 1,671,070 | |||||
Stafford Economic Development, 6.00% due 9/1/2017 (Insured: FGIC) | Aaa/AAA | 1,775,000 | 2,033,866 | |||||
Tarrant County Health Facilities, 6.625% due 11/15/2020 pre-refunded 11/15/2010 (Adventist/Sunbelt) | A1/NR | 3,500,000 | 3,843,000 | |||||
Tarrant County Limited Tax, 5.00% due 7/15/2023 | Aaa/AAA | 1,000,000 | 1,050,520 | |||||
Texarkana Health Facilities Hospital, 5.75% due 10/1/2011 (Wadely Regional Medical Center; Insured: MBIA) | Aaa/AAA | 2,500,000 | 2,696,050 | |||||
Texas City Industrial Development Corp., 7.375% due 10/1/2020 (Arco Pipe Line Company) | Aa1/AA+ | 2,450,000 | 3,114,170 | |||||
Texas State Public Finance Authority, 5.00% due 8/15/2023 (Idea Public School; Insured: ACA) | NR/A | 3,100,000 | 3,066,365 | |||||
Travis County GO, 5.25% due 3/1/2021 | Aaa/AAA | 1,000,000 | 1,081,810 | |||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2010 (Ascension Health; Insured: MBIA) | Aaa/AAA | 2,000,000 | 2,105,880 | |||||
Travis County Health Facilities Development Corp., 6.25% due 11/15/2014 pre-refunded 11/15/2009 (Ascension Health; Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,192,480 | |||||
Upper Trinity Regional Water District Treated Water Supply Systems, 7.125% due 8/1/2008 (Insured: FGIC) | Aaa/AAA | 305,000 | 313,381 | |||||
Waco Health Facilities Development Corp., 6.00% due 11/15/2015 pre-refunded 11/15/2009 (Ascension Health) | Aa2/AAA | 870,000 | 922,130 |
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Waco Health Facilities Development Corp., 6.00% due 11/15/2016 pre-refunded 11/15/2009 (Ascension Health) | Aa2/AAA | $ | 1,050,000 | $ | 1,112,916 | |||
West Harris County Municipal Utility, 6.00% due 3/1/2017 (Insured: Radian) | NR/AA | 500,000 | 505,300 | |||||
UTAH — 0.64% | ||||||||
Salt Lake City Municipal Building, 5.30% due 10/15/2012 pre-refunded 10/15/2009 (Insured: AMBAC) | Aaa/AAA | 1,085,000 | 1,133,782 | |||||
Utah County Municipal Building Authority, 5.50% due 11/1/2016 pre-refunded 11/1/2011 (Insured: AMBAC) | Aaa/NR | 1,000,000 | 1,072,440 | |||||
Utah Housing Finance Authority, 6.05% due 7/1/2016 (Credit Support: FHA) | NR/AAA | 405,000 | 413,448 | |||||
Utah Housing Finance Authority SFMR D-2 Class I, 5.85% due 7/1/2015 (Credit Support: FHA) | Aa2/AA | 45,000 | 45,747 | |||||
Utah State Board of Regents Auxiliary, 5.25% due 5/1/2013 | NR/AA | 595,000 | 633,336 | |||||
VIRGINIA — 2.20% | ||||||||
Alexandria IDRB Institute for Defense Analysis, 6.00% due 10/1/2014 pre-refunded 10/1/2010 (Insured: AMBAC) | Aaa/AAA | 1,500,000 | 1,618,815 | |||||
Alexandria IDRB Institute for Defense Analysis, 6.00% due 10/1/2015 pre-refunded 10/1/2010 (Insured: AMBAC) | Aaa/AAA | 1,590,000 | 1,715,944 | |||||
Alexandria IDRB Institute for Defense Analysis, 5.90% due 10/1/2020 pre-refunded 10/1/2010 (Insured: AMBAC) | Aaa/AAA | 2,000,000 | 2,152,760 | |||||
Fauquier County IDRB, 5.50% due 10/1/2016 (Insured: Radian) | NR/AA | 1,000,000 | 1,058,300 | |||||
Hanover County IDRB Medical Facilities, 6.00% due 10/1/2021 (ETM) | Aaa/AAA | 795,000 | 796,534 | |||||
Norton IDRB Hospital, 6.00% due 12/1/2014 (Norton Community Hospital; Insured: ACA) | NR/A | 1,635,000 | 1,738,299 | |||||
Spotsylvania County IDRB, 6.00% due 9/1/2019 put 9/1/2008 (Walter Grinders; LOC: Deutsche Bank) (AMT) | NR/NR | 2,210,000 | 2,212,122 | |||||
WASHINGTON — 3.60% | ||||||||
Port Longview Industrial Development Corp. Solid Waste Disposal, 6.875% due 10/1/2008 (Weyerhaeuser Co.) (AMT) | NR/BBB | 1,500,000 | 1,540,995 | |||||
Skagit County Public Hospital District Capital Improvement, 5.125% due 12/1/2015 (Insured: MBIA) | Aaa/NR | 1,900,000 | 2,075,674 | |||||
Vancouver Downtown Redevelopment Senior, 5.50% due 1/1/2018 (Conference Center; Insured: ACA) | NR/A | 3,500,000 | 3,632,720 | |||||
Washington Health Care Facilities, 5.50% due 12/1/2010 pre-refunded 12/1/2009 (Providence Services; Insured: MBIA) | Aaa/AAA | 2,690,000 | 2,825,388 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2014 (Catholic Health Services; Insured: MBIA) | Aaa/AAA | 1,735,000 | 1,844,964 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2015 (Catholic Health Services; Insured: MBIA) | Aaa/AAA | 1,945,000 | 2,062,167 | |||||
Washington Nonprofit Housing, 5.60% due 7/1/2011 (Kline Galland Center; Insured: Radian) | NR/AA | 500,000 | 516,185 | |||||
Washington Nonprofit Housing, 5.875% due 7/1/2019 (Kline Galland Center; Insured: Radian) | NR/AA | 1,000,000 | 1,029,250 | |||||
Washington Public Power Supply, 0% due 7/1/2010 | Aaa/AA- | 960,000 | 865,785 | |||||
Washington Public Power Supply, 0% due 7/1/2011 | Aaa/AA- | 1,000,000 | 867,440 | |||||
Washington State Health Care Facilities, 4.50% due 12/1/2008 (Kadlec Medical Center; Insured: Assured Guaranty) | Aaa/AAA | 1,200,000 | 1,213,224 | |||||
WEST VIRGINIA — 0.31% | ||||||||
West Virginia State Hospital Finance Authority, 5.00% due 6/1/2020 (United Hospital Center; Insured: AMBAC) | Aaa/AAA | 1,530,000 | 1,604,511 |
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
WISCONSIN — 0.60% | ||||||||
Wisconsin Health & Educational Facilities, 5.75% due 8/15/2020 (Eagle River Memorial Hospital Inc.; Insured: Radian) | NR/AA | $ | 1,000,000 | $ | 1,036,120 | |||
Wisconsin Housing & Economic Development, 5.875% due 11/1/2016 (Insured: AMBAC) | Aaa/AAA | 1,980,000 | 2,055,459 | |||||
TOTAL INVESTMENTS — 98.87% (COST $494,464,922) | $ | 507,761,647 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.13% | 5,818,145 | |||||||
NET ASSETS — 100.00% | $ | 513,579,792 | ||||||
Footnote Legend
Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end.
(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. | |
AMT | Alternative Minimum Tax | |
CIFG | CIFG Assurance North America Inc. | |
COP | Certificates of Participation | |
DFA | Development Finance Authority | |
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 | |
ISD | Independent School District | |
LOC | Line of Credit | |
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 | |
USD | Unified School District | |
XLCA | Insured by XL Capital Assurance |
See notes to Financial statements.
SUMMARY OF SECURITY CREDIT RATINGS†
We have used ratings from Moody’s Investors Service. Where Moody’s
ratings are not available, we have used Standard & Poor’s ratings.
26 Certified Annual Report
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
Certified Annual Report 27
EXPENSE EXAMPLE | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,014.90 | $ | 3.38 | |||
Hypothetical* | $ | 1,000.00 | $ | 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. |
28 Certified Annual Report
INDEX COMPARISON | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 IN VESTMENT
Thornburg Intermediate Municipal Fund Class I Total Returns, versus
Merrill Lynch 7-12 Year Municipal Bond Index and Consumer Price Index
(July 5, 1996 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
I Shares (Incep: 7/5/96) | 3.06 | % | 3.39 | % | 4.36 | % | 4.79 | % |
FUND ATTRIBUTES
as of September 30, 2007
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 7/5/96) | 4.23 | % | 3.63 | % | $ | 13.13 | $ | 13.13 |
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 representing a broad measure of market performance. It is a model portfolio of municipal obligations throughout the U.S., with an average maturity which ranges from seven to twelve years.
Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
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.
Certified Annual Report 29
TRUSTEES AND OFFICERS | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 31
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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 Intermediate Municipal Fund | September 30, 2007 (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.
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, 2007, 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, 2007.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s above average or
Certified Annual Report 33
OTHER INFORMATION, CONTINUED | ||
Thornburg Intermediate Municipal Fund | Septmeber 30, 2007 |
better investment returns over most measuring periods, and in particular the most recent three years, relative to two categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and the Fund’s good relative performance against comparative measures of portfolio volatility and return.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of fees, the Trustees 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 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. The Trustees observed that the management fee and expense ratios for the Fund were higher to a small extent than the median and average management fee levels and expense ratios for the group of municipal debt funds assembled by the analyst firm, but that the difference was not significant in view of its degree and the Fund’s investment performance. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as the Fund grows in size, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
34 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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 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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
36 This page is not part of the Annual Report.
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 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 taxes 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 normally three to ten years. 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 International Growth Fund |
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2 This page is not part of the Annual Report
Thornburg New Mexico Intermediate Municipal Fund
September 30, 2007
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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 3
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, 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.
Investments 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
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 managers’ 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.
4 Certified Annual Report
Glossary
The Merrill Lynch 7-12 Year Municipal Bond 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.
Consumer Price Index – 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. Also known as the cost-of-living index.
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.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Certified Annual Report 5
![]() | October 18, 2007 | |
Dear Fellow Shareholder: | ||
We are pleased to present the Annual Report for the Thornburg New Mexico Intermediate Municipal Fund. The net asset value of the Class A shares decreased by 10 cents per share to $13.10 during the twelve months ended September 30, 2007. If you were with us for the entire period, you received dividends of 46.6 cents per share. If you reinvested your dividends, you received 47.3 cents per share. Investors who owned Class D shares received dividends of 43.3 and 43.9 cents per share, respectively. | ||
![]() | The past year has been one of the more interesting in recent memory. Municipal bonds traded within a fairly tight trading range until May. Then, as the Federal Reserve raised the targeted Fed Funds rate to 5.0%, the bond market started to worry about an overheated economy and excess inflation. This drove up market yields for bonds by 0.30% to 0.40% and led to a somewhat steeper yield curve. Next, the sordid world of subprime mortgage bonds and derivatives based upon them started to unravel. Though subprime problems didn’t directly affect the municipal bond market, they did set off a panic-stricken flight to quality. As investors piled into Treasury notes and bonds, they drove their yields back down to levels that prevailed toward the beginning of 2007. However, investors mostly bypassed the municipal bond market, leaving rates there relatively unchanged. This created a rare event during which municipal bond yields were extremely attractive relative to Treasury yields. By late summer, ten-year high quality municipal bonds were routinely yielding 90% or more of ten-year Treasury yields, and trades over 100% were occasionally happening. | |
Meanwhile, quality spreads (the difference in yield between the highest quality bonds and lower quality bonds) were getting wider. Some investors, who had been comfortable taking credit risk at very tight spreads to AAA rated bonds, suddenly became a lot less comfortable. Those who sold typically had to sell their bonds at significantly wider spreads than those that prevailed earlier in the year. This led to an environment where investors could finally get compensated for taking incremental credit risk in bonds rated lower than AAA. | ||
![]() | Since the end of August, the bond market has been gradually regaining its composure. A calmer, lower volatility environment has helped fuel a renewed appetite for risk. This has led to some retrenchment of the spread widening that occurred in May. It also has led to a wholesale re-pricing of the municipal bond market so that it is no longer extremely attractive relative to the Treasury market. However, credit spreads on most bonds are still wider than they were just a few months ago, and municipal bonds are still somewhat attractive relative to Treasury notes, particularly if you expect marginal tax rates to go up (we do). | |
The Class A shares of your Fund produced a total return of 2.82% over the twelve-month period ended September 30, 2007, compared to a 3.82% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Over the last year, intermediate municipal bonds have performed better than longer and shorter maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next eighteen years, so it has significant exposure to shorter and longer term bonds. Since those bonds generally underperformed intermediate bonds and the index, the Fund underperformed the index. | ||
Your Thornburg New Mexico Intermediate Municipal Fund is a laddered portfolio of over 130 municipal obligations from all over New Mexico. 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 |
6 Certified Annual Report
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.
We were able to take advantage of the late summer market weakness to restructure the Fund somewhat. Early in 2007, the Fund’s ladder was a bit overweighted in the early years. As interest rates rose, we invested primarily in the later years of the Fund’s ladder so that it is now more evenly distributed. Consequently, at fiscal year end (September 30, 2007), the Fund had an average maturity of 7.88 and duration of 4.51 years. We also added incrementally to lower rated investment grade bonds, although we continue to maintain a AA average quality.
% of portfolio maturing | Cumulative % maturing | |||||||||||
2 years | = | 11.4 | % | Year 2 | = | 11.4 | % | |||||
2 to 4 years | = | 17.4 | % | Year 4 | = | 28.8 | % | |||||
4 to 6 years | = | 12.3 | % | Year 6 | = | 41.1 | % | |||||
6 to 8 years | = | 10.6 | % | Year 8 | = | 51.7 | % | |||||
8 to 10 years | = | 11.2 | % | Year 10 | = | 62.9 | % | |||||
10 to 12 years | = | 12.4 | % | Year 12 | = | 5.3 | % | |||||
12 to 14 years | = | 9.2 | % | Year 14 | = | 84.5 | % | |||||
14 to 16 years | = | 6.7 | % | Year 16 | = | 91.2 | % | |||||
16 to 18 years | = | 3.7 | % | Year 18 | = | 94.9 | % | |||||
Over 18 years | = | 5.1 | % | Over 18 years | = | 100.0 | % |
Percentages can and do vary. Data as of 9/30/07.
Looking forward, we do expect U.S. economic growth to slow from the second quarter’s healthy 3.8% rate. However, consumer spending seems to be holding up well, and exports are surging. These factors, along with new job growth of about 100,000 per month, should keep the U.S. economy out of recession territory. However, the dismal housing sector and the dislocation in financial markets will probably cap future growth at a relatively low rate. This should allow the Fed to continue easing monetary conditions, but with a close eye on what happens to inflation. Market unease about the depreciating dollar and the long-term inflation outlook should keep long-term interest rates from dropping precipitously, which, in turn, should lead to a steeper yield curve going forward. We believe that a steepening yield curve would be advantageous for the laddering style employed by this Fund.
New Mexico state tax revenues grew by 14% in fiscal 2006, allowing the state to build up reserves of $525 million. However, revenue growth is expected to slow to 2% in 2007, and 3.6% in 2008. The slowing is due to a variety of factors, including a depressed housing market, lower income tax rates, and declining prices for natural gas. Expenditures are projected to grow by about 9% in the current fiscal year, which will likely strain state finances. Given these challenges, we do believe it is prudent to keep overall 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, | ||||
![]() | ![]() | ![]() | ||
George Strickland | Josh Gonze | Christopher Ihlefeld | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager |
Certified Annual Report 7
STATEMENT OF ASSETS AND LIABILITIES
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $195,055,430) (Note 2) | $ | 199,257,543 | ||
Cash | 306,817 | |||
Receivable for fund shares sold | 354,917 | |||
Interest receivable | 2,641,946 | |||
Prepaid expenses and other assets | 843 | |||
Total Assets | 202,562,066 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 85,266 | |||
Payable to investment advisor and other affiliates (Note 3) | 143,029 | |||
Accounts payable and accrued expenses | 44,104 | |||
Dividends payable | 208,970 | |||
Total Liabilities | 481,369 | |||
NET ASSETS | $ | 202,080,697 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (19,279 | ) | |
Net unrealized appreciation on investments | 4,202,113 | |||
Accumulated net realized gain (loss) | (1,223,023 | ) | ||
Net capital paid in on shares of beneficial interest | 199,120,886 | |||
$ | 202,080,697 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 13.10 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
Maximum offering price per share | $ | 13.37 | ||
Class D Shares: | ||||
Net asset value, offering and redemption price per share | $ | 13.11 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 13.10 | ||
See notes to financial statements.
8 Certified Annual Report
Thornburg New Mexico Intermediate Municipal Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $882,872) | $ | 9,246,006 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,021,738 | |||
Administration fees (Note 3) | ||||
Class A Shares | 222,042 | |||
Class D Shares | 18,220 | |||
Class I Shares | 6,069 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 444,085 | |||
Class D Shares | 146,139 | |||
Transfer agent fees | ||||
Class A Shares | 71,747 | |||
Class D Shares | 11,170 | |||
Class I Shares | 1,685 | |||
Registration and filing fees | ||||
Class A Shares | 525 | |||
Class D Shares | 524 | |||
Class I Shares | 366 | |||
Custodian fees (Note 3) | 70,149 | |||
Professional fees | 25,069 | |||
Accounting fees | 8,470 | |||
Trustee fees | 3,594 | |||
Other expenses | 24,218 | |||
Total Expenses | 2,075,810 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (5,567 | ) | ||
Distribution fees waived (Note 3) | (73,070 | ) | ||
Fees paid indirectly (Note 3) | (14,004 | ) | ||
Net Expenses | 1,983,169 | |||
Net Investment Income | 7,262,837 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 54,061 | |||
Net change in unrealized appreciation (depreciation) of investments | (1,563,489 | ) | ||
Net Realized and Unrealized Loss on Investments | (1,509,428 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 5,753,409 | ||
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, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 7,262,837 | $ | 7,473,632 | ||||
Net realized gain (loss) on investments | 54,061 | (175,714 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (1,563,489 | ) | (409,024 | ) | ||||
Net Increase (Decrease) in net Assets Resulting from operations | 5,753,409 | 6,888,894 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (6,302,393 | ) | (6,995,117 | ) | ||||
Class D Shares | (480,929 | ) | (478,515 | ) | ||||
Class I Shares | (479,515 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (25,600,468 | ) | (15,627,535 | ) | ||||
Class D Shares | (500,141 | ) | (4,424,114 | ) | ||||
Class I Shares | 19,414,839 | — | ||||||
Net Decrease in net Assets | (8,195,198 | ) | (20,636,387 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 210,275,895 | 230,912,282 | ||||||
End of year | $ | 202,080,697 | $ | 210,275,895 | ||||
See notes to financial statements.
10 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary 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 objective of the Fund 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 D, and 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 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, (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, 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: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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
Certified Annual Report 11
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
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 liabilities 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, 2007, 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 depending on the Fund’s asset size. The Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $5,567 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 the Fund’s shares. For the year ended September 30, 2007, the Distributor has advised the Fund that it earned net commissions aggregating $3,733 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 distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class D shares, under which the Fund compensates the Distributor for services in promoting the sale of Class D shares of the Fund at an annual rate of up to .75 of 1% per annum of the average daily net assets attributable to Class D 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, 2007, are set forth in the Statement of Operations. Distribution fees in the amount of $73,070 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, 2007, fees paid indirectly were $14,004. 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, 2007 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 1,480,808 | $ | 19,422,034 | 1,491,269 | $ | 19,550,483 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 285,590 | 3,745,888 | 309,029 | 4,047,693 | ||||||||||
Shares repurchased | (3,721,960 | ) | (48,768,390 | ) | (2,999,545 | ) | (39,225,711 | ) | ||||||
Net Increase (Decrease) | (1,955,562 | ) | $ | (25,600,468 | ) | (1,199,247 | ) | $ | (15,627,535 | ) | ||||
Class D Shares | ||||||||||||||
Shares sold | 421,403 | $ | 5,522,652 | 227,791 | $ | 2,980,463 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 27,641 | 362,701 | 27,090 | 355,077 | ||||||||||
Shares repurchased | (486,230 | ) | (6,385,494 | ) | (590,696 | ) | (7,759,654 | ) | ||||||
Net Increase (Decrease) | (37,186 | ) | $ | (500,141 | ) | (335,815 | ) | $ | (4,424,114 | ) | ||||
Class I Shares* | ||||||||||||||
Shares sold | 1,771,412 | $ | 23,191,290 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 35,158 | 459,669 | — | — | ||||||||||
Shares repurchased | (323,605 | ) | (4,236,120 | ) | — | — | ||||||||
Net Increase (Decrease) | 1,482,965 | $ | 19,414,839 | — | $ | — | ||||||||
* | Effective date of Class I shares was February 1, 2007. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $34,599,057 and $39,617,145, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 195,054,985 | ||
Gross unrealized appreciation on a tax basis | $ | 4,318,790 | ||
Gross unrealized depreciation on a tax basis | (116,232 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 4,202,558 | ||
At September 30, 2007, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2007, 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:
2008 | $ | 595,638 | |
2009 | 320,666 | ||
2011 | 145,437 | ||
2013 | 255 | ||
2014 | 49,136 | ||
2015 | 112,336 | ||
$ | 1,223,468 | ||
During the year ended September 30, 2007, $33,677 of capital loss carry forwards from prior years expired.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized loss by $33,781, increased over-distributed net investment income by $4,617 and decreased net paid in capital paid in on shares of beneficial interest by $29,164. Reclassifications result primarily from an expired capital loss carry forwards and taxable market discount.
All dividends paid by the Fund for the years ended September 30, 2007 and September 30, 2006, represent tax exempt interest dividends, which are excludable by shareholders from gross income for federal income tax purposes.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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, | ||||||||||||||||||||
Class A Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.20 | $ | 13.22 | $ | 13.40 | $ | 13.46 | $ | 13.42 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.47 | 0.45 | 0.43 | 0.45 | 0.48 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.10 | ) | (0.02 | ) | (0.18 | ) | (0.06 | ) | 0.04 | |||||||||||
Total from investment operations | 0.37 | 0.43 | 0.25 | 0.39 | 0.52 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.47 | ) | (0.45 | ) | (0.43 | ) | (0.45 | ) | (0.48 | ) | ||||||||||
Change in net asset value | (0.10 | ) | (0.02 | ) | (0.18 | ) | (0.06 | ) | 0.04 | |||||||||||
NET ASSET VALUE, end of year | $ | 13.10 | $ | 13.20 | $ | 13.22 | $ | 13.40 | $ | 13.46 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 2.82 | % | 3.31 | % | 1.88 | % | 3.00 | % | 3.93 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.55 | % | 3.41 | % | 3.22 | % | 3.40 | % | 3.55 | % | ||||||||||
Expenses, after expense reductions | 0.98 | % | 0.99 | % | 0.99 | % | 0.96 | % | 0.97 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.97 | % | 0.98 | % | 0.98 | % | 0.96 | % | 0.97 | % | ||||||||||
Expenses, before expense reductions | 0.98 | % | 0.99 | % | 0.99 | % | 0.96 | % | 0.97 | % | ||||||||||
Portfolio turnover rate | 17.38 | % | 11.59 | % | 16.63 | % | 14.66 | % | 16.53 | % | ||||||||||
Net assets at end of year (000) | $ | 169,130 | $ | 196,163 | $ | 212,335 | $ | 208,435 | $ | 216,766 |
(a) | Sales loads are not reflected in computing total return. |
See notes to the financial statements.
Certified Annual Report 15
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
Class D Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.21 | $ | 13.23 | $ | 13.41 | $ | 13.47 | $ | 13.43 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.43 | 0.41 | 0.39 | 0.42 | 0.44 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.10 | ) | (0.02 | ) | (0.18 | ) | (0.06 | ) | 0.04 | |||||||||||
Total from investment operations | 0.33 | 0.39 | 0.21 | 0.36 | 0.48 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.43 | ) | (0.41 | ) | (0.39 | ) | (0.42 | ) | (0.44 | ) | ||||||||||
Change in net asset value | (0.10 | ) | (0.02 | ) | (0.18 | ) | (0.06 | ) | 0.04 | |||||||||||
NET ASSET VALUE, end of year | $ | 13.11 | $ | 13.21 | $ | 13.23 | $ | 13.41 | $ | 13.47 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 2.57 | % | 3.04 | % | 1.62 | % | 2.70 | % | 3.63 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.30 | % | 3.15 | % | 2.96 | % | 3.11 | % | 3.24 | % | ||||||||||
Expenses, after expense reductions | 1.23 | % | 1.24 | % | 1.25 | % | 1.25 | % | 1.25 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.23 | % | 1.24 | % | 1.24 | % | 1.24 | % | 1.25 | % | ||||||||||
Expenses, before expense reductions | 1.77 | % | 1.82 | % | 1.83 | % | 1.83 | % | 1.88 | % | ||||||||||
Portfolio turnover rate | 17.38 | % | 11.59 | % | 16.63 | % | 14.66 | % | 16.53 | % | ||||||||||
Net assets at end of year (000) | $ | 13,524 | $ | 14,113 | $ | 18,577 | $ | 14,051 | $ | 14,658 |
See notes to the financial statements.
16 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund
Class I Shares: | Period Ended September 30, 2007(c) | |||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period) | ||||
Net asset value, beginning of period | $ | 13.10 | ||
Income from investment operations: | ||||
Net investment income | 0.34 | |||
Net realized and unrealized gain (loss) on investments | 0.00 | |||
Total from investment operations | 0.34 | |||
Less dividends from: | ||||
Net investment income | (0.34 | ) | ||
Change in net asset value | 0.00 | |||
NET ASSET VALUE, end of period | $ | 13.10 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 2.64 | % | ||
Ratios to average net assets: | ||||
Net investment income | 3.95 | %(b) | ||
Expenses, after expense reductions | 0.63 | %(b) | ||
Expenses, after expense reductions and net of custody credits | 0.62 | %(b) | ||
Expenses, before expense reductions | 0.63 | %(b) | ||
Portfolio turnover rate | 17.38 | % | ||
Net assets at end of period (000) | $ | 19,427 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class I shares was February 1, 2007. |
See notes to the financial statements.
Certified Annual Report 17
SCHEDULE OF INVESTMENTS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
CUSIPS: CLASS A - 885-215-301, CLASS D - 885-215-624, CLASS I - 885-215-285
NASDAQ SYMBOLS: CLASS A - THNMX, CLASS D - THNDX, CLASS I - THNIX
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Alamogordo Hospital, 5.30% due 1/1/2013 (Insured: Radian) | NR/AA | $ | 3,000,000 | $ | 3,007,080 | |||
Albuquerque GRT, 0% due 7/1/2012 pre-refunded 7/1/2011 | Aaa/AAA | 1,775,000 | 1,483,190 | |||||
Albuquerque GRT, 0% due 7/1/2012 (Insured: FSA) | Aaa/AAA | 225,000 | 187,799 | |||||
Albuquerque Industrial, 5.15% due 4/1/2016 (MCT Industries Inc.; LOC: Bank of the West) (AMT) | Aa3/NR | 1,170,000 | 1,211,816 | |||||
Albuquerque Industrial, 5.25% due 4/1/2017 (MCT Industries Inc.; LOC: Bank of the West) (AMT) | Aa3/NR | 2,140,000 | 2,218,367 | |||||
Albuquerque Joint Water & Sewage, 0% due 7/1/2008 (Insured: FGIC) | Aaa/AAA | 1,600,000 | 1,557,056 | |||||
Albuquerque Joint Water & Sewage Systems, 4.75% due 7/1/2008 | Aa2/AA | 60,000 | 60,056 | |||||
Albuquerque Municipal School District 12, 5.10% due 8/1/2014 pre-refunded 8/1/2008 | Aa2/AA | 760,000 | 770,154 | |||||
Albuquerque Municipal School District 12, 5.00% due 8/1/2015 | Aa2/AA | 1,175,000 | 1,216,748 | |||||
Albuquerque Refuse Removal & Disposal, 5.00% due 7/1/2010 (Insured: FSA) | Aaa/AAA | 415,000 | 430,878 | |||||
Belen Gasoline Tax Improvement, 5.40% due 1/1/2011 | NR/NR | 585,000 | 588,446 | |||||
Bernalillo County GRT, 5.50% due 10/1/2011 pre-refunded 10/01/2009 | Aa3/AAA | 495,000 | 514,231 | |||||
Bernalillo County GRT, 5.25% due 10/1/2012 | Aa3/AAA | 1,000,000 | 1,076,420 | |||||
Bernalillo County GRT, 5.75% due 10/1/2015 pre-refunded 10/01/2009 | Aa3/AAA | 2,000,000 | 2,087,320 | |||||
Bernalillo County GRT, 5.00% due 4/1/2021 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,213,480 | |||||
Bernalillo County GRT, 5.25% due 10/1/2022 (Insured: AMBAC) | Aaa/AAA | 3,170,000 | 3,507,922 | |||||
Chaves County GRT, 5.00% due 7/1/2017 (Insured: FGIC) | Aaa/NR | 1,000,000 | 1,011,520 | |||||
Chaves County GRT, 5.05% due 7/1/2019 (Insured: FGIC) | Aaa/NR | 735,000 | 743,805 | |||||
Cibola County GRT, 5.875% due 11/1/2008 (Insured: AMBAC) (ETM) | Aaa/AAA | 495,000 | 507,627 | |||||
Cibola County GRT, 6.00% due 11/1/2010 (Insured: AMBAC) (ETM) | Aaa/AAA | 555,000 | 594,627 | |||||
Farmington Hospital, 5.00% due 6/1/2017 (San Juan Regional Medical Center) | A3/NR | 1,035,000 | 1,079,464 | |||||
Farmington Hospital, 5.125% due 6/1/2018 (San Juan Regional Medical Center) | A3/NR | 570,000 | 588,650 | |||||
Farmington Hospital, 5.125% due 6/1/2019 (San Juan Regional Medical Center) | A3/NR | 645,000 | 663,486 | |||||
Farmington Hospital, 5.00% due 6/1/2022 (San Juan Regional Medical Center) | A3/NR | 2,325,000 | 2,356,899 | |||||
Farmington PCR, 4.06% due 5/1/2024 put 10/1/2007 (LOC: Barclays Bank) (daily demand notes) | VMIG1/A-1+ | 600,000 | 600,000 | |||||
Farmington Utility Systems, 5.00% due 5/15/2012 (Insured: FSA) | Aaa/AAA | 6,095,000 | 6,389,084 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2012 (Insured: AMBAC) | Aaa/AAA | 3,345,000 | 3,535,866 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2013 (Insured: AMBAC) | Aaa/AAA | 2,060,000 | 2,195,569 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2017 (Insured: AMBAC) | Aaa/AAA | 3,540,000 | 3,764,330 | |||||
Grant County Hospital Facility, 5.50% due 8/1/2009 (Gila Regional Medical Center; Insured: Radian) | NR/AA | 1,310,000 | 1,342,252 | |||||
Grant County Hospital Facility, 5.50% due 8/1/2010 (Gila Regional Medical Center; Insured: Radian) | NR/AA | 1,385,000 | 1,437,741 | |||||
Las Cruces School District 2 GO, 5.50% due 8/1/2010 | Aa3/NR | 1,000,000 | 1,033,690 | |||||
Los Alamos County Utility Systems, 5.00% due 7/1/2013 (Insured: FSA) | Aaa/AAA | 1,265,000 | 1,354,941 | |||||
New Mexico Educational Assistance Foundation, 4.95% due 3/1/2009 (Guaranteed: Student Loans) (AMT) | Aaa/NR | 2,000,000 | 2,033,280 | |||||
New Mexico Finance Authority, 5.15% due 6/1/2012 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 255,000 | 261,273 | |||||
New Mexico Finance Authority, 5.25% due 6/1/2013 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 130,000 | 133,407 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2013 (Insured: AMBAC) | Aaa/NR | 2,280,000 | 2,440,968 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2014 (Insured: MBIA) | Aaa/AAA | 2,660,000 | 2,835,693 | |||||
New Mexico Finance Authority, 5.35% due 6/1/2014 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 130,000 | 133,617 | |||||
New Mexico Finance Authority, 5.25% due 6/1/2015 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,086,080 | |||||
New Mexico Finance Authority, 5.45% due 6/1/2015 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 145,000 | 149,267 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2015 (Insured: AMBAC) | Aaa/NR | 2,360,000 | 2,551,136 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2018 (Insured: AMBAC) | Aaa/NR | 2,915,000 | 3,106,661 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2019 (Insured: MBIA) | Aaa/NR | 1,215,000 | 1,287,438 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2020 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,059,090 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2020 (Insured: MBIA) | Aaa/AAA | 1,625,000 | 1,721,021 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2020 (Revolving Fund F; Insured: MBIA) | Aaa/NR | 1,395,000 | 1,471,558 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2022 (Insured: MBIA) | Aaa/AAA | 1,300,000 | 1,372,618 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2024 (Insured: MBIA) | Aaa/AAA | 7,000,000 | 7,345,590 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
New Mexico Finance Authority Court Facilities Fee, 5.50% due 6/15/2020 pre-refunded 6/15/2011 (Insured: MBIA) | Aaa/AAA | $ | 2,000,000 | $ | 2,132,320 | |||
New Mexico Finance Authority State Office Building Tax, 5.00% due 6/1/2014 pre-refunded 6/1/2011 | Aa1/AAA | 1,875,000 | 1,967,156 | |||||
New Mexico Finance Authority State Transportation, 5.00% due 6/15/2014 (Insured: MBIA) | Aaa/AAA | 2,100,000 | 2,264,892 | |||||
New Mexico Highway Commission Senior Tax, 5.50% due 6/15/2013 pre-refunded 6/15/2011 | Aa2/AAA | 2,000,000 | 2,132,320 | |||||
New Mexico Highway Commission Senior Tax, 5.50% due 6/15/2014 | Aa2/AAA | 2,000,000 | 2,125,160 | |||||
New Mexico Highway Commission Tax, 6.00% due 6/15/2011 pre-refunded 6/15/2009 | Aa2/AAA | 5,000,000 | 5,204,350 | |||||
New Mexico Hospital Equipment Loan, 5.20% due 12/1/2010 pre-refunded 12/1/2007 (Catholic Health Initiatives) | NR/AA | 1,140,000 | 1,154,261 | |||||
New Mexico Hospital Equipment Loan, 5.75% due 8/1/2016 pre-refunded 8/1/2011 (Presbyterian Healthcare) | Aa3/AA- | 5,205,000 | 5,644,354 | |||||
New Mexico Housing Authority Region III Multi Family Housing, 5.30% due 12/1/2022 (Senior El Paseo Apartments; Insured: AMBAC) | Aaa/AAA | 1,100,000 | 1,117,809 | |||||
New Mexico MFA Forward Mortgage, 6.50% due 7/1/2025 (Collateralized: FNMA/GNMA) | NR/AAA | 165,000 | 168,810 | |||||
New Mexico MFA General, 5.80% due 9/1/2019 pre-refunded 9/1/2009 | NR/AAA | 775,000 | 807,589 | |||||
New Mexico MFA Multi Family, 5.05% due 9/1/2027 (St. Anthony; Insured: FHA) | NR/AAA | 890,000 | 892,029 | |||||
New Mexico MFA Multi Family, 6.05% due 7/1/2028 (Sandpiper Apartments; Insured: FHA) | NR/AAA | 2,335,000 | 2,457,774 | |||||
New Mexico MFA Multi Family, 5.00% due 7/1/2031 put 7/1/2011 (Sombra Del Oso Apartments; Collateralized: FNMA) | Aaa/NR | 1,000,000 | 1,024,160 | |||||
New Mexico MFA Multi Family, 5.00% due 7/1/2031 put 7/1/2011 (Riverwalk Apartments; Collateralized: FNMA) | Aaa/NR | 1,910,000 | 1,956,146 | |||||
New Mexico MFA Multi Family, 5.00% due 7/1/2031 put 7/1/2011 (Tierra Pointe I Apartments; Collateralized: FNMA) | Aaa/NR | 2,785,000 | 2,852,286 | |||||
New Mexico MFA SFMR, 5.70% due 9/1/2014 (Collateralized: FNMA/GNMA) | NR/AAA | 80,000 | 80,582 | |||||
New Mexico MFA SFMR, 5.80% due 9/1/2016 (Collateralized: FNMA/GNMA) | NR/AAA | 150,000 | 154,730 | |||||
New Mexico MFA SFMR, 5.75% due 3/1/2017 (Collateralized: FNMA/GNMA) | NR/AAA | 205,000 | 206,503 | |||||
New Mexico MFA SFMR, 6.15% due 9/1/2017 (Collateralized: FNMA/GNMA) | NR/AAA | 65,000 | 65,598 | |||||
New Mexico MFA SFMR, 0% due 9/1/2019 (GIC: Bayerisch Landesbank) | NR/AAA | 250,000 | 223,317 | |||||
New Mexico MFA SFMR, 5.875% due 9/1/2020 (AMT) | NR/AAA | 230,000 | 233,388 | |||||
New Mexico MFA SFMR, 5.875% due 9/1/2021 (Collateralized: FNMA/GNMA) | NR/AAA | 425,000 | 428,362 | |||||
New Mexico MFA SFMR, 6.05% due 9/1/2021 (Collateralized: FNMA/GNMA) | NR/AAA | 260,000 | 271,216 | |||||
New Mexico State Highway Commission Infrastructure C, 5.00% due 6/15/2012 (ETM) | Aa2/AAA | 1,000,000 | 1,059,700 | |||||
New Mexico State Highway Commission Tax, 5.00% due 6/15/2010 (ETM) | Aa2/AAA | 255,000 | 264,540 | |||||
New Mexico State Highway Commission Tax, 5.00% due 6/15/2010 | Aa2/AAA | 245,000 | 254,359 | |||||
New Mexico State Highway Commission Tax, 5.125% due 6/15/2010 pre-refunded 6/15/2008 | Aa2/AAA | 660,000 | 667,603 | |||||
New Mexico State Highway Commission Tax, 5.125% due 6/15/2010 | Aa2/AAA | 3,695,000 | 3,734,426 | |||||
New Mexico State Hospital Equipment Loan Council Hospital, 4.80% due 8/1/2010 (Presbyterian Healthcare) | Aa3/AA- | 500,000 | 513,865 | |||||
New Mexico State Hospital Equipment Loan St. Vincent Hospital, 5.00% due 7/1/2017 (Insured: Radian) | Aa3/AA | 1,730,000 | 1,771,209 | |||||
New Mexico State Hospital Equipment Loan St. Vincent Hospital, 5.00% due 7/1/2019 (Insured: Radian) | Aa3/AA | 1,000,000 | 1,017,290 | |||||
New Mexico State Hospital Equipment Loan St. Vincent Hospital, 5.00% due 7/1/2021 (Insured: Radian) | Aa3/AA | 1,185,000 | 1,197,822 | |||||
New Mexico State Hospital Equipment Loan St. Vincent Hospital, 5.25% due 7/1/2025 (Insured: Radian) | Aa3/AA | 1,000,000 | 1,014,550 | |||||
New Mexico State University Improvement, 5.00% due 4/1/2013 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,069,390 | |||||
New Mexico Supplemental Severance, 5.00% due 7/1/2008 | Aa3/AA- | 5,000,000 | 5,005,650 | |||||
Puerto Rico Public Buildings Authority Government Facilities, 5.25% due 7/1/2019 (Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,110,820 | |||||
Rio Rancho GRT, 5.00% due 6/1/2014 (Insured: FGIC) | Aaa/AAA | 955,000 | 1,028,487 | |||||
Rio Rancho GRT, 5.00% due 6/1/2016 (Insured: FGIC) | Aaa/AAA | 555,000 | 597,113 | |||||
Rio Rancho GRT, 5.00% due 6/1/2022 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,047,290 | |||||
San Juan County Gasoline Tax/Motor Vehicle Improvement, 5.25% due 5/15/2014 | A1/NR | 400,000 | 427,316 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
San Juan County Gasoline Tax/Motor Vehicle Improvement, 5.25% due 5/15/2022 | A1/NR | $ | 1,725,000 | $ | 1,799,071 | |||
San Juan County GRT, 5.30% due 9/15/2009 | A1/NR | 215,000 | 219,158 | |||||
San Juan County GRT, 5.00% due 6/15/2014 (Insured: MBIA) | Aaa/AAA | 1,225,000 | 1,318,921 | |||||
San Juan County GRT, 5.50% due 9/15/2016 (Insured: AMBAC) | Aaa/AAA | 1,180,000 | 1,269,184 | |||||
San Juan County GRT, 5.75% due 9/15/2021 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,088,980 | |||||
Sandoval County Incentive Payment, 5.75% due 2/1/2010 (Intel Corp.) | NR/A+ | 535,000 | 538,199 | |||||
Sandoval County Incentive Payment, 5.00% due 6/1/2020 (Intel Corp.) | NR/A+ | 4,390,000 | 4,588,823 | |||||
Sandoval County Landfill Improvement, 5.50% due 8/15/2015 | Baa2/NR | 1,420,000 | 1,498,853 | |||||
Sandoval County Landfill Improvement, 5.75% due 8/15/2018 | Baa2/NR | 1,335,000 | 1,416,368 | |||||
Santa Fe County, 9.00% due 1/1/2008 (Office & Training Facilities) (ETM) | Aaa/NR | 626,000 | 634,626 | |||||
Santa Fe County, 5.00% due 7/1/2008 (Insured: MBIA) | Aaa/NR | 785,000 | 785,887 | |||||
Santa Fe County, 5.50% due 5/15/2015 (El Castillo Retirement) | NR/BBB- | 1,250,000 | 1,267,837 | |||||
Santa Fe County, 5.80% due 5/15/2018 (El Castillo Retirement) | NR/BBB- | 1,835,000 | 1,836,119 | |||||
Santa Fe County, 7.25% due 7/1/2029 (Rancho Viejo Improvement District) | NR/NR | 1,780,000 | 1,853,443 | |||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation) | NR/NR | 1,000,000 | 1,008,800 | |||||
Santa Fe County Charter School Foundation, 6.625% due 1/15/2036 (ATC Foundation) | NR/NR | 1,030,000 | 1,038,683 | |||||
Santa Fe County Correctional Systems, 5.00% due 2/1/2018 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,075,190 | |||||
Santa Fe County Correctional Systems, 6.00% due 2/1/2027 (Insured: FSA) | Aaa/AAA | 1,520,000 | 1,774,919 | |||||
Santa Fe Educational Facilities, 5.10% due 3/1/2008 (St. John’s College) | NR/BBB+ | 210,000 | 210,758 | |||||
Santa Fe Educational Facilities, 5.40% due 3/1/2017 (St. John’s College) | NR/BBB+ | 1,215,000 | 1,218,657 | |||||
Santa Fe SFMR, 6.00% due 11/1/2010 (Collateralized: FNMA/GNMA) (AMT) | Aaa/NR | 65,000 | 65,116 | |||||
Santa Fe SFMR, 6.10% due 11/1/2011 (Collateralized: FNMA/GNMA) (AMT) | Aaa/NR | 110,000 | 110,135 | |||||
Santa Fe SFMR, 6.20% due 11/1/2016 (Collateralized: FNMA/GNMA) (AMT) | NR/NR | 100,000 | 100,984 | |||||
Taos County GRT, 4.25% due 10/1/2010 (Insured: Radian) | Aa3/NR | 1,000,000 | 1,001,680 | |||||
Taos County GRT, 4.75% due 10/1/2012 (ETM) | Baa1/NR | 1,500,000 | 1,538,265 | |||||
Taos Municipal School District 1, 5.00% due 9/1/2008 (Insured: FSA) | Aaa/NR | 450,000 | 456,160 | |||||
University of New Mexico, 5.25% due 6/1/2013 | Aa3/AA | 665,000 | 709,136 | |||||
University of New Mexico, 5.25% due 6/1/2014 | Aa3/AA | 335,000 | 357,234 | |||||
University of New Mexico, 5.00% due 6/1/2015 (Insured: AMBAC) | Aaa/AAA | 1,590,000 | 1,718,329 | |||||
University of New Mexico, 5.25% due 6/1/2015 | Aa3/AA | 1,195,000 | 1,287,063 | |||||
University of New Mexico, 5.25% due 6/1/2016 | Aa3/AA | 645,000 | 686,383 | |||||
University of New Mexico, 5.25% due 6/1/2017 | Aa3/AA | 1,730,000 | 1,836,430 | |||||
University of New Mexico, 5.25% due 6/1/2018 | Aa3/AA | 1,825,000 | 1,933,259 | |||||
University of New Mexico, 5.25% due 6/1/2018 | Aa3/AA | 1,200,000 | 1,282,320 | |||||
University of New Mexico, 5.25% due 6/1/2021 | Aa3/AA | 1,000,000 | 1,059,320 | |||||
University of New Mexico, 6.00% due 6/1/2021 | Aa3/AA | 610,000 | 702,872 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2016 (Insured: FSA & FHA) | Aaa/AAA | 2,920,000 | 3,112,603 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2017 (Insured: FSA & FHA) | Aaa/AAA | 2,000,000 | 2,122,160 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2018 (Insured: FSA & FHA) | Aaa/AAA | 2,000,000 | 2,111,240 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2019 (Insured: FSA & FHA) | Aaa/AAA | 3,000,000 | 3,152,370 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 7/1/2019 (Insured: FSA & FHA) | Aaa/AAA | 3,000,000 | 3,151,470 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2020 (Insured: FSA & FHA) | Aaa/AAA | 2,310,000 | 2,417,600 | |||||
Ventana West Public Improvement District Special Tax, 6.625% due 8/1/2023 | NR/NR | 2,000,000 | 2,109,200 | |||||
Villa Hermosa Multi Family Housing, 5.85% due 11/20/2016 (Collateralized: GNMA) | NR/AAA | 1,105,000 | 1,127,985 | |||||
TOTAL INVESTMENTS — 98.60% (cost $195,055,430) | $ | 199,257,543 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.40% | 2,823,154 | |||||||
NET ASSETS — 100.00% | $ | 202,080,697 | ||||||
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
Footnote Legend
† | 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. | |
GO | General Obligation | |
GRT | Gross Receipts Tax | |
LOC | Line of Credit | |
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 |
See notes to financial statements.
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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, 2007, 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, 2007 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
22 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
Actual Expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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 for each class of shares 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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,015.00 | $ | 4.87 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.23 | $ | 4.89 | |||
Class D Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,013.70 | $ | 6.11 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,019.00 | $ | 6.13 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,016.70 | $ | 3.12 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.97 | $ | 3.13 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.96%; D: 1.21%; and I: 0.62%) 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 23
INDEX COMPARISON | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 (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 18, 1991 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 6/18/91) | 0.76 | % | 2.58 | % | 3.69 | % | 4.87 | % | ||||
D Shares (Incep: 6/1/99) | 2.57 | % | 2.71 | % | N/A | 3.55 | % |
FUND ATTRIBUTES
as of September 30, 2007
Annualized (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 6/18/91) | 3.63 | % | 3.17 | % | $ | 13.10 | $ | 13.37 | ||||
D Shares (Incep: 6/1/99) | 3.38 | % | 2.98 | % | $ | 13.11 | $ | 13.11 |
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, 2007 (Unaudited) |
Name, Age, Position Held with Fund | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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, 2007 (Unaudited) |
Name, Age, Position Held with Fund | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
26 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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, 2007 (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.
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, 2007, 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, 2007.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to categories of single-state municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 debt mutual fund categories, and in particular to broad-based securities indices, is limited because the Fund’s investment objectives and strategies, as described in its prospectuses, likely will 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.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees
28 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
considered (among other matters) the Fund’s average or below average investment returns over most measuring periods relative to two categories of mutual funds selected by independent mutual fund analyst firms, and the Fund’s favorable performance relative to comparative measures of portfolio volatility and return. The Trustees observed in regard to the two categories considered that the comparability of the categories was limited because of the longer portfolio durations and average maturities of the categories (which favored the performance of the categories in most periods relative to the performance of the shorter duration and average maturity portfolio that the Fund maintained in accordance with its stated strategies), and the unique market niche of the Fund.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 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, similar specific mutual funds. The Trustees observed that the overall expense ratio of the Fund fell between the median and average expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, that the management fee was slightly higher than the average and median fee rates for the same group of funds, and that the difference between the fee rates was not significant in view of its degree. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 29
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
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 International Growth 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 $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 |
TH080
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 taxes 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 normally three to ten years. 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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Thornburg New Mexico Intermediate Municipal Fund
I Shares – September 30, 2007
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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 3
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.
Investments 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
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 managers’ 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.
4 Certified Annual Report
Glossary
The Merrill Lynch 7-12 Year Municipal Bond 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.
Consumer Price Index – 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. Also known as the cost-of-living index.
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.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Certified Annual Report 5
George Strickland Co-Portfolio Manager
Josh Gonze Co-Portfolio Manager
Christopher Ihlefeld Co-Portfolio Manager | October 18, 2007
Dear Fellow Shareholder:
We are pleased to present the Annual Report for the Thornburg New Mexico Intermediate Municipal Fund. The net asset value of the Class I shares started and finished at $13.10 per share during the period from inception on February 1, 2007 through September 30, 2007. If you were with us for the entire period, you received dividends of 34.2 cents per share. If you reinvested your dividends, you received 34.6 cents per share.
The past year has been one of the more interesting in recent memory. Municipal bonds traded within a fairly tight trading range until May. Then, as the Federal Reserve raised the targeted Fed Funds rate to 5.0%, the bond market started to worry about an overheated economy and excess inflation. This drove up market yields for bonds by 0.30% to 0.40% and led to a somewhat steeper yield curve. Next, the sordid world of subprime mortgage bonds and derivatives based upon them started to unravel. Though subprime problems didn’t directly affect the municipal bond market, they did set off a panic-stricken flight to quality. As investors piled into Treasury notes and bonds, they drove their yields back down to levels that prevailed toward the beginning of 2007. However, investors mostly bypassed the municipal bond market, leaving rates there relatively unchanged. This created a rare event during which municipal bond yields were extremely attractive relative to Treasury yields. By late summer, ten-year high quality municipal bonds were routinely yielding 90% or more of ten-year Treasury yields, and trades over 100% were occasionally happening.
Meanwhile, quality spreads (the difference in yield between the highest quality bonds and lower quality bonds) were getting wider. Some investors, who had been comfortable taking credit risk at very tight spreads to AAA rated bonds, suddenly became a lot less comfortable. Those who sold typically had to sell their bonds at significantly wider spreads than those that prevailed earlier in the year. This led to an environment where investors could finally get compensated for taking incremental credit risk in bonds rated lower than AAA.
Since the end of August, the bond market has been gradually regaining its composure. A calmer, lower volatility environment has helped fuel a renewed appetite for risk. This has led to some retrenchment of the spread widening that occurred in May. It also has led to a wholesale re-pricing of the municipal bond market so that it is no longer extremely attractive relative to the Treasury market. However, credit spreads on most bonds are still wider than they were just a few months ago, and municipal bonds are still somewhat attractive relative to Treasury notes, particularly if you expect marginal tax rates to go up (we do).
The Class I shares of your Fund produced a total return of 2.64% over the period from inception on February 1, 2007 through September 30, 2007, compared to a 3.82% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Over the last year, intermediate municipal bonds have performed better than longer and shorter maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next eighteen years, so it has significant exposure to shorter and longer term bonds. Since those bonds generally underperformed intermediate bonds and the index, the Fund underperformed the index.
Your Thornburg New Mexico Intermediate Municipal Fund is a laddered portfolio of over 130 municipal obligations from all over New Mexico. 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 matur- |
6 Certified Annual Report
ities 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 = 11.4% | Year 2 = 11.4% | |
2 to 4 years = 17.4% | Year 4 = 28.8% | |
4 to 6 years = 12.3% | Year 6 = 41.1% | |
6 to 8 years = 10.6% | Year 8 = 51.7% | |
8 to 10 years = 11.2% | Year 10 = 62.9% | |
10 to 12 years = 12.4% | Year 12 = 75.3% | |
12 to 14 years = 9.2% | Year 14 = 84.5% | |
14 to 16 years = 6.7% | Year 16 = 91.2% | |
16 to 18 years = 3.7% | Year 18 = 94.9% | |
Over 18 years = 5.1% | Over 18 years = 100.0% |
Percentages can and do vary. Data as of 9/30/07.
We were able to take advantage of the late summer market weakness to restructure the Fund somewhat. Early in 2007, the Fund’s ladder was a bit overweighted in the early years. As interest rates rose, we invested primarily in the later years of the Fund’s ladder so that it is now more evenly distributed. Consequently, at fiscal year end (September 30, 2007), the Fund had an average maturity of 7.88 and duration of 4.51 years. We also added incrementally to lower rated investment grade bonds, although we continue to maintain a AA average quality.
Looking forward, we do expect U.S. economic growth to slow from the second quarter’s healthy 3.8% rate. However, consumer spending seems to be holding up well, and exports are surging. These factors, along with new job growth of about 100,000 per month, should keep the U.S. economy out of recession territory. However, the dismal housing sector and the dislocation in financial markets will probably cap future growth at a relatively low rate. This should allow the Fed to continue easing monetary conditions, but with a close eye on what happens to inflation. Market unease about the depreciating dollar and the long-term inflation outlook should keep long-term interest rates from dropping precipitously, which, in turn, should lead to a steeper yield curve going forward. We believe that a steepening yield curve would be advantageous for the laddering style employed by this Fund.
New Mexico state tax revenues grew by 14% in fiscal 2006, allowing the state to build up reserves of $525 million. However, revenue growth is expected to slow to 2% in 2007, and 3.6% in 2008. The slowing is due to a variety of factors, including a depressed housing market, lower income tax rates, and declining prices for natural gas. Expenditures are projected to grow by about 9% in the current fiscal year, which will likely strain state finances. Given these challenges, we do believe it is prudent to keep overall 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 | Josh Gonze | Christopher Ihlefeld | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager |
Certified Annual Report 7
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $195,055,430) (Note 2) | $ | 199,257,543 | ||
Cash | 306,817 | |||
Receivable for fund shares sold | 354,917 | |||
Interest receivable | 2,641,946 | |||
Prepaid expenses and other assets | 843 | |||
Total Assets | 202,562,066 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 85,266 | |||
Payable to investment advisor and other affiliates (Note 3) | 143,029 | |||
Accounts payable and accrued expenses | 44,104 | |||
Dividends payable | 208,970 | |||
Total Liabilities | 481,369 | |||
NET ASSETS | $ | 202,080,697 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (19,279 | ) | |
Net unrealized appreciation on investments | 4,202,113 | |||
Accumulated net realized gain (loss) | (1,223,023 | ) | ||
Net capital paid in on shares of beneficial interest | 199,120,886 | |||
$ | 202,080,697 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($169,130,447 applicable to 12,906,718 shares of beneficial interest outstanding—Note 4) | $ | 13.10 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
Maximum offering price per share | $ | 13.37 | ||
Class D Shares: | ||||
Net asset value, offering and redemption price per share ($13,523,507 applicable to 1,031,528 shares of beneficial interest outstanding—Note 4) | $ | 13.11 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($19,426,743 applicable to 1,482,965 shares of beneficial interest outstanding—Note 4) | $ | 13.10 | ||
See notes to financial statements.
8 Certified Annual Report
Thornburg New Mexico Intermediate Municipal Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $882,872) | $ | 9,246,006 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,021,738 | |||
Administration fees (Note 3) | ||||
Class A Shares | 222,042 | |||
Class D Shares | 18,220 | |||
Class I Shares | 6,069 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 444,085 | |||
Class D Shares | 146,139 | |||
Transfer agent fees | ||||
Class A Shares | 71,747 | |||
Class D Shares | 11,170 | |||
Class I Shares | 1,685 | |||
Registration and filing fees | ||||
Class A Shares | 525 | |||
Class D Shares | 524 | |||
Class I Shares | 366 | |||
Custodian fees (Note 3) | 70,149 | |||
Professional fees | 25,069 | |||
Accounting fees | 8,470 | |||
Trustee fees | 3,594 | |||
Other expenses | 24,218 | |||
Total Expenses | 2,075,810 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (5,567 | ) | ||
Distribution fees waived (Note 3) | (73,070 | ) | ||
Fees paid indirectly (Note 3) | (14,004 | ) | ||
Net Expenses | 1,983,169 | |||
Net Investment Income | 7,262,837 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 54,061 | |||
Net change in unrealized appreciation (depreciation) of investments | (1,563,489 | ) | ||
Net Realized and Unrealized Loss on Investments | (1,509,428 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 5,753,409 | ||
See notes to financial statements.
Certified Annual Report 9
Thornburg New Mexico Intermediate Municipal Fund |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 7,262,837 | $ | 7,473,632 | ||||
Net realized gain (loss) on investments | 54,061 | (175,714 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (1,563,489 | ) | (409,024 | ) | ||||
Net Increase (Decrease) in Net Assets | ||||||||
Resulting from Operations | 5,753,409 | 6,888,894 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (6,302,393 | ) | (6,995,117 | ) | ||||
Class D Shares | (480,929 | ) | (478,515 | ) | ||||
Class I Shares | (479,515 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (25,600,468 | ) | (15,627,535 | ) | ||||
Class D Shares | (500,141 | ) | (4,424,114 | ) | ||||
Class I Shares | 19,414,839 | — | ||||||
Net Decrease in Net Assets | (8,195,198 | ) | (20,636,387 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 210,275,895 | 230,912,282 | ||||||
End of year | $ | 202,080,697 | $ | 210,275,895 | ||||
See notes to financial statements.
10 Certified Annual Report
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary 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 objective of the Fund 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 D, and 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 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, (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, 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: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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
Certified Annual Report 11
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
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 liabilities 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, 2007, 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 depending on the Fund’s asset size. The Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $5,567 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 the Fund’s shares. For the year ended September 30, 2007, the Distributor has advised the Fund that it earned net commissions aggregating $3,733 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 distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class D shares, under which the Fund compensates the Distributor for services in promoting the sale of Class D shares of the Fund at an annual rate of up to .75 of 1% per annum of the average daily net assets attributable to Class D 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, 2007, are set forth in the Statement of Operations. Distribution fees in the amount of $73,070 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, 2007, fees paid indirectly were $14,004. 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, 2007 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year ended September 30, 2007 | Year ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 1,480,808 | $ | 19,422,034 | 1,491,269 | $ | 19,550,483 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 285,590 | 3,745,888 | 309,029 | 4,047,693 | ||||||||||
Shares repurchased | (3,721,960 | ) | (48,768,390 | ) | (2,999,545 | ) | (39,225,711 | ) | ||||||
Net Increase (Decrease) | (1,955,562 | ) | $ | (25,600,468 | ) | (1,199,247 | ) | $ | (15,627,535 | ) | ||||
Class D Shares | ||||||||||||||
Shares sold | 421,403 | $ | 5,522,652 | 227,791 | $ | 2,980,463 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 27,641 | 362,701 | 27,090 | 355,077 | ||||||||||
Shares repurchased | (486,230 | ) | (6,385,494 | ) | (590,696 | ) | (7,759,654 | ) | ||||||
Net Increase (Decrease) | (37,186 | ) | $ | (500,141 | ) | (335,815 | ) | $ | (4,424,114 | ) | ||||
Class I Shares* | ||||||||||||||
Shares sold | 1,771,412 | $ | 23,191,290 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 35,158 | 459,669 | — | — | ||||||||||
Shares repurchased | (323,605 | ) | (4,236,120 | ) | — | — | ||||||||
Net Increase (Decrease) | 1,482,965 | $ | 19,414,839 | — | $ | — | ||||||||
* | Effective date of Class I shares was February 1, 2007. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $34,599,057 and $39,617,145, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 195,054,985 | ||
Gross unrealized appreciation on a tax basis | $ | 4,318,790 | ||
Gross unrealized depreciation on a tax basis | (116,232 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 4,202,558 | ||
At September 30, 2007, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2007, 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:
2008 | $ | 595,638 | |
2009 | 320,666 | ||
2011 | 145,437 | ||
2013 | 255 | ||
2014 | 49,136 | ||
2015 | 112,336 | ||
$ | 1,223,468 | ||
During the year ended September 30, 2007, $33,677 of capital loss carry forwards from prior years expired.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized loss by $33,781, increased over-distributed net investment income by $4,617 and decreased net paid in capital paid in on shares of beneficial interest by $29,164. Reclassifications result primarily from an expired capital loss carry forwards and taxable market discount.
All dividends paid by the Fund for the years ended September 30, 2007 and September 30, 2006, represent tax exempt interest dividends, which are excludable by shareholders from gross income for federal income tax purposes.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 |
Period ended 2007(c) | ||||
Class I Shares: | ||||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period) | ||||
Net asset value, beginning of period | $ | 13.10 | ||
Income from investment operations: | ||||
Net investment income | 0.34 | |||
Net realized and unrealized gain (loss) on investments | 0.00 | |||
Total from investment operations | 0.34 | |||
Less dividends from: | ||||
Net investment income | (0.34 | ) | ||
Change in net asset value | 0.00 | |||
NET ASSET VALUE, end of period | $ | 13.10 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 2.64 | % | ||
Ratios to average net assets: | ||||
Net investment income | 3.95 | %(b) | ||
Expenses, after expense reductions | 0.63 | %(b) | ||
Expenses, after expense reductions and net of custody credits | 0.62 | %(b) | ||
Expenses, before expense reductions | 0.63 | %(b) | ||
Portfolio turnover rate | 17.38 | % | ||
Net assets at end of period (000) | $ | 19,427 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class I shares was February 1, 2007. |
See notes to the financial statements.
Certified Annual Report 15
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
CUSIPS: CLASS A – 885-215-301, CLASS D – 885-215-624, CLASS I – 885-215-285
NASDAQ SYMBOLS: CLASS A – THNMX, CLASS D – THNDX, CLASS I – THNIX
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Alamogordo Hospital, 5.30% due 1/1/2013 (Insured: Radian) | NR/AA | $ | 3,000,000 | $ | 3,007,080 | |||
Albuquerque GRT, 0% due 7/1/2012 pre-refunded 7/1/2011 | Aaa/AAA | 1,775,000 | 1,483,190 | |||||
Albuquerque GRT, 0% due 7/1/2012 (Insured: FSA) | Aaa/AAA | 225,000 | 187,799 | |||||
Albuquerque Industrial, 5.15% due 4/1/2016 (MCT Industries Inc.; LOC: Bank of the West) (AMT) | Aa3/NR | 1,170,000 | 1,211,816 | |||||
Albuquerque Industrial, 5.25% due 4/1/2017 (MCT Industries Inc.; LOC: Bank of the West) (AMT) | Aa3/NR | 2,140,000 | 2,218,367 | |||||
Albuquerque Joint Water & Sewage, 0% due 7/1/2008 (Insured: FGIC) | Aaa/AAA | 1,600,000 | 1,557,056 | |||||
Albuquerque Joint Water & Sewage Systems, 4.75% due 7/1/2008 | Aa2/AA | 60,000 | 60,056 | |||||
Albuquerque Municipal School District 12, 5.10% due 8/1/2014 pre-refunded 8/1/2008 | Aa2/AA | 760,000 | 770,154 | |||||
Albuquerque Municipal School District 12, 5.00% due 8/1/2015 | Aa2/AA | 1,175,000 | 1,216,748 | |||||
Albuquerque Refuse Removal & Disposal, 5.00% due 7/1/2010 (Insured: FSA) | Aaa/AAA | 415,000 | 430,878 | |||||
Belen Gasoline Tax Improvement, 5.40% due 1/1/2011 | NR/NR | 585,000 | 588,446 | |||||
Bernalillo County GRT, 5.50% due 10/1/2011 pre-refunded 10/01/2009 | Aa3/AAA | 495,000 | 514,231 | |||||
Bernalillo County GRT, 5.25% due 10/1/2012 | Aa3/AAA | 1,000,000 | 1,076,420 | |||||
Bernalillo County GRT, 5.75% due 10/1/2015 pre-refunded 10/01/2009 | Aa3/AAA | 2,000,000 | 2,087,320 | |||||
Bernalillo County GRT, 5.00% due 4/1/2021 (Insured: MBIA) | Aaa/AAA | 3,000,000 | 3,213,480 | |||||
Bernalillo County GRT, 5.25% due 10/1/2022 (Insured: AMBAC) | Aaa/AAA | 3,170,000 | 3,507,922 | |||||
Chaves County GRT, 5.00% due 7/1/2017 (Insured: FGIC) | Aaa/NR | 1,000,000 | 1,011,520 | |||||
Chaves County GRT, 5.05% due 7/1/2019 (Insured: FGIC) | Aaa/NR | 735,000 | 743,805 | |||||
Cibola County GRT, 5.875% due 11/1/2008 (Insured: AMBAC) (ETM) | Aaa/AAA | 495,000 | 507,627 | |||||
Cibola County GRT, 6.00% due 11/1/2010 (Insured: AMBAC) (ETM) | Aaa/AAA | 555,000 | 594,627 | |||||
Farmington Hospital, 5.00% due 6/1/2017 (San Juan Regional Medical Center) | A3/NR | 1,035,000 | 1,079,464 | |||||
Farmington Hospital, 5.125% due 6/1/2018 (San Juan Regional Medical Center) | A3/NR | 570,000 | 588,650 | |||||
Farmington Hospital, 5.125% due 6/1/2019 (San Juan Regional Medical Center) | A3/NR | 645,000 | 663,486 | |||||
Farmington Hospital, 5.00% due 6/1/2022 (San Juan Regional Medical Center) | A3/NR | 2,325,000 | 2,356,899 | |||||
Farmington PCR, 4.06% due 5/1/2024 put 10/1/2007 (LOC: Barclays Bank) (daily demand notes) | VMIG1/A-1+ | 600,000 | 600,000 | |||||
Farmington Utility Systems, 5.00% due 5/15/2012 (Insured: FSA) | Aaa/AAA | 6,095,000 | 6,389,084 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2012 (Insured: AMBAC) | Aaa/AAA | 3,345,000 | 3,535,866 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2013 (Insured: AMBAC) | Aaa/AAA | 2,060,000 | 2,195,569 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2017 (Insured: AMBAC) | Aaa/AAA | 3,540,000 | 3,764,330 | |||||
Grant County Hospital Facility, 5.50% due 8/1/2009 (Gila Regional Medical Center; Insured: Radian) | NR/AA | 1,310,000 | 1,342,252 | |||||
Grant County Hospital Facility, 5.50% due 8/1/2010 (Gila Regional Medical Center; Insured: Radian) | NR/AA | 1,385,000 | 1,437,741 | |||||
Las Cruces School District 2 GO, 5.50% due 8/1/2010 | Aa3/NR | 1,000,000 | 1,033,690 | |||||
Los Alamos County Utility Systems, 5.00% due 7/1/2013 (Insured: FSA) | Aaa/AAA | 1,265,000 | 1,354,941 | |||||
New Mexico Educational Assistance Foundation, 4.95% due 3/1/2009 (Guaranteed: Student Loans) (AMT) | Aaa/NR | 2,000,000 | 2,033,280 | |||||
New Mexico Finance Authority, 5.15% due 6/1/2012 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 255,000 | 261,273 | |||||
New Mexico Finance Authority, 5.25% due 6/1/2013 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 130,000 | 133,407 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2013 (Insured: AMBAC) | Aaa/NR | 2,280,000 | 2,440,968 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2014 (Insured: MBIA) | Aaa/AAA | 2,660,000 | 2,835,693 | |||||
New Mexico Finance Authority, 5.35% due 6/1/2014 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 130,000 | 133,617 | |||||
New Mexico Finance Authority, 5.25% due 6/1/2015 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,086,080 | |||||
New Mexico Finance Authority, 5.45% due 6/1/2015 pre-refunded 6/1/2009 (Insured: MBIA) | Aaa/AAA | 145,000 | 149,267 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2015 (Insured: AMBAC) | Aaa/NR | 2,360,000 | 2,551,136 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2018 (Insured: AMBAC) | Aaa/NR | 2,915,000 | 3,106,661 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2019 (Insured: MBIA) | Aaa/NR | 1,215,000 | 1,287,438 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2020 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,059,090 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2020 (Insured: MBIA) | Aaa/AAA | 1,625,000 | 1,721,021 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2020 (Revolving Fund F; Insured: MBIA) | Aaa/NR | 1,395,000 | 1,471,558 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2022 (Insured: MBIA) | Aaa/AAA | 1,300,000 | 1,372,618 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2024 (Insured: MBIA) | Aaa/AAA | 7,000,000 | 7,345,590 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
New Mexico Finance Authority Court Facilities Fee, 5.50% due 6/15/2020 pre-refunded 6/15/2011 (Insured: MBIA) | Aaa/AAA | $ | 2,000,000 | $ | 2,132,320 | |||
New Mexico Finance Authority State Office Building Tax, 5.00% due 6/1/2014 pre-refunded 6/1/2011 | Aa1/AAA | 1,875,000 | 1,967,156 | |||||
New Mexico Finance Authority State Transportation, 5.00% due 6/15/2014 (Insured: MBIA) | Aaa/AAA | 2,100,000 | 2,264,892 | |||||
New Mexico Highway Commission Senior Tax, 5.50% due 6/15/2013 pre-refunded 6/15/2011 | Aa2/AAA | 2,000,000 | 2,132,320 | |||||
New Mexico Highway Commission Senior Tax, 5.50% due 6/15/2014 | Aa2/AAA | 2,000,000 | 2,125,160 | |||||
New Mexico Highway Commission Tax, 6.00% due 6/15/2011 pre-refunded 6/15/2009 | Aa2/AAA | 5,000,000 | 5,204,350 | |||||
New Mexico Hospital Equipment Loan, 5.20% due 12/1/2010 pre-refunded 12/1/2007 (Catholic Health Initiatives) | NR/AA | 1,140,000 | 1,154,261 | |||||
New Mexico Hospital Equipment Loan, 5.75% due 8/1/2016 pre-refunded 8/1/2011 (Presbyterian Healthcare) | Aa3/AA- | 5,205,000 | 5,644,354 | |||||
New Mexico Housing Authority Region III Multi Family Housing, 5.30% due 12/1/2022 (Senior El Paseo Apartments; Insured: AMBAC) | Aaa/AAA | 1,100,000 | 1,117,809 | |||||
New Mexico MFA Forward Mortgage, 6.50% due 7/1/2025 (Collateralized: FNMA/GNMA) | NR/AAA | 165,000 | 168,810 | |||||
New Mexico MFA General, 5.80% due 9/1/2019 pre-refunded 9/1/2009 | NR/AAA | 775,000 | 807,589 | |||||
New Mexico MFA Multi Family, 5.05% due 9/1/2027 (St. Anthony; Insured: FHA) | NR/AAA | 890,000 | 892,029 | |||||
New Mexico MFA Multi Family, 6.05% due 7/1/2028 (Sandpiper Apartments; Insured: FHA) | NR/AAA | 2,335,000 | 2,457,774 | |||||
New Mexico MFA Multi Family, 5.00% due 7/1/2031 put 7/1/2011 (Sombra Del Oso Apartments; Collateralized: FNMA) | Aaa/NR | 1,000,000 | 1,024,160 | |||||
New Mexico MFA Multi Family, 5.00% due 7/1/2031 put 7/1/2011 (Riverwalk Apartments; Collateralized: FNMA) | Aaa/NR | 1,910,000 | 1,956,146 | |||||
New Mexico MFA Multi Family, 5.00% due 7/1/2031 put 7/1/2011 (Tierra Pointe I Apartments; Collateralized: FNMA) | Aaa/NR | 2,785,000 | 2,852,286 | |||||
New Mexico MFA SFMR, 5.70% due 9/1/2014 (Collateralized: FNMA/GNMA) | NR/AAA | 80,000 | 80,582 | |||||
New Mexico MFA SFMR, 5.80% due 9/1/2016 (Collateralized: FNMA/GNMA) | NR/AAA | 150,000 | 154,730 | |||||
New Mexico MFA SFMR, 5.75% due 3/1/2017 (Collateralized: FNMA/GNMA) | NR/AAA | 205,000 | 206,503 | |||||
New Mexico MFA SFMR, 6.15% due 9/1/2017 (Collateralized: FNMA/GNMA) | NR/AAA | 65,000 | 65,598 | |||||
New Mexico MFA SFMR, 0% due 9/1/2019 (GIC: Bayerisch Landesbank) | NR/AAA | 250,000 | 223,317 | |||||
New Mexico MFA SFMR, 5.875% due 9/1/2020 (AMT) | NR/AAA | 230,000 | 233,388 | |||||
New Mexico MFA SFMR, 5.875% due 9/1/2021 (Collateralized: FNMA/GNMA) | NR/AAA | 425,000 | 428,362 | |||||
New Mexico MFA SFMR, 6.05% due 9/1/2021 (Collateralized: FNMA/GNMA) | NR/AAA | 260,000 | 271,216 | |||||
New Mexico State Highway Commission Infrastructure C, 5.00% due 6/15/2012 (ETM) | Aa2/AAA | 1,000,000 | 1,059,700 | |||||
New Mexico State Highway Commission Tax, 5.00% due 6/15/2010 (ETM) | Aa2/AAA | 255,000 | 264,540 | |||||
New Mexico State Highway Commission Tax, 5.00% due 6/15/2010 | Aa2/AAA | 245,000 | 254,359 | |||||
New Mexico State Highway Commission Tax, 5.125% due 6/15/2010 pre-refunded 6/15/2008 | Aa2/AAA | 660,000 | 667,603 | |||||
New Mexico State Highway Commission Tax, 5.125% due 6/15/2010 | Aa2/AAA | 3,695,000 | 3,734,426 | |||||
New Mexico State Hospital Equipment Loan Council Hospital, 4.80% due 8/1/2010 (Presbyterian Healthcare) | Aa3/AA- | 500,000 | 513,865 | |||||
New Mexico State Hospital Equipment Loan St. Vincent Hospital, 5.00% due 7/1/2017 (Insured: Radian) | Aa3/AA | 1,730,000 | 1,771,209 | |||||
New Mexico State Hospital Equipment Loan St. Vincent Hospital, 5.00% due 7/1/2019 (Insured: Radian) | Aa3/AA | 1,000,000 | 1,017,290 | |||||
New Mexico State Hospital Equipment Loan St. Vincent Hospital, 5.00% due 7/1/2021 (Insured: Radian) | Aa3/AA | 1,185,000 | 1,197,822 | |||||
New Mexico State Hospital Equipment Loan St. Vincent Hospital, 5.25% due 7/1/2025 (Insured: Radian) | Aa3/AA | 1,000,000 | 1,014,550 | |||||
New Mexico State University Improvement, 5.00% due 4/1/2013 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,069,390 | |||||
New Mexico Supplemental Severance, 5.00% due 7/1/2008 | Aa3/AA- | 5,000,000 | 5,005,650 | |||||
Puerto Rico Public Buildings Authority Government Facilities, 5.25% due 7/1/2019 (Insured: XLCA) | Aaa/AAA | 1,000,000 | 1,110,820 | |||||
Rio Rancho GRT, 5.00% due 6/1/2014 (Insured: FGIC) | Aaa/AAA | 955,000 | 1,028,487 | |||||
Rio Rancho GRT, 5.00% due 6/1/2016 (Insured: FGIC) | Aaa/AAA | 555,000 | 597,113 | |||||
Rio Rancho GRT, 5.00% due 6/1/2022 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,047,290 | |||||
San Juan County Gasoline Tax/Motor Vehicle Improvement, 5.25% due 5/15/2014 | A1/NR | 400,000 | 427,316 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
San Juan County Gasoline Tax/Motor Vehicle Improvement, 5.25% due 5/15/2022 | A1/NR | $ | 1,725,000 | $ | 1,799,071 | |||
San Juan County GRT, 5.30% due 9/15/2009 | A1/NR | 215,000 | 219,158 | |||||
San Juan County GRT, 5.00% due 6/15/2014 (Insured: MBIA) | Aaa/AAA | 1,225,000 | 1,318,921 | |||||
San Juan County GRT, 5.50% due 9/15/2016 (Insured: AMBAC) | Aaa/AAA | 1,180,000 | 1,269,184 | |||||
San Juan County GRT, 5.75% due 9/15/2021 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,088,980 | |||||
Sandoval County Incentive Payment, 5.75% due 2/1/2010 (Intel Corp.) | NR/A+ | 535,000 | 538,199 | |||||
Sandoval County Incentive Payment, 5.00% due 6/1/2020 (Intel Corp.) | NR/A+ | 4,390,000 | 4,588,823 | |||||
Sandoval County Landfill Improvement, 5.50% due 8/15/2015 | Baa2/NR | 1,420,000 | 1,498,853 | |||||
Sandoval County Landfill Improvement, 5.75% due 8/15/2018 | Baa2/NR | 1,335,000 | 1,416,368 | |||||
Santa Fe County, 9.00% due 1/1/2008 (Office & Training Facilities) (ETM) | Aaa/NR | 626,000 | 634,626 | |||||
Santa Fe County, 5.00% due 7/1/2008 (Insured: MBIA) | Aaa/NR | 785,000 | 785,887 | |||||
Santa Fe County, 5.50% due 5/15/2015 (El Castillo Retirement) | NR/BBB- | 1,250,000 | 1,267,837 | |||||
Santa Fe County, 5.80% due 5/15/2018 (El Castillo Retirement) | NR/BBB- | 1,835,000 | 1,836,119 | |||||
Santa Fe County, 7.25% due 7/1/2029 (Rancho Viejo Improvement District) | NR/NR | 1,780,000 | 1,853,443 | |||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation) | NR/NR | 1,000,000 | 1,008,800 | |||||
Santa Fe County Charter School Foundation, 6.625% due 1/15/2036 (ATC Foundation) | NR/NR | 1,030,000 | 1,038,683 | |||||
Santa Fe County Correctional Systems, 5.00% due 2/1/2018 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,075,190 | |||||
Santa Fe County Correctional Systems, 6.00% due 2/1/2027 (Insured: FSA) | Aaa/AAA | 1,520,000 | 1,774,919 | |||||
Santa Fe Educational Facilities, 5.10% due 3/1/2008 (St. John’s College) | NR/BBB+ | 210,000 | 210,758 | |||||
Santa Fe Educational Facilities, 5.40% due 3/1/2017 (St. John’s College) | NR/BBB+ | 1,215,000 | 1,218,657 | |||||
Santa Fe SFMR, 6.00% due 11/1/2010 (Collateralized: FNMA/GNMA) (AMT) | Aaa/NR | 65,000 | 65,116 | |||||
Santa Fe SFMR, 6.10% due 11/1/2011 (Collateralized: FNMA/GNMA) (AMT) | Aaa/NR | 110,000 | 110,135 | |||||
Santa Fe SFMR, 6.20% due 11/1/2016 (Collateralized: FNMA/GNMA) (AMT) | NR/NR | 100,000 | 100,984 | |||||
Taos County GRT, 4.25% due 10/1/2010 (Insured: Radian) | Aa3/NR | 1,000,000 | 1,001,680 | |||||
Taos County GRT, 4.75% due 10/1/2012 (ETM) | Baa1/NR | 1,500,000 | 1,538,265 | |||||
Taos Municipal School District 1, 5.00% due 9/1/2008 (Insured: FSA) | Aaa/NR | 450,000 | 456,160 | |||||
University of New Mexico, 5.25% due 6/1/2013 | Aa3/AA | 665,000 | 709,136 | |||||
University of New Mexico, 5.25% due 6/1/2014 | Aa3/AA | 335,000 | 357,234 | |||||
University of New Mexico, 5.00% due 6/1/2015 (Insured: AMBAC) | Aaa/AAA | 1,590,000 | 1,718,329 | |||||
University of New Mexico, 5.25% due 6/1/2015 | Aa3/AA | 1,195,000 | 1,287,063 | |||||
University of New Mexico, 5.25% due 6/1/2016 | Aa3/AA | 645,000 | 686,383 | |||||
University of New Mexico, 5.25% due 6/1/2017 | Aa3/AA | 1,730,000 | 1,836,430 | |||||
University of New Mexico, 5.25% due 6/1/2018 | Aa3/AA | 1,825,000 | 1,933,259 | |||||
University of New Mexico, 5.25% due 6/1/2018 | Aa3/AA | 1,200,000 | 1,282,320 | |||||
University of New Mexico, 5.25% due 6/1/2021 | Aa3/AA | 1,000,000 | 1,059,320 | |||||
University of New Mexico, 6.00% due 6/1/2021 | Aa3/AA | 610,000 | 702,872 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2016 (Insured: FSA & FHA) | Aaa/AAA | 2,920,000 | 3,112,603 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2017 (Insured: FSA & FHA) | Aaa/AAA | 2,000,000 | 2,122,160 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2018 (Insured: FSA & FHA) | Aaa/AAA | 2,000,000 | 2,111,240 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2019 (Insured: FSA & FHA) | Aaa/AAA | 3,000,000 | 3,152,370 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 7/1/2019 (Insured: FSA & FHA) | Aaa/AAA | 3,000,000 | 3,151,470 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2020 (Insured: FSA & FHA) | Aaa/AAA | 2,310,000 | 2,417,600 | |||||
Ventana West Public Improvement District Special Tax, 6.625% due 8/1/2023 | NR/NR | 2,000,000 | 2,109,200 | |||||
Villa Hermosa Multi Family Housing, 5.85% due 11/20/2016 (Collateralized: GNMA) | NR/AAA | 1,105,000 | 1,127,985 | |||||
TOTAL INVESTMENTS — 98.60% (Cost $ 195,055,430) | $ | 199,257,543 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.40% | 2,823,154 | |||||||
NET ASSETS — 100.00% | $ | 202,080,697 | ||||||
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 |
Footnote Legend
† | 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. | |
GO | General Obligation | |
GRT | Gross Receipts Tax | |
LOC | Line of Credit | |
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 |
See notes to financial statements.
SUMMARY OF SECURITY CREDIT RATINGS†
We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings.
Certified Annual Report 19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
Thornburg New Mexico Intermediate Municipal Fund |
To the Trustees and Class I 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, 2007, 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 February 1, 2007 to September 30, 2007, 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, 2007 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
20 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,016.70 | $ | 3.12 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.97 | $ | 3.13 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.62%) 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
INDEX COMPARISON | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg New Mexico Intermediate Municipal Fund Class I Total Returns,
versus Merrill Lynch 7-12 Year Municipal Bond Index
(February 1, 2007 to September 30, 2007)*
* | Hypothetical chart is based on daily performance of the fund and index. |
AVERAGE ANNUAL TOTAL RETURNS (Not Annualized)
For the periods ended September 30, 2007
Since Inception | |||
I Shares (Incep: 2/1/07) | 2.64 | % |
FUND ATTRIBUTES
as of September 30, 2007
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 2/1/07) | 3.98 | % | 3.59 | % | $ | 13.10 | $ | 13.10 |
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 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.
22 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 New Mexico Intermediate Municipal Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
24 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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
OTHER INFORMATION | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 (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.
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, 2007, 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, 2007.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to categories of single-state municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 debt mutual fund categories, and in particular to broad-based securities indices, is limited because the Fund’s investment objectives and strategies, as described in its prospectuses, likely will 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.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees
26 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
considered (among other matters) the Fund’s average or below average investment returns over most measuring periods relative to two categories of mutual funds selected by independent mutual fund analyst firms, and the Fund’s favorable performance relative to comparative measures of portfolio volatility and return. The Trustees observed in regard to the two categories considered that the comparability of the categories was limited because of the longer portfolio durations and average maturities of the categories (which favored the performance of the categories in most periods relative to the performance of the shorter duration and average maturity portfolio that the Fund maintained in accordance with its stated strategies), and the unique market niche of the Fund.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 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, similar specific mutual funds. The Trustees observed that the overall expense ratio of the Fund fell between the median and average expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, that the management fee was slightly higher than the average and median fee rates for the same group of funds, and that the difference between the fee rates was not significant in view of its degree. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms.
The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 27
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. 29
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 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 normally three to ten years. 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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Thornburg New York Intermediate Municipal Fund
September 30, 2007
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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 3
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, 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.
Investments 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
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 managers’ forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio managers 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.
4 Certified Annual Report
Glossary
The Merrill Lynch 7-12 Year Municipal Bond 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.
Consumer Price Index – 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. Also known as the cost-of-living index.
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.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Certified Annual Report 5
George Strickland Co-Portfolio Manager
Josh Gonze Co-Portfolio Manager
Christopher Ihlefeld Co-Portfolio Manager | October 18, 2007 | |
Dear Fellow Shareholder: | ||
We are 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 8 cents per share to $12.30 during the twelve months ended September 30, 2007. If you were with us for the entire period, you received dividends of 45.9 cents per share. If you reinvested your dividends, you received 46.7 cents per share. | ||
The past year has been one of the more interesting in recent memory. Municipal bonds traded within a fairly tight trading range until May. Then, as the Federal Reserve raised the targeted Fed Funds rate to 5.0%, the bond market started to worry about an overheated economy and excess inflation. This drove up market yields for bonds by 0.30% to 0.40% and led to a somewhat steeper yield curve. Next, the sordid world of subprime mortgage bonds and derivatives based upon them started to unravel. Though subprime problems didn’t directly affect the municipal bond market, they did set off a panic-stricken flight to quality. As investors piled into Treasury notes and bonds, they drove their yields back down to levels that prevailed toward the beginning of 2007. However, investors mostly bypassed the municipal bond market, leaving rates there relatively unchanged. This created a rare event during which municipal bond yields were extremely attractive relative to Treasury yields. By late summer, ten-year high quality municipal bonds were routinely yielding 90% or more of ten-year Treasury yields, and trades over 100% were occasionally happening. | ||
Meanwhile, quality spreads (the difference in yield between the highest quality bonds and lower quality bonds) were getting wider. Some investors, who had been comfortable taking credit risk at very tight spreads to AAA rated bonds, suddenly became a lot less comfortable. Those who sold typically had to sell their bonds at significantly wider spreads than those that prevailed earlier in the year. This led to an environment where investors could finally get compensated for taking incremental credit risk in bonds rated lower than AAA. | ||
Since the end of August, the bond market has been gradually regaining its composure. A calmer, lower volatility environment has helped fuel a renewed appetite for risk. This has led to some retrenchment of the spread widening that occurred in May. It also has led to a wholesale re-pricing of the municipal bond market so that it is no longer extremely attractive relative to the Treasury market. However, credit spreads on most bonds are still wider than they were just a few months ago, and municipal bonds are still somewhat attractive relative to Treasury notes, particularly if you expect marginal tax rates to go up (we do). | ||
The Class A shares of your Fund produced a total return of 3.13% over the twelve-month period ended September 30, 2007, compared to a 3.82% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Over the last year, intermediate municipal bonds have performed better than longer and shorter maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next eighteen years, so it has significant exposure to shorter and longer term bonds. Since those bonds generally underperformed intermediate bonds and the Index, the Fund underperformed the Index. | ||
Your Thornburg New York Intermediate Municipal Fund is a laddered portfolio of over 35 municipal obligations from all over New York. 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 |
6 Certified Annual Report
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.
We were able to take advantage of the late summer market weakness to restructure the Fund somewhat. Early in 2007, the Fund’s ladder was a bit overweighted in the early years. As interest rates rose, we invested primarily in the later years of the Fund’s ladder so that it is now more evenly distributed. Consequently, at fiscal year end (September 30, 2007), the Fund had an average maturity of 7.5 and duration of 4.15 years. We also added incrementally to lower rated investment grade bonds, although we continue to maintain a AA average quality.
% of portfolio maturing | Cumulative % maturing | |||||||||||||
2 years | = | 16.0 | % | Year 2 | = | 16.0 | % | |||||||
2 to 4 years | = | 12.5 | % | Year 4 | = | 28.5 | % | |||||||
4 to 6 years | = | 9.7 | % | Year 6 | = | 38.2 | % | |||||||
6 to 8 years | = | 12.9 | % | Year 8 | = | 51.1 | % | |||||||
8 to 10 years | = | 8.9 | % | Year 10 | = | 60.0 | % | |||||||
10 to 12 years | = | 16.3 | % | Year 12 | = | 76.3 | % | |||||||
12 to 14 years | = | 8.2 | % | Year 14 | = | 84.5 | % | |||||||
14 to 16 years | = | 6.5 | % | Year 16 | = | 91.0 | % | |||||||
16 to 18 years | = | 3.2 | % | Year 18 | = | 94.2 | % | |||||||
Over 18 years | = | 5.8 | % | Over 18 years | = | 100.0 | % |
Percentages can and do vary. Data as of 9/30/07.
Looking forward, we do expect U.S. economic growth to slow from the second quarter’s healthy 3.8% rate. However, consumer spending seems to be holding up well, and exports are surging. These factors, along with new job growth of about 100,000 per month, should keep the U.S. economy out of recession territory. However, the dismal housing sector and the dislocation in financial markets will probably cap future growth at a relatively low rate. This should allow the Fed to continue easing monetary conditions, but with a close eye on what happens to inflation. Market unease about the depreciating dollar and the long-term inflation outlook should keep long-term interest rates from dropping precipitously, which, in turn, should lead to a steeper yield curve going forward. We believe that a steepening yield curve would be advantageous for the laddering style employed by this Fund.
The state of New York has enjoyed three straight years of double digit tax revenue growth. The 2007 fiscal year closed with a $1.5 billion surplus, allowing the state to build reserves to $3.6 billion. Tax revenues are forecasted to grow 7.8% in fiscal 2008; however recent turbulence in the financial markets could negatively impact this growth. Between weakness in the housing market and large losses on Wall Street, revenue projections may be hard to meet. Debt levels are stable, but well above average. Given these challenges, we do believe it is prudent to keep overall 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 | Josh Gonze | Christopher Ihlefeld | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager |
Certified Annual Report 7
STATEMENT OF ASSETS AND LIABILITIES
Thornburg New York Intermediate Municipal Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $31,972,223) (Note 2) | $ | 32,646,627 | ||
Cash | 124,774 | |||
Receivable for fund shares sold | 1,309 | |||
Interest receivable | 325,707 | |||
Prepaid expenses and other assets | 567 | |||
Total Assets | 33,098,984 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 7,529 | |||
Payable to investment advisor and other affiliates (Note 3) | 21,071 | |||
Accounts payable and accrued expenses | 23,995 | |||
Dividends payable | 30,186 | |||
Total Liabilities | 82,781 | |||
NET ASSETS | $ | 33,016,203 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (14,300 | ) | |
Net unrealized appreciation on investments | 674,404 | |||
Accumulated net realized gain (loss) | (49,255 | ) | ||
Net capital paid in on shares of beneficial interest | 32,405,354 | |||
$ | 33,016,203 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($33,016,203 applicable to 2,684,774 shares of beneficial interest outstanding - Note 4) | $ | 12.30 | ||
Maximum sales charge, 2.00% of offering price | 0.25 | |||
Maximum offering price per share | $ | 12.55 | ||
See notes to financial statements.
8 Certified Annual Report
Thornburg New York Intermediate Municipal Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $138,454) | $ | 1,578,356 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 166,982 | |||
Administration fees (Note 3) | 41,745 | |||
Distribution and service fees (Note 3) | 83,491 | |||
Transfer agent fees | 27,562 | |||
Registration and filing fees | 292 | |||
Custodian fees (Note 3) | 18,707 | |||
Professional fees | 22,445 | |||
Accounting fees | 1,368 | |||
Trustee fees | 488 | |||
Other expenses | 7,475 | |||
Total Expenses | 370,555 | |||
Less: | ||||
Management fees waived by investment advisor (Note 3) | (32,356 | ) | ||
Fees paid indirectly (Note 3) | (7,575 | ) | ||
Net Expenses | 330,624 | |||
Net Investment Income | 1,247,732 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 22,961 | |||
Net change in unrealized appreciation (depreciation) of investments | (275,765 | ) | ||
Net Realized and Unrealized Loss on Investments | (252,804 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 994,928 | ||
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, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,247,732 | $ | 1,387,236 | ||||
Net realized gain (loss) on investments | 22,961 | (3,826 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (275,765 | ) | (221,552 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 994,928 | 1,161,858 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (1,247,732 | ) | (1,387,236 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (1,580,052 | ) | (6,301,037 | ) | ||||
Net Decrease in Net Assets | (1,832,856 | ) | (6,526,415 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 34,849,059 | 41,375,474 | ||||||
End of year | $ | 33,016,203 | $ | 34,849,059 | ||||
See notes to financial statements.
10 Certified Annual Report
Thornburg New York Intermediate Municipal Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’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 tax as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary objective is to reduce expected changes in its share price compared to long-term bond portfolios. The Fund will invest primarily in municipal obligations within the state of New York. 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 Securities: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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. 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
Certified Annual Report 11
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg New York Intermediate Municipal Fund | September 30, 2007 |
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, 2007, 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 depending on the Fund’s asset size. For the year ended September 30, 2007, the Advisor voluntarily waived investment advisory fees of $32,356. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services 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 the Fund’s shares. For the year ended September 30, 2007, the Distributor has advised the Fund that it earned commissions aggregating $39 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 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 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, 2007, fees paid indirectly were $7,575. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 455,331 | $ | 5,595,138 | 249,857 | $ | 3,077,469 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 70,407 | 865,914 | 74,036 | 911,749 | ||||||||||
Shares repurchased | (656,314 | ) | (8,041,104 | ) | (835,675 | ) | (10,290,255 | ) | ||||||
Net Increase (Decrease) | (130,576 | ) | $ | (1,580,052 | ) | (511,782 | ) | $ | (6,301,037 | ) | ||||
12 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg New York Intermediate Municipal Fund | September 30, 2007 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $4,843,705 and $8,017,069, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 31,972,223 | |
Gross unrealized appreciation on a tax basis | $ | 674,404 | |
Gross unrealized depreciation on a tax basis | — | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 674,404 | |
At September 30, 2007, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2007, the Fund had tax basis capital losses of $49,255, 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 losses will expire September 30, 2014.
The Fund utilized $20,985 of its loss carry forward during the year ended September 30, 2007. To the extent such carry forwards are used, capital gain distributions may be reduced to the extent provided by regulations.
All dividends paid by the Fund for the year ended September 30, 2007 and September 30, 2006, 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 $827, increased net capital paid in on shares of beneficial interest by $1,943, and increased over-distributed net investment income by $2,770. Reclassifications result primarily from market discount amortization.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 Ended Sept. 30, 2004(c) | Year Ended June 30, | ||||||||||||||||||||||
Class A Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.38 | $ | 12.44 | $ | 12.64 | $ | 12.46 | $ | 12.86 | $ | 12.63 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.46 | 0.45 | 0.42 | 0.10 | 0.45 | 0.51 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.08 | ) | (0.06 | ) | (0.20 | ) | 0.18 | (0.40 | ) | 0.25 | ||||||||||||||
Total from investment operations | 0.38 | 0.39 | 0.22 | 0.28 | 0.05 | 0.76 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.46 | ) | (0.45 | ) | (0.42 | ) | (0.10 | ) | (0.45 | ) | (0.51 | ) | ||||||||||||
Realized capital gains | — | — | — | — | — | (0.02 | ) | |||||||||||||||||
Total distributions | (0.46 | ) | (0.45 | ) | (0.42 | ) | (0.10 | ) | (0.45 | ) | (0.53 | ) | ||||||||||||
Change in net asset value | (0.08 | ) | (0.06 | ) | (0.20 | ) | 0.18 | (0.40 | ) | 0.23 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 12.30 | $ | 12.38 | $ | 12.44 | $ | 12.64 | $ | 12.46 | $ | 12.86 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return(a) | 3.13 | % | 3.23 | % | 1.73 | % | 2.26 | % | 0.36 | % | 6.16 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income | 3.74 | % | 3.66 | % | 3.31 | % | 3.19 | %(b) | 3.51 | % | 4.02 | % | ||||||||||||
Expenses, after expense reductions | 1.01 | % | 1.01 | % | 1.00 | % | 0.99 | %(b) | 0.99 | % | 0.93 | % | ||||||||||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | %(b) | 0.99 | % | 0.93 | % | ||||||||||||
Expenses, before expense reductions | 1.11 | % | 1.11 | % | 1.12 | % | 1.18 | %(b) | 1.11 | % | 1.10 | % | ||||||||||||
Portfolio turnover rate | 14.91 | % | 15.38 | % | 28.70 | % | 4.27 | % | 13.46 | % | 15.57 | % | ||||||||||||
Net assets at end of period (000) | $ | 33,016 | $ | 34,849 | $ | 41,375 | $ | 45,543 | $ | 42,551 | $ | 39,764 |
(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. |
See notes to the financial statements.
14 Certified Annual Report
Thornburg New York Intermediate Municipal Fund | September 30, 2007 |
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, 5.75% due 4/1/2015 (Insured: ACA) | NR/A | $ | 465,000 | $ | 486,934 | |||
Dutchess County Industrial Development Agency, 5.00% due 8/1/2021 (Bard College) | A3/NR | 1,100,000 | 1,152,195 | |||||
Hempstead Industrial Development Agency Resource Recovery, 5.00% due 12/1/2010 put 6/1/2010 (American Ref-Fuel) | Baa3/BB+ | 1,000,000 | 1,013,010 | |||||
Metropolitan Transitional Authority, 4.06% due 11/1/2026 put 10/1/2007 (LOC: BNP Paribas) (daily demand notes) | VMIG1/A-1+ | 600,000 | 600,000 | |||||
Monroe County Industrial Development Agency, 6.45% due 2/1/2014 (DePaul Community Facility; Insured: SONYMA) | Aa1/NR | 725,000 | 731,308 | |||||
Nassau Health Care Corp., 6.00% due 8/1/2011 pre-refunded 8/1/2009 | Aaa/AAA | 530,000 | 563,348 | |||||
New York, 6.75% due 2/1/2009 (Insured: MBIA-IBC) | Aaa/AAA | 950,000 | 990,062 | |||||
New York, 5.00% due 8/1/2018 | Aa3/AA | 1,000,000 | 1,057,450 | |||||
New York, 3.89% due 8/15/2018 put 10/1/2007 (Insured: AMBAC) (daily demand notes) | VMIG1/A-1+ | 1,000,000 | 1,000,000 | |||||
New York City Municipal Water Finance Authority, 5.75% due 6/15/2013 (ETM) | Aaa/AAA | 1,000,000 | 1,039,630 | |||||
New York City Transitional Finance Authority, 5.00% due 11/1/2020 | Aa1/AAA | 1,000,000 | 1,058,170 | |||||
New York City Transitional Finance Authority, 5.25% due 8/1/2016 | ||||||||
(Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,069,910 | |||||
New York City Transitional Finance Authority, 3.91% due 8/1/2031 put 10/1/2007 (Insured: Citibank N.A.) (daily demand notes) | VMIG1/A-1+ | 100,000 | 100,000 | |||||
New York City Trust Cultural Resources, 5.75% due 7/1/2014 (Museum of American Folk Art; Insured: ACA) | NR/A | 920,000 | 973,056 | |||||
New York Convention Center Development Corp. Hotel Unit Fee, 5.00% due 11/15/2017 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,081,830 | |||||
New York Dormitory Authority, 5.25% due 7/1/2010 (D’Youville College; Insured: Radian) | NR/AA | 350,000 | 361,018 | |||||
New York Dormitory Authority, 5.25% due 7/1/2011 (D’Youville College; Insured: Radian) | NR/AA | 370,000 | 385,048 | |||||
New York Dormitory Authority, 6.10% due 7/1/2019 (Ryan Clinton Community Health Center; Insured: SONYMA) | Aa1/NR | 1,000,000 | 1,057,770 | |||||
New York Dormitory Authority Lease, 5.25% due 8/15/2013 (Master Boces; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,053,290 | |||||
New York Dormitory Authority Mental Health Services, 5.50% due 2/15/2019 pre-refunded 8/15/2011 (Insured: MBIA) | Aaa/AAA | 1,085,000 | 1,162,653 | |||||
New York Dormitory Authority Mental Health Services Facilities Improvement, 5.00% due 2/15/2015 (Insured: AMBAC) | Aaa/AAA | 1,500,000 | 1,610,340 | |||||
New York Environmental Facilities Corp. PCR Water, 6.875% due 6/15/2014 (State Revolving Fund) | Aaa/AAA | 400,000 | 401,056 | |||||
New York State Dormitory Authority, 5.00% due 7/1/2016 (Bishop Henry B Hucles Nursing Home; Insured: SONYMA) | Aa1/NR | 400,000 | 430,204 | |||||
New York State Dormitory Authority, 5.00% due 7/1/2024 (Bishop Henry B Hucles Nursing Home; Insured: SONYMA) | Aa1/NR | 1,000,000 | 1,041,680 | |||||
New York State Dormitory Authority Health Quest Systems, 5.25% due 7/1/2027 (Insured: Assured Guaranty) | Aaa/AAA | 500,000 | 526,895 | |||||
New York State Dormitory Authority Personal Income Tax, 5.50% due 3/15/2012 | Aa3/AAA | 1,000,000 | 1,078,800 | |||||
New York State Dormitory Authority Personal Income Tax, 5.00% due 3/15/2019 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,060,030 | |||||
New York State Thruway Authority General, 5.00% due 1/1/2018 (Insured: AMBAC) | Aaa/AAA | 1,000,000 | 1,063,480 | |||||
New York State Thruway Authority Highway & Bridge Trust Fund, 5.00% due 4/1/2022 | NR/AA | 1,000,000 | 1,061,460 | |||||
New York Urban Development Corp. Correctional Facilities, 0% due 1/1/2008 | A1/AA- | 2,000,000 | 1,981,360 | |||||
Newark Wayne Community Hospital, 5.875% due 1/15/2033 (Insured: AMBAC) | Aaa/AAA | 1,355,000 | 1,357,304 | |||||
Oneida County Industrial Development Agency, 6.00% due 1/1/2010 (Insured: Radian) | NR/AA | 375,000 | 390,851 | |||||
Oneida County Industrial Development Agency, 6.10% due 6/1/2020 (Civic Facility Presbyterian Home; LOC: HSBC Bank USA) | Aa2/NR | 450,000 | 474,363 | |||||
Port Authority New York & New Jersey, 5.00% due 8/15/2022 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,062,440 | |||||
Port Chester Industrial Development Agency, 4.75% due 7/1/2031 put 7/1/2011 (American Foundation; Collateralized: FNMA) | NR/AAA | 750,000 | 776,423 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg New York Intermediate Municipal Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Puerto Rico Electric Power Authority, 5.375% due 7/1/2017 (Insured: XLCA) | Aaa/AAA | $ | 1,045,000 | $ | 1,170,849 | |||
Utica Industrial Development Agency Civic Facility, 5.25% due 7/15/2016 | A1/NR | 210,000 | 222,410 | |||||
TOTAL INVESTMENTS — 98.88% (Cost $31,972,223) | $ | 32,646,627 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.12% | 369,576 | |||||||
NET ASSETS — 100.00% | $ | 33,016,203 | ||||||
Footnote Legend
† | 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:
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. | |
LOC | Line of Credit | |
MBIA | Insured by Municipal Bond Investors Assurance | |
MBIA-IBC | Insured by Municipal Bond Investors Assurance - Insured Bond Certificates | |
PCR | Pollution Control Revenue Bond | |
RADIAN | Insured by Radian Asset Assurance | |
SONYMA | State of New York Mortgage Authority | |
XLCA | Insured by XL Capital Assurance |
See notes to financial statements.
SUMMARY OF SECURITY CREDIT RATINGS†
We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings.
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, 2007, 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, 2007 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
Certified Annual Report 17
Thornburg New York Intermediate Municipal Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,017.20 | $ | 5.01 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 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
Thornburg New York Intermediate Municipal Fund | September 30, 2007 (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 5, 1997 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 9/5/97) | 1.09 | % | 2.29 | % | 3.92 | % | 3.97 | % |
FUND ATTRIBUTES
as of September 30, 2007
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum Offering Price | |||||||||
A Shares (Incep: 9/5/97) | 3.71 | % | 2.94 | % | $ | 12.30 | $ | 12.55 |
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 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
Thornburg New York Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 New York Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 21
TRUSTEES AND OFFICERS, CONTINUED
Thornburg New York Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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
Thornburg New York Intermediate Municipal Fund | September 30, 2007 (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.
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, 2007, 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, 2007.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, The Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 recalled their observations 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 strategies, as described in its prospectus, likely will vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) that the Fund’s total returns in most periods had trailed the average returns for the two
Certified Annual Report 23
OTHER INFORMATION, CONTINUED
Thornburg New York Intermediate Municipal Fund | September 30, 2007 (Unaudited) |
mutual fund categories reviewed, but that the two categories were comprised of funds maintaining longer average portfolio maturities and durations than the Fund (which generally favored the funds comprising those categories relative to the Fund in those periods), and that the Fund’s relative performance had improved in recent periods as market factors (including particularly changes in interest rates) had favored the Fund’s stated strategies.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 group of New York 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. The Trustees observed that the management fee charged by the Advisor to the Fund, after the Advisor’s waiver of a portion of the fee, was lower than the median and average fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio was comparable to the average and higher to a small degree than the median expense ratios for the same fund group. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 and other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as the Fund grows in size, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectus, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
24 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
26 This page is not part of the Annual Report
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 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 normally less than five years.
Thornburg Limited Term Income Fund – This Fund is a laddered portfolio of short/intermediate investment grade obligations with an average maturity of normally less than five years.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Thornburg Limited Term Income Funds
September 30, 2007
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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 3
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 I or Class R3 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.
Investments 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. Please see the Funds’ Prospectus for a discussion of the risks associated with an investment in the Funds. Investments 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 Funds will meet their investment objectives. The laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
4 Certified Annual Report
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).
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Fed Funds Rate – The Fed Funds Rate is the interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Average Maturity – The average maturity is the stated or dollar-weighted average, which describes the relationship between the price of a portfolio’s various stocks and their average earnings per share.
S&P 500 Index – The S&P 500 Index is an unmanaged broad measure of the U.S. stock market.
Dow Jones Industrial Average – The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 actively traded “blue chip” stocks, primarily industrials, but includes financials and other service-oriented companies. The components, which change from time to time, represent between 15% and 20% of the market value of NYSE stocks.
Certified Annual Report 5
Jason Brady, CFA Portfolio Manager | October 16, 2007
Dear Thornburg 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 year ended September 30, 2007. The net asset value of a Class A share of the Thornburg Limited Term U.S. Government Fund increased 22 cents per share in the period to $12.97. If you were invested for the entire period, you received dividends of 41.0 cents per share. If you reinvested your dividends, you received 41.6 cents per share. Investors who owned Class C shares received 37.9 and 38.4 cents per share, respectively. The net asset value of a Class A share of the Thornburg Limited Term Income Fund increased 3 cents per share in the period to $12.40. If you were invested for the entire period, you received dividends of 50.6 cents per share. If you reinvested your dividends, you received 51.6 cents per share. Investors who owned Class C shares received 47.5 and 48.3 cents per share respectively. Please examine the accompanying exhibits for more detailed information and history. |
The yield on U.S. Treasuries was volatile over the course of the past year, with a major change in the shape of the yield curve being a significant driver of U.S. dollar denominated bond returns. The two-year U.S. Treasury moved from a 4.69% yield to a 3.99% yield over the course of the past year, while the ten-year U.S. Treasury moved from a 4.63% yield to a 4.59% yield. As you can see, relatively, front end securities moved much lower in yield than longer term securities. This “dis-inversion” of the yield curve was primarily the result of a slowing in the U.S. economy and the corresponding actions of the Federal Reserve to lower the Fed Funds rate. The Federal Reserve Open Market Committee (FOMC) had kept the Fed Funds rate unchanged at 5.25% from June 2006 through September 18, 2007, when they lowered the rate to 4.75%. That change in policy was largely due to a significant dislocation of global credit markets. Credit spreads (the additional yield the market requires for investing in risky securities versus credit risk-less U.S. Treasuries) widened significantly, particularly in the period between June and September of 2007. Though the intervening time period has seen some recovery from the widest levels of credit spreads (and also from the lowest yields on most tenures of U.S. Treasury securities), we at Thornburg believe that we have entered a period of increased volatility.
Putting income and change in price together, the Class A shares of the Thornburg Limited Term U.S. Government Fund produced a total return of 5.03% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Lehman Brothers Intermediate Government Bond Index produced a 5.87% total return over the same time period. The Class A shares of the Thornburg Limited Term Income Fund produced a total return of 4.43% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Lehman Brothers Intermediate Government/Credit Bond Index produced a 5.44% total return over the same time period. The Funds kept their durations somewhat shorter than the indices during the past year, and as a result took advantage of the aforementioned yield curve steepening. At the same time, Thornburg’s laddered portfolio strategy and prudent credit selection (within the Income Fund) clearly benefited the Fund. However, the Thornburg Limited Term Income Fund, while maintaining a very high (AA) average credit rating, holds a smaller proportion of U.S. Treasury securities than the index. In a time of widening credit spreads, U.S. Treasuries outperformed lower rated securities. While the fact that only a very small (9%) proportion of the Fund is held in BBB securities did help overall returns, the general deterioration in credit spreads of all qualities hurt the Fund relative to its index. I remain quite comfortable with our holdings and believe that over time each investment has the potential to yield satisfactory results and in aggregate position the Funds well to meet their investment objectives. Both Lehman indices reflect no deduction for fees, expenses, or taxes.
The recent volatility in the marketplace underscores the importance of high quality bonds in your bond portfolio allocation. Both Thornburg Funds performed well during the volatile period between June and August of 2007.
6 Certified Annual Report
These periods of volatility have been relatively short over the course of the past several years, and credit spreads have remained fairly well behaved. Similarly, stock markets have generally advanced at a steady rate. The S&P 500 Index and the Dow Jones Industrial Average have recently made record highs despite concerns around the strength of the U.S. economy. However, the past several months have shown that volatility is alive and well. Furthermore, the challenges to continued smooth economic and asset growth are significant. In particular, the U.S. housing market, an increasing willingness of companies to lever their balance sheets, and a potentially decreasing ability of those same companies to grow their earnings all are forces which act to increase uncertainty. Add that to a marketplace which had grown somewhat complacent given the steady diet of higher equity valuations and tight credit spreads, and you have a recipe for destabilizing market movements. This sort of destabilization began in the summer of this year as the housing picture continued to worsen and consumers began to tighten their spending habits. Though I do not believe that a recession is immediately in the cards, the increased volatility that the markets have experienced over the course of the past few months is indicative of a trend which could continue.
In this environment, high quality bond funds may represent a safe haven. Thornburg Investment Management will continue to strive to give you, the bond investor, a consistent income stream and a set of funds which are not highly correlated to equity markets’ returns. Though the period of 2003 through early 2007 has been less than exciting for bond investors generally (certainly relative to their equity brethren), it is important to remember that the principal focus of a bond investment is exactly that: principal. If the economic landscape continues to darken, high quality bond investments will benefit. While a few extra basis points in yield may be attractive, the overall goal is to continue to give you your money back with a reasonable rate of return and a limited amount of risk.
No matter the direction of interest rates or credit spreads in the near term, I believe your Funds are well positioned to achieve their longer term goals of principal stability and reasonable income. The Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund are laddered portfolios of short-to-intermediate bonds. This balances duration and yield in a way which is designed to provide the best risk-adjusted bond returns over time. Intermediate bonds can provide stability to the underlying principal, they can provide income for your portfolio, and over time they have provided an attractive return versus money market instruments. Keep in mind, that as the yield curve steepens, with two year rates significantly below ten year rates, the laddered portfolio strategy of an average intermediate duration should again (as is normally the case) potentially be able to provide you significantly better returns than a cash or money market investment.
Thank you very much for investing in our Funds. I feel that the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund are appropriate investments for investors who are looking for short-to-intermediate bond portfolios. While future performance cannot be guaranteed, Thornburg Investment Management will continue to strive to chart a steady course in what has become once again a volatile marketplace.
Sincerely, |
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Jason H. Brady, CFA |
Portfolio Manager |
Certified Annual Report 7
STATEMENTS OF ASSETS AND LIABILITIES
Thornburg International Value Fund | September 30, 2007 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||||
ASSETS | ||||||||
Investments at value (cost $139,054,145 and $306,329,942, respectively) (Note 2) | $ | 138,674,621 | $ | 305,395,690 | ||||
Cash | 368,118 | 365,873 | ||||||
Receivable for investments sold | 1,653 | 2,190,290 | ||||||
Receivable for fund shares sold | 354,447 | 352,990 | ||||||
Interest receivable | 1,350,673 | 3,246,992 | ||||||
Prepaid expenses and other assets | 26,771 | 30,073 | ||||||
Total Assets | 140,776,283 | 311,581,908 | ||||||
LIABILITIES | ||||||||
Payable for securities purchased | — | 5,198,808 | ||||||
Payable for fund shares redeemed | 471,739 | 411,599 | ||||||
Payable to investment advisor and other affiliates (Note 3) | 89,851 | 171,307 | ||||||
Accounts payable and accrued expenses | 57,353 | 105,038 | ||||||
Dividends payable | 83,331 | 184,108 | ||||||
Total Liabilities | 702,274 | 6,070,860 | ||||||
NET ASSETS | $ | 140,074,009 | $ | 305,511,048 | ||||
NET ASSETS CONSIST OF: | ||||||||
Undistributed net investment income | $ | 30,440 | $ | 29,903 | ||||
Net unrealized depreciation on investments | (379,524 | ) | (934,253 | ) | ||||
Accumulated net realized gain (loss) | (1,948,084 | ) | (6,351,006 | ) | ||||
Net capital paid in on shares of beneficial interest | 142,371,177 | 312,766,404 | ||||||
$ | 140,074,009 | $ | 305,511,048 | |||||
NET ASSET VALUE: | ||||||||
Class A Shares: | ||||||||
Net asset value and redemption price per share | $ | 12.97 | $ | 12.40 | ||||
Maximum sales charge, 1.50% of offering price | 0.20 | 0.19 | ||||||
Maximum offering price per share | $ | 13.17 | $ | 12.59 | ||||
Class B Shares: | ||||||||
Net asset value and offering price per share * | $ | 12.94 | — | |||||
8 Certified Annual Report
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
| ||
Thornburg Limited Term Income Funds | September 30, 2007 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||
Class C Shares: | ||||||
Net asset value and offering price per share * | $ | 13.04 | $ | 12.38 | ||
Class I Shares: | ||||||
Net asset value, offering and redemption price per share | $ | 12.97 | $ | 12.40 | ||
Class R3 Shares: | ||||||
Net asset value, offering and redemption price per share | $ | 12.97 | $ | 12.40 | ||
* | 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
Thornburg Limited Term Income Funds | Year Ended September 30, 2007 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||||
INVESTMENT INCOME: | ||||||||
Interest income (net of premium amortized of $1,020,037 and $698,748, respectively) | $ | 5,935,053 | $ | 16,325,226 | ||||
EXPENSES: | ||||||||
Investment advisory fees (Note 3) | 542,146 | 1,612,500 | ||||||
Administration fees (Note 3) | ||||||||
Class A Shares | 121,634 | 216,618 | ||||||
Class B Shares | 3,044 | — | ||||||
Class C Shares | 31,001 | 51,590 | ||||||
Class I Shares | 7,923 | 51,517 | ||||||
Class R3 Shares | 5,229 | 6,124 | ||||||
Distribution and service fees (Note 3) | ||||||||
Class A Shares | 243,267 | 433,236 | ||||||
Class B Shares | 24,343 | — | ||||||
Class C Shares | 248,058 | 412,578 | ||||||
Class R3 Shares | 20,943 | 24,554 | ||||||
Transfer agent fees | ||||||||
Class A Shares | 121,208 | 205,898 | ||||||
Class B Shares | 8,670 | — | ||||||
Class C Shares | 34,216 | 58,188 | ||||||
Class I Shares | 18,753 | 75,128 | ||||||
Class R3 Shares | 4,333 | 5,507 | ||||||
Registration and filing fees | ||||||||
Class A Shares | 17,486 | 24,779 | ||||||
Class B Shares | 16,616 | — | ||||||
Class C Shares | 16,387 | 18,574 | ||||||
Class I Shares | 16,975 | 20,338 | ||||||
Class R3 Shares | 18,678 | 19,152 | ||||||
Custodian fees (Note 3) | 72,243 | 105,580 | ||||||
Professional fees | 31,002 | 41,940 | ||||||
Accounting fees | 5,017 | 14,339 | ||||||
Trustee fees | 1,888 | 5,637 | ||||||
Other expenses | 25,508 | 76,542 | ||||||
Total Expenses | 1,656,568 | 3,480,319 | ||||||
Less: | ||||||||
Expenses reimbursed by investment advisor (Note 3) | (60,136 | ) | (292,680 | ) | ||||
Distribution fees waived (Note 3) | (124,029 | ) | (206,289 | ) | ||||
Fees paid indirectly (Note 3) | (14,192 | ) | (16,160 | ) | ||||
Net Expenses | 1,458,211 | 2,965,190 | ||||||
Net Investment Income | $ | 4,476,842 | $ | 13,360,036 | ||||
Certified Annual Report 10
STATEMENTS OF OPERATIONS, CONTINUED
Thornburg Limited Term Income Funds | Year Ended September 30, 2007 |
Limited Term U.S. Government Fund | Limited term Income Fund | |||||||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||
Net realized gain (loss) on investments | $ | (1,130,360 | ) | $ | (2,488,007 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 3,591,635 | 3,252,405 | ||||||
Net Realized and Unrealized Gain on Investments | 2,461,275 | 764,398 | ||||||
Net Increase in Net Assets Resulting From Operations | $ | 6,938,117 | $ | 14,124,434 | ||||
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, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,476,842 | $ | 4,837,241 | ||||
Net realized loss on investments sold | (1,130,360 | ) | (50,733 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 3,591,635 | (360,311 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 6,938,117 | 4,426,197 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (3,111,314 | ) | (3,504,156 | ) | ||||
Class B Shares | (43,700 | ) | (27,495 | ) | ||||
Class C Shares | (730,241 | ) | (737,598 | ) | ||||
Class I Shares | (557,507 | ) | (465,896 | ) | ||||
Class R3 Shares | (134,180 | ) | (102,096 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (16,914,982 | ) | (31,185,601 | ) | ||||
Class B Shares | 69,320 | 594,525 | ||||||
Class C Shares | 19,577 | (7,610,351 | ) | |||||
Class I Shares | 797,088 | (1,162,905 | ) | |||||
Class R3 Shares | 730,067 | 586,260 | ||||||
Net Decrease in Net Assets | (12,937,755 | ) | (39,189,116 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 153,011,764 | 192,200,880 | ||||||
End of year | $ | 140,074,009 | $ | 153,011,764 | ||||
Undistributed net investment income | $ | 30,440 | $ | 110,307 |
See notes to financial statements.
12 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Limited Term Income Fund
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 13,360,036 | $ | 14,631,799 | ||||
Net realized loss on investments sold | (2,488,007 | ) | (113,993 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 3,252,405 | (4,147,964 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 14,124,434 | 10,369,842 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (7,108,149 | ) | (8,047,005 | ) | ||||
Class C Shares | (1,590,499 | ) | (1,957,921 | ) | ||||
Class I Shares | (4,559,897 | ) | (4,507,364 | ) | ||||
Class R3 Shares | (201,476 | ) | (119,509 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (35,890,344 | ) | (19,776,336 | ) | ||||
Class C Shares | (3,689,930 | ) | (14,283,087 | ) | ||||
Class I Shares | (8,312,790 | ) | 13,217,562 | |||||
Class R3 Shares | 2,841,946 | 1,198,886 | ||||||
Net Decrease in Net Assets | (44,386,705 | ) | (23,904,932 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 349,897,753 | 373,802,685 | ||||||
End of year | $ | 305,511,048 | $ | 349,897,753 | ||||
Undistributed net investment income | $ | 29,903 | $ | 111,720 |
See notes to financial statements.
Certified Annual Report 13
Thornburg Limited Term Income Funds | September 30, 2007 |
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 eleven 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The 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 preservation of capital. As a secondary objective, the Funds seek to reduce changes in their share prices 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 R3) 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 R3) 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 R3 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 distribution and service 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 Securities: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. Quotations for any foreign debt securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Funds, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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 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
14 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Limited Term Income Funds | September 30, 2007 |
received payment. Dividends are paid monthly and are reinvested in additional shares of the Funds at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized over the life of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. The Funds invest in various mortgage-backed securities. Such securities pay interest and a portion of principal each month, which is then available for investment in securities at prevailing prices. 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.
Guarantees and Indemnifications: Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities 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, 2007, 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 entered into administrative services agreements 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 R3 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $4,276, $5,603, $12,488, $10,838, and $26,931 for the Class A, B, C, I, and R3 shares, respectively, of the Government Fund and $153,495, $58,451, $45,884, and $34,850 for the Class A, C, I, and R3 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, 2007, the Distributor has advised the Funds that they earned net commissions aggregating $1,454 from the sale of Class A shares of the Government Fund, $1,181 from the sale of Class A shares of the Income Fund, and collected contingent deferred sales charges aggregating $3,479 and $2,221 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 the average daily net assets attributable to the Class A, Class B, Class C, and Class R3 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.
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Limited Term Income Funds | September 30, 2007 |
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 R3 shares under which the Funds compensate the Distributor for services in promoting the sale of Class B, C, and R3 shares of the 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 the Distributor for each class of shares of the Funds under their respective Service and Distribution Plans for the year ended September 30, 2007, are set forth in the Statements of Operations. Distribution fees of $124,029 and $206,289, 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 Statements of Operations. For the year ended September 30, 2007, fees paid indirectly were $14,192 for the Government Fund and $16,160 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, 2007, 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, 2007 | Year Ended September 30, 2006 | ||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 1,276,492 | $ | 16,340,009 | 1,127,442 | $ | 14,273,031 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 190,598 | 2,442,071 | 210,223 | 2,662,638 | ||||||||||
Shares repurchased | (2,790,433 | ) | (35,697,062 | ) | (3,799,025 | ) | (48,121,270 | ) | ||||||
Net Increase (Decrease) | (1,323,343 | ) | $ | (16,914,982 | ) | (2,461,360 | ) | $ | (31,185,601 | ) | ||||
Class B Shares | ||||||||||||||
Shares sold | 67,148 | $ | 859,574 | 85,374 | $ | 1,076,317 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,341 | 29,948 | 1,620 | 20,478 | ||||||||||
Shares repurchased | (64,214 | ) | (820,202 | ) | (39,667 | ) | (502,270 | ) | ||||||
Net Increase (Decrease) | 5,275 | $ | 69,320 | 47,327 | $ | 594,525 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 805,083 | $ | 10,391,015 | 435,047 | $ | 5,539,917 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 44,908 | 578,910 | 44,361 | 565,288 | ||||||||||
Shares repurchased | (849,163 | ) | (10,950,348 | ) | (1,076,447 | ) | (13,715,556 | ) | ||||||
Net Increase (Decrease) | 828 | $ | 19,577 | (597,039 | ) | $ | (7,610,351 | ) | ||||||
Class I Shares | ||||||||||||||
Shares sold | 449,065 | $ | 5,745,316 | 284,094 | $ | 3,589,619 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 36,249 | 464,437 | 31,981 | 405,096 | ||||||||||
Shares repurchased | (422,642 | ) | (5,412,665 | ) | (407,147 | ) | (5,157,620 | ) | ||||||
Net Increase (Decrease) | 62,672 | $ | 797,088 | (91,072 | ) | $ | (1,162,905 | ) | ||||||
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Limited Term Income Funds | September 30, 2007 |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 202,447 | $ | 2,596,860 | 146,432 | $ | 1,860,958 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 10,191 | 130,690 | 7,844 | 99,399 | ||||||||||
Shares repurchased | (155,073 | ) | (1,997,483 | ) | (108,414 | ) | (1,374,097 | ) | ||||||
Net Increase (Decrease) | 57,565 | $ | 730,067 | 45,862 | $ | 586,260 | ||||||||
INCOME FUND | ||||||||||||||
Class A Shares | ||||||||||||||
Shares sold | 2,831,583 | $ | 34,951,535 | 3,250,026 | $ | 40,085,247 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 452,077 | 5,583,769 | 494,039 | 6,098,155 | ||||||||||
Shares repurchased | (6,196,310 | ) | (76,425,648 | ) | (5,340,874 | ) | (65,959,738 | ) | ||||||
Net Increase (Decrease) | (2,912,650 | ) | $ | (35,890,344 | ) | (1,596,809 | ) | $ | (19,776,336 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 590,334 | $ | 7,262,571 | 563,413 | $ | 6,944,987 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 93,760 | 1,156,118 | 108,235 | 1,333,999 | ||||||||||
Shares repurchased | (982,996 | ) | (12,108,619 | ) | (1,830,119 | ) | (22,562,073 | ) | ||||||
Net Increase (Decrease) | (298,902 | ) | $ | (3,689,930 | ) | (1,158,471 | ) | $ | (14,283,087 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 1,954,926 | $ | 24,120,287 | 2,696,403 | $ | 33,258,881 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 335,119 | 4,139,507 | 334,633 | 4,129,810 | ||||||||||
Shares repurchased | (2,957,329 | ) | (36,572,584 | ) | (1,956,476 | ) | (24,171,129 | ) | ||||||
Net Increase (Decrease) | (667,284 | ) | $ | (8,312,790 | ) | 1,074,560 | $ | 13,217,562 | ||||||
Class R3 Shares | ||||||||||||||
Shares sold | 320,679 | $ | 3,961,502 | 143,837 | $ | 1,782,628 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 13,801 | 170,430 | 7,699 | 95,044 | ||||||||||
Shares repurchased | (104,551 | ) | (1,289,986 | ) | (54,991 | ) | (678,786 | ) | ||||||
Net Increase (Decrease) | 229,929 | $ | 2,841,946 | 96,545 | $ | 1,198,886 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Government Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $59,760,115 and $63,773,956, respectively, while the Income Fund had purchase and sale transactions of investment securities (excluding short-term investments and U.S. Government obligations) of $128,599,724 and $142,796,119, respectively.
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Limited Term Income Funds | September 30, 2007 |
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Government Fund | Income Fund | |||||||
Cost of investments for tax purposes | $ | 139,054,145 | $ | 306,384,532 | ||||
Gross unrealized appreciation on a tax basis | $ | 855,608 | $ | 2,266,245 | ||||
Gross unrealized depreciation on a tax basis | (1,235,132 | ) | (3,255,088 | ) | ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (379,524 | ) | $ | (988,843 | ) | ||
Distributable earnings ordinary income | $ | 30,441 | $ | 29,903 | ||||
At September 30, 2007, 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 | ||
2015 | 108,190 | ||
$ | 800,444 | ||
At September 30, 2007, 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 | ||
2015 | 178,155 | ||
$ | 3,862,624 | ||
As of September 30, 2007, the Government Fund had deferred capital losses occurring subsequent to October 31, 2006 of $1,147,640. For tax purposes, such losses will be reflected in the year ending September 30, 2008. 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, 2007, the Income Fund had deferred capital losses occurring subsequent to October 31, 2006 of $2,433,792. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
In order to account for book/tax differences, the Government Fund increased undistributed net investment income by $20,233 and increased accumulated net realized (loss) by $20,233. The Income Fund increased undistributed net investment income by $18,168 and increased accumulated net realized loss by $18,168. This reclass has no impact on the net asset value of the Funds. Reclassifications result primarily from paydown losses.
For tax purposes, distributions for the year ended September 30, 2007 and September 30, 2006, were paid from ordinary income.
OTHER NOTES:
FASB Interpretation No. 48:
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 model for how a company, including the Funds, should recognize, measure, present and disclose in their 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for their fiscal year beginning after December 15, 2006, which for the Funds is March 31, 2008. As of the date of this report, management of the Funds have not identified any material effect on the Funds’ financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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, | ||||||||||||||||||||
Class A Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.23 | $ | 13.27 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.40 | 0.37 | 0.32 | 0.35 | 0.47 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.23 | (0.01 | ) | (0.24 | ) | (0.22 | ) | (0.04 | ) | |||||||||||
Total from investment operations | 0.63 | 0.36 | 0.08 | 0.13 | 0.43 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.41 | ) | (0.37 | ) | (0.33 | ) | (0.35 | ) | (0.47 | ) | ||||||||||
Change in net asset value | 0.22 | (0.01 | ) | (0.25 | ) | (0.22 | ) | (0.04 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 12.97 | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.23 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 5.03 | % | 2.87 | % | 0.66 | % | 1.04 | % | 3.29 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.13 | % | 2.90 | % | 2.50 | % | 2.72 | % | 3.53 | % | ||||||||||
Expenses, after expense reductions | 0.98 | % | 0.99 | % | 0.99 | % | 0.92 | % | 0.92 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.97 | % | 0.96 | % | 0.98 | % | 0.91 | % | 0.90 | % | ||||||||||
Expenses, before expense reductions | 0.99 | % | 0.99 | % | 0.99 | % | 0.92 | % | 0.92 | % | ||||||||||
Portfolio turnover rate | 43.35 | % | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | ||||||||||
Net assets at end of year (000) | $ | 91,561 | $ | 106,913 | $ | 138,422 | $ | 163,530 | $ | 176,876 |
(a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
Certified Annual Report 19
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term U.S. Government Fund |
Year Ended September 30, | Period Ended September 30, | |||||||||||||||||||
Class B Shares: | 2007 | 2006 | 2005 | 2004 | 2003(c) | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||
Net asset value, beginning of period | $ | 12.72 | $ | 12.73 | $ | 12.98 | $ | 13.22 | $ | 13.12 | ||||||||||
Income from investment operations | ||||||||||||||||||||
Net investment income | 0.22 | 0.18 | 0.13 | 0.21 | 0.37 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.23 | (0.01 | ) | (0.24 | ) | (0.24 | ) | 0.10 | ||||||||||||
Total from investment operations | 0.45 | 0.17 | (0.11 | ) | (0.03 | ) | 0.47 | |||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.23 | ) | (0.18 | ) | (0.14 | ) | (0.21 | ) | (0.37 | ) | ||||||||||
Change in net asset value | 0.22 | (0.01 | ) | (0.25 | ) | (0.24 | ) | 0.10 | ||||||||||||
NET ASSET VALUE, end of period | $ | 12.94 | $ | 12.72 | $ | 12.73 | $ | 12.98 | $ | 13.22 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 3.55 | % | 1.32 | % | (0.82 | )% | (0.24 | )% | 3.60 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 1.73 | % | 1.41 | % | 1.03 | % | 1.65 | % | 2.93 | %(b) | ||||||||||
Expenses, after expense reductions | 2.40 | % | 2.51 | % | 2.46 | % | 1.99 | % | 1.35 | %(b) | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.39 | % | 2.48 | % | 2.45 | % | 1.99 | % | 1.33 | %(b) | ||||||||||
Expenses, before expense reductions | 2.63 | % | 3.21 | % | 2.86 | % | 2.74 | % | 3.32 | %(b) | ||||||||||
Portfolio turnover rate | 43.35 | % | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | ||||||||||
Net assets at end of period (000) | $ | 2,586 | $ | 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. |
See notes to financial statements.
20 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term U.S. Government Fund |
Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.83 | $ | 12.84 | $ | 13.09 | $ | 13.31 | $ | 13.35 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.37 | 0.34 | 0.29 | 0.31 | 0.43 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.22 | (0.01 | ) | (0.24 | ) | (0.22 | ) | (0.04 | ) | |||||||||||
Total from investment operations | 0.59 | 0.33 | 0.05 | 0.09 | 0.39 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.38 | ) | (0.34 | ) | (0.30 | ) | (0.31 | ) | (0.43 | ) | ||||||||||
Change in net asset value | 0.21 | (0.01 | ) | (0.25 | ) | (0.22 | ) | (0.04 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 13.04 | $ | 12.83 | $ | 12.84 | $ | 13.09 | $ | 13.31 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 4.66 | % | 2.60 | % | 0.41 | % | 0.73 | % | 2.96 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 2.88 | % | 2.63 | % | 2.24 | % | 2.40 | % | 3.14 | % | ||||||||||
Expenses, after expense reductions | 1.25 | % | 1.26 | % | 1.25 | % | 1.24 | % | 1.24 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.24 | % | 1.23 | % | 1.24 | % | 1.24 | % | 1.22 | % | ||||||||||
Expenses, before expense reductions | 1.80 | % | 1.79 | % | 1.79 | % | 1.76 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 43.35 | % | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | ||||||||||
Net assets at end of year (000) | $ | 25,566 | $ | 25,132 | $ | 32,821 | $ | 43,404 | $ | 56,166 |
See notes to financial statements.
Certified Annual Report 21
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term U.S. Government Fund |
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.22 | $ | 13.27 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.44 | 0.41 | 0.36 | 0.39 | 0.51 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.23 | (0.01 | ) | (0.24 | ) | (0.21 | ) | (0.05 | ) | |||||||||||
Total from investment operations | 0.67 | 0.40 | 0.12 | 0.18 | 0.46 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.45 | ) | (0.41 | ) | (0.37 | ) | (0.39 | ) | (0.51 | ) | ||||||||||
Change in net asset value | 0.22 | (0.01 | ) | (0.25 | ) | (0.21 | ) | (0.05 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 12.97 | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.22 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 5.35 | % | 3.19 | % | 0.95 | % | 1.37 | % | 3.51 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.45 | % | 3.22 | % | 2.82 | % | 2.95 | % | 3.77 | % | ||||||||||
Expenses, after expense reductions | 0.68 | % | 0.68 | % | 0.68 | % | 0.67 | % | 0.64 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.67 | % | 0.65 | % | 0.67 | % | 0.67 | % | 0.62 | % | ||||||||||
Expenses, before expense reductions | 0.74 | % | 0.78 | % | 0.80 | % | 0.77 | % | 0.82 | % | ||||||||||
Portfolio turnover rate | 43.35 | % | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | ||||||||||
Net assets at end of year (000) | $ | 15,963 | $ | 14,900 | $ | 16,075 | $ | 12,905 | $ | 13,085 |
See notes to financial statements.
22 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term U.S. Government Fund |
Year Ended September 30, | Period Ended September 30, | |||||||||||||||||||
Class R3 Shares: | 2007 | 2006 | 2005 | 2004 | 2003(c) | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||
Net asset value, beginning of period | $ | 12.76 | $ | 12.77 | $ | 13.02 | $ | 13.23 | $ | 13.38 | ||||||||||
Income from investment operations | ||||||||||||||||||||
Net investment income | 0.40 | 0.37 | 0.34 | 0.37 | 0.17 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.22 | (0.01 | ) | (0.25 | ) | (0.21 | ) | (0.15 | ) | |||||||||||
Total from investment operations | 0.62 | 0.36 | 0.09 | 0.16 | 0.02 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.41 | ) | (0.37 | ) | (0.34 | ) | (0.37 | ) | (0.17 | ) | ||||||||||
Change in net asset value | 0.21 | (0.01 | ) | (0.25 | ) | (0.21 | ) | (0.15 | ) | |||||||||||
NET ASSET VALUE, end of period | $ | 12.97 | $ | 12.76 | $ | 12.77 | $ | 13.02 | $ | 13.23 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 4.93 | % | 2.86 | % | 0.72 | % | 1.26 | % | 0.19 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.15 | % | 2.90 | % | 2.66 | % | 2.62 | % | 5.07 | %(b) | ||||||||||
Expenses, after expense reductions | 1.00 | % | 1.00 | % | 0.93 | % | 0.91 | % | 1.15 | %(b) | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.97 | % | 0.91 | % | 0.91 | % | 1.15 | %(b) | ||||||||||
Expenses, before expense reductions | 1.64 | % | 1.55 | % | 3.55 | % | 13.56 | % | 41,652.81 | %(b)* | ||||||||||
Portfolio turnover rate | 43.35 | % | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | ||||||||||
Net assets at end of period (000) | $ | 4,398 | $ | 3,591 | $ | 3,008 | $ | 422 | $ | — | (d) |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R3 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. |
See notes to financial statements.
Certified Annual Report 23
FINANCIAL HIGHLIGHTS
Thornburg Limited Term Income Fund
Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | $ | 12.79 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.50 | 0.50 | 0.46 | 0.43 | 0.51 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.04 | (0.14 | ) | (0.28 | ) | (0.19 | ) | 0.20 | ||||||||||||
Total from investment operations | 0.54 | 0.36 | 0.18 | 0.24 | 0.71 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.51 | ) | (0.50 | ) | (0.47 | ) | (0.43 | ) | (0.51 | ) | ||||||||||
Change in net asset value | 0.03 | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.40 | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 4.43 | % | 2.96 | % | 1.44 | % | 1.96 | % | 5.56 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.07 | % | 4.05 | % | 3.52 | % | 3.33 | % | 3.91 | % | ||||||||||
Expenses, after expense reductions | 1.00 | % | 1.00 | % | 1.00 | % | 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 | 1.08 | % | 1.09 | % | 1.09 | % | 1.07 | % | 1.04 | % | ||||||||||
Portfolio turnover rate | 41.55 | % | 6.77 | % | 23.16 | % | 22.73 | % | 18.86 | % | ||||||||||
Net assets at end of year (000) | $ | 155,021 | $ | 190,670 | $ | 212,881 | $ | 230,256 | $ | 184,497 |
(a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
24 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term Income Fund |
Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.35 | $ | 12.49 | $ | 12.78 | $ | 12.97 | $ | 12.77 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.47 | 0.47 | 0.43 | 0.40 | 0.46 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.03 | (0.14 | ) | (0.28 | ) | (0.19 | ) | 0.20 | ||||||||||||
Total from investment operations | 0.50 | 0.33 | 0.15 | 0.21 | 0.66 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.47 | ) | (0.47 | ) | (0.44 | ) | (0.40 | ) | (0.46 | ) | ||||||||||
Change in net asset value | 0.03 | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.38 | $ | 12.35 | $ | 12.49 | $ | 12.78 | $ | 12.97 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 4.17 | % | 2.71 | % | 1.19 | % | 1.70 | % | 5.20 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.82 | % | 3.79 | % | 3.27 | % | 3.07 | % | 3.56 | % | ||||||||||
Expenses, after expense reductions | 1.24 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.33 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.24 | % | 1.24 | % | 1.24 | % | 1.24 | % | 1.33 | % | ||||||||||
Expenses, before expense reductions | 1.89 | % | 1.87 | % | 1.88 | % | 1.87 | % | 1.92 | % | ||||||||||
Portfolio turnover rate | 41.55 | % | 6.77 | % | 23.16 | % | 22.73 | % | 18.86 | % | ||||||||||
Net assets at end of year (000) | $ | 40,769 | $ | 44,361 | $ | 59,355 | $ | 65,398 | $ | 54,926 |
See notes to financial statements.
Certified Annual Report 25
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term Income Fund |
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | $ | 12.79 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.54 | 0.54 | 0.51 | 0.47 | 0.55 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.04 | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | ||||||||||||
Total from investment operations | 0.58 | 0.40 | 0.22 | 0.28 | 0.75 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.55 | ) | (0.54 | ) | (0.51 | ) | (0.47 | ) | (0.55 | ) | ||||||||||
Change in net asset value | 0.03 | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.40 | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 4.76 | % | 3.30 | % | 1.77 | % | 2.29 | % | 5.89 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.39 | % | 4.38 | % | 3.85 | % | 3.64 | % | 4.23 | % | ||||||||||
Expenses, after expense reductions | 0.67 | % | 0.68 | % | 0.67 | % | 0.67 | % | 0.69 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.67 | % | 0.67 | % | 0.67 | % | 0.67 | % | 0.69 | % | ||||||||||
Expenses, before expense reductions | 0.72 | % | 0.72 | % | 0.72 | % | 0.72 | % | 0.76 | % | ||||||||||
Portfolio turnover rate | 41.55 | % | 6.77 | % | 23.16 | % | 22.73 | % | 18.86 | % | ||||||||||
Net assets at end of year (000) | $ | 103,530 | $ | 111,535 | $ | 99,396 | $ | 90,025 | $ | 59,473 |
See notes to financial statements.
26 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term Income Fund |
Year ended September 30, | Period ended September 30, | |||||||||||||||||||
Class R3 Shares: | 2007 | 2006 | 2005 | 2004 | 2003(c) | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||
Net asset value, beginning of period | $ | 12.38 | $ | 12.52 | $ | 12.81 | $ | 12.99 | $ | 13.10 | ||||||||||
Income from investment operations | ||||||||||||||||||||
Net investment income | 0.50 | 0.50 | 0.48 | 0.45 | 0.17 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.03 | (0.14 | ) | (0.30 | ) | (0.18 | ) | (0.11 | ) | |||||||||||
Total from investment operations | 0.53 | 0.36 | 0.18 | 0.27 | 0.06 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.51 | ) | (0.50 | ) | (0.47 | ) | (0.45 | ) | (0.17 | ) | ||||||||||
Change in net asset value | 0.02 | (0.14 | ) | (0.29 | ) | (0.18 | ) | (0.11 | ) | |||||||||||
NET ASSET VALUE, end of period | $ | 12.40 | $ | 12.38 | $ | 12.52 | $ | 12.81 | $ | 12.99 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 4.34 | % | 2.97 | % | 1.43 | % | 2.14 | % | 0.48 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.09 | % | 4.07 | % | 3.57 | % | 3.41 | % | 5.19 | %(b) | ||||||||||
Expenses, after expense reductions | 0.99 | % | 1.00 | % | 1.00 | % | 0.98 | % | 1.25 | %(b) | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.99 | % | 0.99 | % | 0.98 | % | 1.25 | %(b) | ||||||||||
Expenses, before expense reductions | 1.71 | % | 1.79 | % | 3.15 | % | 7.63 | % | 41,534.94 | %(b)* | ||||||||||
Portfolio turnover rate | 41.55 | % | 6.77 | % | 23.16 | % | 22.73 | % | 18.86 | % | ||||||||||
Net assets at end of period (000) | $ | 6,191 | $ | 3,331 | $ | 2,162 | $ | 911 | $ | — | (d) |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R3 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. |
See notes to financial statements.
Certified Annual Report 27
Thornburg Limited Term U.S. Government Fund | September 30, 2007 |
CUSIPS: Class A—885-215-103, CLASS B—885-215-848, CLASS C—885-215-830, CLASS I—885-215-699, CLASS R3—885-215-491 NASDAQ SYMBOLS: CLASS A—LTUSX, CLASS B—LTUBX, CLASS C—LTUCX, CLASS I—LTUIX, CLASS R3—LTURX
Issuer-Description | Principal Amount | Value | ||||
U.S. TREASURY SECURITIES — 45.13% | ||||||
United States Treasury Notes, 2.625% due 5/15/2008 | $ | 9,000,000 | $ | 8,915,625 | ||
United States Treasury Notes, 5.50% due 5/15/2009 | 10,000,000 | 10,238,281 | ||||
United States Treasury Notes, 3.625% due 1/15/2010 | 16,000,000 | 15,873,751 | ||||
United States Treasury Notes, 5.75% due 8/15/2010 | 6,000,000 | 6,277,969 | ||||
United States Treasury Notes, 4.625% due 10/31/2011 | 2,000,000 | 2,035,000 | ||||
United States Treasury Notes, 3.625% due 5/15/2013 | 11,000,000 | 10,658,828 | ||||
United States Treasury Notes, 4.75% due 5/15/2014 | 3,000,000 | 3,067,734 | ||||
United States Treasury Notes, 4.875% due 8/15/2016 | 6,000,000 | 6,142,031 | ||||
TOTAL U.S. TREASURY SECURITIES (Cost $ 63,549,400) | 63,209,219 | |||||
U.S. GOVERNMENT AGENCIES — 53.87% | ||||||
Federal Agricultural Mtg Corp., 6.71% due 7/28/2014 | 200,000 | 220,876 | ||||
Federal Farm Credit Bank, 5.875% due 7/28/2008 | 1,900,000 | 1,917,033 | ||||
Federal Farm Credit Bank, 5.87% due 9/2/2008 | 1,300,000 | 1,312,919 | ||||
Federal Farm Credit Bank, 5.35% due 12/11/2008 | 200,000 | 201,876 | ||||
Federal Farm Credit Bank, 5.80% due 3/19/2009 | 300,000 | 305,714 | ||||
Federal Farm Credit Bank, 6.75% due 7/7/2009 | 350,000 | 363,462 | ||||
Federal Farm Credit Bank, 6.06% due 5/28/2013 | 240,000 | 255,311 | ||||
Federal Home Loan Bank, 7.00% due 2/15/2008 | 150,000 | 151,215 | ||||
Federal Home Loan Bank, 5.48% due 1/8/2009 | 1,250,000 | 1,264,318 | ||||
Federal Home Loan Bank, 5.985% due 4/9/2009 | 1,000,000 | 1,022,017 | ||||
Federal Home Loan Bank, 5.79% due 4/27/2009 | 200,000 | 203,976 | ||||
Federal Home Loan Bank, 5.125% due 4/29/2009 | 1,750,000 | 1,767,315 | ||||
Federal Home Loan Bank, 3.40% due 11/12/2010 | 2,750,000 | 2,746,400 | ||||
Federal Home Loan Mtg Corp., CMO Series 1321 Class TE, 7.00% due 8/15/2022 | 953,914 | 983,724 | ||||
Federal Home Loan Mtg Corp., CMO Series 1616 Class E, 6.50% due 11/15/2008 | 450,822 | 453,760 | ||||
Federal Home Loan Mtg Corp., CMO Series 2592 Class PD, 5.00% due 7/15/2014 | 1,000,000 | 1,000,317 | ||||
Federal Home Loan Mtg Corp., CMO Series 2744 Class JG, 5.00% due 8/15/2032 | 1,500,000 | 1,451,930 | ||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | 1,192,858 | 1,167,867 | ||||
Federal Home Loan Mtg Corp., CMO Series 2825 Class VP, 5.50% due 6/15/2015 | 1,567,113 | 1,577,295 | ||||
Federal Home Loan Mtg Corp., CMO Series 3067 Class PJ, 5.50% due 7/15/2031 | 3,000,000 | 2,998,064 | ||||
Federal Home Loan Mtg Corp., CMO Series 3078 Class PC, 5.50% due 11/15/2030 | 2,250,000 | 2,249,987 | ||||
Federal Home Loan Mtg Corp., CMO Series 3138 Class PC, 5.50% due 6/15/2032 | 5,000,000 | 4,997,392 | ||||
Federal Home Loan Mtg Corp., CMO Series 3192 Class GB, 6.00% due 1/15/2031 | 1,000,000 | 1,014,476 | ||||
Federal Home Loan Mtg Corp., CMO Series 3320 Class TC, 5.50% due 10/15/2032 | 2,000,000 | 1,988,825 | ||||
Federal Home Loan Mtg Corp., CMO Series 3331 Class PB, 6.00% due 1/15/2031 | 2,000,000 | 2,029,838 | ||||
Federal Home Loan Mtg Corp., CMO Series R012 Class AB, 5.50% due 12/15/2020 | 3,859,067 | 3,823,530 | ||||
Federal Home Loan Mtg Corp., Pool # 141016, 9.25% due 11/1/2016 | 20,499 | 22,484 | ||||
Federal Home Loan Mtg Corp., Pool # 141412, 8.50% due 4/1/2017 | 39,571 | 42,606 | ||||
Federal Home Loan Mtg Corp., Pool # 160043, 8.75% due 4/1/2008 | 393 | 392 | ||||
Federal Home Loan Mtg Corp., Pool # 181730, 8.50% due 5/1/2008 | 1,287 | 1,284 | ||||
Federal Home Loan Mtg Corp., Pool # 252986, 10.75% due 4/1/2010 | 14,486 | 15,206 | ||||
Federal Home Loan Mtg Corp., Pool # 298107, 10.25% due 8/1/2017 | 24,891 | 28,464 | ||||
Federal Home Loan Mtg Corp., Pool # C90041, 6.50% due 11/1/2013 | 30,468 | 31,217 | ||||
Federal Home Loan Mtg Corp., Pool # D37120, 7.00% due 7/1/2023 | 35,920 | 37,552 | ||||
Federal Home Loan Mtg Corp., Pool # E49074, 6.50% due 7/1/2008 | 4,927 | 5,028 |
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Limited Term U.S. Government Fund | September 30, 2007 |
Issuer-Description | Principal Amount | Value | ||||
Federal Home Loan Mtg Corp., Pool # E61778, 6.50% due 4/1/2008 | $ | 1,166 | $ | 1,190 | ||
Federal National Mtg Assoc, 5.125% due 12/8/2008 | 3,665,000 | 3,688,674 | ||||
Federal National Mtg Assoc CMO Series 1993-101 Class PJ, 7.00% due 6/25/2008 | 67,634 | 67,758 | ||||
Federal National Mtg Assoc CMO Series 1993-122 Class D, 6.50% due 6/25/2023 | 55,202 | 55,657 | ||||
Federal National Mtg Assoc CMO Series 1993-32 Class H, 6.00% due 3/25/2023 | 111,839 | 113,589 | ||||
Federal National Mtg Assoc CMO Series 2003-92 Class KH, 5.00% due 3/25/2032 | 2,000,000 | 1,940,130 | ||||
Federal National Mtg Assoc CMO Series 2004-35 Class CA, 4.00% due 12/25/2017 | 2,068,435 | 1,998,800 | ||||
Federal National Mtg Assoc CMO Series 2007-65 Class PB, 6.00% due 10/25/2032 | 2,916,000 | 2,957,444 | ||||
Federal National Mtg Assoc CPI Floating Rate Note, 3.50% due 2/17/2009 | 3,000,000 | 2,943,720 | ||||
Federal National Mtg Assoc REMIC Series 2006-B1 Class AB, 6.00% due 6/25/2016 | 3,554,675 | 3,626,386 | ||||
Federal National Mtg Assoc, Pool # 008307, 8.00% due 5/1/2008 | 3,510 | 3,510 | ||||
Federal National Mtg Assoc, Pool # 044003, 8.00% due 6/1/2017 | 33,814 | 36,126 | ||||
Federal National Mtg Assoc, Pool # 050811, 7.50% due 12/1/2012 | 28,711 | 29,825 | ||||
Federal National Mtg Assoc, Pool # 050832, 7.50% due 6/1/2013 | 37,014 | 38,346 | ||||
Federal National Mtg Assoc, Pool # 076388, 9.25% due 9/1/2018 | 68,448 | 74,907 | ||||
Federal National Mtg Assoc, Pool # 077725, 9.75% due 10/1/2018 | 3,852 | 3,944 | ||||
Federal National Mtg Assoc, Pool # 100286, 7.50% due 8/1/2009 | 33,546 | 33,926 | ||||
Federal National Mtg Assoc, Pool # 112067, 9.50% due 10/1/2016 | 27,452 | 30,350 | ||||
Federal National Mtg Assoc, Pool # 156156, 8.50% due 4/1/2021 | 21,435 | 22,354 | ||||
Federal National Mtg Assoc, Pool # 190555, 7.00% due 1/1/2014 | 27,230 | 28,179 | ||||
Federal National Mtg Assoc, Pool # 190703, 7.00% due 3/1/2009 | 6,632 | 6,662 | ||||
Federal National Mtg Assoc, Pool # 190836, 7.00% due 6/1/2009 | 20,150 | 20,269 | ||||
Federal National Mtg Assoc, Pool # 250387, 7.00% due 11/1/2010 | 31,564 | 32,155 | ||||
Federal National Mtg Assoc, Pool # 251759, 6.00% due 5/1/2013 | 59,386 | 60,275 | ||||
Federal National Mtg Assoc, Pool # 252648, 6.50% due 5/1/2022 | 142,708 | 146,599 | ||||
Federal National Mtg Assoc, Pool # 303383, 7.00% due 12/1/2009 | 5,762 | 5,796 | ||||
Federal National Mtg Assoc, Pool # 312663, 7.50% due 6/1/2010 | 33,023 | 33,620 | ||||
Federal National Mtg Assoc, Pool # 323706, 7.00% due 2/1/2009 | 12,665 | 12,689 | ||||
Federal National Mtg Assoc, Pool # 334996, 7.00% due 2/1/2011 | 28,098 | 28,676 | ||||
Federal National Mtg Assoc, Pool # 342947, 7.25% due 4/1/2024 | 290,849 | 306,410 | ||||
Federal National Mtg Assoc, Pool # 345775, 8.50% due 12/1/2024 | 3,151 | 3,166 | ||||
Federal National Mtg Assoc, Pool # 373942, 6.50% due 12/1/2008 | �� | 7,780 | 7,945 | |||
Federal National Mtg Assoc, Pool # 384243, 6.10% due 10/1/2011 | 601,355 | 612,382 | ||||
Federal National Mtg Assoc, Pool # 384746, 5.86% due 2/1/2009 | 1,026,627 | 1,027,483 | ||||
Federal National Mtg Assoc, Pool # 385714, 4.70% due 1/1/2010 | 3,084,787 | 3,056,382 | ||||
Federal National Mtg Assoc, Pool # 406384, 8.25% due 12/1/2024 | 148,361 | 158,081 | ||||
Federal National Mtg Assoc, Pool # 443909, 6.50% due 9/1/2018 | 100,058 | 103,375 | ||||
Federal National Mtg Assoc, Pool # 516363, 5.00% due 3/1/2014 | 148,644 | 148,591 | ||||
Federal National Mtg Assoc, Pool # 555207, 7.00% due 11/1/2017 | 65,309 | 66,463 | ||||
Government National Mtg Assoc CMO Series 2001-65 Class PG, 6.00% due 7/20/2028 | 250,553 | 251,004 | ||||
Government National Mtg Assoc, Pool # 000623, 8.00% due 9/20/2016 | 51,550 | 54,582 | ||||
Government National Mtg Assoc, Pool # 369693, 7.00% due 1/15/2009 | 23,091 | 23,239 | ||||
Government National Mtg Assoc, Pool # 409921, 7.50% due 8/15/2010 | 20,493 | 21,000 | ||||
Government National Mtg Assoc, Pool # 410240, 7.00% due 12/15/2010 | 26,959 | 27,517 | ||||
Government National Mtg Assoc, Pool # 410271, 7.50% due 8/15/2010 | 26,319 | 27,078 | ||||
Government National Mtg Assoc, Pool # 410846, 7.00% due 12/15/2010 | 41,213 | 42,065 | ||||
Government National Mtg Assoc, Pool # 430150, 7.25% due 12/15/2026 | 30,487 | 31,977 | ||||
Government National Mtg Assoc, Pool # 453928, 7.00% due 7/15/2017 | 73,727 | 76,938 | ||||
Government National Mtg Assoc, Pool # 780063, 7.00% due 9/15/2008 | 3,140 | 3,143 | ||||
Government National Mtg Assoc, Pool # 780448, 6.50% due 8/15/2011 | 68,077 | 69,686 | ||||
Overseas Private Investment Corp., 4.10% due 11/15/2014 | 1,876,800 | 1,836,862 | ||||
Private Export Funding Corp., 5.685% due 5/15/2012 | 5,000,000 | 5,219,295 | ||||
Private Export Funding Corp., 4.974% due 8/15/2013 | 2,700,000 | 2,738,356 |
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Limited Term U.S. Government Fund | September 30, 2007 |
Issuer-Description | Principal Amount | Value | ||||
Tennessee Valley Authority, 4.75% due 8/1/2013 | $ | 3,000,000 | $ | 3,016,063 | ||
United States Department of Housing & Urban Development, 3.51% due 8/1/2008 | 850,000 | 841,093 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $ 75,504,745) | 75,465,402 | |||||
TOTAL INVESTMENTS — 99.00% (Cost $ 139,054,145) | $ | 138,674,621 | ||||
OTHER ASSETS LESS LIABILITIES — 1.00% | 1,399,388 | |||||
NET ASSETS — 100.00% | $ | 140,074,009 | ||||
Footnote Legend
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
CMO | Collateralized Mortgage Obligation | |
Mtg | Mortgage | |
REMIC | Real Estate Mortgage Investment Conduit |
See notes to financial statements.
30 Certified Annual Report
SCHEDULE OF INVESTMENTS
Thornburg Limited Term Income Fund | September 30, 2007 |
CUSIPS: Class A—885-215-509, CLASS C—885-215-764, CLASS I—885-215-681, CLASS R3—885-215-483 NASDAQ SYMBOLS: CLASS A—THIFX, CLASS C—THICX, CLASS I—THIIX, CLASS R3—THIRX
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
U.S. TREASURY SECURITIES — 8.07% | ||||||||
United States Treasury Notes, 3.625% due 1/15/2008 | Aaa/AAA | $ | 2,578,680 | $ | 2,575,352 | |||
United States Treasury Notes, 4.75% due 11/15/2008 | Aaa/AAA | 1,500,000 | 1,512,305 | |||||
United States Treasury Notes, 4.75% due 5/15/2014 | Aaa/AAA | 5,000,000 | 5,112,890 | |||||
United States Treasury Notes, 5.125% due 5/15/2016 | Aaa/AAA | 5,000,000 | 5,209,375 | |||||
United States Treasury Notes, 4.875% due 8/15/2016 | Aaa/AAA | 10,000,000 | 10,236,719 | |||||
TOTAL U.S. TREASURY SECURITIES (Cost $ 24,305,202) | 24,646,641 | |||||||
U.S. GOVERNMENT AGENCIES — 6.14% | ||||||||
Federal Home Loan Bank, 5.833% due 1/23/2008 | Aaa/AAA | 500,000 | 501,797 | |||||
Federal Home Loan Bank, 5.785% due 4/14/2008 | Aaa/AAA | 75,000 | 75,407 | |||||
Federal Home Loan Bank, 5.835% due 7/15/2008 | Aaa/AAA | 300,000 | 302,411 | |||||
Federal Home Loan Bank, 5.085% due 10/7/2008 | Aaa/AAA | 250,000 | 251,144 | |||||
Federal Home Loan Bank, 5.038% due 10/14/2008 | Aaa/AAA | 200,000 | 200,852 | |||||
Federal Home Loan Bank, 5.365% due 12/11/2008 | Aaa/AAA | 75,000 | 75,699 | |||||
Federal Home Loan Bank, 4.50% due 12/15/2008 | Aaa/AAA | 3,000,000 | 2,998,056 | |||||
Federal Home Loan Bank, 5.985% due 4/9/2009 | Aaa/AAA | 85,000 | 86,871 | |||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | Aaa/AAA | 1,192,858 | 1,167,867 | |||||
Federal Home Loan Mtg Corp., CMO Series 3192 Class GB, 6.00% due 1/15/2031 | Aaa/AAA | 2,000,000 | 2,028,952 | |||||
Federal National Mtg Assoc, 6.00% due 12/1/2008 | Aaa/AAA | 19,293 | 19,557 | |||||
Federal National Mtg Assoc, 8.00% due 12/1/2009 | Aaa/AAA | 17,928 | 18,324 | |||||
Federal National Mtg Assoc, 7.00% due 3/1/2011 | Aaa/AAA | 18,261 | 18,591 | |||||
Federal National Mtg Assoc, 6.42% due 4/1/2011 | Aaa/AAA | 2,314,030 | 2,321,658 | |||||
Federal National Mtg Assoc, 5.095% due 12/1/2011 | Aaa/AAA | 122,788 | 122,663 | |||||
Federal National Mtg Assoc, 7.491% due 8/1/2014 | Aaa/AAA | 30,955 | 31,748 | |||||
Federal National Mtg Assoc CMO Series 2003-64 Class EC, 5.50% due 5/25/2030 | Aaa/AAA | 527,396 | 528,530 | |||||
Federal National Mtg Assoc CMO Series 2007-65 Class PB, 6.00% due 10/25/2032 | Aaa/AAA | 3,000,000 | 3,042,638 | |||||
Federal National Mtg Assoc CPI Floating Rate Note, 3.50% due 2/17/2009 | Aaa/AAA | 5,000,000 | 4,906,200 | |||||
Government National Mtg Assoc, Pool # 003007, 8.50% due 11/20/2015 | Aaa/AAA | 24,327 | 25,745 | |||||
Government National Mtg Assoc, Pool # 827148, 6.375% due 2/20/2024 | Aaa/AAA | 37,805 | 38,008 | |||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $ 18,861,503) | 18,762,718 | |||||||
ASSET BACK SECURITIES — 10.96% | ||||||||
American Honda Finance Corp., 5.125% due 12/15/2010 | Aa3/A+ | 1,500,000 | 1,520,854 | |||||
Bear Stearns Mtg Series 2004-3 Class 1-A2, 5.756% due 7/25/2034 | Aaa/AAA | 785,659 | 787,187 | |||||
Countrywide Home Loan Series 2004 Class 1-A, 5.671% due 7/20/2034 | Aaa/AAA | 1,174,966 | 1,186,672 | |||||
FNBC Pass Through Trust Series 1993 A, 8.08% due 1/5/2018 | Aa3/AA- | 1,103,381 | 1,268,811 | |||||
GSR Mtg Loan Trust Series 2004-3F Class 2-A10, 3.764% due 2/25/2034 | NR/AAA | 682,018 | 649,375 | |||||
IHOP Franchising LLC Series 2007-1A Class A1, 5.144% due 3/20/2037 | Aaa/AAA | 3,000,000 | 2,969,971 | |||||
JP Morgan Chase Commercial Mtg Series 2004-C3 Class A-5, 4.878% due 1/15/2042 | Aaa/NR | 5,000,000 | 4,820,300 | |||||
Legg Mason Mortgage Capital Corp., 7.01% due 6/1/2009 | NR/NR | 1,714,286 | 1,714,286 | |||||
Small Business Administration, 4.638% due 2/10/2015 | NR/NR | 2,591,765 | 2,532,860 | |||||
Wachovia Bank Commercial Mtg Trust Series 2005-C21 Class A-4, 5.385% due 10/15/2044 | Aaa/AAA | 5,000,000 | 4,936,116 | |||||
Wachovia Bank Commercial Mtg Trust Series 2005-C22 Class A-4, 5.266% due 12/15/2044 | Aaa/AAA | 5,000,000 | 4,963,937 | |||||
Washington Mutual Series 03-AR10 Class-A4, 4.057% due 10/25/2033 | Aaa/AAA | 529,148 | 527,449 | |||||
Washington Mutual Series 03-AR5 Class-A6, 3.695% due 6/25/2033 | Aaa/AAA | 3,207,569 | 3,179,498 |
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | ||||
Washington Mutual Series 05-AR4 Class-A4b, 4.672% due 4/25/2035 | Aaa/AAA | $ | 830,000 $ | 815,743 | |||
Wells Fargo Mortgage Backed Securities Series 2005-3 Class-A10, 5.50% due 5/25/2035 | Aaa/NR | 1,625,182 | 1,625,446 | ||||
TOTAL ASSET BACK SECURITIES (Cost $ 33,494,446) | 33,498,505 | ||||||
CORPORATE BONDS — 56.67% | |||||||
BANKS — 4.30% | |||||||
COMMERCIAL BANKS — 4.30% | |||||||
Fifth Third Bank, Cincinnati Ohio, 3.375% due 8/15/2008 | Aa2/AA- | 2,500,000 | 2,456,703 | ||||
Household Finance Corp., 6.40% due 9/15/2009 | Aa3/AA- | 400,000 | 408,022 | ||||
Household Finance Corp. CPI Floating Rate Note, 3.73% due 8/10/2009 | Aa3/AA- | 5,000,000 | 4,775,100 | ||||
National City Bank, 7.25% due 7/15/2010 | NR/A | 2,000,000 | 2,099,352 | ||||
National Westminster Bank, 7.375% due 10/1/2009 | Aa1/AA- | 715,000 | 753,203 | ||||
Nations Bank Corp., 7.23% due 8/15/2012 | Aa1/AA | 250,000 | 269,448 | ||||
US Bank, 6.30% due 7/15/2008 | Aa2/AA | 400,000 | 402,234 | ||||
Whitney National Bank, 5.875% due 4/1/2017 | A3/BBB | 2,000,000 | 1,963,830 | ||||
13,127,892 | |||||||
CAPITAL GOODS — 7.19% | |||||||
ELECTRICAL EQUIPMENT — 0.62% | |||||||
Emerson Electric Co., 5.75% due 11/1/2011 | A2/A | 800,000 | 818,300 | ||||
Hubbell Inc., 6.375% due 5/15/2012 | A3/A+ | 1,000,000 | 1,059,372 | ||||
INDUSTRIAL CONGLOMERATES — 2.94% | |||||||
General Electric Capital Corp., 7.75% due 6/9/2009 | Aaa/AAA | 200,000 | 208,546 | ||||
General Electric Capital Corp., 4.25% due 12/1/2010 | Aaa/AAA | 2,000,000 | 1,957,602 | ||||
General Electric Capital Corp., 7.375% due 1/19/2010 | Aaa/AAA | 400,000 | 419,889 | ||||
General Electric Capital Corp. Floating Rate Note, 5.814% due 12/15/2009 | Aaa/AAA | 1,000,000 | 996,435 | ||||
General Electric Capital Corp. Floating Rate Note, 4.80% due 5/30/2008 | Aaa/AAA | 494,000 | 487,001 | ||||
General Electric Capital Corp. Floating Rate Note, 4.207% due 3/2/2009 | Aaa/AAA | 5,000,000 | 4,925,000 | ||||
MACHINERY — 3.63% | |||||||
Caterpillar Financial Services Corp., 6.40% due 2/15/2008 | A2/A | 250,000 | 250,414 | ||||
General American Railcar Corp., 6.69% due 9/20/2016 | A3/AA- | 188,322 | 204,211 | ||||
Illinois Tool Works Cupids Financing Trust, 6.55% due 12/31/2011 | Aa3/NR | 5,000,000 | 5,165,360 | ||||
John Deere Capital Corp. Floating Rate Note, 5.849% due 6/10/2008 | A2/A | 4,415,000 | 4,424,236 | ||||
Pentair, Inc., 7.85% due 10/15/2009 | Baa3/BBB | 1,000,000 | 1,056,549 | ||||
21,972,915 | |||||||
COMMERCIAL SERVICES & SUPPLIES — 1.17% | |||||||
COMMERCIAL SERVICES & SUPPLIES — 1.17% | |||||||
Science Applications International Corp., 6.75% due 2/1/2008 | A3/A- | 250,000 | 250,819 | ||||
Science Applications International Corp., 6.25% due 7/1/2012 | A3/A- | 1,000,000 | 1,034,213 | ||||
Waste Management, Inc., 6.875% due 5/15/2009 | Baa3/BBB | 725,000 | 749,367 | ||||
Waste Management, Inc., 7.375% due 8/1/2010 | Baa3/BBB | 500,000 | 529,204 | ||||
Waste Management, Inc., 6.50% due 11/15/2008 | Baa3/BBB | 1,000,000 | 1,012,968 | ||||
3,576,571 | |||||||
32 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
CONSUMER DURABLES & APPAREL — 0.75% | ||||||||
TEXTILES, APPAREL & LUXURY GOODS — 0.75% | ||||||||
Nike, Inc., 5.15% due 10/15/2015 | A2/A+ | $ | 2,315,000 | $ | 2,280,590 | |||
2,280,590 | ||||||||
CONSUMER SERVICES — 1.32% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 1.32% | ||||||||
Dunkin 2006-1 Class A2, 5.779% due 6/20/2031 | Aaa/AAA | 4,000,000 | 4,024,348 | |||||
4,024,348 | ||||||||
DIVERSIFIED FINANCIALS — 11.67% | ||||||||
CAPITAL MARKETS — 5.24% | ||||||||
Bear Stearns Co., Inc., 4.50% due 10/28/2010 | A1/A+ | 1,500,000 | 1,454,343 | |||||
Goldman Sachs Group, Inc., 5.625% due 1/15/2017 | A1/A+ | 2,000,000 | 1,940,498 | |||||
Lehman Brothers Holdings, Inc., 6.00% due 7/19/2012 | A1/A+ | 1,500,000 | 1,523,251 | |||||
Lehman Brothers Holdings, Inc., 3.50% due 8/7/2008 | A1/A+ | 700,000 | 691,349 | |||||
Merrill Lynch & Co. Floating Rate Note, 5.89% due 8/14/2009 | Aa3/AA- | 2,000,000 | 1,990,776 | |||||
Merrill Lynch & Co. CPI Floating Rate Note, 3.847% due 3/2/2009 | Aa3/AA- | 3,000,000 | 2,914,950 | |||||
Morgan Stanley Group, Inc., 5.485% due 1/18/2008 | Aa3/AA- | 5,000,000 | 4,995,845 | |||||
Northern Trust Co., 6.25% due 6/2/2008 | A1/A+ | 500,000 | 504,067 | |||||
CONSUMER FINANCE — 3.54% | ||||||||
American General Finance Corp., 4.625% due 9/1/2010 | A1/A+ | 200,000 | 196,051 | |||||
Capital One Bank, 6.70% due 5/15/2008 | A2/A- | 2,025,000 | 2,040,868 | |||||
SLM Corp. Floating Rate Note, 5.57% due 7/25/2008 | Baa1/BBB+ | 3,000,000 | 2,958,324 | |||||
SLM Corp. Floating Rate Note, 4.69% due 9/15/2008 | Baa1/BBB+ | 1,675,000 | 1,606,650 | |||||
Toyota Motor Credit Corp., 4.25% due 3/15/2010 | Aaa/AAA | 2,450,000 | 2,437,701 | |||||
Toyota Motor Credit Corp., 2.875% due 8/1/2008 | Aaa/AAA | 800,000 | 784,800 | |||||
Toyota Motor Credit Corp., 4.35% due 12/15/2010 | Aaa/AAA | 800,000 | 795,171 | |||||
DIVERSIFIED FINANCIAL SERVICES — 2.89% | ||||||||
Bank of America Institutional Series B, 7.70% due 12/31/2026 | Aa2/A+ | 2,000,000 | 2,075,600 | |||||
JP Morgan Chase Co., 4.50% due 11/15/2010 | Aa2/AA- | 1,465,000 | 1,443,480 | |||||
JP Morgan Chase Co. CPI Floating Rate Note, 4.09% due 6/28/2009 | Aa2/AA- | 5,000,000 | 4,940,500 | |||||
US Central Credit Union, 2.75% due 5/30/2008 | Aa1/AAA | 375,000 | 368,694 | |||||
35,662,918 | ||||||||
ENERGY — 2.30% | ||||||||
ENERGY EQUIPMENT & SERVICES — 0.64% | ||||||||
Detroit Edison Corporate Senior Note Series D, 5.40% due 8/1/2014 | A3/BBB+ | 2,000,000 | 1,971,940 | |||||
OIL, GAS & CONSUMABLE FUELS — 1.66% | ||||||||
Chevron Phillips Chemical, 7.00% due 3/15/2011 | Baa1/BBB+ | 500,000 | 524,784 | |||||
Enbridge, Inc., 5.80% due 6/15/2014 | Baa1/A- | 2,000,000 | 1,993,336 | |||||
Enterprise Products Participating LP, 7.50% due 2/1/2011 | Baa3/BBB- | 250,000 | 265,512 | |||||
Murphy Oil Corp., 6.375% due 5/1/2012 | Baa3/BBB | 750,000 | 781,117 | |||||
Phillips Petroleum Co., 8.75% due 5/25/2010 | A1/A- | 250,000 | 272,446 | |||||
Phillips Petroleum Co., 9.375% due 2/15/2011 | A1/A- | 900,000 | 1,021,953 |
Certified Annual Report 33
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Union Oil Co. California, 7.90% due 4/18/2008 | Aa2/BBB+ | $ | 200,000 | $ | 202,953 | |||
7,034,041 | ||||||||
FOOD & STAPLES RETAILING — 0.30% | ||||||||
FOOD & STAPLES RETAILING — 0.30% | ||||||||
Wal-Mart Stores, Inc., 6.875% due 8/10/2009 | Aa2/AA | 900,000 | 930,322 | |||||
930,322 | ||||||||
FOOD, BEVERAGE & TOBACCO — 1.79% | ||||||||
BEVERAGES — 0.69% | ||||||||
Anheuser Busch Co., Inc., 4.375% due 1/15/2013 | A2/A | 2,000,000 | 1,902,736 | |||||
Coca Cola Co., 5.75% due 3/15/2011 | Aa3/A+ | 200,000 | 204,499 | |||||
FOOD PRODUCTS — 1.10% | ||||||||
Conagra, Inc., 7.875% due 9/15/2010 | Baa2/BBB+ | 100,000 | 107,668 | |||||
General Mills, 5.50% due 1/12/2009 | Baa1/BBB+ | 300,000 | 301,636 | |||||
Kraft Foods, Inc., 6.00% due 2/11/2013 | Baa2/A- | 2,000,000 | 2,058,880 | |||||
Sara Lee Corp., 6.00% due 1/15/2008 | Baa1/BBB+ | 900,000 | 900,928 | |||||
5,476,347 | ||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.65% | ||||||||
HOUSEHOLD PRODUCTS — 0.65% | ||||||||
Procter & Gamble Co., 4.30% due 8/15/2008 | Aa3/AA- | 2,000,000 | 1,984,926 | |||||
1,984,926 | ||||||||
INSURANCE — 8.40% | ||||||||
INSURANCE — 8.40% | ||||||||
Berkshire Hathaway Finance Corp. Senior Note, 4.625% due 10/15/2013 | Aaa/AAA | 1,000,000 | 962,253 | |||||
Hartford Financial Services Group, Inc. Senior Note, 4.625% due 7/15/2013 | A2/A | 1,000,000 | 953,410 | |||||
International Lease Finance Corp., 4.55% due 10/15/2009 | A1/AA- | 2,500,000 | 2,482,690 | |||||
International Lease Finance Corp., 5.00% due 9/15/2012 | A1/AA- | 2,000,000 | 1,951,550 | |||||
International Lease Finance Corp. Floating Rate Note, 5.76% due 1/15/2010 | A1/AA- | 4,050,000 | 4,037,737 | |||||
Liberty Mutual Group, Inc., 5.75% due 3/15/2014 | Baa2/BBB | 1,000,000 | 978,088 | |||||
Lincoln National Corp., 4.75% due 2/15/2014 | A3/A+ | 1,000,000 | 958,114 | |||||
Pacific Life Global Funding CPI Floating Rate Note, 4.867% due 2/6/2016 | Aa3/AA | 8,000,000 | 7,339,120 | |||||
Principal Financial Group Australia, 8.20% due 8/15/2009 | A2/A | 700,000 | 738,811 | |||||
Principal Life Global Funding, 4.40% due 10/1/2010 | Aa2/AA | 4,000,000 | 3,936,028 | |||||
UnumProvident Corp., 7.625% due 3/1/2011 | Ba1/BB+ | 1,257,000 | 1,338,280 | |||||
25,676,081 | ||||||||
MATERIALS — 1.38% | ||||||||
CHEMICALS — 0.74% | ||||||||
Dow Chemical Co., 5.75% due 12/15/2008 | A3/A- | 350,000 | 352,468 | |||||
E.I. du Pont de Nemours & Co., 4.75% due 11/15/2012 | A2/A | 1,000,000 | 977,470 | |||||
E.I. du Pont de Nemours & Co., 4.125% due 3/6/2013 | A2/A | 325,000 | 306,136 |
34 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Lubrizol Corp. Senior Note, 5.875% due 12/1/2008 | Baa3/BBB- | $ | 635,000 | $ | 636,949 | |||
METALS & MINING — 0.64% | ||||||||
BHP Billiton Finance, 5.40% due 3/29/2017 | A1/A+ | 2,000,000 | 1,950,046 | |||||
4,223,069 | ||||||||
MEDIA — 1.62% | ||||||||
MEDIA — 1.62% | ||||||||
AOL Time Warner, Inc., 6.75% due 4/15/2011 | Baa2/BBB+ | 750,000 | 779,544 | |||||
Comcast Corp., 6.30% due 11/15/2017 | Baa2/BBB+ | 1,000,000 | 1,016,434 | |||||
E W Scripps Co. Ohio, 5.75% due 7/15/2012 | A2/A | 80,000 | 81,159 | |||||
Thomson Corp., 4.25% due 8/15/2009 | Baa1/A- | 2,900,000 | 2,848,409 | |||||
Time Warner, Inc., 8.05% due 1/15/2016 | Baa2/BBB+ | 200,000 | 223,811 | |||||
4,949,357 | ||||||||
MISCELLANEOUS — 1.45% | ||||||||
MISCELLANEOUS — 1.17% | ||||||||
Stanford University, 5.85% due 3/15/2009 | Aaa/NR | 3,500,000 | 3,573,370 | |||||
YANKEE — 0.28% | ||||||||
Nova Scotia Province Canada, 5.75% due 2/27/2012 | Aa2/A+ | 500,000 | 519,276 | |||||
Ontario Province Canada, 3.282% due 3/28/2008 | Aa1/AA | 335,000 | 332,829 | |||||
4,425,475 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.75% | ||||||||
PHARMACEUTICALS — 0.75% | ||||||||
Abbott Labs, 3.75% due 3/15/2011 | A1/AA | 500,000 | 481,932 | |||||
Tiers Inflation Linked Trust Series Wyeth 2004-21 Trust Certificate CPI Floating Rate Note, 4.537%due 2/1/2014 | Baa1/A+ | 2,000,000 | 1,794,900 | |||||
2,276,832 | ||||||||
RETAILING — 1.02% | ||||||||
DISTRIBUTORS — 0.03% | ||||||||
Dayton Hudson Corp., 9.625% due 2/1/2008 | A1/A+ | 100,000 | 101,280 | |||||
SPECIALTY RETAIL — 0.99% | ||||||||
Lowe’s Companies Inc., 6.10% due 9/15/2017 | A1/A+ | 3,000,000 | 3,031,089 | |||||
3,132,369 | ||||||||
SOFTWARE & SERVICES — 1.08% | ||||||||
IT SERVICES — 1.08% | ||||||||
Computer Sciences Corp., 6.25% due 3/15/2009 | Baa1/A- | 300,000 | 303,122 | |||||
Computer Sciences Corp., 3.50% due 4/15/2008 | Baa1/A- | 2,000,000 | 1,973,518 | |||||
Electronic Data Systems Corp., 6.50% due 8/1/2013 | Ba1/BBB- | 1,000,000 | 1,008,929 | |||||
3,285,569 | ||||||||
Certified Annual Report 35
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.50% | ||||||||
COMMUNICATIONS EQUIPMENT — 0.33% | ||||||||
Cisco Systems, Inc., 5.25% due 2/22/2011 | A1/A+ | $ | 1,000,000 | $ | 1,009,302 | |||
ELECTRONIC EQUIPMENT & INSTRUMENTS — 0.17% | ||||||||
Jabil Circuit, Inc., 5.875% due 7/15/2010 | Ba1/BBB- | 500,000 | 504,596 | |||||
1,513,898 | ||||||||
TELECOMMUNICATION SERVICES — 0.32% | ||||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.32% | ||||||||
Vodafone Group plc, 5.625% due 2/27/2017 | Baa1/A- | 1,000,000 | 971,961 | |||||
971,961 | ||||||||
TRANSPORTATION — 0.06% | ||||||||
AIRLINES — 0.06% | ||||||||
Continental Airlines Pass Through Certificate Series 1997-4 Class 4-A, 6.90% due 1/2/2018 | Baa2/BBB+ | 169,258 | 173,066 | |||||
173,066 | ||||||||
UTILITIES — 8.65% | ||||||||
ELECTRIC UTILITIES — 6.40% | ||||||||
AEP Texas Central Transition Bond A1, 4.98% due 1/1/2010 | Aaa/AAA | 2,206,251 | 2,209,362 | |||||
Appalachian Power Co., 6.60% due 5/1/2009 (Insured: MBIA) | Aaa/AAA | 175,000 | 179,029 | |||||
Central Power & Light Co., 7.125% due 2/1/2008 | Baa1/BBB | 2,000,000 | 2,011,274 | |||||
Commonwealth Edison Co., 4.74% due 8/15/2010 | Baa2/BBB | 975,000 | 959,631 | |||||
Entergy Gulf States, Inc., 5.12% due 8/1/2010 | Baa3/BBB+ | 1,800,000 | 1,785,121 | |||||
Great River Energy 1st Mtg Series 2007-A, 5.829% due 7/1/2017 (Insured: MBIA) | Aaa/NR | 5,000,000 | 5,111,300 | |||||
Gulf Power Co., 4.35% due 7/15/2013 | A2/A | 925,000 | 867,215 | |||||
Madison Gas & Electric Co., 6.02% due 9/15/2008 | Aa3/AA- | 950,000 | 958,100 | |||||
MP Environmental, 4.982% due 7/1/2014 | Aaa/AAA | 5,000,000 | 4,975,000 | |||||
PSI Energy, Inc., 7.85% due 10/15/2007 | Baa1/A- | 500,000 | 500,373 | |||||
GAS UTILITIES — 0.21% | ||||||||
Questar Pipeline Co., 6.05% due 12/1/2008 | A2/A- | 425,000 | 429,147 | |||||
Southern California Gas Co., 4.375% due 1/15/2011 | A1/A+ | 225,000 | 219,005 | |||||
MULTI-UTILITIES — 2.04% | ||||||||
Northern States Power Co., 4.75% due 8/1/2010 | A2/A- | 2,825,000 | 2,799,954 | |||||
Union Electric Co., 4.65% due 10/1/2013 | A3/BBB- | 2,000,000 | 1,886,954 | |||||
Wisconsin Energy Corp., 5.50% due 12/1/2008 | A3/BBB+ | 350,000 | 351,102 | |||||
Wisconsin Public Service Corp., 6.125% due 8/1/2011 | Aa3/A | 1,150,000 | 1,183,702 | |||||
26,426,269 | ||||||||
TOTAL CORPORATE BONDS (COST $ 174,340,671) | 173,124,816 | |||||||
TAXABLE MUNICIPAL BONDS — 17.34% | ||||||||
American Campus Properties Student Housing, 7.38% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 2,975,000 | 3,179,353 | |||||
American Fork City Utah Sales, 4.89% due 3/1/2012 (Insured: FSA) | Aaa/AAA | 300,000 | 297,720 | |||||
American Fork City Utah Sales, 5.07% due 3/1/2013 (Insured: FSA) | Aaa/AAA | 120,000 | 119,293 |
36 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Arkansas Electric Coop Corp., 7.33% due 6/30/2008 | A2/AA- | $ | 37,000 | $ | 37,287 | |||
Bessemer Alabama Water Revenue Taxable Warrants Series B, 7.375% due 7/1/2008 | ||||||||
(Insured: FSA) | Aaa/AAA | 170,000 | 172,054 | |||||
Brockton MA Taxable Economic Development Series A, 6.45% due 5/1/2017 (Insured: FGIC) | Aaa/AAA | 150,000 | 158,661 | |||||
Burbank California Waste Disposal Revenue, 5.48% due 5/1/2008 (Insured: FSA) | Aaa/AAA | 310,000 | 311,091 | |||||
Cleveland Cuyahoga County Ohio, 6.10% due 5/15/2013 | NR/BBB+ | 1,545,000 | 1,518,148 | |||||
Cook County Illinois School District 083, 4.625% due 12/1/2010 (Insured: FSA) | Aaa/NR | 250,000 | 249,263 | |||||
Cook County Illinois School District 083, 4.875% due 12/1/2011 (Insured: FSA) | Aaa/NR | 150,000 | 149,582 | |||||
Denver City & County Special Facilities Taxable Refunding & Improvement Series B, 7.15% due | ||||||||
1/1/2008 (Insured: MBIA) | Aaa/AAA | 900,000 | 905,580 | |||||
Elkhart Indiana Redevelopment District Revenue, 4.80% due 6/15/2011 (ETM) | NR/NR | 240,000 | 237,710 | |||||
Elkhart Indiana Redevelopment District Revenue, 4.80% due 12/15/2011 (ETM) | NR/NR | 245,000 | 241,734 | |||||
Elkhart Indiana Redevelopment District Revenue, 5.05% due 12/15/2012 (ETM) | NR/NR | 515,000 | 511,560 | |||||
Elkhart Indiana Redevelopment District Revenue, 5.25% due 12/15/2013 pre-refunded 6/15/2013 | NR/NR | 540,000 | 538,245 | |||||
Grant County Washington Water Public Utility District 2 Series Z, 5.14% due 1/1/2014 | ||||||||
(Insured: FGIC) | Aaa/AAA | 1,015,000 | 1,006,362 | |||||
Green Bay Wisconsin Series B, 4.875% due 4/1/2011 (Insured: MBIA) | Aaa/NR | 365,000 | 363,489 | |||||
Hancock County Mississippi, 4.20% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 305,000 | 303,627 | |||||
Hancock County Mississippi, 4.80% due 8/1/2010 (Insured: MBIA) | Aaa/NR | 245,000 | 244,657 | |||||
Hancock County Mississippi, 4.90% due 8/1/2011 (Insured: MBIA) | Aaa/NR | 315,000 | 313,869 | |||||
Hanover Pennsylvania Area School District Taxable Notes Series B, 4.47% due 3/15/2013 | ||||||||
(Insured: FSA) | Aaa/AAA | 1,385,000 | 1,343,949 | |||||
Jefferson County Texas Navigation Taxable Refunding, 5.50% due 5/1/2010 (Insured: FSA) | Aaa/NR | 500,000 | 502,190 | |||||
Jersey City New Jersey Municipal Utilities Authority, 3.72% due 5/15/2009 (Insured: MBIA) | Aaa/AAA | 575,000 | 564,995 | |||||
Kendall Kane County Illinois School 308, 5.50% due 10/1/2011 (Insured: FGIC) | Aaa/NR | 365,000 | 371,223 | |||||
Los Angeles County California Metropolitan Transport, 4.56% due 7/1/2010 (Insured: AMBAC) | Aaa/AAA | 2,775,000 | 2,758,156 | |||||
Los Angeles County California Pension Series C, 0% due 6/30/2008 (Insured: MBIA) | Aaa/AAA | 300,000 | 288,981 | |||||
Maryland State Economic Development Corp., 7.25% due 6/1/2008 (Maryland Tech | ||||||||
Development Center) | NR/NR | 100,000 | 101,155 | |||||
Menasha Wisconsin, 5.60% due 9/1/2010 (Steam Utility) | NR/NR | 2,805,000 | 2,814,649 | |||||
Mississippi Development Bank Special Obligation Refinance Taxable Harrison County B, | ||||||||
5.21% due 7/1/2013 (Insured: FSA) | NR/AAA | 1,200,000 | 1,199,484 | |||||
Missouri State Development Finance Board Series A, 5.45% due 3/1/2011 (Crackerneck Creek) | NR/A+ | 1,090,000 | 1,098,644 | |||||
Montgomery County Maryland Revenue Authority, 5.00% due 2/15/2012 | Aa2/AA | 100,000 | 99,482 | |||||
Multnomah County Oregon School District 1J Refunding Taxable, 4.191% due 6/15/2008 | A1/A- | 650,000 | 646,295 | |||||
New Jersey Health Care Facilities Financing, 10.75% due 7/1/2010 (ETM) | NR/NR | 295,000 | 325,385 | |||||
New Jersey Health Care Facilities Financing, 7.70% due 7/1/2011 (Insured: Connie Lee) | NR/AAA | 90,000 | 94,528 | |||||
New Mexico Mortgage Finance Authority Single Family Mortgage I D 2, 5.77% due 1/1/2016 | ||||||||
(GNMA/FNMA/FHLMC) | NR/AAA | 910,000 | 921,830 | |||||
New Rochelle New York Industrial Development Agency, 7.15% due 10/1/2014 | ||||||||
(LOC: Bank of New York) | Aaa/A+ | 360,000 | 380,826 | |||||
New York Environmental Facilities, 5.85% due 3/15/2011 | NR/AA- | 3,500,000 | 3,604,895 | |||||
New York State Housing Finance, 4.46% due 8/15/2009 | Aa1/NR | 235,000 | 233,101 | |||||
New York State Urban Development Corp., 4.75% due 12/15/2011 | NR/AAA | 1,400,000 | 1,386,532 | |||||
Newark New Jersey, 4.70% due 4/1/2011 (Insured: MBIA) | Aaa/NR | 845,000 | 836,795 | |||||
Newark New Jersey, 4.90% due 4/1/2012 (Insured: MBIA) | Aaa/NR | 1,225,000 | 1,213,534 | |||||
Niagara Falls New York Public Water, 4.30% due 7/15/2010 (Insured: MBIA) | Aaa/AAA | 360,000 | 355,799 | |||||
Northwest Open Access Network Washington Revenue, 6.18% due 12/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,600,000 | 1,626,352 | |||||
Ohio Housing Financing Agency Mortgage Revenue, 5.20% due 9/1/2014 (GNMA/FNMA) | Aaa/NR | 2,395,000 | 2,361,135 | |||||
Ohio State Petroleum Underground Storage, 6.75% due 8/15/2008 (Insured: MBIA) | Aaa/AAA | 235,000 | 235,409 | |||||
Ohio State Taxable Development Assistance Series A, 4.88% due 10/1/2011 (Insured: MBIA) | Aaa/AAA | 550,000 | 547,134 | |||||
Port Walla Walla Revenue, 5.30% due 12/1/2009 | NR/NR | 235,000 | 233,508 | |||||
Providence Rhode Island, 5.59% due 1/15/2008 (Insured: FGIC) | Aaa/AAA | 340,000 | 340,996 |
Certified Annual Report 37
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Redlands California Redevelopment Agency Series A, 5.818% due 8/1/2022 (Tax Allocation) | ||||||||
(Insured: AMBAC) | NR/AAA | $ | 3,000,000 | $ | 3,002,100 | |||
Santa Fe County New Mexico Charter School Taxable Series B, 7.55% due 1/15/2010 (ATC | ||||||||
Foundation) | NR/NR | 190,000 | 188,634 | |||||
Short Pump Town Center Community Development, 6.26% due 2/1/2009 | NR/NR | 1,000,000 | 1,009,480 | |||||
Sisters Providence Obligation Group Direct Obligation Notes Series 1997, 7.47% due | ||||||||
10/1/2007 | Aa2/AA | 1,590,000 | 1,590,000 | |||||
Springfield City School District Tax Anticipation Notes, 6.35% due 12/1/2010 (Insured: AMBAC) | Aaa/NR | 1,400,000 | 1,437,212 | |||||
Springfield City School District Tax Anticipation Notes, 6.40% due 12/1/2011 (Insured: AMBAC) | Aaa/NR | 1,500,000 | 1,541,280 | |||||
Tazewell County Illinois Community High School, 5.20% due 12/1/2011 (Insured: FSA) | Aaa/NR | 355,000 | 356,981 | |||||
Tennessee State Taxable Series B, 6.00% due 2/1/2013 | Aa1/AA+ | 500,000 | 514,585 | |||||
Texas Tech University Revenue, 6.00% due 8/15/2011 (Insured: MBIA) | Aaa/AAA | 245,000 | 253,467 | |||||
University of Illinois Revenue, 6.35% due 4/1/2011 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,044,420 | |||||
Victor New York, 9.20% due 5/1/2014 | NR/NR | 1,250,000 | 1,282,375 | |||||
Virginia Housing Development Authority Taxable Rental Housing Series I, 7.30% due 2/1/2008 | Aa1/AA+ | 505,000 | 508,717 | |||||
Wisconsin State General Revenue, 4.80% due 5/1/2013 (Insured: FSA) | Aaa/AAA | 200,000 | 195,584 | |||||
Wisconsin State Health & Educational Facilities Taxable Series B, 7.08% due 6/1/2016 | ||||||||
(Insured: ACA) | NR/A | 2,610,000 | 2,691,928 | |||||
TOTAL TAXABLE MUNICIPAL BONDS (COST $ 52,928,120) | 52,963,010 | |||||||
SHORT TERM INVESTMENTS — 0.78% | ||||||||
Toyota Credit de Puerto Rico, 4.70% due 10/1/2007 | A1/P1 | 2,400,000 | 2,400,000 | |||||
TOTAL SHORT TERM INVESTMENTS (COST $ 2,400,000) | 2,400,000 | |||||||
TOTAL INVESTMENTS — 99.96% (COST $ 306,329,942) | $ | 305,395,690 | ||||||
OTHER ASSETS LESS LIABILITIES — 0.04% | 115,358 | |||||||
NET ASSETS — 100.00% | $ | 305,511,048 | ||||||
38 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Limited Term Income Fund | September 30, 2007 |
Footnote Legend
† | 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:
ACA | Insured by American Capital Access | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
CMO | Collateralized Mortgage Obligation | |
Cupids | Cumulative Undivided Preferred Interests In Debt Securities | |
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 | |
Mtg | Mortgage |
See notes to financial statements.
Certified Annual Report 39
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Limited Term Income Funds | September 30, 2007 |
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
40 Certified Annual Report
Thornburg Limited Term Income Funds | September 30, 2007 (Unaudited) |
As a shareholder of the Funds, 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 B shares within eight years of purchase;
(d) 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 Funds 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, 2007 and held until September 30, 2007.
Actual expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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 for each class of shares 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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
U.S. Government Fund | |||||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,028.20 | $ | 4.85 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.28 | $ | 4.83 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,021.40 | $ | 11.59 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.60 | $ | 11.55 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,026.70 | $ | 6.28 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.88 | $ | 6.25 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,029.70 | $ | 3.37 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.75 | $ | 3.36 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,028.00 | $ | 5.03 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 | |||
Income Fund | |||||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,022.50 | $ | 5.02 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,021.30 | $ | 6.28 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.85 | $ | 6.28 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,023.40 | $ | 3.39 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.71 | $ | 3.39 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,021.70 | $ | 5.02 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 |
† | Thornburg Limited Term U.S. Government Fund expenses are equal to the annualized expense ratio for each class (A: 0.95%; B: 2.29%; C: 1.24%; I: 0.66%; and R3: 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: 0.67%; and R3: 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 41
Thornburg Limited Term U.S. Government Fund | September 30, 2007 (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 16, 1987 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 11/16/87) | 3.49 | % | 2.26 | % | 4.62 | % | 5.92 | % | ||||||
B Shares (Incep: 11/1/02) | (1.45 | )% | N/A | N/A | 1.11 | % | ||||||||
C Shares (Incep: 9/1/94) | 4.16 | % | 2.26 | % | 4.42 | % | 4.86 | % | ||||||
R3 Shares (Incep: 7/1/03) | 4.93 | % | N/A | N/A | 2.33 | % | ||||||||
FUND ATTRIBUTES as of September 30, 2007
|
| |||||||||||||
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum offering Price | |||||||||||
A Shares (Incep: 11/16/87) | 3.63 | % | 3.63 | % | $ | 12.97 | $ | 13.17 | ||||||
B Shares (Incep: 11/1/02) | 2.47 | % | 2.52 | % | $ | 12.94 | $ | 12.94 | ||||||
C Shares (Incep: 9/1/94) | 3.35 | % | 3.37 | % | $ | 13.04 | $ | 13.04 | ||||||
R3 Shares (Incep: 7/1/03) | 3.57 | % | 3.61 | % | $ | 12.97 | $ | 12.97 |
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 R3 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, 2007 (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, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 10/1/92) | 2.85 | % | 2.96 | % | 4.76 | % | 5.38 | % | ||||||
C Shares (Incep: 9/1/94) | 3.67 | % | 2.99 | % | 4.57 | % | 5.19 | % | ||||||
R3 Shares (Incep: 7/1/03) | 4.34 | % | N/A | N/A | 2.67 | % | ||||||||
FUND ATTRIBUTES as of September 30, 2007
|
| |||||||||||||
Annualized Dist. Rate (@NAV) | SEC Yield | NAV | Maximum offering Price | |||||||||||
A Shares (Incep: 10/1/92) | 4.13 | % | 3.85 | % | $ | 12.40 | $ | 12.59 | ||||||
C Shares (Incep: 9/1/94) | 3.88 | % | 3.67 | % | $ | 12.38 | $ | 12.38 | ||||||
R3 Shares (Incep: 7/1/03) | 4.13 | % | 3.91 | % | $ | 12.40 | $ | 12.40 |
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 R3 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
Thornburg Limited Term Income Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 45
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Limited Term Income Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held With Fund | Principal Occupation(s) During Past Five Years | Other Directorships Held By Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thorn-burg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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
Thornburg Limited Term Income Funds | September 30, 2007 (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.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the Fund’s investment performance.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to different categories of mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the parameters for selecting the investments for other funds and the largely theoretical character of securities indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the good performance of the Fund over most measuring periods relative to the two mutual fund categories reviewed, and that while the Fund’s relative performance had fluctuated in recent years due to interest rate changes, the Fund demonstrated good relative long term performance.
Certified Annual Report 47
OTHER INFORMATION, CONTINUED
Thornburg Limited Term Income Funds | September 30, 2007 (Unaudited) |
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor had received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 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. The Trustees observed that the management fee charged by the Advisor to the Fund was lower to some degree than the average and median fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio was comparable to the average and median expense ratios for the same fund group. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment advisor reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided
48 Certified Annual Report
OTHER INFORMATION, CONTINUED
Thornburg Limited Term Income Funds | September 30, 2007 (Unaudited) |
to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time, relative to two 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 (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s above average investment performance in most measurement periods relative to the performance of two categories of fixed income mutual funds selected by independent mutual fund analyst firms, and the Fund’s relative performance against comparative measures of portfolio volatility and return. The Trustees recognized that the performance of the Fund relative to the categories in the most recent year was slightly below the categories’ respective averages, but this appeared attributable to the defensive posture maintained by the Fund in accordance with its objective of safety of capital.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees considered the fee 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 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. The Trustees observed that the overall expense ratio of the Fund was higher to a small extent than the median (but equal to the average) expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, that the management fee was somewhat higher than the average and median fee rates for the same group of funds, but that the differences were not significant in view of the degree of the differences and the Fund’s investment performance. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 49
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
50 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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. 51
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 normally less than five years.
Thornburg Limited Term Income Fund – This Fund is a laddered portfolio of short/intermediate investment grade obligations with an average maturity of normally less than five years.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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
Reduce paper clutter. | ||
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
Thornburg Limited Term Income Funds
I Shares – September 30, 2007
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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 3
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.
Investments 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. Please see the Funds’ Prospectus for a discussion of the risks associated with an investment in the Funds. Investments 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 Funds will meet their investment objectives. The laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The information presented on the following pages was current as of September 30, 2007. 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.
4 Certified Annual Report
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).
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Fed Funds Rate ��� The Fed Funds Rate is the interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Average Maturity – The average maturity is the stated or dollar-weighted average, which describes the relationship between the price of a portfolio’s various stocks and their average earnings per share.
S&P 500 Index – The S&P 500 Index is an unmanaged broad measure of the U.S. stock market.
Dow Jones Industrial Average – The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 actively traded “blue chip” stocks, primarily industrials, but includes financials and other service-oriented companies. The components, which change from time to time, represent between 15% and 20% of the market value of NYSE stocks.
Certified Annual Report 5
Jason Brady,CFA Portfolio Manager | October 16, 2007
Dear Thornburg 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 year ended September 30, 2007. The net asset value of a Class I share of the Thornburg Limited Term U.S. Government Fund increased 22 cents per share in the period to $12.97. If you were invested for the entire period, you received dividends of 44.9 cents per share. If you reinvested your dividends, you received 45.7 cents per share. The net asset value of a Class I share of the Thornburg Limited Term Income Fund increased 3 cents per share in the period to $12.40. If you were invested for the entire period, you received dividends of 54.6 cents per share. If you reinvested your dividends, you received 55.7 cents per share. Please examine the accompanying exhibits for more detailed information and history. |
The yield on U.S. Treasuries was volatile over the course of the past year, with a major change in the shape of the yield curve being a significant driver of U.S. dollar denominated bond returns. The two-year U.S. Treasury moved from a 4.69% yield to a 3.99% yield over the course of the past year, while the ten-year U.S. Treasury moved from a 4.63% yield to a 4.59% yield. As you can see, relatively, front end securities moved much lower in yield than longer term securities. This “dis-inversion” of the yield curve was primarily the result of a slowing in the U.S. economy and the corresponding actions of the Federal Reserve to lower the Fed Funds rate. The Federal Reserve Open Market Committee (FOMC) had kept the Fed Funds rate unchanged at 5.25% from June 2006 through September 18, 2007, when they lowered the rate to 4.75%. That change in policy was largely due to a significant dislocation of global credit markets. Credit spreads (the additional yield the market requires for investing in risky securities versus credit risk-less U.S. Treasuries) widened significantly, particularly in the period between June and September of 2007. Though the intervening time period has seen some recovery from the widest levels of credit spreads (and also from the lowest yields on most tenures of U.S. Treasury securities), we at Thornburg believe that we have entered a period of increased volatility.
Putting income and change in price together, the Class I shares of the Thornburg Limited Term U.S. Government Fund produced a total return of 5.35% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Lehman Brothers Intermediate Government Bond Index produced a 5.87% total return over the same time period. The Class I shares of the Thornburg Limited Term Income Fund produced a total return of 4.76% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Lehman Brothers Intermediate Government/Credit Bond Index produced a 5.44% total return over the same time period. The Funds kept their durations somewhat shorter than the indices during the past year, and as a result took advantage of the aforementioned yield curve steepening. At the same time, Thornburg’s laddered portfolio strategy and prudent credit selection (within the Income Fund) clearly benefited the Fund. However, the Thornburg Limited Term Income Fund, while maintaining a very high (AA) average credit rating, holds a smaller proportion of U.S. Treasury securities than the index. In a time of widening credit spreads, U.S. Treasuries outperformed lower rated securities. While the fact that only a very small (9%) proportion of the Fund is held in BBB securities did help overall returns, the general deterioration in credit spreads of all qualities hurt the Fund relative to its index. I remain quite comfortable with our holdings and believe that over time each investment has the potential to yield satisfactory results and in aggregate position the Funds well to meet their investment objectives. Both Lehman indices reflect no deduction for fees, expenses, or taxes.
The recent volatility in the marketplace underscores the importance of high quality bonds in your bond portfolio allocation. Both Thornburg Funds performed well during the volatile period between June and August of 2007. These periods of volatility have been relatively short over the course of the past several years, and credit spreads have remained fairly well behaved. Similarly, stock markets have generally advanced at a steady rate. The S&P 500
6 Certified Annual Report
Index and the Dow Jones Industrial Average have recently made record highs despite concerns around the strength of the U.S. economy. However, the past several months have shown that volatility is alive and well. Furthermore, the challenges to continued smooth economic and asset growth are significant. In particular, the U.S. housing market, an increasing willingness of companies to lever their balance sheets, and a potentially decreasing ability of those same companies to grow their earnings all are forces which act to increase uncertainty. Add that to a marketplace which had grown somewhat complacent given the steady diet of higher equity valuations and tight credit spreads, and you have a recipe for destabilizing market movements. This sort of destabilization began in the summer of this year as the housing picture continued to worsen and consumers began to tighten their spending habits. Though I do not believe that a recession is immediately in the cards, the increased volatility that the markets have experienced over the course of the past few months is indicative of a trend which could continue.
In this environment, high quality bond funds may represent a safe haven. Thornburg Investment Management will continue to strive to give you, the bond investor, a consistent income stream and a set of funds which are not highly correlated to equity markets’ returns. Though the period of 2003 through early 2007 has been less than exciting for bond investors generally (certainly relative to their equity brethren), it is important to remember that the principal focus of a bond investment is exactly that: principal. If the economic landscape continues to darken, high quality bond investments will benefit. While a few extra basis points in yield may be attractive, the overall goal is to continue to give you your money back with a reasonable rate of return and a limited amount of risk.
No matter the direction of interest rates or credit spreads in the near term, I believe your Funds are well positioned to achieve their longer term goals of principal stability and reasonable income. The Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund are laddered portfolios of short-to-intermediate bonds. This balances duration and yield in a way which is designed to provide the best risk-adjusted bond returns over time. Intermediate bonds can provide stability to the underlying principal, they can provide income for your portfolio, and over time they have provided an attractive return versus money market instruments. Keep in mind, that as the yield curve steepens, with two year rates significantly below ten year rates, the laddered portfolio strategy of an average intermediate duration should again (as is normally the case) potentially be able to provide you significantly better returns than a cash or money market investment.
Thank you very much for investing in our Funds. I feel that the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund are appropriate investments for investors who are looking for short-to-intermediate bond portfolios. While future performance cannot be guaranteed, Thornburg Investment Management will continue to strive to chart a steady course in what has become once again a volatile marketplace.
Sincerely, |
|
Jason H. Brady, CFA |
Portfolio Manager |
Certified Annual Report 7
Thornburg Limited Term Income Funds | September 30, 2007 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||||
ASSETS | ||||||||
Investments at value (cost $139,054,145 and $306,329,942, respectively) (Note 2) | $ | 138,674,621 | $ | 305,395,690 | ||||
Cash | 368,118 | 365,873 | ||||||
Receivable for investments sold | 1,653 | 2,190,290 | ||||||
Receivable for fund shares sold | 354,447 | 352,990 | ||||||
Interest receivable | 1,350,673 | 3,246,992 | ||||||
Prepaid expenses and other assets | 26,771 | 30,073 | ||||||
Total Assets | 140,776,283 | 311,581,908 | ||||||
LIABILITIES | ||||||||
Payable for securities purchased | — | 5,198,808 | ||||||
Payable for fund shares redeemed | 471,739 | 411,599 | ||||||
Payable to investment advisor and other affiliates (Note 3) | 89,851 | 171,307 | ||||||
Accounts payable and accrued expenses | 57,353 | 105,038 | ||||||
Dividends payable | 83,331 | 184,108 | ||||||
Total Liabilities | 702,274 | 6,070,860 | ||||||
NET ASSETS | $ | 140,074,009 | $ | 305,511,048 | ||||
NET ASSETS CONSIST OF: | ||||||||
Undistributed net investment income | $ | 30,440 | $ | 29,903 | ||||
Net unrealized depreciation on investments | (379,524 | ) | (934,253 | ) | ||||
Accumulated net realized gain (loss) | (1,948,084 | ) | (6,351,006 | ) | ||||
Net capital paid in on shares of beneficial interest | 142,371,177 | 312,766,404 | ||||||
$ | 140,074,009 | $ | 305,511,048 | |||||
NET ASSET VALUE: | ||||||||
Class A Shares: | ||||||||
Net asset value and redemption price per share ($91,560,741 and $155,021,339 applicable to 7,061,870 and 12,504,285 shares of beneficial interest outstanding - Note 4) | $ | 12.97 | $ | 12.40 | ||||
Maximum sales charge, 1.50% of offering price | 0.20 | 0.19 | ||||||
Maximum offering price per share | $ | 13.17 | $ | 12.59 | ||||
Class B Shares: | ||||||||
Net asset value and offering price per share * ($2,585,646 applicable to 199,855 shares of beneficial interest outstanding - Note 4) | $ | 12.94 | $ | — | ||||
8 Certified Annual Report
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2007 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||
Class C Shares: | ||||||
Net asset value and offering price per share * ($25,566,120 and $40,768,719 applicable to 1,959,876 and 3,293,723 shares of beneficial interest outstanding - Note 4) | $ | 13.04 | $ | 12.38 | ||
Class I Shares: | ||||||
Net asset value, offering and redemption price per share ($15,963,449 and $103,529,813 applicable to 1,231,240 and 8,350,059 shares of beneficial interest outstanding - Note 4) | $ | 12.97 | $ | 12.40 | ||
Class R3 Shares: | ||||||
Net asset value, offering and redemption price per share ($4,398,053 and $6,191,177 applicable to 338,997 and 499,100 shares of beneficial interest outstanding - Note 4) | $ | 12.97 | $ | 12.40 | ||
* | 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
Thornburg Limited Term Income Funds | Year Ended September 30, 2007 |
Limited Term U.S. Government Fund | Limited Term Income Fund | |||||||
INVESTMENT INCOME: | ||||||||
Interest income (net of premium amortized of $1,020,037 and $698,748, respectively) | $ | 5,935,053 | $ | 16,325,226 | ||||
EXPENSES: | ||||||||
Investment advisory fees (Note 3) | 542,146 | 1,612,500 | ||||||
Administration fees (Note 3) | ||||||||
Class A Shares | 121,634 | 216,618 | ||||||
Class B Shares | 3,044 | — | ||||||
Class C Shares | 31,001 | 51,590 | ||||||
Class I Shares | 7,923 | 51,517 | ||||||
Class R3 Shares | 5,229 | 6,124 | ||||||
Distribution and service fees (Note 3) | ||||||||
Class A Shares | 243,267 | 433,236 | ||||||
Class B Shares | 24,343 | — | ||||||
Class C Shares | 248,058 | 412,578 | ||||||
Class R3 Shares | 20,943 | 24,554 | ||||||
Transfer agent fees | ||||||||
Class A Shares | 121,208 | 205,898 | ||||||
Class B Shares | 8,670 | — | ||||||
Class C Shares | 34,216 | 58,188 | ||||||
Class I Shares | 18,753 | 75,128 | ||||||
Class R3 Shares | 4,333 | 5,507 | ||||||
Registration and filing fees | ||||||||
Class A Shares | 17,486 | 24,779 | ||||||
Class B Shares | 16,616 | — | ||||||
Class C Shares | 16,387 | 18,574 | ||||||
Class I Shares | 16,975 | 20,338 | ||||||
Class R3 Shares | 18,678 | 19,152 | ||||||
Custodian fees (Note 3) | 72,243 | 105,580 | ||||||
Professional fees | 31,002 | 41,940 | ||||||
Accounting fees | 5,017 | 14,339 | ||||||
Trustee fees | 1,888 | 5,637 | ||||||
Other expenses | 25,508 | 76,542 | ||||||
Total Expenses | 1,656,568 | 3,480,319 | ||||||
Less: | ||||||||
Expenses reimbursed by investment advisor (Note 3) | (60,136 | ) | (292,680 | ) | ||||
Distribution fees waived (Note 3) | (124,029 | ) | (206,289 | ) | ||||
Fees paid indirectly (Note 3) | (14,192 | ) | (16,160 | ) | ||||
Net Expenses | 1,458,211 | 2,965,190 | ||||||
Net Investment Income | $ | 4,476,842 | $ | 13,360,036 | ||||
10 Certified Annual Report
STATEMENTS OF OPERATIONS, CONTINUED | ||
Thornburg Limited Term Income Funds | Year Ended September 30, 2007 |
Limited term U.S. Government Fund | Limited Term Income Fund | |||||||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||
Net realized gain (loss) on investments | $ | (1,130,360 | ) | $ | (2,488,007 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 3,591,635 | 3,252,405 | ||||||
Net Realized and Unrealized Gain on Investments | 2,461,275 | 764,398 | ||||||
Net Increase in Net Assets Resulting From Operations | $ | 6,938,117 | $ | 14,124,434 | ||||
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, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,476,842 | $ | 4,837,241 | ||||
Net realized loss on investments sold | (1,130,360 | ) | (50,733 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 3,591,635 | (360,311 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 6,938,117 | 4,426,197 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (3,111,314 | ) | (3,504,156 | ) | ||||
Class B Shares | (43,700 | ) | (27,495 | ) | ||||
Class C Shares | (730,241 | ) | (737,598 | ) | ||||
Class I Shares | (557,507 | ) | (465,896 | ) | ||||
Class R3 Shares | (134,180 | ) | (102,096 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (16,914,982 | ) | (31,185,601 | ) | ||||
Class B Shares | 69,320 | 594,525 | ||||||
Class C Shares | 19,577 | (7,610,351 | ) | |||||
Class I Shares | 797,088 | (1,162,905 | ) | |||||
Class R3 Shares | 730,067 | 586,260 | ||||||
Net Decrease in Net Assets | (12,937,755 | ) | (39,189,116 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 153,011,764 | 192,200,880 | ||||||
End of year | $ | 140,074,009 | $ | 153,011,764 | ||||
Undistributed net investment income | $ | 30,440 | $ | 110,307 |
See notes to financial statements.
12 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Limited Term Income Fund
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 13,360,036 | $ | 14,631,799 | ||||
Net realized loss on investments sold | (2,488,007 | ) | (113,993 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 3,252,405 | (4,147,964 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 14,124,434 | 10,369,842 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (7,108,149 | ) | (8,047,005 | ) | ||||
Class C Shares | (1,590,499 | ) | (1,957,921 | ) | ||||
Class I Shares | (4,559,897 | ) | (4,507,364 | ) | ||||
Class R3 Shares | (201,476 | ) | (119,509 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (35,890,344 | ) | (19,776,336 | ) | ||||
Class C Shares | (3,689,930 | ) | (14,283,087 | ) | ||||
Class I Shares | (8,312,790 | ) | 13,217,562 | |||||
Class R3 Shares | 2,841,946 | 1,198,886 | ||||||
Net Decrease in Net Assets | (44,386,705 | ) | (23,904,932 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 349,897,753 | 373,802,685 | ||||||
End of year | $ | 305,511,048 | $ | 349,897,753 | ||||
Undistributed net investment income | $ | 29,903 | $ | 111,720 |
See notes to financial statements.
Certified Annual Report 13
Thornburg Limited Term Income Funds | September 30, 2007 |
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 eleven 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The 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 preservation of capital. As a secondary objective, the Funds seek to reduce changes in their share prices 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 R3) 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 R3) 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 R3 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 distribution and service 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 Securities: Debt securities have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. Quotations for any foreign debt securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation. When quotations are not available, debt securities are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where a pricing service fails to provide a price for a debt security held by the Funds, the valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the security.
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 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
14 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2007 |
received payment. Dividends are paid monthly and are reinvested in additional shares of the Funds at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized over the life of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. The Funds invest in various mortgage-backed securities. Such securities pay interest and a portion of principal each month, which is then available for investment in securities at prevailing prices. 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.
Guarantees and Indemnifications: Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities 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, 2007, 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 entered into administrative services agreements 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 R3 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $4,276, $5,603, $12,488, $10,838, and $26,931 for the Class A, B, C, I, and R3 shares, respectively, of the Government Fund and $153,495, $58,451, $45,884, and $34,850 for the Class A, C, I, and R3 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, 2007, the Distributor has advised the Funds that they earned net commissions aggregating $1,454 from the sale of Class A shares of the Government Fund, $1,181 from the sale of Class A shares of the Income Fund, and collected contingent deferred sales charges aggregating $3,479 and $2,221 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 the average daily net assets attributable to the Class A, Class B, Class C, and Class R3 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.
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2007 |
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 R3 shares under which the Funds compensate the Distributor for services in promoting the sale of Class B, C, and R3 shares of the 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 the Distributor for each class of shares of the Funds under their respective Service and Distribution Plans for the year ended September 30, 2007, are set forth in the Statements of Operations. Distribution fees of $124,029 and $206,289, 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 Statements of Operations. For the year ended September 30, 2007, fees paid indirectly were $14,192 for the Government Fund and $16,160 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, 2007, 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, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 1,276,492 | $ | 16,340,009 | 1,127,442 | $ | 14,273,031 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 190,598 | 2,442,071 | 210,223 | 2,662,638 | ||||||||||
Shares repurchased | (2,790,433 | ) | (35,697,062 | ) | (3,799,025 | ) | (48,121,270 | ) | ||||||
Net Increase (Decrease) | (1,323,343 | ) | $ | (16,914,982 | ) | (2,461,360 | ) | $ | (31,185,601 | ) | ||||
Class B Shares | ||||||||||||||
Shares sold | 67,148 | $ | 859,574 | 85,374 | $ | 1,076,317 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,341 | 29,948 | 1,620 | 20,478 | ||||||||||
Shares repurchased | (64,214 | ) | (820,202 | ) | (39,667 | ) | (502,270 | ) | ||||||
Net Increase (Decrease) | 5,275 | $ | 69,320 | 47,327 | $ | 594,525 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 805,083 | $ | 10,391,015 | 435,047 | $ | 5,539,917 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 44,908 | 578,910 | 44,361 | 565,288 | ||||||||||
Shares repurchased | (849,163 | ) | (10,950,348 | ) | (1,076,447 | ) | (13,715,556 | ) | ||||||
Net Increase (Decrease) | 828 | $ | 19,577 | (597,039 | ) | $ | (7,610,351 | ) | ||||||
Class I Shares | ||||||||||||||
Shares sold | 449,065 | $ | 5,745,316 | 284,094 | $ | 3,589,619 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 36,249 | 464,437 | 31,981 | 405,096 | ||||||||||
Shares repurchased | (422,642 | ) | (5,412,665 | ) | (407,147 | ) | (5,157,620 | ) | ||||||
Net Increase (Decrease) | 62,672 | $ | 797,088 | (91,072 | ) | $ | (1,162,905 | ) | ||||||
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2007 |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 202,447 | $ | 2,596,860 | 146,432 | $ | 1,860,958 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 10,191 | 130,690 | 7,844 | 99,399 | ||||||||||
Shares repurchased | (155,073 | ) | (1,997,483 | ) | (108,414 | ) | (1,374,097 | ) | ||||||
Net Increase (Decrease) | 57,565 | $ | 730,067 | 45,862 | $ | 586,260 | ||||||||
INCOME FUND | ||||||||||||||
Class A Shares | ||||||||||||||
Shares sold | 2,831,583 | $ | 34,951,535 | 3,250,026 | $ | 40,085,247 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 452,077 | 5,583,769 | 494,039 | 6,098,155 | ||||||||||
Shares repurchased | (6,196,310 | ) | (76,425,648 | ) | (5,340,874 | ) | (65,959,738 | ) | ||||||
Net Increase (Decrease) | (2,912,650 | ) | $ | (35,890,344 | ) | (1,596,809 | ) | $ | (19,776,336 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 590,334 | $ | 7,262,571 | 563,413 | $ | 6,944,987 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 93,760 | 1,156,118 | 108,235 | 1,333,999 | ||||||||||
Shares repurchased | (982,996 | ) | (12,108,619 | ) | (1,830,119 | ) | (22,562,073 | ) | ||||||
Net Increase (Decrease) | (298,902 | ) | $ | (3,689,930 | ) | (1,158,471 | ) | $ | (14,283,087 | ) | ||||
Class I Shares | ||||||||||||||
Shares sold | 1,954,926 | $ | 24,120,287 | 2,696,403 | $ | 33,258,881 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 335,119 | 4,139,507 | 334,633 | 4,129,810 | ||||||||||
Shares repurchased | (2,957,329 | ) | (36,572,584 | ) | (1,956,476 | ) | (24,171,129 | ) | ||||||
Net Increase (Decrease) | (667,284 | ) | $ | (8,312,790 | ) | 1,074,560 | $ | 13,217,562 | ||||||
Class R3 Shares | ||||||||||||||
Shares sold | 320,679 | $ | 3,961,502 | 143,837 | $ | 1,782,628 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 13,801 | 170,430 | 7,699 | 95,044 | ||||||||||
Shares repurchased | (104,551 | ) | (1,289,986 | ) | (54,991 | ) | (678,786 | ) | ||||||
Net Increase (Decrease) | 229,929 | $ | 2,841,946 | 96,545 | $ | 1,198,886 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Government Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $59,760,115 and $63,773,956, respectively, while the Income Fund had purchase and sale transactions of investment securities (excluding short-term investments and U.S. Government obligations) of $128,599,724 and $142,796,119, respectively.
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2007 |
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Government Fund | Income Fund | |||||||
Cost of investments for tax purposes | $ | 139,054,145 | $ | 306,384,532 | ||||
Gross unrealized appreciation on a tax basis | $ | 855,608 | $ | 2,266,245 | ||||
Gross unrealized depreciation on a tax basis | (1,235,132 | ) | (3,255,088 | ) | ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (379,524 | ) | $ | (988,843 | ) | ||
Distributable earnings ordinary income | $ | 30,441 | $ | 29,903 | ||||
At September 30, 2007, 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 | ||
2015 | 108,190 | ||
$ | 800,444 | ||
At September 30, 2007, 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 | ||
2015 | 178,155 | ||
$ | 3,862,624 | ||
As of September 30, 2007, the Government Fund had deferred capital losses occurring subsequent to October 31, 2006 of $1,147,640. For tax purposes, such losses will be reflected in the year ending September 30, 2008. 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, 2007, the Income Fund had deferred capital losses occurring subsequent to October 31, 2006 of $2,433,792. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
In order to account for book/tax differences, the Government Fund increased undistributed net investment income by $20,233 and increased accumulated net realized (loss) by $20,233. The Income Fund increased undistributed net investment income by $18,168 and increased accumulated net realized loss by $18,168. This reclass has no impact on the net asset value of the Funds. Reclassifications result primarily from paydown losses.
For tax purposes, distributions for the year ended September 30, 2007 and September 30, 2006, were paid from ordinary income.
OTHER NOTES:
FASB Interpretation No. 48:
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 model for how a company, including the Funds, should recognize, measure, present and disclose in their 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for their fiscal year beginning after December 15, 2006, which for the Funds is March 31, 2008. As of the date of this report, management of the Funds have not identified any material effect on the Funds’ financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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, | ||||||||||||||||||||
Class I Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.22 | $ | 13.27 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.44 | 0.41 | 0.36 | 0.39 | 0.51 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.23 | (0.01 | ) | (0.24 | ) | (0.21 | ) | (0.05 | ) | |||||||||||
Total from investment operations | 0.67 | 0.40 | 0.12 | 0.18 | 0.46 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.45 | ) | (0.41 | ) | (0.37 | ) | (0.39 | ) | (0.51 | ) | ||||||||||
Change in net asset value | 0.22 | (0.01 | ) | (0.25 | ) | (0.21 | ) | (0.05 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 12.97 | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.22 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 5.35 | % | 3.19 | % | 0.95 | % | 1.37 | % | 3.51 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.45 | % | 3.22 | % | 2.82 | % | 2.95 | % | 3.77 | % | ||||||||||
Expenses, after expense reductions | 0.68 | % | 0.68 | % | 0.68 | % | 0.67 | % | 0.64 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.67 | % | 0.65 | % | 0.67 | % | 0.67 | % | 0.62 | % | ||||||||||
Expenses, before expense reductions | 0.74 | % | 0.78 | % | 0.80 | % | 0.77 | % | 0.82 | % | ||||||||||
Portfolio turnover rate | 43.35 | % | 7.47 | % | 18.00 | % | 12.39 | % | 35.06 | % | ||||||||||
Net assets at end of year (000) | $ | 15,963 | $ | 14,900 | $ | 16,075 | $ | 12,905 | $ | 13,085 |
See notes to financial statements.
Certified Annual Report 19
Thornburg Limited Term Income Fund
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | $ | 12.79 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.54 | 0.54 | 0.51 | 0.47 | 0.55 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.04 | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | ||||||||||||
Total from investment operations | 0.58 | 0.40 | 0.22 | 0.28 | 0.75 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.55 | ) | (0.54 | ) | (0.51 | ) | (0.47 | ) | (0.55 | ) | ||||||||||
Change in net asset value | 0.03 | (0.14 | ) | (0.29 | ) | (0.19 | ) | 0.20 | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.40 | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 4.76 | % | 3.30 | % | 1.77 | % | 2.29 | % | 5.89 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.39 | % | 4.38 | % | 3.85 | % | 3.64 | % | 4.23 | % | ||||||||||
Expenses, after expense reductions | 0.67 | % | 0.68 | % | 0.67 | % | 0.67 | % | 0.69 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.67 | % | 0.67 | % | 0.67 | % | 0.67 | % | 0.69 | % | ||||||||||
Expenses, before expense reductions | 0.72 | % | 0.72 | % | 0.72 | % | 0.72 | % | 0.76 | % | ||||||||||
Portfolio turnover rate | 41.55 | % | 6.77 | % | 23.16 | % | 22.73 | % | 18.86 | % | ||||||||||
Net assets at end of year (000) | $ | 103,530 | $ | 111,535 | $ | 99,396 | $ | 90,025 | $ | 59,473 |
See notes to financial statements.
20 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2007 |
CUSIPS: Class A - 885-215-103, CLASS B - 885-215-848, CLASS C - 885-215-830, CLASS I - 885-215-699, CLASS R3 - 885-215-491 NASDAQ SYMBOLS: CLASS A - LTUSX, CLASS B - LTUBX, CLASS C - LTUCX, CLASS I - LTUIX, CLASS R3 - LTURX
Issuer-Description | Principal Amount | Value | ||||
U.S. TREASURY SECURITIES — 45.13% | ||||||
United States Treasury Notes, 2.625% due 5/15/2008 | $ | 9,000,000 | $ | 8,915,625 | ||
United States Treasury Notes, 5.50% due 5/15/2009 | 10,000,000 | 10,238,281 | ||||
United States Treasury Notes, 3.625% due 1/15/2010 | 16,000,000 | 15,873,751 | ||||
United States Treasury Notes, 5.75% due 8/15/2010 | 6,000,000 | 6,277,969 | ||||
United States Treasury Notes, 4.625% due 10/31/2011 | 2,000,000 | 2,035,000 | ||||
United States Treasury Notes, 3.625% due 5/15/2013 | 11,000,000 | 10,658,828 | ||||
United States Treasury Notes, 4.75% due 5/15/2014 | 3,000,000 | 3,067,734 | ||||
United States Treasury Notes, 4.875% due 8/15/2016 | 6,000,000 | 6,142,031 | ||||
TOTAL U.S. TREASURY SECURITIES (Cost $63,549,400) | 63,209,219 | |||||
U.S. GOVERNMENT AGENCIES — 53.87% | ||||||
Federal Agricultural Mtg Corp., 6.71% due 7/28/2014 | 200,000 | 220,876 | ||||
Federal Farm Credit Bank, 5.875% due 7/28/2008 | 1,900,000 | 1,917,033 | ||||
Federal Farm Credit Bank, 5.87% due 9/2/2008 | 1,300,000 | 1,312,919 | ||||
Federal Farm Credit Bank, 5.35% due 12/11/2008 | 200,000 | 201,876 | ||||
Federal Farm Credit Bank, 5.80% due 3/19/2009 | 300,000 | 305,714 | ||||
Federal Farm Credit Bank, 6.75% due 7/7/2009 | 350,000 | 363,462 | ||||
Federal Farm Credit Bank, 6.06% due 5/28/2013 | 240,000 | 255,311 | ||||
Federal Home Loan Bank, 7.00% due 2/15/2008 | 150,000 | 151,215 | ||||
Federal Home Loan Bank, 5.48% due 1/8/2009 | 1,250,000 | 1,264,318 | ||||
Federal Home Loan Bank, 5.985% due 4/9/2009 | 1,000,000 | 1,022,017 | ||||
Federal Home Loan Bank, 5.79% due 4/27/2009 | 200,000 | 203,976 | ||||
Federal Home Loan Bank, 5.125% due 4/29/2009 | 1,750,000 | 1,767,315 | ||||
Federal Home Loan Bank, 3.40% due 11/12/2010 | 2,750,000 | 2,746,400 | ||||
Federal Home Loan Mtg Corp., CMO Series 1321 Class TE, 7.00% due 8/15/2022 | 953,914 | 983,724 | ||||
Federal Home Loan Mtg Corp., CMO Series 1616 Class E, 6.50% due 11/15/2008 | 450,822 | 453,760 | ||||
Federal Home Loan Mtg Corp., CMO Series 2592 Class PD, 5.00% due 7/15/2014 | 1,000,000 | 1,000,317 | ||||
Federal Home Loan Mtg Corp., CMO Series 2744 Class JG, 5.00% due 8/15/2032 | 1,500,000 | 1,451,930 | ||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | 1,192,858 | 1,167,867 | ||||
Federal Home Loan Mtg Corp., CMO Series 2825 Class VP, 5.50% due 6/15/2015 | 1,567,113 | 1,577,295 | ||||
Federal Home Loan Mtg Corp., CMO Series 3067 Class PJ, 5.50% due 7/15/2031 | 3,000,000 | 2,998,064 | ||||
Federal Home Loan Mtg Corp., CMO Series 3078 Class PC, 5.50% due 11/15/2030 | 2,250,000 | 2,249,987 | ||||
Federal Home Loan Mtg Corp., CMO Series 3138 Class PC, 5.50% due 6/15/2032 | 5,000,000 | 4,997,392 | ||||
Federal Home Loan Mtg Corp., CMO Series 3192 Class GB, 6.00% due 1/15/2031 | 1,000,000 | 1,014,476 | ||||
Federal Home Loan Mtg Corp., CMO Series 3320 Class TC, 5.50% due 10/15/2032 | 2,000,000 | 1,988,825 | ||||
Federal Home Loan Mtg Corp., CMO Series 3331 Class PB, 6.00% due 1/15/2031 | 2,000,000 | 2,029,838 | ||||
Federal Home Loan Mtg Corp., CMO Series R012 Class AB, 5.50% due 12/15/2020 | 3,859,067 | 3,823,530 | ||||
Federal Home Loan Mtg Corp., Pool # 141016, 9.25% due 11/1/2016 | 20,499 | 22,484 | ||||
Federal Home Loan Mtg Corp., Pool # 141412, 8.50% due 4/1/2017 | 39,571 | 42,606 | ||||
Federal Home Loan Mtg Corp., Pool # 160043, 8.75% due 4/1/2008 | 393 | 392 | ||||
Federal Home Loan Mtg Corp., Pool # 181730, 8.50% due 5/1/2008 | 1,287 | 1,284 | ||||
Federal Home Loan Mtg Corp., Pool # 252986, 10.75% due 4/1/2010 | 14,486 | 15,206 | ||||
Federal Home Loan Mtg Corp., Pool # 298107, 10.25% due 8/1/2017 | 24,891 | 28,464 | ||||
Federal Home Loan Mtg Corp., Pool # C90041, 6.50% due 11/1/2013 | 30,468 | 31,217 | ||||
Federal Home Loan Mtg Corp., Pool # D37120, 7.00% due 7/1/2023 | 35,920 | 37,552 | ||||
Federal Home Loan Mtg Corp., Pool # E49074, 6.50% due 7/1/2008 | 4,927 | 5,028 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2007 |
Issuer-Description | Principal Amount | Value | ||||
Federal Home Loan Mtg Corp., Pool # E61778, 6.50% due 4/1/2008 | $ | 1,166 | $ | 1,190 | ||
Federal National Mtg Assoc, 5.125% due 12/8/2008 | 3,665,000 | 3,688,674 | ||||
Federal National Mtg Assoc CMO Series 1993-101 Class PJ, 7.00% due 6/25/2008 | 67,634 | 67,758 | ||||
Federal National Mtg Assoc CMO Series 1993-122 Class D, 6.50% due 6/25/2023 | 55,202 | 55,657 | ||||
Federal National Mtg Assoc CMO Series 1993-32 Class H, 6.00% due 3/25/2023 | 111,839 | 113,589 | ||||
Federal National Mtg Assoc CMO Series 2003-92 Class KH, 5.00% due 3/25/2032 | 2,000,000 | 1,940,130 | ||||
Federal National Mtg Assoc CMO Series 2004-35 Class CA, 4.00% due 12/25/2017 | 2,068,435 | 1,998,800 | ||||
Federal National Mtg Assoc CMO Series 2007-65 Class PB, 6.00% due 10/25/2032 | 2,916,000 | 2,957,444 | ||||
Federal National Mtg Assoc CPI Floating Rate Note, 3.50% due 2/17/2009 | 3,000,000 | 2,943,720 | ||||
Federal National Mtg Assoc REMIC Series 2006-B1 Class AB, 6.00% due 6/25/2016 | 3,554,675 | 3,626,386 | ||||
Federal National Mtg Assoc, Pool # 008307, 8.00% due 5/1/2008 | 3,510 | 3,510 | ||||
Federal National Mtg Assoc, Pool # 044003, 8.00% due 6/1/2017 | 33,814 | 36,126 | ||||
Federal National Mtg Assoc, Pool # 050811, 7.50% due 12/1/2012 | 28,711 | 29,825 | ||||
Federal National Mtg Assoc, Pool # 050832, 7.50% due 6/1/2013 | 37,014 | 38,346 | ||||
Federal National Mtg Assoc, Pool # 076388, 9.25% due 9/1/2018 | 68,448 | 74,907 | ||||
Federal National Mtg Assoc, Pool # 077725, 9.75% due 10/1/2018 | 3,852 | 3,944 | ||||
Federal National Mtg Assoc, Pool # 100286, 7.50% due 8/1/2009 | 33,546 | 33,926 | ||||
Federal National Mtg Assoc, Pool # 112067, 9.50% due 10/1/2016 | 27,452 | 30,350 | ||||
Federal National Mtg Assoc, Pool # 156156, 8.50% due 4/1/2021 | 21,435 | 22,354 | ||||
Federal National Mtg Assoc, Pool # 190555, 7.00% due 1/1/2014 | 27,230 | 28,179 | ||||
Federal National Mtg Assoc, Pool # 190703, 7.00% due 3/1/2009 | 6,632 | 6,662 | ||||
Federal National Mtg Assoc, Pool # 190836, 7.00% due 6/1/2009 | 20,150 | 20,269 | ||||
Federal National Mtg Assoc, Pool # 250387, 7.00% due 11/1/2010 | 31,564 | 32,155 | ||||
Federal National Mtg Assoc, Pool # 251759, 6.00% due 5/1/2013 | 59,386 | 60,275 | ||||
Federal National Mtg Assoc, Pool # 252648, 6.50% due 5/1/2022 | 142,708 | 146,599 | ||||
Federal National Mtg Assoc, Pool # 303383, 7.00% due 12/1/2009 | 5,762 | 5,796 | ||||
Federal National Mtg Assoc, Pool # 312663, 7.50% due 6/1/2010 | 33,023 | 33,620 | ||||
Federal National Mtg Assoc, Pool # 323706, 7.00% due 2/1/2009 | 12,665 | 12,689 | ||||
Federal National Mtg Assoc, Pool # 334996, 7.00% due 2/1/2011 | 28,098 | 28,676 | ||||
Federal National Mtg Assoc, Pool # 342947, 7.25% due 4/1/2024 | 290,849 | 306,410 | ||||
Federal National Mtg Assoc, Pool # 345775, 8.50% due 12/1/2024 | 3,151 | 3,166 | ||||
Federal National Mtg Assoc, Pool # 373942, 6.50% due 12/1/2008 | 7,780 | 7,945 | ||||
Federal National Mtg Assoc, Pool # 384243, 6.10% due 10/1/2011 | 601,355 | 612,382 | ||||
Federal National Mtg Assoc, Pool # 384746, 5.86% due 2/1/2009 | 1,026,627 | 1,027,483 | ||||
Federal National Mtg Assoc, Pool # 385714, 4.70% due 1/1/2010 | 3,084,787 | 3,056,382 | ||||
Federal National Mtg Assoc, Pool # 406384, 8.25% due 12/1/2024 | 148,361 | 158,081 | ||||
Federal National Mtg Assoc, Pool # 443909, 6.50% due 9/1/2018 | 100,058 | 103,375 | ||||
Federal National Mtg Assoc, Pool # 516363, 5.00% due 3/1/2014 | 148,644 | 148,591 | ||||
Federal National Mtg Assoc, Pool # 555207, 7.00% due 11/1/2017 | 65,309 | 66,463 | ||||
Government National Mtg Assoc CMO Series 2001-65 Class PG, 6.00% due 7/20/2028 | 250,553 | 251,004 | ||||
Government National Mtg Assoc, Pool # 000623, 8.00% due 9/20/2016 | 51,550 | 54,582 | ||||
Government National Mtg Assoc, Pool # 369693, 7.00% due 1/15/2009 | 23,091 | 23,239 | ||||
Government National Mtg Assoc, Pool # 409921, 7.50% due 8/15/2010 | 20,493 | 21,000 | ||||
Government National Mtg Assoc, Pool # 410240, 7.00% due 12/15/2010 | 26,959 | 27,517 | ||||
Government National Mtg Assoc, Pool # 410271, 7.50% due 8/15/2010 | 26,319 | 27,078 | ||||
Government National Mtg Assoc, Pool # 410846, 7.00% due 12/15/2010 | 41,213 | 42,065 | ||||
Government National Mtg Assoc, Pool # 430150, 7.25% due 12/15/2026 | 30,487 | 31,977 | ||||
Government National Mtg Assoc, Pool # 453928, 7.00% due 7/15/2017 | 73,727 | 76,938 | ||||
Government National Mtg Assoc, Pool # 780063, 7.00% due 9/15/2008 | 3,140 | 3,143 | ||||
Government National Mtg Assoc, Pool # 780448, 6.50% due 8/15/2011 | 68,077 | 69,686 | ||||
Overseas Private Investment Corp., 4.10% due 11/15/2014 | 1,876,800 | 1,836,862 | ||||
Private Export Funding Corp., 5.685% due 5/15/2012 | 5,000,000 | 5,219,295 | ||||
Private Export Funding Corp., 4.974% due 8/15/2013 | 2,700,000 | 2,738,356 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2007 |
Issuer-Description | Principal Amount | Value | ||||
Tennessee Valley Authority, 4.75% due 8/1/2013 | $ | 3,000,000 | $ | 3,016,063 | ||
United States Department of Housing & Urban Development, 3.51% due 8/1/2008 | 850,000 | 841,093 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $75,504,745) | 75,465,402 | |||||
TOTAL INVESTMENTS — 99.00% (Cost $139,054,145) | $ | 138,674,621 | ||||
OTHER ASSETS LESS LIABILITIES — 1.00% | 1,399,388 | |||||
NET ASSETS — 100.00% | $ | 140,074,009 | ||||
Footnote Legend
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
CMO | Collateralized Mortgage Obligation | |
Mtg | Mortgage | |
REMIC | Real Estate Mortgage Investment Conduit |
See notes to financial statements.
Certified Annual Report 23
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Income Fund | September 30, 2007 |
CUSIPS: Class A - 885-215-509, CLASS C - 885-215-764, CLASS I - 885-215-681, CLASS R3 - 885-215-483
NASDAQ SYMBOLS: CLASS A - THIFX, CLASS C - THICX, CLASS I - THIIX, CLASS R3 - THIRX
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
U.S. TREASURY SECURITIES — 8.07% | ||||||||
United States Treasury Notes, 3.625% due 1/15/2008 | Aaa/AAA | $ | 2,578,680 | $ | 2,575,352 | |||
United States Treasury Notes, 4.75% due 11/15/2008 | Aaa/AAA | 1,500,000 | 1,512,305 | |||||
United States Treasury Notes, 4.75% due 5/15/2014 | Aaa/AAA | 5,000,000 | 5,112,890 | |||||
United States Treasury Notes, 5.125% due 5/15/2016 | Aaa/AAA | 5,000,000 | 5,209,375 | |||||
United States Treasury Notes, 4.875% due 8/15/2016 | Aaa/AAA | 10,000,000 | 10,236,719 | |||||
TOTAL U.S. TREASURY SECURITIES (Cost $24,305,202) | 24,646,641 | |||||||
U.S. GOVERNMENT AGENCIES — 6.14% | ||||||||
Federal Home Loan Bank, 5.833% due 1/23/2008 | Aaa/AAA | 500,000 | 501,797 | |||||
Federal Home Loan Bank, 5.785% due 4/14/2008 | Aaa/AAA | 75,000 | 75,407 | |||||
Federal Home Loan Bank, 5.835% due 7/15/2008 | Aaa/AAA | 300,000 | 302,411 | |||||
Federal Home Loan Bank, 5.085% due 10/7/2008 | Aaa/AAA | 250,000 | 251,144 | |||||
Federal Home Loan Bank, 5.038% due 10/14/2008 | Aaa/AAA | 200,000 | 200,852 | |||||
Federal Home Loan Bank, 5.365% due 12/11/2008 | Aaa/AAA | 75,000 | 75,699 | |||||
Federal Home Loan Bank, 4.50% due 12/15/2008 | Aaa/AAA | 3,000,000 | 2,998,056 | |||||
Federal Home Loan Bank, 5.985% due 4/9/2009 | Aaa/AAA | 85,000 | 86,871 | |||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | Aaa/AAA | 1,192,858 | 1,167,867 | |||||
Federal Home Loan Mtg Corp., CMO Series 3192 Class GB, 6.00% due 1/15/2031 | Aaa/AAA | 2,000,000 | 2,028,952 | |||||
Federal National Mtg Assoc, 6.00% due 12/1/2008 | Aaa/AAA | 19,293 | 19,557 | |||||
Federal National Mtg Assoc, 8.00% due 12/1/2009 | Aaa/AAA | 17,928 | 18,324 | |||||
Federal National Mtg Assoc, 7.00% due 3/1/2011 | Aaa/AAA | 18,261 | 18,591 | |||||
Federal National Mtg Assoc, 6.42% due 4/1/2011 | Aaa/AAA | 2,314,030 | 2,321,658 | |||||
Federal National Mtg Assoc, 5.095% due 12/1/2011 | Aaa/AAA | 122,788 | 122,663 | |||||
Federal National Mtg Assoc, 7.491% due 8/1/2014 | Aaa/AAA | 30,955 | 31,748 | |||||
Federal National Mtg Assoc CMO Series 2003-64 Class EC, 5.50% due 5/25/2030 | Aaa/AAA | 527,396 | 528,530 | |||||
Federal National Mtg Assoc CMO Series 2007-65 Class PB, 6.00% due 10/25/2032 | Aaa/AAA | 3,000,000 | 3,042,638 | |||||
Federal National Mtg Assoc CPI Floating Rate Note, 3.50% due 2/17/2009 | Aaa/AAA | 5,000,000 | 4,906,200 | |||||
Government National Mtg Assoc, Pool # 003007, 8.50% due 11/20/2015 | Aaa/AAA | 24,327 | 25,745 | |||||
Government National Mtg Assoc, Pool # 827148, 6.375% due 2/20/2024 | Aaa/AAA | 37,805 | 38,008 | |||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $18,861,503) | 18,762,718 | |||||||
ASSET BACK SECURITIES — 10.96% | ||||||||
American Honda Finance Corp., 5.125% due 12/15/2010 | Aa3/A+ | 1,500,000 | 1,520,854 | |||||
Bear Stearns Mtg Series 2004-3 Class 1-A2, 5.756% due 7/25/2034 | Aaa/AAA | 785,659 | 787,187 | |||||
Countrywide Home Loan Series 2004 Class 1-A, 5.671% due 7/20/2034 | Aaa/AAA | 1,174,966 | 1,186,672 | |||||
FNBC Pass Through Trust Series 1993 A, 8.08% due 1/5/2018 | Aa3/AA- | 1,103,381 | 1,268,811 | |||||
GSR Mtg Loan Trust Series 2004-3F Class 2-A10, 3.764% due 2/25/2034 | NR/AAA | 682,018 | 649,375 | |||||
IHOP Franchising LLC Series 2007-1A Class A1, 5.144% due 3/20/2037 | Aaa/AAA | 3,000,000 | 2,969,971 | |||||
JP Morgan Chase Commercial Mtg Series 2004-C3 Class A-5, 4.878% due 1/15/2042 | Aaa/NR | 5,000,000 | 4,820,300 | |||||
Legg Mason Mortgage Capital Corp., 7.01% due 6/1/2009 | NR/NR | 1,714,286 | 1,714,286 | |||||
Small Business Administration, 4.638% due 2/10/2015 | NR/NR | 2,591,765 | 2,532,860 | |||||
Wachovia Bank Commercial Mtg Trust Series 2005-C21 Class A-4, 5.385% due 10/15/2044 | Aaa/AAA | 5,000,000 | 4,936,116 | |||||
Wachovia Bank Commercial Mtg Trust Series 2005-C22 Class A-4, 5.266% due 12/15/2044 | Aaa/AAA | 5,000,000 | 4,963,937 | |||||
Washington Mutual Series 03-AR10 Class-A4, 4.057% due 10/25/2033 | Aaa/AAA | 529,148 | 527,449 | |||||
Washington Mutual Series 03-AR5 Class-A6, 3.695% due 6/25/2033 | Aaa/AAA | 3,207,569 | 3,179,498 |
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Washington Mutual Series 05-AR4 Class-A4b, 4.672% due 4/25/2035 | Aaa/AAA | $ | 830,000 | $ | 815,743 | |||
Wells Fargo Mortgage Backed Securities Series 2005-3 Class-A10, 5.50% due 5/25/2035 | Aaa/NR | 1,625,182 | 1,625,446 | |||||
TOTAL ASSET BACK SECURITIES (Cost $33,494,446) | 33,498,505 | |||||||
CORPORATE BONDS — 56.67% | ||||||||
BANKS — 4.30% | ||||||||
COMMERCIAL BANKS — 4.30% | ||||||||
Fifth Third Bank, Cincinnati Ohio, 3.375% due 8/15/2008 | Aa2/AA- | 2,500,000 | 2,456,703 | |||||
Household Finance Corp., 6.40% due 9/15/2009 | Aa3/AA- | 400,000 | 408,022 | |||||
Household Finance Corp. CPI Floating Rate Note, 3.73% due 8/10/2009 | Aa3/AA- | 5,000,000 | 4,775,100 | |||||
National City Bank, 7.25% due 7/15/2010 | NR/A | 2,000,000 | 2,099,352 | |||||
National Westminster Bank, 7.375% due 10/1/2009 | Aa1/AA- | 715,000 | 753,203 | |||||
Nations Bank Corp., 7.23% due 8/15/2012 | Aa1/AA | 250,000 | 269,448 | |||||
US Bank, 6.30% due 7/15/2008 | Aa2/AA | 400,000 | 402,234 | |||||
Whitney National Bank, 5.875% due 4/1/2017 | A3/BBB | 2,000,000 | 1,963,830 | |||||
13,127,892 | ||||||||
CAPITAL GOODS — 7.19% | ||||||||
ELECTRICAL EQUIPMENT — 0.62% | ||||||||
Emerson Electric Co., 5.75% due 11/1/2011 | A2/A | 800,000 | 818,300 | |||||
Hubbell Inc., 6.375% due 5/15/2012 | A3/A+ | 1,000,000 | 1,059,372 | |||||
INDUSTRIAL CONGLOMERATES — 2.94% | ||||||||
General Electric Capital Corp., 7.75% due 6/9/2009 | Aaa/AAA | 200,000 | 208,546 | |||||
General Electric Capital Corp., 4.25% due 12/1/2010 | Aaa/AAA | 2,000,000 | 1,957,602 | |||||
General Electric Capital Corp., 7.375% due 1/19/2010 | Aaa/AAA | 400,000 | 419,889 | |||||
General Electric Capital Corp. Floating Rate Note, 5.814% due 12/15/2009 | Aaa/AAA | 1,000,000 | 996,435 | |||||
General Electric Capital Corp. Floating Rate Note, 4.80% due 5/30/2008 | Aaa/AAA | 494,000 | 487,001 | |||||
General Electric Capital Corp. Floating Rate Note, 4.207% due 3/2/2009 | Aaa/AAA | 5,000,000 | 4,925,000 | |||||
MACHINERY — 3.63% | ||||||||
Caterpillar Financial Services Corp., 6.40% due 2/15/2008 | A2/A | 250,000 | 250,414 | |||||
General American Railcar Corp., 6.69% due 9/20/2016 | A3/AA- | 188,322 | 204,211 | |||||
Illinois Tool Works Cupids Financing Trust, 6.55% due 12/31/2011 | Aa3/NR | 5,000,000 | 5,165,360 | |||||
John Deere Capital Corp. Floating Rate Note, 5.849% due 6/10/2008 | A2/A | 4,415,000 | 4,424,236 | |||||
Pentair, Inc., 7.85% due 10/15/2009 | Baa3/BBB | 1,000,000 | 1,056,549 | |||||
21,972,915 | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 1.17% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 1.17% | ||||||||
Science Applications International Corp., 6.75% due 2/1/2008 | A3/A- | 250,000 | 250,819 | |||||
Science Applications International Corp., 6.25% due 7/1/2012 | A3/A- | 1,000,000 | 1,034,213 | |||||
Waste Management, Inc., 6.875% due 5/15/2009 | Baa3/BBB | 725,000 | 749,367 | |||||
Waste Management, Inc., 7.375% due 8/1/2010 | Baa3/BBB | 500,000 | 529,204 | |||||
Waste Management, Inc., 6.50% due 11/15/2008 | Baa3/BBB | 1,000,000 | 1,012,968 | |||||
3,576,571 | ||||||||
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
CONSUMER DURABLES & APPAREL — 0.75% | ||||||||
TEXTILES, APPAREL & LUXURY GOODS — 0.75% | ||||||||
Nike, Inc., 5.15% due 10/15/2015 | A2/A+ | $ | 2,315,000 | $ | 2,280,590 | |||
2,280,590 | ||||||||
CONSUMER SERVICES — 1.32% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 1.32% | ||||||||
Dunkin 2006-1 Class A2, 5.779% due 6/20/2031 | Aaa/AAA | 4,000,000 | 4,024,348 | |||||
4,024,348 | ||||||||
DIVERSIFIED FINANCIALS — 11.67% | ||||||||
CAPITAL MARKETS — 5.24% | ||||||||
Bear Stearns Co., Inc., 4.50% due 10/28/2010 | A1/A+ | 1,500,000 | 1,454,343 | |||||
Goldman Sachs Group, Inc., 5.625% due 1/15/2017 | A1/A+ | 2,000,000 | 1,940,498 | |||||
Lehman Brothers Holdings, Inc., 6.00% due 7/19/2012 | A1/A+ | 1,500,000 | 1,523,251 | |||||
Lehman Brothers Holdings, Inc., 3.50% due 8/7/2008 | A1/A+ | 700,000 | 691,349 | |||||
Merrill Lynch & Co. Floating Rate Note, 5.89% due 8/14/2009 | Aa3/AA- | 2,000,000 | 1,990,776 | |||||
Merrill Lynch & Co. CPI Floating Rate Note, 3.847% due 3/2/2009 | Aa3/AA- | 3,000,000 | 2,914,950 | |||||
Morgan Stanley Group, Inc., 5.485% due 1/18/2008 | Aa3/AA- | 5,000,000 | 4,995,845 | |||||
Northern Trust Co., 6.25% due 6/2/2008 | A1/A+ | 500,000 | 504,067 | |||||
CONSUMER FINANCE — 3.54% | ||||||||
American General Finance Corp., 4.625% due 9/1/2010 | A1/A+ | 200,000 | 196,051 | |||||
Capital One Bank, 6.70% due 5/15/2008 | A2/A- | 2,025,000 | 2,040,868 | |||||
SLM Corp. Floating Rate Note, 5.57% due 7/25/2008 | Baa1/BBB+ | 3,000,000 | 2,958,324 | |||||
SLM Corp. Floating Rate Note, 4.69% due 9/15/2008 | Baa1/BBB+ | 1,675,000 | 1,606,650 | |||||
Toyota Motor Credit Corp., 4.25% due 3/15/2010 | Aaa/AAA | 2,450,000 | 2,437,701 | |||||
Toyota Motor Credit Corp., 2.875% due 8/1/2008 | Aaa/AAA | 800,000 | 784,800 | |||||
Toyota Motor Credit Corp., 4.35% due 12/15/2010 | Aaa/AAA | 800,000 | 795,171 | |||||
DIVERSIFIED FINANCIAL SERVICES — 2.89% | ||||||||
Bank of America Institutional Series B, 7.70% due 12/31/2026 | Aa2/A+ | 2,000,000 | 2,075,600 | |||||
JP Morgan Chase Co., 4.50% due 11/15/2010 | Aa2/AA- | 1,465,000 | 1,443,480 | |||||
JP Morgan Chase Co. CPI Floating Rate Note, 4.09% due 6/28/2009 | Aa2/AA- | 5,000,000 | 4,940,500 | |||||
US Central Credit Union, 2.75% due 5/30/2008 | Aa1/AAA | 375,000 | 368,694 | |||||
35,662,918 | ||||||||
ENERGY — 2.30% | ||||||||
ENERGY EQUIPMENT & SERVICES — 0.64% | ||||||||
Detroit Edison Corporate Senior Note Series D, 5.40% due 8/1/2014 | A3/BBB+ | 2,000,000 | 1,971,940 | |||||
OIL, GAS & CONSUMABLE FUELS — 1.66% | ||||||||
Chevron Phillips Chemical, 7.00% due 3/15/2011 | Baa1/BBB+ | 500,000 | 524,784 | |||||
Enbridge, Inc., 5.80% due 6/15/2014 | Baa1/A- | 2,000,000 | 1,993,336 | |||||
Enterprise Products Participating LP, 7.50% due 2/1/2011 | Baa3/BBB- | 250,000 | 265,512 | |||||
Murphy Oil Corp., 6.375% due 5/1/2012 | Baa3/BBB | 750,000 | 781,117 | |||||
Phillips Petroleum Co., 8.75% due 5/25/2010 | A1/A- | 250,000 | 272,446 | |||||
Phillips Petroleum Co., 9.375% due 2/15/2011 | A1/A- | 900,000 | 1,021,953 |
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Union Oil Co. California, 7.90% due 4/18/2008 | Aa2/BBB+ | $ | 200,000 | $ | 202,953 | |||
7,034,041 | ||||||||
FOOD & STAPLES RETAILING — 0.30% | ||||||||
FOOD & STAPLES RETAILING — 0.30% | ||||||||
Wal-Mart Stores, Inc., 6.875% due 8/10/2009 | Aa2/AA | 900,000 | 930,322 | |||||
930,322 | ||||||||
FOOD, BEVERAGE & TOBACCO — 1.79% | ||||||||
BEVERAGES — 0.69% | ||||||||
Anheuser Busch Co., Inc., 4.375% due 1/15/2013 | A2/A | 2,000,000 | 1,902,736 | |||||
Coca Cola Co., 5.75% due 3/15/2011 | Aa3/A+ | 200,000 | 204,499 | |||||
FOOD PRODUCTS — 1.10% | ||||||||
Conagra, Inc., 7.875% due 9/15/2010 | Baa2/BBB+ | 100,000 | 107,668 | |||||
General Mills, 5.50% due 1/12/2009 | Baa1/BBB+ | 300,000 | 301,636 | |||||
Kraft Foods, Inc., 6.00% due 2/11/2013 | Baa2/A- | 2,000,000 | 2,058,880 | |||||
Sara Lee Corp., 6.00% due 1/15/2008 | Baa1/BBB+ | 900,000 | 900,928 | |||||
5,476,347 | ||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.65% | ||||||||
HOUSEHOLD PRODUCTS — 0.65% | ||||||||
Procter & Gamble Co., 4.30% due 8/15/2008 | Aa3/AA- | 2,000,000 | 1,984,926 | |||||
1,984,926 | ||||||||
INSURANCE — 8.40% | ||||||||
INSURANCE — 8.40% | ||||||||
Berkshire Hathaway Finance Corp. Senior Note, 4.625% due 10/15/2013 | Aaa/AAA | 1,000,000 | 962,253 | |||||
Hartford Financial Services Group, Inc. Senior Note, 4.625% due 7/15/2013 | A2/A | 1,000,000 | 953,410 | |||||
International Lease Finance Corp., 4.55% due 10/15/2009 | A1/AA- | 2,500,000 | 2,482,690 | |||||
International Lease Finance Corp., 5.00% due 9/15/2012 | A1/AA- | 2,000,000 | 1,951,550 | |||||
International Lease Finance Corp. Floating Rate Note, 5.76% due 1/15/2010 | A1/AA- | 4,050,000 | 4,037,737 | |||||
Liberty Mutual Group, Inc., 5.75% due 3/15/2014 | Baa2/BBB | 1,000,000 | 978,088 | |||||
Lincoln National Corp., 4.75% due 2/15/2014 | A3/A+ | 1,000,000 | 958,114 | |||||
Pacific Life Global Funding CPI Floating Rate Note, 4.867% due 2/6/2016 | Aa3/AA | 8,000,000 | 7,339,120 | |||||
Principal Financial Group Australia, 8.20% due 8/15/2009 | A2/A | 700,000 | 738,811 | |||||
Principal Life Global Funding, 4.40% due 10/1/2010 | Aa2/AA | 4,000,000 | 3,936,028 | |||||
UnumProvident Corp., 7.625% due 3/1/2011 | Ba1/BB+ | 1,257,000 | 1,338,280 | |||||
25,676,081 | ||||||||
MATERIALS — 1.38% | ||||||||
CHEMICALS — 0.74% | ||||||||
Dow Chemical Co., 5.75% due 12/15/2008 | A3/A- | 350,000 | 352,468 | |||||
E.I. du Pont de Nemours & Co., 4.75% due 11/15/2012 | A2/A | 1,000,000 | 977,470 | |||||
E.I. du Pont de Nemours & Co., 4.125% due 3/6/2013 | A2/A | 325,000 | 306,136 |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Lubrizol Corp. Senior Note, 5.875% due 12/1/2008 | Baa3/BBB- | $ | 635,000 | $ | 636,949 | |||
METALS & MINING — 0.64% | ||||||||
BHP Billiton Finance, 5.40% due 3/29/2017 | A1/A+ | 2,000,000 | 1,950,046 | |||||
4,223,069 | ||||||||
MEDIA — 1.62% | ||||||||
MEDIA — 1.62% | ||||||||
AOL Time Warner, Inc., 6.75% due 4/15/2011 | Baa2/BBB+ | 750,000 | 779,544 | |||||
Comcast Corp., 6.30% due 11/15/2017 | Baa2/BBB+ | 1,000,000 | 1,016,434 | |||||
EW Scripps Co. Ohio, 5.75% due 7/15/2012 | A2/A | 80,000 | 81,159 | |||||
Thomson Corp., 4.25% due 8/15/2009 | Baa1/A- | 2,900,000 | 2,848,409 | |||||
Time Warner, Inc., 8.05% due 1/15/2016 | Baa2/BBB+ | 200,000 | 223,811 | |||||
4,949,357 | ||||||||
MISCELLANEOUS — 1.45% | ||||||||
MISCELLANEOUS — 1.17% | ||||||||
Stanford University, 5.85% due 3/15/2009 | Aaa/NR | 3,500,000 | 3,573,370 | |||||
YANKEE — 0.28% | ||||||||
Nova Scotia Province Canada, 5.75% due 2/27/2012 | Aa2/A+ | 500,000 | 519,276 | |||||
Ontario Province Canada, 3.282% due 3/28/2008 | Aa1/AA | 335,000 | 332,829 | |||||
4,425,475 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.75% | ||||||||
PHARMACEUTICALS — 0.75% | ||||||||
Abbott Labs, 3.75% due 3/15/2011 | A1/AA | 500,000 | 481,932 | |||||
Tiers Inflation Linked Trust Series Wyeth 2004-21 Trust Certificate CPI Floating Rate Note, 4.537% due 2/1/2014 | Baa1/A+ | 2,000,000 | 1,794,900 | |||||
2,276,832 | ||||||||
RETAILING — 1.02% | ||||||||
DISTRIBUTORS — 0.03% | ||||||||
Dayton Hudson Corp., 9.625% due 2/1/2008 | A1/A+ | 100,000 | 101,280 | |||||
SPECIALTY RETAIL — 0.99% | ||||||||
Lowe’s Companies Inc., 6.10% due 9/15/2017 | A1/A+ | 3,000,000 | 3,031,089 | |||||
3,132,369 | ||||||||
SOFTWARE & SERVICES — 1.08% | ||||||||
IT SERVICES — 1.08% | ||||||||
Computer Sciences Corp., 6.25% due 3/15/2009 | Baa1/A- | 300,000 | 303,122 | |||||
Computer Sciences Corp., 3.50% due 4/15/2008 | Baa1/A- | 2,000,000 | 1,973,518 | |||||
Electronic Data Systems Corp., 6.50% due 8/1/2013 | Ba1/BBB- | 1,000,000 | 1,008,929 | |||||
3,285.569 | ||||||||
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.50% | ||||||||
COMMUNICATIONS EQUIPMENT — 0.33% | ||||||||
Cisco Systems, Inc., 5.25% due 2/22/2011 | A1/A+ | $ | 1,000,000 | $ | 1,009,302 | |||
ELECTRONIC EQUIPMENT & INSTRUMENTS — 0.17% | ||||||||
Jabil Circuit, Inc., 5.875% due 7/15/2010 | Ba1/BBB- | 500,000 | 504,596 | |||||
1,513,898 | ||||||||
TELECOMMUNICATION SERVICES — 0.32% | ||||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.32% | ||||||||
Vodafone Group plc, 5.625% due 2/27/2017 | Baa1/A- | 1,000,000 | 971,961 | |||||
971,961 | ||||||||
TRANSPORTATION — 0.06% | ||||||||
AIRLINES — 0.06% | ||||||||
Continental Airlines Pass Through Certificate Series 1997-4 Class 4-A, 6.90% due 1/2/2018 | Baa2/BBB+ | 169,258 | 173,066 | |||||
173,066 | ||||||||
UTILITIES — 8.65% | ||||||||
ELECTRIC UTILITIES — 6.40% | ||||||||
AEP Texas Central Transition Bond A1, 4.98% due 1/1/2010 | Aaa/AAA | 2,206,251 | 2,209,362 | |||||
Appalachian Power Co., 6.60% due 5/1/2009 (Insured: MBIA) | Aaa/AAA | 175,000 | 179,029 | |||||
Central Power & Light Co., 7.125% due 2/1/2008 | Baa1/BBB | 2,000,000 | 2,011,274 | |||||
Commonwealth Edison Co., 4.74% due 8/15/2010 | Baa2/BBB | 975,000 | 959,631 | |||||
Entergy Gulf States, Inc., 5.12% due 8/1/2010 | Baa3/BBB+ | 1,800,000 | 1,785,121 | |||||
Great River Energy 1st Mtg Series 2007-A, 5.829% due 7/1/2017 (Insured: MBIA) | Aaa/NR | 5,000,000 | 5,111,300 | |||||
Gulf Power Co., 4.35% due 7/15/2013 | A2/A | 925,000 | 867,215 | |||||
Madison Gas & Electric Co., 6.02% due 9/15/2008 | Aa3/AA- | 950,000 | 958,100 | |||||
MP Environmental, 4.982% due 7/1/2014 | Aaa/AAA | 5,000,000 | 4,975,000 | |||||
PSI Energy, Inc., 7.85% due 10/15/2007 | Baa1/A- | 500,000 | 500,373 | |||||
GAS UTILITIES — 0.21% | ||||||||
Questar Pipeline Co., 6.05% due 12/1/2008 | A2/A- | 425,000 | 429,147 | |||||
Southern California Gas Co., 4.375% due 1/15/2011 | A1/A+ | 225,000 | 219,005 | |||||
MULTI-UTILITIES — 2.04% | ||||||||
Northern States Power Co., 4.75% due 8/1/2010 | A2/A- | 2,825,000 | 2,799,954 | |||||
Union Electric Co., 4.65% due 10/1/2013 | A3/BBB- | 2,000,000 | 1,886,954 | |||||
Wisconsin Energy Corp., 5.50% due 12/1/2008 | A3/BBB+ | 350,000 | 351,102 | |||||
Wisconsin Public Service Corp., 6.125% due 8/1/2011 | Aa3/A | 1,150,000 | 1,183,702 | |||||
26,426,269 | ||||||||
TOTAL CORPORATE BONDS (Cost $174,340,671) | 173,124,816 | |||||||
TAXABLE MUNICIPAL BONDS — 17.34% | ||||||||
American Campus Properties Student Housing, 7.38% due 9/1/2012 (Insured: MBIA) | Aaa/AAA | 2,975,000 | 3,179,353 | |||||
American Fork City Utah Sales, 4.89% due 3/1/2012 (Insured: FSA) | Aaa/AAA | 300,000 | 297,720 | |||||
American Fork City Utah Sales, 5.07% due 3/1/2013 (Insured: FSA) | Aaa/AAA | 120,000 | 119,293 |
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Arkansas Electric Coop Corp., 7.33% due 6/30/2008 | A2/AA- | $ | 37,000 | $ | 37,287 | |||
Bessemer Alabama Water Revenue Taxable Warrants Series B, 7.375% due 7/1/2008 (Insured: FSA) | Aaa/AAA | 170,000 | 172,054 | |||||
Brockton MA Taxable Economic Development Series A, 6.45% due 5/1/2017 (Insured: FGIC) | Aaa/AAA | 150,000 | 158,661 | |||||
Burbank California Waste Disposal Revenue, 5.48% due 5/1/2008 (Insured: FSA) | Aaa/AAA | 310,000 | 311,091 | |||||
Cleveland Cuyahoga County Ohio, 6.10% due 5/15/2013 | NR/BBB+ | 1,545,000 | 1,518,148 | |||||
Cook County Illinois School District 083, 4.625% due 12/1/2010 (Insured: FSA) | Aaa/NR | 250,000 | 249,263 | |||||
Cook County Illinois School District 083, 4.875% due 12/1/2011 (Insured: FSA) | Aaa/NR | 150,000 | 149,582 | |||||
Denver City & County Special Facilities Taxable Refunding & Improvement Series B, 7.15% due 1/1/2008 (Insured: MBIA) | Aaa/AAA | 900,000 | 905,580 | |||||
Elkhart Indiana Redevelopment District Revenue, 4.80% due 6/15/2011 (ETM) | NR/NR | 240,000 | 237,710 | |||||
Elkhart Indiana Redevelopment District Revenue, 4.80% due 12/15/2011 (ETM) | NR/NR | 245,000 | 241,734 | |||||
Elkhart Indiana Redevelopment District Revenue, 5.05% due 12/15/2012 (ETM) | NR/NR | 515,000 | 511,560 | |||||
Elkhart Indiana Redevelopment District Revenue, 5.25% due 12/15/2013 pre-refunded 6/15/2013 | NR/NR | 540,000 | 538,245 | |||||
Grant County Washington Water Public Utility District 2 Series Z, 5.14% due 1/1/2014 (Insured: FGIC) | Aaa/AAA | 1,015,000 | 1,006,362 | |||||
Green Bay Wisconsin Series B, 4.875% due 4/1/2011 (Insured: MBIA) | Aaa/NR | 365,000 | 363,489 | |||||
Hancock County Mississippi, 4.20% due 8/1/2008 (Insured: MBIA) | Aaa/NR | 305,000 | 303,627 | |||||
Hancock County Mississippi, 4.80% due 8/1/2010 (Insured: MBIA) | Aaa/NR | 245,000 | 244,657 | |||||
Hancock County Mississippi, 4.90% due 8/1/2011 (Insured: MBIA) | Aaa/NR | 315,000 | 313,869 | |||||
Hanover Pennsylvania Area School District Taxable Notes Series B, 4.47% due 3/15/2013 (Insured: FSA) | Aaa/AAA | 1,385,000 | 1,343,949 | |||||
Jefferson County Texas Navigation Taxable Refunding, 5.50% due 5/1/2010 (Insured: FSA) | Aaa/NR | 500,000 | 502,190 | |||||
Jersey City New Jersey Municipal Utilities Authority, 3.72% due 5/15/2009 (Insured: MBIA) | Aaa/AAA | 575,000 | 564,995 | |||||
Kendall Kane County Illinois School 308, 5.50% due 10/1/2011 (Insured: FGIC) | Aaa/NR | 365,000 | 371,223 | |||||
Los Angeles County California Metropolitan Transport, 4.56% due 7/1/2010 (Insured: AMBAC) | Aaa/AAA | 2,775,000 | 2,758,156 | |||||
Los Angeles County California Pension Series C, 0% due 6/30/2008 (Insured: MBIA) | Aaa/AAA | 300,000 | 288,981 | |||||
Maryland State Economic Development Corp., 7.25% due 6/1/2008 (Maryland Tech Development Center) | NR/NR | 100,000 | 101,155 | |||||
Menasha Wisconsin, 5.60% due 9/1/2010 (Steam Utility) | NR/NR | 2,805,000 | 2,814,649 | |||||
Mississippi Development Bank Special Obligation Refinance Taxable Harrison County B, 5.21% due 7/1/2013 (Insured: FSA) | NR/AAA | 1,200,000 | 1,199,484 | |||||
Missouri State Development Finance Board Series A, 5.45% due 3/1/2011 (Crackerneck Creek) | NR/A+ | 1,090,000 | 1,098,644 | |||||
Montgomery County Maryland Revenue Authority, 5.00% due 2/15/2012 | Aa2/AA | 100,000 | 99,482 | |||||
Multnomah County Oregon School District 1J Refunding Taxable, 4.191% due 6/15/2008 | A1/A- | 650,000 | 646,295 | |||||
New Jersey Health Care Facilities Financing, 10.75% due 7/1/2010 (ETM) | NR/NR | 295,000 | 325,385 | |||||
New Jersey Health Care Facilities Financing, 7.70% due 7/1/2011 (Insured: Connie Lee) | NR/AAA | 90,000 | 94,528 | |||||
New Mexico Mortgage Finance Authority Single Family Mortgage I D 2, 5.77% due 1/1/2016 (GNMA/FNMA/FHLMC) | NR/AAA | 910,000 | 921,830 | |||||
New Rochelle New York Industrial Development Agency, 7.15% due 10/1/2014 (LOC: Bank of New York) | Aaa/A+ | 360,000 | 380,826 | |||||
New York Environmental Facilities, 5.85% due 3/15/2011 | NR/AA- | 3,500,000 | 3,604,895 | |||||
New York State Housing Finance, 4.46% due 8/15/2009 | Aa1/NR | 235,000 | 233,101 | |||||
New York State Urban Development Corp., 4.75% due 12/15/2011 | NR/AAA | 1,400,000 | 1,386,532 | |||||
Newark New Jersey, 4.70% due 4/1/2011 (Insured: MBIA) | Aaa/NR | 845,000 | 836,795 | |||||
Newark New Jersey, 4.90% due 4/1/2012 (Insured: MBIA) | Aaa/NR | 1,225,000 | 1,213,534 | |||||
Niagara Falls New York Public Water, 4.30% due 7/15/2010 (Insured: MBIA) | Aaa/AAA | 360,000 | 355,799 | |||||
Northwest Open Access Network Washington Revenue, 6.18% due 12/1/2008 (Insured: AMBAC) | Aaa/AAA | 1,600,000 | 1,626,352 | |||||
Ohio Housing Financing Agency Mortgage Revenue, 5.20% due 9/1/2014 (GNMA/FNMA) | Aaa/NR | 2,395,000 | 2,361,135 | |||||
Ohio State Petroleum Underground Storage, 6.75% due 8/15/2008 (Insured: MBIA) | Aaa/AAA | 235,000 | 235,409 | |||||
Ohio State Taxable Development Assistance Series A, 4.88% due 10/1/2011 (Insured: MBIA) | Aaa/AAA | 550,000 | 547,134 | |||||
Port Walla Walla Revenue, 5.30% due 12/1/2009 | NR/NR | 235,000 | 233,508 | |||||
Providence Rhode Island, 5.59% due 1/15/2008 (Insured: FGIC) | Aaa/AAA | 340,000 | 340,996 |
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2007 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Redlands California Redevelopment Agency Series A, 5.818% due 8/1/2022 (Tax Allocation) (Insured: AMBAC) | NR/AAA | $ | 3,000,000 | $ | 3,002,100 | |||
Santa Fe County New Mexico Charter School Taxable Series B, 7.55% due 1/15/2010 (ATC Foundation) | NR/NR | 190,000 | 188,634 | |||||
Short Pump Town Center Community Development, 6.26% due 2/1/2009 | NR/NR | 1,000,000 | 1,009,480 | |||||
Sisters Providence Obligation Group Direct Obligation Notes Series 1997, 7.47% due 10/1/2007 | Aa2/AA | 1,590,000 | 1,590,000 | |||||
Springfield City School District Tax Anticipation Notes, 6.35% due 12/1/2010 (Insured: AMBAC) | Aaa/NR | 1,400,000 | 1,437,212 | |||||
Springfield City School District Tax Anticipation Notes, 6.40% due 12/1/2011 (Insured: AMBAC) | Aaa/NR | 1,500,000 | 1,541,280 | |||||
Tazewell County Illinois Community High School, 5.20% due 12/1/2011 (Insured: FSA) | Aaa/NR | 355,000 | 356,981 | |||||
Tennessee State Taxable Series B, 6.00% due 2/1/2013 | Aa1/AA+ | 500,000 | 514,585 | |||||
Texas Tech University Revenue, 6.00% due 8/15/2011 (Insured: MBIA) | Aaa/AAA | 245,000 | 253,467 | |||||
University of Illinois Revenue, 6.35% due 4/1/2011 (Insured: FGIC) | Aaa/AAA | 1,000,000 | 1,044,420 | |||||
Victor New York, 9.20% due 5/1/2014 | NR/NR | 1,250,000 | 1,282,375 | |||||
Virginia Housing Development Authority Taxable Rental Housing Series I, 7.30% due 2/1/2008 | Aa1/AA+ | 505,000 | 508,717 | |||||
Wisconsin State General Revenue, 4.80% due 5/1/2013 (Insured: FSA) | Aaa/AAA | 200,000 | 195,584 | |||||
Wisconsin State Health & Educational Facilities Taxable Series B, 7.08% due 6/1/2016 (Insured: ACA) | NR/A | 2,610,000 | 2,691,928 | |||||
TOTAL TAXABLE MUNICIPAL BONDS (Cost $52,928,120) | 52,963,010 | |||||||
SHORT TERM INVESTMENTS — 0.78% | ||||||||
Toyota Credit de Puerto Rico, 4.70% due 10/1/2007 | A1/P1 | 2,400,000 | 2,400,000 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $2,400,000) | 2,400,000 | |||||||
TOTAL INVESTMENTS — 99.96% (Cost $306,329,942) | $ | 305,395,690 | ||||||
OTHER ASSETS LESS LIABILITIES — 0.04% | 115,358 | |||||||
NET ASSETS — 100.00% | $ | 305,511,048 | ||||||
Footnote Legend
† | 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:
ACA | Insured by American Capital Access | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
CMO | Collateralized Mortgage Obligation | |
Cupids | Cumulative Undivided Preferred Interests In Debt Securities | |
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 | |
Mtg | Mortgage |
See notes to financial statements.
Certified Annual Report 31
Thornburg Limited Term Income Funds | September 30, 2007 |
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
32 Certified Annual Report
Thornburg Limited Term Income Funds | September 30, 2007 (Unaudited) |
As a shareholder of the Funds, 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 Funds 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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
U.S. Government Fund | |||||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,029.70 | $ | 3.37 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.75 | $ | 3.36 | |||
Income Fund | |||||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,023.40 | $ | 3.39 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.71 | $ | 3.39 |
† | Thornburg Limited Term U.S. Government 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. |
† | Thornburg Limited Term Income 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. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Certified Annual Report 33
September 30, 2007 (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 5, 1996 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
I Shares (Incep: 7/5/96) | 5.35 | % | 2.86 | % | 5.12 | % | 5.42 | % |
FUND ATTRIBUTES
as of September 30, 2007
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 7/5/96) | 3.92 | % | 3.97 | % | $ | 12.97 | $ | 12.97 |
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.
34 Certified Annual Report
Thornburg Limited Term Income Fund | September 30, 2007 (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 5, 1996 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2007
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
I Shares (Incep: 7/5/96) | 4.76 | % | 3.59 | % | 5.25 | % | 5.72 | % |
FUND ATTRIBUTES
as of September 30, 2007
Annualized Dist. Rate | SEC Yield | NAV | Maximum Offering Price | |||||||||
I Shares (Incep: 7/5/96) | 4.44 | % | 4.23 | % | $ | 12.40 | $ | 12.40 |
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.
Certified Annual Report 35
TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Income Funds | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 |
36 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 37
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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.
38 Certified Annual Report
OTHER INFORMATION | ||
Thornburg Limited Term Income Funds | September 30, 2007 (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.
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.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the Fund’s investment performance.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to different categories of mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the parameters for selecting the investments for other funds and the largely theoretical character of securities indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the good performance of the Fund over most measuring periods relative to the two mutual fund categories reviewed, and that while the Fund’s relative performance had fluctuated in recent years due to interest rate changes, the Fund demonstrated good relative long term performance.
Certified Annual Report 39
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2007 (Unaudited) |
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor had received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 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. The Trustees observed that the management fee charged by the Advisor to the Fund was lower to some degree than the average and median fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio was comparable to the average and median expense ratios for the same fund group. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment advisor reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided
40 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2007 (Unaudited) |
to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time, relative to two 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 (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the parameters for selecting the investments for other funds and the largely theoretical character of fixed income security indices.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s above average investment performance in most measurement periods relative to the performance of two categories of fixed income mutual funds selected by independent mutual fund analyst firms, and the Fund’s relative performance against comparative measures of portfolio volatility and return. The Trustees recognized that the performance of the Fund relative to the categories in the most recent year was slightly below the categories’ respective averages, but this appeared attributable to the defensive posture maintained by the Fund in accordance with its objective of safety of capital.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees considered the fee 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 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. The Trustees observed that the overall expense ratio of the Fund was higher to a small extent than the median (but equal to the average) expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, that the management fee was somewhat higher than the average and median fee rates for the same group of funds, but that the differences were not significant in view of the degree of the differences and the Fund’s investment performance. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 41
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
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 International Growth 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 $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 |
TH868
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 Fund expects to invest primarily in domestic equity securities (primarily common stocks) selected on a value basis. However, the Fund may own a variety of securities, including foreign equity and debt securities and domestic debt securities which, in the opinion of the Fund’s investment advisor, offer prospects for meeting the Fund’s investment goals.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Risks may be associated with investments in emerging markets including illiquidity and volatility. Additionally, the Fund may invest a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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.
To determine a fund’s Morningstar Rating™, funds with at least a three-year history are ranked in their categories by their Morningstar Risk-Adjusted Return scores. The top 10% receive 5 stars; the next 22.5%, 4 stars; the middle 35%, 3 stars; the next 22.5%, 2 stars; and the bottom 10% receive 1 star. The Risk-Adjusted Return accounts for variation in a fund’s performance (including the effects of all sales charges), placing more emphasis on downward variations and rewarding consistent performance. Other share classes may have different performance characteristics. © 2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
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.
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.
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.
This page is not part of the Annual Report. 3
Thornburg Value Fund
Finding Promising Companies at a Discount
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, 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%. Class A shares are subject to a 1% 30-day redemption fee. The total annual fund operating expense of Class A shares is 1.35%, as disclosed in the most recent Prospectus.
CO-PORTFOLIO MANAGERS
Left to right: Connor Browne,CFA, Bill Fries,CFA, Edward Maran,CFA.
KEY PORTFOLIO ATTRIBUTES
As of 9/30/07
Portfolio P/E Trailing 12-months* | 17.2x | ||
Portfolio Price to Cash Flow* | 10.9 | ||
Portfolio Price to Book Value* | 2.9 | ||
Median Market Cap* | $ | 33.9 B | |
7-Year Beta (Thornburg vs. S&P 500)* | 0.94 | ||
Equity Holdings | 41 |
* | Source: FactSet |
Investing is both an art and a science. It requires the vision to recognize opportunity and the precision to use that opportunity to achieve a specific goal. Consistent success comes to those who strike a balance between the two. We believe Thornburg Value Fund strikes such a balance.
The Fund seeks to find promising companies at a discounted valuation. It differs from many other 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 material positive returns for shareholders who have been invested since the Fund’s inception in 1995.
Our team is dedicated to providing value to shareholders. We accomplish this through the application of seasoned investment principles with hands-on, company-oriented research. We use a collaborative approach in implementing our investment research process. Our focus is on finding promising companies available at a discount to our estimate of their intrinsic value.
In managing the Thornburg Value Fund, we take a bottom-up approach to stock selection. The Fund is not predisposed to an industry or sector. We use a variety of valuation methods and business evaluations in an effort to gauge the intrinsic value of a company based on its past record and future potential. The continuum of process moves from screens and idea generation, through conventional “Wall Street” research and documentation, to company contact, the latter often including
AVERAGE ANNUAL TOTAL RETURNS* FOR PERIODS ENDED SEPTEMBER 30, 2007
YTD | 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | |||||||||||
A Shares (Incep: 10/2/95) | |||||||||||||||
Without Sales Charge | 12.92 | % | 22.23 | % | 18.49 | % | 17.85 | % | 10.30 | % | |||||
With Sales Charge | 7.84 | % | 16.73 | % | 16.69 | % | 16.77 | % | 9.80 | % | |||||
S&P 500 Index (Since: 10/2/95) | 9.13 | % | 16.44 | % | 13.14 | % | 15.45 | % | 6.57 | % | |||||
* | Periods under one year are not annualized. |
4 This page is not part of the Annual Report.
on-site visits. The focus of the analysis is on what’s behind the numbers, its revenue and cash-generating model. We make an effort to get to know the company’s reputation in the industry, its people and its corporate culture.
The current posture is to maintain a portfolio of 40–55 companies diversified by sector, industry, market capitalization, and our three categories of stocks: Basic Value, Consistent Earners and Emerging Franchises. Because of the limited number of stocks in the portfolio, every holding counts. At the time of purchase, we set a 12–18 month price target for each stock. The target is reviewed as the fundamentals of the stock develop during the course of ownership.
The bottom line? Engendering a wide-open, collegial environment fosters information flows and critical thinking intended to benefit portfolio decision making. We do not view our location in Santa Fe, NM, as a disadvantage. While we have access to the best of Wall Street’s analysis, we are not ruled by it. Distance from the crowd serves to fortify independent and objective thinking.
Being diversified in various ways, the Fund is well positioned to take advantage of a broad array of opportunities. Losses in one may be offset by gains in another. Limiting the number of stocks in the portfolio and employing a sell discipline has enabled the Fund to strike an effective balance between risk and reward.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/07
Top Contributors | Top Detractors | |
Las Vegas Sands Corp. | Caremark Rx, Inc. | |
Southern Copper Corp. | Motorola, Inc. | |
Freeport-McMoRan Copper & Gold, Inc. | Pfizer, Inc. | |
Hertz Global Holdings, Inc. | The Blackstone Group LP | |
China Mobile Ltd. | Wyeth |
Source: FactSet
MARKET CAPITALIZATION EXPOSURE
As of 9/30/07
TOP TEN HOLDINGS
As of 9/30/07
Las Vegas Sands Corp. | 3.8 | % | |
WellPoint, Inc. | 3.7 | % | |
Citigroup, Inc. | 3.2 | % | |
DIRECTV Group, Inc. | 3.2 | % | |
Freddie Mac | 3.2 | % | |
Freeport-McMoRan Copper & Gold | 3.1 | % | |
Motorola, Inc. | 3.0 | % | |
CME Group, Inc. | 3.0 | % | |
Intel Corp. | 3.0 | % | |
Google, Inc. | 2.9 | % |
BASKET STRUCTURE
As of 9/30/07
This page is not part of the Annual Report. 5
September 30, 2007
Table of Contents | ||
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12 | ||
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15 | ||
20 | ||
27 | ||
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35 | ||
38 |
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.
6 Certified Annual Report
William V. Fries,CFA Co-Portfolio Manager
Connor Browne,CFA Co-Portfolio Manager
Edward E. Maran,CFA Co-Portfolio Manager |
October 15, 2007
Dear Fellow Shareholder:
We are pleased to report that the fiscal year ended September 30, 2007, was a good year for the Thornburg Value Fund. The total return for Class A shares of the Fund was 22.23%, compared with 16.44% for the S&P 500 Index. Looking back just a little further, as fellow shareholders, we are pleased that returns have been consistently good for some time – the Fund has outperformed the S&P 500 Index in twelve consecutive quarters. While we do not expect this to continue indefinitely, we do believe that our focused approach, along with employing our three baskets of value, gives the portfolio the potential to outperform in many different economic environments. Individual stock selection is the key driver of consistent performance in a focused portfolio like the Thornburg Value Fund.
A varied group of stocks contributed to our strong performance. Our top ten stocks during the year operate in seven different sectors. That said, four of our top ten contributors to performance were Materials stocks (Southern Copper Corp., Freeport-McMoRan Copper & Gold Inc., Alcoa Inc., and Air Products & Chemicals Inc.). Even with the good sector performance, our combined exposure to the Energy and Materials sectors has declined over the course of the year, primarily due to sales of a number of our holdings as they reached price targets.
Las Vegas Sands Corp. had another great year and was our top single contributor. Progress continues in the development of the Cotai Strip in Macau, China, where Sands opened their newest casino, the Venetian Macau, just as our fiscal year ended. The grand opening was an impressive and encouraging event (Bill Fries attended). We continue to see greater value in future casino developments than is reflected in the company’s stock price. Hertz Global Holdings Inc. has performed well for the Fund since the company’s November 2006 stock market debut. The news coverage of the company’s Initial Public Offering was decidedly negative as the news media contended that private equity holders that were selling shares had made too much, too quickly. We took advantage of the negative sentiment and purchased shares at what we believed was a significant discount to fair value. Hertz has a leading share in on-airport car rentals in the U.S., and has an interesting and growing equipment rental business. New management is driving operational improvements that are building on the company’s leading brand.
Two emerging franchise stocks were among our top contributors – Cytyc Corp. and China Mobile Ltd. Cytyc is a medical device company focused on women’s health with a number of different products that have generated consistent, recurring revenue streams for the company. The company makes most of its money on “consumables” related to a number of different medical procedures. Once a doctor or a lab chooses to use their product for a procedure, Cytyc gets paid each time the doctor treats a patient with the device. This business is a lot like Gillette’s razor/razor blade business. We believed Cytyc deserved a higher valuation based on the compelling characteristics of its business model. Hologic, another publicly traded medical device company, agreed with us. They have agreed to acquire Cytyc at a reasonable premium to the company’s prior market value. The combined company looks interesting to us, and as of the end of the fiscal year, the Fund continued |
Certified Annual Report 7
Letter to Shareholders | ||
Continued |
to own Cytyc shares. China Mobile has risen dramatically since our initial investment due to favorable business development and rising stock valuations in China. While the Fund primarily invests in U.S. companies, we also invest opportunistically in compelling ideas outside of the United States. China Mobile was one such investment.
Not all of our investments were successful during the fiscal year and we will now take some time to discuss a few of the names that didn’t work. Of our 10 leading detractors to performance, five were sold during the fiscal year when it became evident that business developments were not tracking expectations. Five were still in the portfolio at fiscal year end. While stock price performance for these five has not been inspiring, we believe the firms continue to track towards our investment theses, and we are optimistic that the promise of our original investment theses are still valid.
Four of our leading ten detractors were Financials (Freddie Mac, Wachovia Corp., The Blackstone Group LP, and Capital One Financial Corp.). Freddie Mac and Wachovia have been buffeted from the turbulence in the asset backed securities market. Blackstone is a major player in the private equity space, which concerns investors because the access of private equity deals to funding has diminished. But concurrent with the difficult financing environment we are seeing potential for Blackstone to face less competition for attractive deals, for acquisitions to be consummated at more attractive prices, and for Blackstone to take advantage of its financial strength to do deals that less well-funded entities could not accomplish. Finally, we sold Capital One because we found a more compelling investment opportunity. The financial sector is facing real risks and headwinds related to rising credit costs, decreasing liquidity, and changes in the structure of the markets for financial derivatives. Investors have sought to decrease exposure to the financial sector, in general, and especially to anything related to mortgage finance. We believe, however, that in this turbulent environment there will be winners as well as losers. Those companies that were not over-exposed to the areas of the credit markets that are experiencing problems may be able to capitalize on the change in the competitive landscape that has occurred.
Two large cap U.S. pharmaceutical companies also appeared in our bottom ten (Pfizer Inc. and Wyeth). Both were sold following negative developments regarding significant pipeline candidates. Both companies face patent expiration on their largest drugs (Pfizer’s Lipitor and Wyeth’s Effexor). In both cases we were enthused about the candidates that we thought could fill the void and generate significant revenues for the companies. These drugs were either pulled from development or delayed by the FDA. While the FDA has seemingly been very tough on new compound approvals of late, we think most of the concern involves treatments that show benefit, but not for significant, near-term, life-threatening disease states. Two of our newest holdings in the Fund, Genentech Inc. and Roche Holdings AG, are focused on cancer treatments. We think that each company’s pipeline candidates are at less risk to adverse approval decisions because these drugs treat very ill patients and have significant survival benefits.
Related to housing and the credit markets, we thought we’d share commentary from our first monthly comments of this past fiscal year (October 2006), related to our investment in Toll Brothers. It is illustrative of our investment approach.
The recent performance of housing related stocks (they have done well) is somewhat perplexing to us, as we continue to be fearful for the outlook of that sector. Cancellations remain at or near historic highs for public builders, even as the October unemployment reading notched a five-year low (4.4%). We ended our relatively brief investment in the homebuilders during September when we sold our Toll Brothers position. We initiated a limited position earlier in the year, and were happy to be able to exit that position very close to cost even as our downside fundamental scenario had developed. We continue to hope for the opportunity to reenter the homebuilder space if presented with a more compelling risk-reward tradeoff. With the housing sector our main concern in
8 Certified Annual Report
an otherwise strong domestic backdrop, we continue to like the environment for U.S. stocks, and in particular those owned by the Thornburg Value Fund.
This excerpt is a nice example of a few of the keys to our investment philosophy. We believe one of the most important forms of risk management in the portfolio is stock selection, and it served us well here. We like to buy stocks when they are out of favor – Toll Brothers was out of favor on our initial investment, which is partly why we were able to escape unscathed even as fundamentals developed worse than we had envisioned. We employ an effective sell discipline. When fundamentals deteriorated, we sold the stock. That sale preserved value for our shareholders, as the stock has traded lower over the last year.
The economic environment today is admittedly difficult. The cases for both a domestic recession and accelerating inflation are easily supported. Nevertheless, prospects for companies that are positioned to benefit from global, as well as domestic, growth may continue to be bright. Despite a challenging economic environment, earnings improvement and interest rate levels will play the major role in determining future stock price levels. We are optimistic about the outlook for the companies in our portfolio and believe that the philosophy of finding promising companies at a discount to intrinsic value has the potential to continue to yield attractive results for investors over time.
We invite you to visit our web site at www.thornburg.com where you will find useful information on the Thornburg Value Fund as well our other funds and investment topics.
Thank you for your trust and confidence.
Sincerely,
![]() | ![]() | ![]() | ||
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 9
STATEMENT OF ASSETS AND LIABILITIES
Thornburg Value Fund | September 30, 2007 |
ASSETS | |||
Investments at value (cost $4,330,341,633) (Note 2) | $ | 4,985,527,504 | |
Cash | 741,618 | ||
Receivable for investments sold | 31,069,244 | ||
Receivable for fund shares sold | 27,147,696 | ||
Dividends receivable | 3,597,065 | ||
Prepaid expenses and other assets | 79,684 | ||
Total Assets | 5,048,162,811 | ||
LIABILITIES | |||
Payable for securities purchased | 30,978,201 | ||
Payable for fund shares redeemed | 10,597,367 | ||
Payable to investment advisor and other affiliates (Note 3) | 4,127,159 | ||
Accounts payable and accrued expenses | 817,264 | ||
Dividends payable | 4,004 | ||
Total liabilities | 46,523,995 | ||
NET ASSETS | $ | 5,001,638,816 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 2,143,362 | |
Net unrealized appreciation on investments | 655,185,871 | ||
Accumulated net realized gain (loss) | 445,392,295 | ||
Net capital paid in on shares of beneficial interest | 3,898,917,288 | ||
$ | 5,001,638,816 | ||
10 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($1,599,976,479 applicable to 36,226,613 shares of beneficial interest outstanding – Note 4) | $ | 44.17 | |
Maximum sales charge, 4.50% of offering price | 2.08 | ||
Maximum offering price per share | $ | 46.25 | |
Class B Shares: | |||
Net asset value and offering price per share * ($113,299,060 applicable to 2,674,867 shares of beneficial interest outstanding – Note 4) | $ | 42.36 | |
Class C Shares: | |||
Net asset value and offering price per share * ($621,687,232 applicable to 14,518,380 shares of beneficial interest outstanding – Note 4) | $ | 42.82 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($2,401,473,066 applicable to 53,598,903 shares of beneficial interest outstanding – Note 4) | $ | 44.80 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($151,259,736 applicable to 3,442,259 shares of beneficial interest outstanding – Note 4) | $ | 43.94 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($7,037,515 applicable to 159,439 shares of beneficial interest outstanding – Note 4) | $ | 44.14 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($106,905,728 applicable to 2,387,580 shares of beneficial interest outstanding – Note 4) | $ | 44.78 | |
* | 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 11
Thornburg Value Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $941,191) | $ | 63,040,726 | ||
Interest income (net of premium amortized of $57,508) | 14,709,696 | |||
Total Income | 77,750,422 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 29,048,560 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,766,163 | |||
Class B Shares | 132,775 | |||
Class C Shares | 701,857 | |||
Class I Shares | 850,718 | |||
Class R3 Shares | 125,484 | |||
Class R4 Shares | 2,233 | |||
Class R5 Shares | 24,437 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 3,536,151 | |||
Class B Shares | 1,063,013 | |||
Class C Shares | 5,621,685 | |||
Class R3 Shares | 503,880 | |||
Class R4 Shares | 4,505 | |||
Transfer agent fees | ||||
Class A Shares | 1,529,780 | |||
Class B Shares | 155,634 | |||
Class C Shares | 655,835 | |||
Class I Shares | 1,454,540 | |||
Class R3 Shares | 193,456 | |||
Class R4 Shares | 4,036 | |||
Class R5 Shares | 32,623 | |||
Registration and filing fees | ||||
Class A Shares | 101,547 | |||
Class B Shares | 17,649 | |||
Class C Shares | 30,240 | |||
Class I Shares | 126,461 | |||
Class R3 Shares | 27,458 | |||
Class R4 Shares | 17,075 | |||
Class R5 Shares | 15,945 | |||
Custodian fees (Note 3) | 677,176 | |||
Professional fees | 135,560 | |||
Accounting fees | 146,185 | |||
Trustee fees | 56,555 | |||
Other expenses | 735,611 | |||
Total Expenses | 49,494,827 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (305,712 | ) | ||
Fees paid indirectly (Note 3) | (78,446 | ) | ||
Net Expenses | 49,110,669 | |||
Net Investment Income | $ | 28,639,753 | ||
12 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Value Fund | Year Ended September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 455,944,236 | ||
Foreign currency transactions | (81,653 | ) | ||
455,862,583 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 268,342,490 | |||
Foreign currency translations | 25,407 | |||
268,367,897 | ||||
Net Realized And Unrealized Gain | 724,230,480 | |||
Net Increase in Net Assets Resulting From Operations | $ | 752,870,233 | ||
See notes to financial statements.
Certified Annual Report 13
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Value Fund
Year Ended | Year Ended | |||||||
September 30, 2007 | September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 28,639,753 | $ | 22,542,790 | ||||
Net realized gain on investments and foreign currency transactions | 455,862,583 | 110,046,848 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 268,367,897 | 208,823,648 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 752,870,233 | 341,413,286 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (9,517,757 | ) | (9,041,451 | ) | ||||
Class B Shares | (62,759 | ) | (208,210 | ) | ||||
Class C Shares | (455,165 | ) | (1,136,901 | ) | ||||
Class I Shares | (18,072,475 | ) | (10,091,399 | ) | ||||
Class R3 Shares | (707,632 | ) | (308,217 | ) | ||||
Class R4 Shares | (24,305 | ) | — | |||||
Class R5 Shares | (578,768 | ) | (49,565 | ) | ||||
From realized gains | ||||||||
Class A Shares | (40,724,358 | ) | — | |||||
Class B Shares | (3,458,689 | ) | — | |||||
Class C Shares | (17,561,097 | ) | — | |||||
Class I Shares | (39,645,604 | ) | — | |||||
Class R3 Shares | (1,897,722 | ) | — | |||||
Class R5 Shares | (456,993 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 254,630,938 | 8,192,636 | ||||||
Class B Shares | 70,097 | (8,432,486 | ) | |||||
Class C Shares | 43,074,529 | (19,010,765 | ) | |||||
Class I Shares | 1,059,702,770 | 516,880,753 | ||||||
Class R3 Shares | 87,096,462 | 33,144,127 | ||||||
Class R4 Shares | 6,750,585 | — | ||||||
Class R5 Shares | 88,298,634 | 10,020,743 | ||||||
Net Increase in Net Assets | 2,159,330,924 | 861,372,551 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 2,842,307,892 | 1,980,935,341 | ||||||
End of year | $ | 5,001,638,816 | $ | 2,842,307,892 | ||||
Undistributed net investment income | $ | 2,143,362 | $ | 3,003,948 |
See notes to financial statements.
14 Certified Annual Report
Thornburg Value Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types.
The Fund currently offers seven classes of shares of beneficial interest: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R3, Class R4, 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 R3 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 R4 shares are sold at net asset value without a sales charge at the time of purchase, but bear a service fee, (vii) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (viii) 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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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 Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $278,338 for Class R3 shares, $19,411 for Class R4 Shares, and $7,963 for Class R5 shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 |
Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2007, the Distributor has advised the Fund that it earned net commissions aggregating $259,262 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $31,772 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 distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class B, Class C, and Class R3 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class B, Class C, and Class R3 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 R3 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, 2007, 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, 2007, fees paid indirectly were $78,446. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 13,429,422 | $ | 547,664,978 | 5,364,547 | $ | 188,094,156 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,156,240 | 45,570,783 | 225,438 | 8,058,294 | ||||||||||
Shares repurchased | (8,199,947 | ) | (338,622,249 | ) | (5,410,098 | ) | (187,983,831 | ) | ||||||
Redemption fees received** | — | 17,426 | — | 24,017 | ||||||||||
Net Increase (Decrease) | 6,385,715 | $ | 254,630,938 | 179,887 | $ | 8,192,636 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 238,194 | $ | 9,443,286 | 84,367 | $ | 2,870,375 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 83,508 | 3,126,334 | 5,111 | 182,575 | ||||||||||
Shares repurchased | (316,970 | ) | (12,500,818 | ) | (343,699 | ) | (11,486,467 | ) | ||||||
Redemption fees received** | — | 1,295 | — | 1,031 | ||||||||||
Net Increase (Decrease) | 4,732 | $ | 70,097 | (254,221 | ) | $ | (8,432,486 | ) | ||||||
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 2,252,675 | $ | 89,691,497 | 1,293,511 | $ | 43,965,842 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 417,160 | 15,793,087 | 27,097 | 974,298 | ||||||||||
Shares repurchased | (1,569,020 | ) | (62,416,929 | ) | (1,894,704 | ) | (63,956,086 | ) | ||||||
Redemption fees received** | — | 6,874 | — | 5,181 | ||||||||||
Net Increase (Decrease) | 1,100,815 | $ | 43,074,529 | (574,096 | ) | $ | (19,010,765 | ) | ||||||
Class I Shares | ||||||||||||||
Shares sold | 29,796,837 | $ | 1,246,028,389 | 16,999,909 | $ | 608,478,099 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,185,152 | 47,802,515 | 235,654 | 8,565,755 | ||||||||||
Shares repurchased | (5,579,299 | ) | (234,149,563 | ) | (2,814,649 | ) | (100,182,966 | ) | ||||||
Redemption fees received** | — | 21,429 | — | 19,865 | ||||||||||
Net Increase (Decrease) | 25,402,690 | $ | 1,059,702,770 | 14,420,914 | $ | 516,880,753 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 2,874,263 | $ | 117,754,787 | 1,006,131 | $ | 35,300,994 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 64,233 | 2,541,337 | 8,245 | 297,478 | ||||||||||
Shares repurchased | (795,418 | ) | (33,200,944 | ) | (72,017 | ) | (2,454,755 | ) | ||||||
Redemption fees received** | — | 1,282 | — | 410 | ||||||||||
Net Increase (Decrease) | 2,143,078 | $ | 87,096,462 | 942,359 | $ | 33,144,127 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 170,003 | $ | 7,199,837 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 555 | 24,227 | — | — | ||||||||||
Shares repurchased | (11,119 | ) | (473,504 | ) | — | — | ||||||||
Redemption fees received** | — | 25 | — | — | ||||||||||
Net Increase (Decrease) | 159,439 | $ | 6,750,585 | — | $ | — | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 2,430,984 | $ | 101,996,046 | 276,338 | $ | 10,096,784 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 24,855 | 1,035,760 | 1,309 | 49,565 | ||||||||||
Shares repurchased | (343,451 | ) | (14,733,830 | ) | (3,390 | ) | (125,667 | ) | ||||||
Redemption fees received** | — | 658 | — | 61 | ||||||||||
Net Increase (Decrease) | 2,112,388 | $ | 88,298,634 | 274,257 | $ | 10,020,743 | ||||||||
* | Effective date of Class R4 shares was February 1, 2007. |
** | 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. |
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $4,285,270,660 and $2,978,007,575, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 4,328,815,499 | ||
Gross unrealized appreciation on a tax basis | $ | 732,866,933 | ||
Gross unrealized depreciation on a tax basis | (76,154,928 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 656,712,005 | ||
Distributable earnings – ordinary income | $ | 87,188,678 | ||
Distributable capital gains | $ | 358,910,099 |
At September 30, 2007, the Fund had deferred currency losses occurring subsequent to October 31, 2006 of $89,255. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $81,478 and increased net realized investment gain by $81,478. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency transactions.
The tax character of distributions paid during the year ended September 30, 2007, and September 30, 2006, was as follows:
2007 | 2006 | |||||
Distributions from: | ||||||
Ordinary income | $ | 33,091,951 | $ | 20,835,743 | ||
Capital gains | $ | 100,071,373 | $ | — | ||
Total Distributions | $ | 133,163,324 | $ | 20,835,743 | ||
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
There are special risks associated with international investing, including currency fluctuations, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 19
Thornburg Value Fund
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 37.59 | $ | 32.79 | $ | 28.11 | $ | 26.29 | $ | 20.73 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.29 | 0.35 | 0.32 | 0.20 | 0.15 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 7.86 | 4.76 | 4.64 | 1.81 | 5.45 | |||||||||||||||
Total from investment operations | 8.15 | 5.11 | 4.96 | 2.01 | 5.60 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.27 | ) | (0.31 | ) | (0.28 | ) | (0.19 | ) | (0.02 | ) | ||||||||||
Net realized gains | (1.30 | ) | — | — | — | — | ||||||||||||||
Return of capital | — | — | — | — | (0.02 | ) | ||||||||||||||
Total dividends | (1.57 | ) | (0.31 | ) | (0.28 | ) | (0.19 | ) | (0.04 | ) | ||||||||||
Change in net asset value | 6.58 | 4.80 | 4.68 | 1.82 | 5.56 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 44.17 | $ | 37.59 | $ | 32.79 | $ | 28.11 | $ | 26.29 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 22.23 | % | 15.63 | % | 17.70 | % | 7.61 | % | 27.02 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.70 | % | 1.02 | % | 1.05 | % | 0.69 | % | 0.66 | % | ||||||||||
Expenses, after expense reductions | 1.27 | % | 1.35 | % | 1.40 | % | 1.37 | % | 1.43 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.27 | % | 1.34 | % | 1.40 | % | 1.37 | % | 1.43 | % | ||||||||||
Expenses, before expense reductions | 1.27 | % | 1.35 | % | 1.40 | % | 1.37 | % | 1.43 | % | ||||||||||
Portfolio turnover rate | 79.29 | % | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | ||||||||||
Net assets at end of year (000) | $ | 1,599,976 | $ | 1,121,720 | $ | 972,478 | $ | 1,086,448 | $ | 994,043 |
(a) | Sales loads are not reflected in computing total return. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
20 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class B Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 36.17 | $ | 31.60 | $ | 27.13 | $ | 25.47 | $ | 20.22 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.04 | ) | 0.07 | 0.08 | (0.03 | ) | (0.05 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 7.55 | 4.58 | 4.47 | 1.74 | 5.30 | |||||||||||||||
Total from investment operations | 7.51 | 4.65 | 4.55 | 1.71 | 5.25 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.02 | ) | (0.08 | ) | (0.08 | ) | (0.05 | ) | — | |||||||||||
Net realized gains | (1.30 | ) | — | — | — | — | ||||||||||||||
Total dividends | (1.32 | ) | (0.08 | ) | (0.08 | ) | (0.05 | ) | — | |||||||||||
Change in net asset value | 6.19 | 4.57 | 4.47 | 1.66 | 5.25 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 42.36 | $ | 36.17 | $ | 31.60 | $ | 27.13 | $ | 25.47 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 21.26 | % | 14.71 | % | 16.78 | % | 6.71 | % | 25.96 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.09 | )% | 0.21 | % | 0.27 | % | (0.12 | )% | (0.22 | )% | ||||||||||
Expenses, after expense reductions | 2.07 | % | 2.15 | % | 2.17 | % | 2.18 | % | 2.31 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.07 | % | 2.14 | % | 2.17 | % | 2.18 | % | 2.31 | % | ||||||||||
Expenses, before expense reductions | 2.07 | % | 2.15 | % | 2.17 | % | 2.20 | % | 2.32 | % | ||||||||||
Portfolio turnover rate | 79.29 | % | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | ||||||||||
Net assets at end of year (000) | $ | 113,299 | $ | 96,587 | $ | 92,410 | $ | 93,508 | $ | 89,661 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 21
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 36.55 | $ | 31.92 | $ | 27.40 | $ | 25.70 | $ | 20.40 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.02 | ) | 0.09 | 0.09 | (0.02 | ) | (0.04 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 7.62 | 4.62 | 4.51 | 1.77 | 5.34 | |||||||||||||||
Total from investment operations | 7.60 | 4.71 | 4.60 | 1.75 | 5.30 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.03 | ) | (0.08 | ) | (0.08 | ) | (0.05 | ) | — | |||||||||||
Net realized gains | (1.30 | ) | — | — | — | — | ||||||||||||||
Total dividends | (1.33 | ) | (0.08 | ) | (0.08 | ) | (0.05 | ) | — | |||||||||||
Change in net asset value | 6.27 | 4.63 | 4.52 | 1.70 | 5.30 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 42.82 | $ | 36.55 | $ | 31.92 | $ | 27.40 | $ | 25.70 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 21.29 | % | 14.77 | % | 16.80 | % | 6.81 | % | 25.98 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.05 | )% | 0.27 | % | 0.31 | % | (0.07 | )% | (0.16 | )% | ||||||||||
Expenses, after expense reductions | 2.03 | % | 2.09 | % | 2.14 | % | 2.14 | % | 2.25 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.03 | % | 2.09 | % | 2.14 | % | 2.14 | % | 2.25 | % | ||||||||||
Expenses, before expense reductions | 2.03 | % | 2.09 | % | 2.14 | % | 2.15 | % | 2.25 | % | ||||||||||
Portfolio turnover rate | 79.29 | % | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | ||||||||||
Net assets at end of year (000) | $ | 621,687 | $ | 490,399 | $ | 446,567 | $ | 475,296 | $ | 441,103 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 22
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 38.11 | $ | 33.23 | $ | 28.49 | $ | 26.64 | $ | 20.95 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.44 | 0.50 | 0.45 | 0.31 | 0.26 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 7.96 | 4.82 | 4.70 | 1.84 | 5.51 | |||||||||||||||
Total from investment operations | 8.40 | 5.32 | 5.15 | 2.15 | 5.77 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.41 | ) | (0.44 | ) | (0.41 | ) | (0.30 | ) | (0.03 | ) | ||||||||||
Net realized gains | (1.30 | ) | — | — | — | — | ||||||||||||||
Return of capital | — | — | — | — | (0.05 | ) | ||||||||||||||
Total dividends | (1.71 | ) | (0.44 | ) | (0.41 | ) | (0.30 | ) | (0.08 | ) | ||||||||||
Change in net asset value | 6.69 | 4.88 | 4.74 | 1.85 | 5.69 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 44.80 | $ | 38.11 | $ | 33.23 | $ | 28.49 | $ | 26.64 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 22.62 | % | 16.10 | % | 18.16 | % | 8.04 | % | 27.55 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.05 | % | 1.41 | % | 1.44 | % | 1.07 | % | 1.10 | % | ||||||||||
Expenses, after expense reductions | 0.93 | % | 0.98 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.92 | % | 0.97 | % | 0.98 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, before expense reductions | 0.93 | % | 0.98 | % | 1.00 | % | 0.99 | % | 1.03 | % | ||||||||||
Portfolio turnover rate | 79.29 | % | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | ||||||||||
Net assets at end of year (000) | $ | 2,401,473 | $ | 1,074,492 | $ | 457,788 | $ | 378,334 | $ | 260,624 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 23
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | Period Ended | |||||||||||||||||||
2007 | 2006 | 2005 | 2004 | September 30, 2003(c) | ||||||||||||||||
Class R3 Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||||||
Net asset value, beginning of period | $ | 37.43 | $ | 32.68 | $ | 28.06 | $ | 26.27 | $ | 25.83 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.26 | 0.37 | 0.33 | 0.17 | 0.03 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 7.81 | 4.71 | 4.60 | 1.85 | 0.41 | |||||||||||||||
Total from investment operations | 8.07 | 5.08 | 4.93 | 2.02 | 0.44 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.26 | ) | (0.33 | ) | (0.31 | ) | (0.23 | ) | — | |||||||||||
Net realized gains | (1.30 | ) | — | — | — | — | ||||||||||||||
Total dividends | (1.56 | ) | (0.33 | ) | (0.31 | ) | (0.23 | ) | — | |||||||||||
Change in net asset value | 6.51 | 4.75 | 4.62 | 1.79 | 0.44 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 43.94 | $ | 37.43 | $ | 32.68 | $ | 28.06 | $ | 26.27 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 22.11 | % | 15.60 | % | 17.64 | % | 7.68 | % | 1.70 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.63 | % | 1.05 | % | 1.07 | % | 0.61 | % | 0.48 | % (b) | ||||||||||
Expenses, after expense reductions | 1.35 | % | 1.36 | % | 1.35 | % | 1.34 | % | 1.45 | % (b) | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.35 | % | 1.35 | % | 1.35 | % | 1.34 | % | 1.45 | % (b) | ||||||||||
Expenses, before expense reductions | 1.63 | % | 1.69 | % | 1.94 | % | 2.22 | % | 44,445.63 | % (b)† | ||||||||||
Portfolio turnover rate | 79.29 | % | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | ||||||||||
Net assets at end of period (000) | $ | 151,260 | $ | 48,627 | $ | 11,661 | $ | 5,754 | $ | — | (d) |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R3 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. |
See notes to financial statements.
24 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Period Ended September 30, 2007(c) | ||||
Class R4 Shares: | ||||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 41.00 | ||
Income from investment operations: | ||||
Net investment income | 0.20 | |||
Net realized and unrealized gain (loss) on investments | 3.12 | |||
Total from investment operations | 3.32 | |||
Less dividends from: | ||||
Net investment income | (0.18 | ) | ||
Change in net asset value | 3.14 | |||
NET ASSET VALUE, end of period | $ | 44.14 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 8.09 | % | ||
Ratios to average net assets: | ||||
Net investment income | 0.70 | % (b) | ||
Expenses, after expense reductions | 1.25 | % (b) | ||
Expenses, after expense reductions and net of custody credits | 1.25 | % (b) | ||
Expenses, before expense reductions | 2.34 | % (b) | ||
Portfolio turnover rate | 79.29 | % | ||
Net assets at end of period (000) | $ | 7,038 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R4 shares was February 1, 2007. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 25
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | Period Ended | |||||||||||
September 30, | ||||||||||||
2007 | 2006 | 2005(c) | ||||||||||
Class R5 Shares: | ||||||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 38.09 | $ | 33.22 | $ | 30.75 | ||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.49 | 0.24 | 0.28 | |||||||||
Net realized and unrealized gain (loss) on investments | 7.91 | 5.07 | 2.45 | |||||||||
Total from investment operations | 8.40 | 5.31 | 2.73 | |||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.41 | ) | (0.44 | ) | (0.26 | ) | ||||||
Net realized gains | (1.30 | ) | — | — | ||||||||
Total dividends | (1.71 | ) | (0.44 | ) | (0.26 | ) | ||||||
Change in net asset value | 6.69 | 4.87 | 2.47 | |||||||||
NET ASSET VALUE, end of period | $ | 44.78 | $ | 38.09 | $ | 33.22 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return(a) | 22.63 | % | 16.07 | % | 8.93 | % | ||||||
Ratios to average net assets: | ||||||||||||
Net investment income | 1.14 | % | 0.64 | % | 1.31 | % (b) | ||||||
Expenses, after expense reductions | 0.91 | % | 1.00 | % | 1.00 | % (b) | ||||||
Expenses, after expense reductions and net of custody credits | 0.91 | % | 0.98 | % | 0.99 | % (b) | ||||||
Expenses, before expense reductions | 0.93 | % | 3.24 | % | 127.30 | % (b)† | ||||||
Portfolio turnover rate | 79.29 | % | 51.36 | % | 58.90 | % | ||||||
Net assets at end of period (000) | $ | 106,906 | $ | 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. |
See | notes to financial statements. |
26 Certified Annual Report
Thornburg Value Fund | September 30, 2007 |
CUSIPS: CLASS A – 885-215-731, CLASS B – 885-215-590, CLASS C – 885-215-715, CLASS I – 885-215-632, CLASS R3 – 885-215-533, CLASS R4 – 885-215-277, CLASS R5 – 885-215-376
NASDAQ SYMBOLS: CLASS A – TVAFX, CLASS B – TVBFX, CLASS C – TVCFX, CLASS I – TVIFX, CLASS R3 – TVRFX, CLASS R4 – TVIRX, CLASS R5 – TVRRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/07
Diversified Financials | 12.3 | % | |
Telecommunication Services | 8.9 | % | |
Health Care Equipment & Services | 8.8 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 6.8 | % | |
Technology Hardware & Equipment | 6.2 | % | |
Materials | 5.8 | % | |
Energy | 5.3 | % | |
Media | 5.3 | % | |
Insurance | 5.2 | % | |
Software & Services | 4.6 | % | |
Banks | 4.2 | % | |
Semiconductors & Semiconductor Equipment | 4.0 | % | |
Transportation | 4.0 | % | |
Consumer Services | 3.8 | % | |
Capital Goods | 2.7 | % | |
Utilities | 2.7 | % | |
Food, Beverage & Tobacco | 2.3 | % | |
Food & Staples Retailing | 2.1 | % | |
Other Assets and Cash Equivalents | 5.0 | % |
Shares/ | |||||
Principal Amount | Value | ||||
COMMON STOCK — 94.94% | |||||
BANKS — 4.16% | |||||
COMMERCIAL BANKS — 1.00% | |||||
Wachovia Corp. | 993,000 | $ | 49,798,950 | ||
THRIFTS & MORTGAGE FINANCE — 3.16% | |||||
Freddie Mac | 2,683,209 | 158,336,163 | |||
208,135,113 | |||||
CAPITAL GOODS — 2.67% | |||||
INDUSTRIAL CONGLOMERATES — 2.67% | |||||
General Electric Co. | 3,227,600 | 133,622,640 | |||
133,622,640 | |||||
CONSUMER SERVICES — 3.79% | |||||
HOTELS, RESTAURANTS & LEISURE — 3.79% | |||||
Las Vegas Sands Corp.+ | 1,422,306 | 189,764,066 | |||
189,764,066 | |||||
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
DIVERSIFIED FINANCIALS — 12.27% | |||||
CAPITAL MARKETS — 6.04% | |||||
Alliance Bernstein Holdings LP | 320,030 | $ | 28,185,042 | ||
Charles Schwab Corp. | 4,179,400 | 90,275,040 | |||
The Blackstone Group LP+ | 3,640,100 | 91,293,708 | |||
UBS AG | 1,731,700 | 92,213,025 | |||
DIVERSIFIED FINANCIAL SERVICES — 6.23% | |||||
Citigroup, Inc. | 3,445,100 | 160,782,817 | |||
CME Group, Inc. | 256,825 | 150,846,164 | |||
613,595,796 | |||||
ENERGY — 5.32% | |||||
OIL, GAS & CONSUMABLE FUELS — 5.32% | |||||
Apache Corp. | 1,596,337 | 143,766,110 | |||
Conoco Phillips | 1,395,900 | 122,518,143 | |||
266,284,253 | |||||
FOOD & STAPLES RETAILING — 2.12% | |||||
FOOD & STAPLES RETAILING — 2.12% | |||||
Rite Aid Corp.+ | 22,905,200 | 105,822,024 | |||
105,822,024 | |||||
FOOD, BEVERAGE & TOBACCO — 2.27% | |||||
FOOD PRODUCTS — 2.27% | |||||
Kraft Foods, Inc. A | 3,295,200 | 113,717,352 | |||
113,717,352 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 8.80% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 3.92% | |||||
Cytyc Corp.+ | 2,171,797 | 103,486,127 | |||
Varian Medical Services, Inc.+ | 2,215,800 | 92,819,862 | |||
HEALTH CARE PROVIDERS & SERVICES — 3.69% | |||||
WellPoint, Inc.+ | 2,336,250 | 184,376,850 | |||
HEALTH CARE TECHNOLOGY — 1.19% | |||||
Eclipsys Corp.+ | 2,542,440 | 59,289,701 | |||
439,972,540 | |||||
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 |
Shares/ | |||||
Principal Amount | Value | ||||
INSURANCE — 5.23% | |||||
INSURANCE — 5.23% | |||||
Allstate Corp. | 2,304,600 | $ | 131,800,074 | ||
American International Group, Inc. | 1,916,300 | 129,637,695 | |||
261,437,769 | |||||
MATERIALS — 5.79% | |||||
CHEMICALS — 2.67% | |||||
Air Products & Chemicals, Inc. | 1,366,500 | 133,589,040 | |||
METALS & MINING — 3.12% | |||||
Freeport-McMoRan Copper & Gold, Inc. | 1,486,055 | 155,872,309 | |||
289,461,349 | |||||
MEDIA — 5.30% | |||||
MEDIA — 5.30% | |||||
Comcast Corp.+ | 4,456,450 | 106,776,542 | |||
DIRECTV Group, Inc.+ | 6,528,700 | 158,516,836 | |||
265,293,378 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 6.82% | |||||
BIOTECHNOLOGY — 2.38% | |||||
Genentech, Inc.+ | 1,524,700 | 118,957,094 | |||
PHARMACEUTICALS — 4.44% | |||||
Roche Holdings AG | 654,700 | 118,709,186 | |||
Teva Pharmaceutical Industries Ltd. ADR | 2,330,800 | 103,650,676 | |||
341,316,956 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.02% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.02% | |||||
Intel Corp. | 5,710,300 | 147,668,358 | |||
ON Semiconductor Corp.+ | 4,245,000 | 53,317,200 | |||
200,985,558 | |||||
SOFTWARE & SERVICES — 4.56% | |||||
INTERNET SOFTWARE & SERVICES — 2.93% | |||||
Google, Inc.+ | 257,892 | 146,294,395 | |||
SOFTWARE — 1.63% | |||||
Microsoft Corp. | 2,769,300 | 81,583,578 | |||
227,877,973 | |||||
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 6.22% | ||||||
COMMUNICATIONS EQUIPMENT — 5.03% | ||||||
Corning, Inc. | 4,060,400 | $ | 100,088,860 | |||
Motorola, Inc. | 8,172,300 | 151,432,719 | ||||
COMPUTERS & PERIPHERALS — 1.19% | ||||||
Dell, Inc.+ | 2,152,800 | 59,417,280 | ||||
310,938,859 | ||||||
TELECOMMUNICATION SERVICES — 8.94% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.20% | ||||||
Chunghwa Telecom Co. Ltd. ADR | 6,390,516 | 118,096,736 | ||||
Level 3 Communications, Inc.+ | 19,803,900 | 92,088,135 | ||||
WIRELESS TELECOMMUNICATION SERVICES — 4.74% | ||||||
China Mobile Ltd. | 7,155,700 | 117,085,490 | ||||
Crown Castle International Corp.+ | 2,951,850 | 119,933,666 | ||||
447,204,027 | ||||||
TRANSPORTATION — 3.99% | ||||||
AIRLINES — 1.16% | ||||||
JetBlue Airways Corp.+ | 6,320,400 | 58,274,088 | ||||
ROAD & RAIL — 2.83% | ||||||
Hertz Global Holdings, Inc.+ | 6,225,400 | 141,441,088 | ||||
199,715,176 | ||||||
UTILITIES — 2.67% | ||||||
ELECTRIC UTILITIES — 2.67% | ||||||
Entergy Corp. | 1,232,136 | 133,428,007 | ||||
133,428,007 | ||||||
TOTAL COMMON STOCK (Cost $4,093,386,965) | 4,748,572,836 | |||||
SHORT TERM INVESTMENTS — 4.74% | ||||||
Abbey National, 4.775%, 10/2/2007 | $ | 77,000,000 | 76,989,787 | |||
General Electric Capital Corp., 4.68%, 10/3/2007 | 43,000,000 | 42,988,820 | ||||
General Electric Capital Corp., 4.68%, 10/4/2007 | 50,000,000 | 49,980,500 | ||||
Toyota Credit de Puerto Rico, 4.70%, 10/3/2007 | 17,000,000 | 16,995,561 | ||||
Toyota Credit de Puerto Rico, 4.65%, 10/1/2007 | 50,000,000 | 50,000,000 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $236,954,668) | 236,954,668 | |||||
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 |
Value | |||
TOTAL INVESTMENTS — 99.68% (Cost $4,330,341,633) | $ | 4,985,527,504 | |
OTHER ASSETS LESS LIABILITIES — 0.32% | 16,111,312 | ||
NET ASSETS — 100.00% | $ | 5,001,638,816 | |
Footnote Legend
+ Non-income producing
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
See notes to financial statements.
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
32 Certified Annual Report
Thornburg Value Fund | September 30, 2007 (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 B shares within eight years of purchase;
(d) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(e) 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, 2007 and held until September 30, 2007.
Actual Expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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
Beginning Account Value 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,098.20 | $ | 6.70 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.68 | $ | 6.45 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,093.90 | $ | 10.79 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.76 | $ | 10.39 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,094.00 | $ | 10.59 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.95 | $ | 10.19 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,099.90 | $ | 4.89 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.41 | $ | 4.70 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,097.80 | $ | 7.10 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.30 | $ | 6.83 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,098.60 | $ | 6.58 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,100.20 | $ | 4.72 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.58 | $ | 4.54 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.27%; B: 2.06%; C: 2.02%; I: 0.93%; R3: 1.35%; R4: 1.25%; and R5: 0.90%) 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. |
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 for each class of shares 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
Thornburg Value Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Value Fund versus S&P 500 Index (October 2, 1995 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2007 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 10/2/95) | 16.73 | % | 16.77 | % | 9.80 | % | 13.59 | % | ||||
B Shares (Incep: 4/3/00) | 16.26 | % | 16.69 | % | — | 4.41 | % | |||||
C Shares (Incep: 10/2/95) | 20.29 | % | 16.95 | % | 9.44 | % | 13.14 | % | ||||
R3 Shares (Incep: 7/1/03) | 22.11 | % | — | — | 15.11 | % | ||||||
R4 Shares (Incep: 2/1/07) | — | — | — | 8.09 | %* | |||||||
R5 Shares (Incep: 2/1/05) | 22.63 | % | — | — | 17.92 | % | ||||||
S&P 500 Index (Since: 10/2/95) | 16.44 | % | 15.45 | % | 6.57 | % | 10.20 | % |
* | Not annualized for periods less than one year. |
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 R3, R4 and R5 shares. Class R3, R4 and R5 shares are available only to certain qualified investors. Class A shares are subject to a 1% 30-day redemption fee.
The S&P 500 Index, an unmanaged broad measure of the U.S. stock market, does not reflect sales charges or expenses. Investors cannot invest directly in an index.
34 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Value Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 (Unaudited) |
Name, Age, Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
36 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 (Unaudited) |
Name, Age, Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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
Thornburg Value Fund | September 30, 2007 (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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web
site at www.sec.gov.
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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the fiscal year ended September 30, 2007, the Fund designates long-term capital gain dividends of $100,071,373.
For the tax year ended September 30, 2007, the Thornburg Value Fund designates 61.06% (or the maximum allowed) 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.
54.47% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2007 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, 2007. Complete information will be computed and reported in conjunction with your 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to a category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to broad-based securities indices, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal
38 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Value Fund | September 30, 2007 (Unaudited) |
meetings throughout the year, the Advisor’s staffing and other resources, trade execution, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s superior investment performance in most periods relative to the performance of a category of “large blend” equity mutual funds selected by a mutual fund analyst firm, the Fund’s higher relative performance in periods of negative market conditions relative to the same category of mutual funds, the Fund’s higher performance relative to two-broad based securities indices over multiple periods, the Fund’s cumulative returns over time, and measures of the Fund’s risk.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 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. The Trustees observed that the overall expense ratio of the Fund fell between the median and average expense ratios for the group of mutual funds assembled by an independent mutual fund analyst firm, that the management fee was somewhat higher than the average and median fee rates for the same group of funds, and that the difference between the fee rates was not significant in view of its degree and the Fund’s investment performance. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund’s assets increase, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 39
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
40 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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. 41
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 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 Fund expects to invest primarily in domestic equity securities (primarily common stocks) selected on a value basis. However, the Fund may own a variety of securities, including foreign equity and debt securities and domestic debt securities which, in the opinion of the Fund’s investment advisor, offer prospects for meeting the Fund’s investment goals.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Risks may be associated with investments in emerging markets including illiquidity and volatility. Additionally, the Fund may invest a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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.
To determine a fund’s Morningstar Rating™, funds with at least a three-year history are ranked in their categories by their Morningstar Risk-Adjusted Return scores. The top 10% receive 5 stars; the next 22.5%, 4 stars; the middle 35%, 3 stars; the next 22.5%, 2 stars; and the bottom 10% receive 1 star. The Risk-Adjusted Return accounts for variation in a fund’s performance (including the effects of all sales charges), placing more emphasis on downward variations and rewarding consistent performance. Other share classes may have different performance characteristics. © 2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
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.
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.
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.
This page is not part of the Annual Report. 3
Thornburg Value Fund
Finding Promising Companies at a Discount
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, 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. The total annual fund operating expense of Class I shares is 0.98%, as disclosed in the most recent Prospectus.
CO-PORTFOLIO MANAGERS
Left to right: Connor Browne,CFA, Bill Fries,CFA, Edward Maran,CFA.
KEY PORTFOLIO ATTRIBUTES
As of 9/30/07
Portfolio P/E Trailing 12-months* | 17.2x | ||
Portfolio Price to Cash Flow* | 10.9 | ||
Portfolio Price to Book Value* | 2.9 | ||
Median Market Cap* | $ | 33.9 B | |
7-Year Beta (Thornburg vs. S&P 500)* | 0.94 | ||
Equity Holdings | 41 |
* | Source: FactSet |
Investing is both an art and a science. It requires the vision to recognize opportunity and the precision to use that opportunity to achieve a specific goal. Consistent success comes to those who strike a balance between the two. We believe Thornburg Value Fund strikes such a balance.
The Fund seeks to find promising companies at a discounted valuation. It differs from many other 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 material positive returns for shareholders who have been invested since the Fund’s inception in 1995.
Our team is dedicated to providing value to shareholders. We accomplish this through the application of seasoned investment principles with hands-on, company-oriented research. We use a collaborative approach in implementing our investment research process. Our focus is on finding promising companies available at a discount to our estimate of their intrinsic value.
In managing the Thornburg Value Fund, we take a bottom-up approach to stock selection. The Fund is not predisposed to an industry or sector. We use a variety of valuation methods and business evaluations in an effort to gauge the intrinsic value of a company based on its past record and future potential. The continuum of process moves from screens and idea generation, through conventional “Wall Street” research and documentation, to company contact, the latter often including
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2007
YTD | 1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||
I Shares (Incep: 11/2/98) | 13.20 | % | 22.62 | % | 18.93 | % | 18.31 | % | 10.30 | % | |||||
S&P 500 Index (Since: 11/2/98) | 9.13 | % | 16.44 | % | 13.14 | % | 15.45 | % | 5.30 | % |
* | Periods under one year are not annualized. |
4 This page is not part of the Annual Report.
on-site visits. The focus of the analysis is on what’s behind the numbers, its revenue and cash-generating model. We make an effort to get to know the company’s reputation in the industry, its people and its corporate culture.
The current posture is to maintain a portfolio of 40–55 companies diversified by sector, industry, market capitalization, and our three categories of stocks: Basic Value, Consistent Earners and Emerging Franchises. Because of the limited number of stocks in the portfolio, every holding counts. At the time of purchase, we set a 12–18 month price target for each stock. The target is reviewed as the fundamentals of the stock develop during the course of ownership.
The bottom line? Engendering a wide-open, collegial environment fosters information flows and critical thinking intended to benefit portfolio decision making. We do not view our location in Santa Fe, NM, as a disadvantage. While we have access to the best of Wall Street’s analysis, we are not ruled by it. Distance from the crowd serves to fortify independent and objective thinking.
Being diversified in various ways, the Fund is well positioned to take advantage of a broad array of opportunities. Losses in one may be offset by gains in another. Limiting the number of stocks in the portfolio and employing a sell discipline has enabled the Fund to strike an effective balance between risk and reward.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/07
Top Contributors | Top Detractors | |
Las Vegas Sands Corp. | Caremark Rx, Inc. | |
Southern Copper Corp. | Motorola, Inc. | |
Freeport-McMoRan Copper & Gold, Inc. | Pfizer, Inc. | |
Hertz Global Holdings, Inc. | The Blackstone Group LP | |
China Mobile Ltd. | Wyeth |
Source: FactSet
MARKET CAPITALIZATION EXPOSURE
As of 9/30/07
TOP TEN HOLDINGS
As of 9/30/07
Las Vegas Sands Corp. | 3.8 | % | |
WellPoint, Inc. | 3.7 | % | |
Citigroup, Inc. | 3.2 | % | |
DIRECTV Group, Inc. | 3.2 | % | |
Freddie Mac | 3.2 | % | |
Freeport-McMoRan Copper & Gold | 3.1 | % | |
Motorola, Inc. | 3.0 | % | |
CME Group, Inc. | 3.0 | % | |
Intel Corp. | 3.0 | % | |
Google, Inc. | 2.9 | % |
BASKET STRUCTURE
As of 9/30/07
This page is not part of the Annual Report. 5
I Shares – September 30, 2007
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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.
6 Certified Annual Report
William V. Fries, CFA Co-Portfolio Manager
Connor Browne,CFA Co-Portfolio Manager
Edward E. Maran, CFA Co-Portfolio Manager | October 15, 2007
Dear Fellow Shareholder:
We are pleased to report that the fiscal year ended September 30, 2007, was a good year for the Thornburg Value Fund. The total return for the Fund’s Class I shares was 22.62%, compared with 16.44% for the S&P 500 Index. Looking back just a little further, as fellow shareholders, we are pleased that returns have been consistently good for some time – the Fund has outperformed the S&P 500 Index in twelve consecutive quarters. While we do not expect this to continue indefinitely, we do believe that our focused approach, along with employing our three baskets of value, gives the portfolio the potential to outperform in many different economic environments. Individual stock selection is the key driver of consistent performance in a focused portfolio like the Thornburg Value Fund.
A varied group of stocks contributed to our strong performance. Our top ten stocks during the year operate in seven different sectors. That said, four of our top ten contributors to performance were Materials stocks (Southern Copper Corp., Freeport-McMoRan Copper & Gold Inc., Alcoa Inc., and Air Products & Chemicals Inc.). Even with the good sector performance, our combined exposure to the Energy and Materials sectors has declined over the course of the year, primarily due to sales of a number of our holdings as they reached price targets.
Las Vegas Sands Corp. had another great year and was our top single contributor. Progress continues in the development of the Cotai Strip in Macau, China, where Sands opened their newest casino, the Venetian Macau, just as our fiscal year ended. The grand opening was an impressive and encouraging event (Bill Fries attended). We continue to see greater value in future casino developments than is reflected in the company’s stock price. Hertz Global Holdings Inc. has performed well for the Fund since the company’s November 2006 stock market debut. The news coverage of the company’s Initial Public Offering was decidedly negative as the news media contended that private equity holders that were selling shares had made too much, too quickly. We took advantage of the negative sentiment and purchased shares at what we believed was a significant discount to fair value. Hertz has a leading share in on-airport car rentals in the U.S., and has an interesting and growing equipment rental business. New management is driving operational improvements that are building on the company’s leading brand.
Two emerging franchise stocks were among our top contributors – Cytyc Corp. and China Mobile Ltd. Cytyc is a medical device company focused on women’s health with a number of different products that have generated consistent, recurring revenue streams for the company. The company makes most of its money on “consumables” related to a number of different medical procedures. Once a doctor or a lab chooses to use their product for a procedure, Cytyc gets paid each time the doctor treats a patient with the device. This business is a lot like Gillette’s razor/razor blade business. We believed Cytyc deserved a higher valuation based on the compelling characteristics of its business model. Hologic, another publicly traded medical device company, agreed with us. They have agreed to acquire Cytyc at a reasonable premium to the company’s prior market value. The combined company looks interesting to us, and as of the end of the fiscal year, the Fund continued |
Certified Annual Report 7
Letter to Shareholders
Continued |
to own Cytyc shares. China Mobile has risen dramatically since our initial investment due to favorable business development and rising stock valuations in China. While the Fund primarily invests in U.S. companies, we also invest opportunistically in compelling ideas outside of the United States. China Mobile was one such investment.
Not all of our investments were successful during the fiscal year and we will now take some time to discuss a few of the names that didn’t work. Of our 10 leading detractors to performance, five were sold during the fiscal year when it became evident that business developments were not tracking expectations. Five were still in the portfolio at fiscal year end. While stock price performance for these five has not been inspiring, we believe the firms continue to track towards our investment theses, and we are optimistic that the promise of our original investment theses are still valid.
Four of our leading ten detractors were Financials (Freddie Mac, Wachovia Corp., The Blackstone Group LP, and Capital One Financial Corp.). Freddie Mac and Wachovia have been buffeted from the turbulence in the asset backed securities market. Blackstone is a major player in the private equity space, which concerns investors because the access of private equity deals to funding has diminished. But concurrent with the difficult financing environment we are seeing potential for Blackstone to face less competition for attractive deals, for acquisitions to be consummated at more attractive prices, and for Blackstone to take advantage of its financial strength to do deals that less well-funded entities could not accomplish. Finally, we sold Capital One because we found a more compelling investment opportunity. The financial sector is facing real risks and headwinds related to rising credit costs, decreasing liquidity, and changes in the structure of the markets for financial derivatives. Investors have sought to decrease exposure to the financial sector, in general, and especially to anything related to mortgage finance. We believe, however, that in this turbulent environment there will be winners as well as losers. Those companies that were not over-exposed to the areas of the credit markets that are experiencing problems may be able to capitalize on the change in the competitive landscape that has occurred.
Two large cap U.S. pharmaceutical companies also appeared in our bottom ten (Pfizer Inc. and Wyeth). Both were sold following negative developments regarding significant pipeline candidates. Both companies face patent expiration on their largest drugs (Pfizer’s Lipitor and Wyeth’s Effexor). In both cases we were enthused about the candidates that we thought could fill the void and generate significant revenues for the companies. These drugs were either pulled from development or delayed by the FDA. While the FDA has seemingly been very tough on new compound approvals of late, we think most of the concern involves treatments that show benefit, but not for significant, near-term, life-threatening disease states. Two of our newest holdings in the Fund, Genentech Inc. and Roche Holdings AG, are focused on cancer treatments. We think that each company’s pipeline candidates are at less risk to adverse approval decisions because these drugs treat very ill patients and have significant survival benefits.
Related to housing and the credit markets, we thought we’d share commentary from our first monthly comments of this past fiscal year (October 2006), related to our investment in Toll Brothers. It is illustrative of our investment approach.
The recent performance of housing related stocks (they have done well) is somewhat perplexing to us, as we continue to be fearful for the outlook of that sector. Cancellations remain at or near historic highs for public builders, even as the October unemployment reading notched a five-year low (4.4%). We ended our relatively brief investment in the homebuilders during September when we sold our Toll Brothers position. We initiated a limited position earlier in the year, and were happy to be able to exit that position very close to cost even as our downside fundamental scenario had developed. We continue to hope for the opportunity to reenter the homebuilder space if presented with a more compelling risk-reward tradeoff. With the housing sector our main concern in
8 Certified Annual Report
an otherwise strong domestic backdrop, we continue to like the environment for U.S. stocks, and in particular those owned by the Thornburg Value Fund.
This excerpt is a nice example of a few of the keys to our investment philosophy. We believe one of the most important forms of risk management in the portfolio is stock selection, and it served us well here. We like to buy stocks when they are out of favor – Toll Brothers was out of favor on our initial investment, which is partly why we were able to escape unscathed even as fundamentals developed worse than we had envisioned. We employ an effective sell discipline. When fundamentals deteriorated, we sold the stock. That sale preserved value for our shareholders, as the stock has traded lower over the last year.
The economic environment today is admittedly difficult. The cases for both a domestic recession and accelerating inflation are easily supported. Nevertheless, prospects for companies that are positioned to benefit from global, as well as domestic, growth may continue to be bright. Despite a challenging economic environment, earnings improvement and interest rate levels will play the major role in determining future stock price levels. We are optimistic about the outlook for the companies in our portfolio and believe that the philosophy of finding promising companies at a discount to intrinsic value has the potential to continue to yield attractive results for investors over time.
We invite you to visit our web site at www.thornburg.com where you will find useful information on the Thornburg Value Fund as well our other funds and investment topics.
Thank you for your trust and confidence.
Sincerely, | ||||
![]() | ![]() | ![]() | ||
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 9
STATEMENT OF ASSETS AND LIABILITIES
Thornburg Value Fund | September 30, 2007 |
ASSETS | |||
Investments at value (cost $4,330,341,633) (Note 2) | $ | 4,985,527,504 | |
Cash | 741,618 | ||
Receivable for investments sold | 31,069,244 | ||
Receivable for fund shares sold | 27,147,696 | ||
Dividends receivable | 3,597,065 | ||
Prepaid expenses and other assets | 79,684 | ||
Total Assets | 5,048,162,811 | ||
LIABILITIES | |||
Payable for securities purchased | 30,978,201 | ||
Payable for fund shares redeemed | 10,597,367 | ||
Payable to investment advisor and other affiliates (Note 3) | 4,127,159 | ||
Accounts payable and accrued expenses | 817,264 | ||
Dividends payable | 4,004 | ||
Total Liabilities | 46,523,995 | ||
NET ASSETS | $ | 5,001,638,816 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 2,143,362 | |
Net unrealized appreciation on investments | 655,185,871 | ||
Accumulated net realized gain (loss) | 445,392,295 | ||
Net capital paid in on shares of beneficial interest | 3,898,917,288 | ||
$ | 5,001,638,816 | ||
10 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
Thornburg Value Fund | September 30, 2007 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($1,599,976,479 applicable to 36,226,613 shares of beneficial interest outstanding - Note 4) | $ | 44.17 | |
Maximum sales charge, 4.50% of offering price | 2.08 | ||
Maximum offering price per share | $ | 46.25 | |
Class B Shares: | |||
Net asset value and offering price per share * ($113,299,060 applicable to 2,674,867 shares of beneficial interest outstanding - Note 4) | $ | 42.36 | |
Class C Shares: | |||
Net asset value and offering price per share * ($621,687,232 applicable to 14,518,380 shares of beneficial interest outstanding - Note 4) | $ | 42.82 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($2,401,473,066 applicable to 53,598,903 shares of beneficial interest outstanding - Note 4) | $ | 44.80 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($151,259,736 applicable to 3,442,259 shares of beneficial interest outstanding - Note 4) | $ | 43.94 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($7,037,515 applicable to 159,439 shares of beneficial interest outstanding - Note 4) | $ | 44.14 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($106,905,728 applicable to 2,387,580 shares of beneficial interest outstanding - Note 4) | $ | 44.78 | |
* | 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 11
Thornburg Value Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $941,191) | $ | 63,040,726 | ||
Interest income (net of premium amortized of $57,508) | 14,709,696 | |||
Total Income | 77,750,422 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 29,048,560 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,766,163 | |||
Class B Shares | 132,775 | |||
Class C Shares | 701,857 | |||
Class I Shares | 850,718 | |||
Class R3 Shares | 125,484 | |||
Class R4 Shares | 2,233 | |||
Class R5 Shares | 24,437 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 3,536,151 | |||
Class B Shares | 1,063,013 | |||
Class C Shares | 5,621,685 | |||
Class R3 Shares | 503,880 | |||
Class R4 Shares | 4,505 | |||
Transfer agent fees | ||||
Class A Shares | 1,529,780 | |||
Class B Shares | 155,634 | |||
Class C Shares | 655,835 | |||
Class I Shares | 1,454,540 | |||
Class R3 Shares | 193,456 | |||
Class R4 Shares | 4,036 | |||
Class R5 Shares | 32,623 | |||
Registration and filing fees | ||||
Class A Shares | 101,547 | |||
Class B Shares | 17,649 | |||
Class C Shares | 30,240 | |||
Class I Shares | 126,461 | |||
Class R3 Shares | 27,458 | |||
Class R4 Shares | 17,075 | |||
Class R5 Shares | 15,945 | |||
Custodian fees (Note 3) | 677,176 | |||
Professional fees | 135,560 | |||
Accounting fees | 146,185 | |||
Trustee fees | 56,555 | |||
Other expenses | 735,611 | |||
Total Expenses | 49,494,827 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (305,712 | ) | ||
Fees paid indirectly (Note 3) | (78,446 | ) | ||
Net Expenses | 49,110,669 | |||
Net Investment Income | $ | 28,639,753 | ||
12 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
Thornburg Value Fund | Year Ended September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 455,944,236 | ||
Foreign currency transactions | (81,653 | ) | ||
455,862,583 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 268,342,490 | |||
Foreign currency translations | 25,407 | |||
268,367,897 | ||||
Net Realized and Unrealized Gain | 724,230,480 | |||
Net Increase in Net Assets Resulting From Operations | $ | 752,870,233 | ||
See notes to financial statements.
Certified Annual Report 13
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Value Fund |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 28,639,753 | $ | 22,542,790 | ||||
Net realized gain on investments and foreign currency transactions | 455,862,583 | 110,046,848 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 268,367,897 | 208,823,648 | ||||||
Net Increase (Decrease) in Net Assets | ||||||||
Resulting from Operations | 752,870,233 | 341,413,286 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (9,517,757 | ) | (9,041,451 | ) | ||||
Class B Shares | (62,759 | ) | (208,210 | ) | ||||
Class C Shares | (455,165 | ) | (1,136,901 | ) | ||||
Class I Shares | (18,072,475 | ) | (10,091,399 | ) | ||||
Class R3 Shares | (707,632 | ) | (308,217 | ) | ||||
Class R4 Shares | (24,305 | ) | — | |||||
Class R5 Shares | (578,768 | ) | (49,565 | ) | ||||
From realized gains | ||||||||
Class A Shares | (40,724,358 | ) | — | |||||
Class B Shares | (3,458,689 | ) | — | |||||
Class C Shares | (17,561,097 | ) | — | |||||
Class I Shares | (39,645,604 | ) | — | |||||
Class R3 Shares | (1,897,722 | ) | — | |||||
Class R5 Shares | (456,993 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 254,630,938 | 8,192,636 | ||||||
Class B Shares | 70,097 | (8,432,486 | ) | |||||
Class C Shares | 43,074,529 | (19,010,765 | ) | |||||
Class I Shares | 1,059,702,770 | 516,880,753 | ||||||
Class R3 Shares | 87,096,462 | 33,144,127 | ||||||
Class R4 Shares | 6,750,585 | — | ||||||
Class R5 Shares | 88,298,634 | 10,020,743 | ||||||
Net Increase in Net Assets | 2,159,330,924 | 861,372,551 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 2,842,307,892 | 1,980,935,341 | ||||||
End of year | $ | 5,001,638,816 | $ | 2,842,307,892 | ||||
Undistributed net investment income | $ | 2,143,362 | $ | 3,003,948 |
See notes to financial statements.
14 Certified Annual Report
Thornburg Value Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types.
The Fund currently offers seven classes of shares of beneficial interest: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R3, Class R4, 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 R3 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 R4 shares are sold at net asset value without a sales charge at the time of purchase, but bear a service fee, (vii) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (viii) 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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Value Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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 Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $278,338 for Class R3 shares, $19,411 for Class R4 Shares, and $7,963 for Class R5 shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Value Fund | September 30, 2007 |
Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2007, the Distributor has advised the Fund that it earned net commissions aggregating $259,262 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $31,772 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 distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class B, Class C, and Class R3 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class B, Class C, and Class R3 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 R3 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, 2007, 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, 2007, fees paid indirectly were $78,446. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 13,429,422 | $ | 547,664,978 | 5,364,547 | $ | 188,094,156 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,156,240 | 45,570,783 | 225,438 | 8,058,294 | ||||||||||
Shares repurchased | (8,199,947 | ) | (338,622,249 | ) | (5,410,098 | ) | (187,983,831 | ) | ||||||
Redemption fees received** | — | 17,426 | — | 24,017 | ||||||||||
Net Increase (Decrease) | 6,385,715 | $ | 254,630,938 | 179,887 | $ | 8,192,636 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 238,194 | $ | 9,443,286 | 84,367 | $ | 2,870,375 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 83,508 | 3,126,334 | 5,111 | 182,575 | ||||||||||
Shares repurchased | (316,970 | ) | (12,500,818 | ) | (343,699 | ) | (11,486,467 | ) | ||||||
Redemption fees received** | — | 1,295 | — | 1,031 | ||||||||||
Net Increase (Decrease) | 4,732 | $ | 70,097 | (254,221 | ) | $ | (8,432,486 | ) | ||||||
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Value Fund | September 30, 2007 |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 2,252,675 | $ | 89,691,497 | 1,293,511 | $ | 43,965,842 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 417,160 | 15,793,087 | 27,097 | 974,298 | ||||||||||
Shares repurchased | (1,569,020 | ) | (62,416,929 | ) | (1,894,704 | ) | (63,956,086 | ) | ||||||
Redemption fees received** | — | 6,874 | — | 5,181 | ||||||||||
Net Increase (Decrease) | 1,100,815 | $ | 43,074,529 | (574,096 | ) | $ | (19,010,765 | ) | ||||||
Class I Shares | ||||||||||||||
Shares sold | 29,796,837 | $ | 1,246,028,389 | 16,999,909 | $ | 608,478,099 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,185,152 | 47,802,515 | 235,654 | 8,565,755 | ||||||||||
Shares repurchased | (5,579,299 | ) | (234,149,563 | ) | (2,814,649 | ) | (100,182,966 | ) | ||||||
Redemption fees received** | — | 21,429 | — | 19,865 | ||||||||||
Net Increase (Decrease) | 25,402,690 | $ | 1,059,702,770 | 14,420,914 | $ | 516,880,753 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 2,874,263 | $ | 117,754,787 | 1,006,131 | $ | 35,300,994 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 64,233 | 2,541,337 | 8,245 | 297,478 | ||||||||||
Shares repurchased | (795,418 | ) | (33,200,944 | ) | (72,017 | ) | (2,454,755 | ) | ||||||
Redemption fees received** | — | 1,282 | — | 410 | ||||||||||
Net Increase (Decrease) | 2,143,078 | $ | 87,096,462 | 942,359 | $ | 33,144,127 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 170,003 | $ | 7,199,837 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 555 | 24,227 | — | — | ||||||||||
Shares repurchased | (11,119 | ) | (473,504 | ) | — | — | ||||||||
Redemption fees received** | — | 25 | — | — | ||||||||||
Net Increase (Decrease) | 159,439 | $ | 6,750,585 | — | $ | — | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 2,430,984 | $ | 101,996,046 | 276,338 | $ | 10,096,784 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 24,855 | 1,035,760 | 1,309 | 49,565 | ||||||||||
Shares repurchased | (343,451 | ) | (14,733,830 | ) | (3,390 | ) | (125,667 | ) | ||||||
Redemption fees received** | — | 658 | — | 61 | ||||||||||
Net Increase (Decrease) | 2,112,388 | $ | 88,298,634 | 274,257 | $ | 10,020,743 | ||||||||
* | Effective date of Class R4 shares was February 1, 2007. |
** | 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. |
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Value Fund | September 30, 2007 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $4,285,270,660 and $2,978,007,575, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 4,328,815,499 | ||
Gross unrealized appreciation on a tax basis | $ | 732,866,933 | ||
Gross unrealized depreciation on a tax basis | (76,154,928 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 656,712,005 | ||
Distributable earnings – ordinary income | $ | 87,188,678 | ||
Distributable capital gains | $ | 358,910,099 |
At September 30, 2007, the Fund had deferred currency losses occurring subsequent to October 31, 2006 of $89,255. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $81,478 and increased net realized investment gain by $81,478. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency transactions.
The tax character of distributions paid during the year ended September 30, 2007, and September 30, 2006, was as follows:
2007 | 2006 | |||||
Distributions from: | ||||||
Ordinary income | $ | 33,091,951 | $ | 20,835,743 | ||
Capital gains | $ | 100,071,373 | $ | — | ||
Total Distributions | $ | 133,163,324 | $ | 20,835,743 | ||
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
There are special risks associated with international investing, including currency fluctuations, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 19
Thornburg Value Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 38.11 | $ | 33.23 | $ | 28.49 | $ | 26.64 | $ | 20.95 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.44 | 0.50 | 0.45 | 0.31 | 0.26 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 7.96 | 4.82 | 4.70 | 1.84 | 5.51 | |||||||||||||||
Total from investment operations | 8.40 | 5.32 | 5.15 | 2.15 | 5.77 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.41 | ) | (0.44 | ) | (0.41 | ) | (0.30 | ) | (0.03 | ) | ||||||||||
Net realized gains | (1.30 | ) | — | — | — | — | ||||||||||||||
Return of capital | — | — | — | — | (0.05 | ) | ||||||||||||||
Total dividends | (1.71 | ) | (0.44 | ) | (0.41 | ) | (0.30 | ) | (0.08 | ) | ||||||||||
Change in net asset value | 6.69 | 4.88 | 4.74 | 1.85 | 5.69 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 44.80 | $ | 38.11 | $ | 33.23 | $ | 28.49 | $ | 26.64 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 22.62 | % | 16.10 | % | 18.16 | % | 8.04 | % | 27.55 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.05 | % | 1.41 | % | 1.44 | % | 1.07 | % | 1.10 | % | ||||||||||
Expenses, after expense reductions | 0.93 | % | 0.98 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.92 | % | 0.97 | % | 0.98 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, before expense reductions | 0.93 | % | 0.98 | % | 1.00 | % | 0.99 | % | 1.03 | % | ||||||||||
Portfolio turnover rate | 79.29 | % | 51.36 | % | 58.90 | % | 68.74 | % | 82.89 | % | ||||||||||
Net assets at end of year (000) | $ | 2,401,473 | $ | 1,074,492 | $ | 457,788 | $ | 378,334 | $ | 260,624 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
20 Certified Annual Report
Thornburg Value Fund | September 30, 2007 |
CUSIPS: CLASS A - 885-215-731, CLASS B - 885-215-590, CLASS C - 885-215-715, CLASS I - 885-215-632, CLASS R3 - 885-215-533, CLASS R4 - 885-215-277, CLASS R5 - 885-215-376
NASDAQ SYMBOLS: CLASS A - TVAFX, CLASS B - TVBFX, CLASS C - TVCFX, CLASS I - TVIFX, CLASS R3 - TVRFX, CLASS R4 - TVIRX, CLASS R5 - TVRRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/07
Diversified Financials | 12.3 | % | |
Telecommunication Services | 8.9 | % | |
Health Care Equipment & Services | 8.8 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 6.8 | % | |
Technology Hardware & Equipment | 6.2 | % | |
Materials | 5.8 | % | |
Energy | 5.3 | % | |
Media | 5.3 | % | |
Insurance | 5.2 | % | |
Software & Services | 4.6 | % | |
Banks | 4.2 | % | |
Semiconductors & Semiconductor Equipment | 4.0 | % | |
Transportation | 4.0 | % | |
Consumer Services | 3.8 | % | |
Capital Goods | 2.7 | % | |
Utilities | 2.7 | % | |
Food, Beverage & Tobacco | 2.3 | % | |
Food & Staples Retailing | 2.1 | % | |
Other Assets and Cash Equivalents | 5.0 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 94.94% | |||||
BANKS — 4.16% | |||||
COMMERCIAL BANKS — 1.00% | |||||
Wachovia Corp. | 993,000 | $ | 49,798,950 | ||
THRIFTS & MORTGAGE FINANCE — 3.16% | |||||
Freddie Mac | 2,683,209 | 158,336,163 | |||
208,135,113 | |||||
CAPITAL GOODS — 2.67% | |||||
INDUSTRIAL CONGLOMERATES — 2.67% | |||||
General Electric Co. | 3,227,600 | 133,622,640 | |||
133,622,640 | |||||
CONSUMER SERVICES — 3.79% | |||||
HOTELS, RESTAURANTS & LEISURE — 3.79% | |||||
Las Vegas Sands Corp.+ | 1,422,306 | 189,764,066 | |||
189,764,066 | |||||
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
DIVERSIFIED FINANCIALS — 12.27% | |||||
CAPITAL MARKETS — 6.04% | |||||
AllianceBernstein Holdings LP | 320,030 | $ | 28,185,042 | ||
Charles Schwab Corp. | 4,179,400 | 90,275,040 | |||
The Blackstone Group LP+ | 3,640,100 | 91,293,708 | |||
UBS AG | 1,731,700 | 92,213,025 | |||
DIVERSIFIED FINANCIAL SERVICES — 6.23% | |||||
Citigroup, Inc. | 3,445,100 | 160,782,817 | |||
CME Group, Inc. | 256,825 | 150,846,164 | |||
613,595,796 | |||||
ENERGY — 5.32% | |||||
OIL, GAS & CONSUMABLE FUELS — 5.32% | |||||
Apache Corp. | 1,596,337 | 143,766,110 | |||
ConocoPhillips | 1,395,900 | 122,518,143 | |||
266,284,253 | |||||
FOOD & STAPLES RETAILING — 2.12% | |||||
FOOD & STAPLES RETAILING — 2.12% | |||||
Rite Aid Corp.+ | 22,905,200 | 105,822,024 | |||
105,822,024 | |||||
FOOD, BEVERAGE & TOBACCO — 2.27% | |||||
FOOD PRODUCTS — 2.27% | |||||
Kraft Foods, Inc. A | 3,295,200 | 113,717,352 | |||
113,717,352 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 8.80% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 3.92% | |||||
Cytyc Corp.+ | 2,171,797 | 103,486,127 | |||
Varian Medical Services, Inc.+ | 2,215,800 | 92,819,862 | |||
HEALTH CARE PROVIDERS & SERVICES — 3.69% | |||||
WellPoint, Inc.+ | 2,336,250 | 184,376,850 | |||
HEALTH CARE TECHNOLOGY — 1.19% | |||||
Eclipsys Corp.+ | 2,542,440 | 59,289,701 | |||
439,972,540 | |||||
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
INSURANCE — 5.23% | |||||
INSURANCE — 5.23% | |||||
Allstate Corp. | 2,304,600 | $ | 131,800,074 | ||
American International Group, Inc. | 1,916,300 | 129,637,695 | |||
261,437,769 | |||||
MATERIALS — 5.79% | |||||
CHEMICALS — 2.67% | |||||
Air Products & Chemicals, Inc. | 1,366,500 | 133,589,040 | |||
METALS & MINING — 3.12% | |||||
Freeport-McMoRan Copper & Gold, Inc. | 1,486,055 | 155,872,309 | |||
289,461,349 | |||||
MEDIA — 5.30% | |||||
MEDIA — 5.30% | |||||
Comcast Corp.+ | 4,456,450 | 106,776,542 | |||
DIRECTV Group, Inc.+ | 6,528,700 | 158,516,836 | |||
265,293,378 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 6.82% | |||||
BIOTECHNOLOGY — 2.38% | |||||
Genentech, Inc.+ | 1,524,700 | 118,957,094 | |||
PHARMACEUTICALS — 4.44% | |||||
Roche Holdings AG | 654,700 | 118,709,186 | |||
Teva Pharmaceutical Industries Ltd. ADR | 2,330,800 | 103,650,676 | |||
341,316,956 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.02% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.02% | |||||
Intel Corp. | 5,710,300 | 147,668,358 | |||
ON Semiconductor Corp.+ | 4,245,000 | 53,317,200 | |||
200,985,558 | |||||
SOFTWARE & SERVICES — 4.56% | |||||
INTERNET SOFTWARE & SERVICES — 2.93% | |||||
Google, Inc.+ | 257,892 | 146,294,395 | |||
SOFTWARE — 1.63% | |||||
Microsoft Corp. | 2,769,300 | 81,583,578 | |||
227,877,973 | |||||
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 6.22% | ||||||
COMMUNICATIONS EQUIPMENT — 5.03% | ||||||
Corning, Inc. | 4,060,400 | $ | 100,088,860 | |||
Motorola, Inc. | 8,172,300 | 151,432,719 | ||||
COMPUTERS & PERIPHERALS — 1.19% | ||||||
Dell, Inc.+ | 2,152,800 | 59,417,280 | ||||
310,938,859 | ||||||
TELECOMMUNICATION SERVICES — 8.94% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.20% | ||||||
Chunghwa Telecom Co. Ltd. ADR | 6,390,516 | 118,096,736 | ||||
Level 3 Communications, Inc.+ | 19,803,900 | 92,088,135 | ||||
WIRELESS TELECOMMUNICATION SERVICES — 4.74% | ||||||
China Mobile Ltd. | 7,155,700 | 117,085,490 | ||||
Crown Castle International Corp.+ | 2,951,850 | 119,933,666 | ||||
447,204,027 | ||||||
TRANSPORTATION — 3.99% | ||||||
AIRLINES — 1.16% | ||||||
JetBlue Airways Corp.+ | 6,320,400 | 58,274,088 | ||||
ROAD & RAIL — 2.83% | ||||||
Hertz Global Holdings, Inc.+ | 6,225,400 | 141,441,088 | ||||
199,715,176 | ||||||
UTILITIES — 2.67% | ||||||
ELECTRIC UTILITIES — 2.67% | ||||||
Entergy Corp. | 1,232,136 | 133,428,007 | ||||
133,428,007 | ||||||
TOTAL COMMON STOCK (Cost $4,093,386,965) | 4,748,572,836 | |||||
SHORT TERM INVESTMENTS — 4.74% | ||||||
Abbey National, 4.775%, 10/2/2007 | $ | 77,000,000 | 76,989,787 | |||
General Electric Capital Corp., 4.68%, 10/3/2007 | 43,000,000 | 42,988,820 | ||||
General Electric Capital Corp., 4.68%, 10/4/2007 | 50,000,000 | 49,980,500 | ||||
Toyota Credit de Puerto Rico, 4.70%, 10/3/2007 | 17,000,000 | 16,995,561 | ||||
Toyota Credit de Puerto Rico, 4.65%, 10/1/2007 | 50,000,000 | 50,000,000 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $236,954,668) | 236,954,668 | |||||
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Value Fund | September 30, 2007 |
Value | |||
TOTAL INVESTMENTS — 99.68% (Cost $4,330,341,633) | $ | 4,985,527,504 | |
OTHER ASSETS LESS LIABILITIES — 0.32% | 16,111,312 | ||
NET ASSETS — 100.00% | $ | 5,001,638,816 | |
Footnote Legend
+ | Non-income producing |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR American Depository Receipt
See notes to financial statements.
Certified Annual Report 25
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
26 Certified Annual Report
Thornburg Value Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,099.90 | $ | 4.89 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.41 | $ | 4.70 |
† | Expenses are equal to the annualized expense ratio for Class I shares (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. |
Certified Annual Report 27
Thornburg Value Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Value Fund versus S&P 500 Index (November 2, 1998 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2007
1 Yr | 5 Yrs | Since Inception | |||||||
I Shares (Incep: 11/2/98) | 22.62 | % | 18.31 | % | 10.30 | % | |||
S&P 500 Index (Since: 11/2/98) | 16.44 | % | 15.45 | % | 5.30 | % |
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 S&P 500 Index, an unmanaged broad measure of the U.S. stock market, does not reflect sales charges or expenses. Investors cannot invest directly in an index.
28 Certified Annual Report
Thornburg Value Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 29
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Value Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
30 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Value Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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 31
Thornburg Value Fund | September 30, 2007 (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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the fiscal year ended September 30, 2007, the Fund designates long-term capital gain dividends of $100,071,373.
For the tax year ended September 30, 2007, the Thornburg Value Fund designates 61.06% (or the maximum allowed) 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.
54.47% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2007 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, 2007. Complete information will be computed and reported in conjunction with your 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to a category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to broad-based securities indices, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal
32 Certified Annual Report
OTHER INFORMATION, CONTINUED
Thornburg Value Fund | September 30, 2007 (Unaudited) |
meetings throughout the year, the Advisor’s staffing and other resources, trade execution, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s superior investment performance in most periods relative to the performance of a category of “large blend” equity mutual funds selected by a mutual fund analyst firm, the Fund’s higher relative performance in periods of negative market conditions relative to the same category of mutual funds, the Fund’s higher performance relative to two-broad based securities indices over multiple periods, the Fund’s cumulative returns over time, and measures of the Fund’s risk.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 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. The Trustees observed that the overall expense ratio of the Fund fell between the median and average expense ratios for the group of mutual funds assembled by an independent mutual fund analyst firm, that the management fee was somewhat higher than the average and median fee rates for the same group of funds, and that the difference between the fee rates was not significant in view of its degree and the Fund’s investment performance. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund’s assets increase, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 33
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
34 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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. 35
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 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 Fund invests primarily in foreign securities and, under normal market conditions, invests at least 75% of its assets in foreign securities or depository receipts of foreign securities. The Fund may invest in developing countries.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Investing outside the United States involves additional risks, such as currency fluctuations. Risks may be associated with investments in emerging markets including illiquidity and volatility. Additionally, the Fund may invest a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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
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.
This page is not part of the Annual Report. 3
Thornburg International Value Fund
Finding Promising Companies at a Discount
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, 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%. Class A shares are subject to a 1% 30-day redemption fee. The total annual fund operating expenses of Class A shares is 1.33%, as disclosed in the most recent Prospectus.
Left to right: Lei Wang, CFA, Bill Fries, CFA,
Wendy Trevisani
KEY PORTFOLIO ATTRIBUTES
As of 9/30/07
Portfolio P/E Trailing 12-months* | 18.3x | ||
Portfolio Price to Cash Flow* | 11.7 | ||
Portfolio Price to Book Value* | 3.5 | ||
Median Market Cap* | $ | 37.1 B | |
7-Year Beta (Thornburg vs. MSCI EAFE)* | 0.90 | ||
Holdings | 52 |
* | Source: FactSet |
Investing is both an art and a science. It requires the vision to recognize opportunity and the precision to use that opportunity to achieve a specific goal. Consistent success comes to those who strike a balance between the two. We believe Thornburg International Value Fund strikes such a balance.
The Fund seeks to find value 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 material positive returns for shareholders who have been invested since the Fund’s inception in 1998.
Our team is dedicated to providing value to shareholders. We accomplish this through the application of seasoned investment principles with hands-on, company-oriented research. We use a collaborative approach in implementing our investment research process. Our focus is on finding promising companies available at a discount to our estimate of their intrinsic value, no matter where they are located outside the United States. Geographic location is secondary to individual stock merit.
In managing the Thornburg International Value Fund, we take a bottom-up approach to stock selection. The Fund is not predisposed to a particular geographic region or industry. As of September 30, 2007, holdings cover 18 countries and 21 industries. We use a variety of valuation methods and business evaluations in an effort to gauge the intrinsic value of a company based on its past record and future potential. The continuum of process moves from screens and idea generation, through conventional “Wall Street” research and documentation, to company contact, the latter often including on-site visits. The focus of the analysis is on what’s behind the numbers, its revenue and cash-generating model. We make an effort to get to know the company’s reputation in the industry, its people and its corporate culture.
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2007
YTD | 1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||
A Shares (Incep: 5/28/98) | |||||||||||||||
Without Sales Charge | 27.50 | % | 40.64 | % | 28.52 | % | 26.57 | % | 14.80 | % | |||||
With Sales Charge | 21.77 | % | 34.31 | % | 26.55 | % | 25.41 | % | 14.24 | % | |||||
MSCI EAFE Index (Since: 5/28/98) | 13.15 | % | 24.86 | % | 23.24 | % | 23.55 | % | 7.88 | % |
* | Periods under one year are not annualized. |
4 This page is not part of the Annual Report.
The current posture is to maintain a portfolio of 50–65 companies diversified by country, sector, industry, market capitalization, and our three categories of stocks: Basic Value, Consistent Earners and Emerging Franchises. Because of the limited number of stocks in the portfolio, every holding counts. At the time of purchase, we set a 12–18 month price target for each stock. The target is reviewed as the fundamentals of the stock develop during the course of ownership.
The bottom line? Engendering a wide-open, collegial environment fosters information flows and critical thinking intended to benefit portfolio decision making. We do not view our location in Santa Fe, NM, as a disadvantage. While we have access to the best of Wall Street’s analysis, we are not ruled by it. Distance from the crowd serves to fortify independent and objective thinking.
Being diversified in various ways, the Fund is well positioned to take advantage of a broad array of opportunities. 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 stocks in the portfolio and employing a sell discipline has enabled the Fund to strike an effective balance between risk and reward.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/07
Top Contributors | Top Detractors | |
Hong Kong Exchanges & Clearing Ltd. | Kingfisher plc | |
China Merchants Bank Co. Ltd. | Allied Irish Banks plc | |
China Mobile Ltd. | Hyundai Motor Co. Ltd. | |
Nokia Oyj | Carrefour SA | |
Potash Corp. of Saskatchewan, Inc. | Amdocs Ltd. | |
Source: FactSet |
MARKET CAPITALIZATION EXPOSURE
As of 9/30/07
TOP TEN HOLDINGS
As of 9/30/07
China Mobile Ltd. | 3.8 | % | |
UBS AG | 3.2 | % | |
Nestlé SA-REG | 3.0 | % | |
Nintendo Co. Ltd | 2.9 | % | |
Potash Corp. of Saskatchewan, Inc. | 2.8 | % | |
Teva Pharmaceutical Industries Ltd. | 2.8 | % | |
E. ON AG | 2.7 | % | |
Novo Nordisk A/S | 2.6 | % | |
AXA SA | 2.5 | % | |
Nokia Oyj | 2.4 | % |
BASKET STRUCTURE
As of 9/30/07
This page is not part of the Annual Report. 5
Thornburg International Value Fund
September 30, 2007
7 | ||
10 | ||
12 | ||
14 | ||
15 | ||
21 | ||
28 | ||
34 | ||
35 | ||
36 | ||
37 | ||
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.
6 Certified Annual Report
William V. Fries,CFA Co-Portfolio Manager
Wendy Trevisani Co-Portfolio Manager
Lei Wang,CFA Co-Portfolio Manager | October 18, 2007 | |
Dear Fellow Shareholder: | ||
The fiscal year ended September 30, 2007, was an extraordinary year for the Thornburg International Value Fund. The net asset value per share (NAV) of the Class A shares on September 30, 2007, was $36.09 versus $26.51 one year ago. Total return for the Fund’s Class A shares for the period was 40.64% at NAV compared with 24.86% for the Morgan Stanley Capital International Europe, Australasia, Far East Index (MSCI EAFE). Strong European and emerging market currencies boosted returns for U.S. investors, evidenced by the disparity of returns in local currencies versus dollars. Our lower weighting compared with the benchmark in underperforming areas such as Japan and industries such as Financials was beneficial, and reflects our bottom-up approach, as we have found more compelling value elsewhere. As usual, individual stock selection had the largest impact on performance. | ||
Portfolio gains were spread across a variety of sectors, with notable performance from telecommunication services, materials, energy, information technology and financial issues. Positive returns by geography were also broadly based with China and related issues contributing handsomely to portfolio gains. Notable performance was also achieved by stocks in Europe and Canada. Stock selection was positive in Japan, with Nintendo Co. Ltd., a top performer in a lackluster stock market environment. For details on performance by share class, please refer to the performance summary on page 36. | ||
These strong results were achieved in an environment that was indeed challenging. The combination of interest rate skepticism, liquidity crisis, regional and sector volatility, and the subprime debacle created investor uncertainty and, in our opinion, opportunity. Recent actions by central banks, such as the Bank of England guaranteeing deposits at Northern Rock Bank and the U.S. Federal Reserve lowering interest rates, have worked toward restoring confidence in securities markets. These actions have helped markets close at the end of our fiscal year on a strongly positive note. | ||
China remained one of the most dynamic regions globally. On more than one occasion during the year, markets there experienced intense volatility. Three of our top five performers capitalized on the development phenomena in China. Having had a number of our portfolio management and research team members visit the region during the year, we remain optimistic about the promise of our investments there. Our top contributor, although not based in mainland China, was Hong Kong Exchanges & Clearing Ltd. It is the only approved venue for overseas investments under the Qualified Domestic Institutional Investor (QDII) arrangement. In addition, the Hong Kong government has purchased a minority interest in the exchange, which may boost average daily turnover if a potential strategic tie-up with the |
Certified Annual Report 7
Letter to Shareholders
Continued
Chinese mainland stock exchanges occurs. China Merchants Bank Co. Ltd. continued to benefit from improving net interest margin and strong fee income growth. China Mobile Ltd. was another top performer. The company signed up another record number of new subscribers, and expectations prevailed that industry restructuring might be further delayed, allowing China Mobile to continue its industry dominance. Another emerging markets stock, Teva Pharmaceutical Industries Ltd., went from being one of our bottom ten contributors in 2006 to a star performer in 2007, as the culmination of fears surrounding Wal-Mart’s $4 generic offering, incorporating the $7.5 billion acquisition of Ivax, and a new CEO proved to be benign events to the future of the company. Teva is the world’s largest manufacturer of generic drugs, exposed to billions of dollars of branded product coming off patent.
The strong performance of our emerging market holdings, where our average weighting for the year hovered around 20%, complemented excellent performance generated from holdings based in developed markets. Nokia Oyj has been successful in introducing new mobile devices that cross the mid-to-high end of the market, and continues to gain market share in the fast growing developing markets. Potash Corporation of Saskatchewan Inc., one of the Fund’s top five contributors, is the world’s largest fertilizer company by capacity. There are limited potash deposits around the world and most of Potash’s competitors are operating at or near capacity. Rogers Communications Inc. continues to benefit from market share gains in cable TV, broadband access and mobile communications in the robust Canadian market. Nintendo’s Wii and DS platforms have dominated the electronic game market this year and sales have exceeded expectations. Schlumberger Ltd. benefited from higher oil prices and strong demand for oilfield services in the Middle East, the former Soviet Union, and in the deepwater offshore production market. Alliance Boots plc rose sharply on a bid by private equity firm Kohlberg Kravis Roberts and was sold from the portfolio.
Detractors, although similarly diverse in nature, were much less significant in magnitude to the impact of the overall performance of the Fund than the contributors. Many stocks that are directly related to the consumer were penalized, such as home improvement retailer Kingfisher plc., Carrefour SA, and Hyundai Motor Co. Ltd. Kingfisher suffered, as not only is the U.K. consumer sensitive to interest rate increases given the predominance of adjustable mortgages, but some of the wettest months on record were experienced in the U.K. throughout the summer. Additionally, any enthusiasm surrounding a potential private equity bid was quickly eliminated as the credit crunch unfolded. Other poor performers included financials, which reacted to the negative news flow stemming from the U.S. subprime crisis, causing negative contribution from stocks such as Allied Irish Banks plc, UBS AG, and Intesa Sanpaolo in Italy. Rounding out the bottom ten were Amdocs Ltd., Samsung Electronics Co. Ltd., Marks & Spencer Group plc, and Bank of Yokohama Ltd. Samsung Electronics was eliminated from the portfolio during the year.
Economic activity globally remains healthy in most sectors, with growth in most countries outpacing the United States. Emerging markets continue to expand at rates well above those in developed markets. Reflecting this expansion and improving earnings, stocks in emerging markets generally continue to perform well. High individual savings rates, stable currencies and a dearth of alternative investments is likely contributing to strength in some of these markets, particularly China. It also seems that western investors are growing more comfortable allocating at least a portion of their assets to emerging market securities.
8 Certified Annual Report
Despite volatile markets during the last year, our results were good. With the aforementioned volatility comes opportunity and subsequent activity. We have established new positions in stocks that we consider to be leading franchises such as Nestlé SA, Marks & Spencer Group plc, and Groupe Danone, each of which had fallen out of favor. We feel that our additions and eliminations in the portfolio have been taken with the appropriate risk considerations in mind. Our investment goal remains to participate in rising markets, yet be cognizant of the risk to the downside that is ever present in equity markets. Our positive performance through this year’s challenging summer months was particularly gratifying. For well selected stock portfolios, we believe the potential remains for earnings and interest rate driven capital appreciation in the period ahead. The Thornburg International Value Fund is, we believe, one such portfolio.
We invite you to visit our web site at www.thornburg.com where you will find useful information on the Thornburg International Value Fund as well our other funds and investment topics.
Thank you for your trust and confidence.
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 9
STATEMENT OF ASSETS AND LIABILITIES
Thornburg International Value Fund | September 30, 2007 |
ASSETS | |||
Investments at value (cost $12,131,233,285) (Note 2) | $ | 16,028,904,176 | |
Cash | 4,083,372 | ||
Cash denominated in foreign currency (cost $9,423,365) | 9,481,639 | ||
Receivable for investments sold | 544,860,262 | ||
Receivable for fund shares sold | 145,929,312 | ||
Unrealized gain on forward exchange contracts (Note 7) | 5,859,673 | ||
Dividends receivable | 23,320,151 | ||
Prepaid expenses and other assets | 80,838 | ||
Total Assets | 16,762,519,423 | ||
LIABILITIES | |||
Payable for securities purchased | 584,830,379 | ||
Payable for fund shares redeemed | 17,202,589 | ||
Payable to investment advisor and other affiliates (Note 3) | 13,258,438 | ||
Accounts payable and accrued expenses | 3,176,991 | ||
Dividends payable | 15,069 | ||
Total Liabilities | 618,483,466 | ||
NET ASSETS | $ | 16,144,035,957 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 5,460,264 | |
Net unrealized appreciation on investments | 3,904,036,914 | ||
Accumulated net realized gain (loss) | 1,350,112,704 | ||
Net capital paid in on shares of beneficial interest | 10,884,426,075 | ||
$ | 16,144,035,957 | ||
10 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($7,111,205,134 applicable to 197,042,328 shares of beneficial interest outstanding - Note 4) | $ | 36.09 | |
Maximum sales charge, 4.50% of offering price | 1.70 | ||
Maximum offering price per share | $ | 37.79 | |
Class B Shares: | |||
Net asset value and offering price per share * ($135,486,475 applicable to 3,946,854 shares of beneficial interest outstanding - Note 4) | $ | 34.33 | |
Class C Shares: | |||
Net asset value and offering price per share * ($2,309,487,297 applicable to 67,035,550 shares of beneficial interest outstanding - Note 4) | $ | 34.45 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($5,113,108,610 applicable to 139,037,967 shares of beneficial interest outstanding - Note 4) | $ | 36.77 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($984,587,375 applicable to 27,215,915 shares of beneficial interest outstanding - Note 4) | $ | 36.18 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($39,217,487 applicable to 1,088,877 shares of beneficial interest outstanding - Note 4) | $ | 36.02 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($450,943,579 applicable to 12,274,454 shares of beneficial interest outstanding - Note 4) | $ | 36.74 | |
* | 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 11
Thornburg International Value Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $20,687,076) | $ | 234,456,109 | ||
Interest income | 18,222,772 | |||
Total Income | 252,678,881 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 80,553,444 | |||
Administration fees (Note 3) | ||||
Class A Shares | 6,652,187 | |||
Class B Shares | 131,841 | |||
Class C Shares | 2,157,090 | |||
Class I Shares | 1,773,228 | |||
Class R3 Shares | 853,351 | |||
Class R4 Shares | 5,601 | |||
Class R5 Shares | 88,481 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 13,305,200 | |||
Class B Shares | 1,056,675 | |||
Class C Shares | 17,303,822 | |||
Class R3 Shares | 3,420,945 | |||
Class R4 Shares | 11,970 | |||
Transfer agent fees | ||||
Class A Shares | 7,959,105 | |||
Class B Shares | 163,999 | |||
Class C Shares | 2,000,350 | |||
Class I Shares | 2,916,430 | |||
Class R3 Shares | 1,445,374 | |||
Class R4 Shares | 6,404 | |||
Class R5 Shares | 219,420 | |||
Registration and filing fees | ||||
Class A Shares | 167,280 | |||
Class B Shares | 20,053 | |||
Class C Shares | 79,383 | |||
Class I Shares | 136,325 | |||
Class R3 Shares | 28,023 | |||
Class R4 Shares | 18,209 | |||
Class R5 Shares | 23,392 | |||
Custodian fees (Note 3) | 4,867,907 | |||
Professional fees | 248,545 | |||
Accounting fees | 430,265 | |||
Trustee fees | 161,320 | |||
Other expenses | 1,923,532 | |||
Total Expenses | 150,129,151 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,073,052 | ) | ||
Fees paid indirectly (Note 3) | (343,408 | ) | ||
Net Expenses | 148,712,691 | |||
Net Investment Income | $ | 103,966,190 | ||
12 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
Thornburg International Value Fund | Year Ended September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 1,494,470,799 | ||
Foreign currency transactions | (66,025,711 | ) | ||
1,428,445,088 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $ 393,320) | 2,529,250,741 | |||
Foreign currency translations | 6,952,563 | |||
2,536,203,304 | ||||
Net Realized And Unrealized Gain | 3,964,648,392 | |||
Net Increase In Net Assets Resulting From Operations | $ | 4,068,614,582 | ||
See notes to financial statements.
Certified Annual Report 13
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg International Value Fund
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 103,966,190 | $ | 74,614,709 | ||||
Net realized gain on investments and foreign currency transactions | 1,428,445,088 | 117,445,836 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, foreign currency translation, and deferred taxes | 2,536,203,304 | 786,733,704 | ||||||
Net Increase (decrease) in Net Assets Resulting from Operations | 4,068,614,582 | 978,794,249 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (51,935,263 | ) | (31,195,911 | ) | ||||
Class B Shares | (290,064 | ) | (183,287 | ) | ||||
Class C Shares | (5,990,504 | ) | (3,436,661 | ) | ||||
Class I Shares | (49,998,965 | ) | (19,772,460 | ) | ||||
Class R3 Shares | (5,881,366 | ) | (2,966,495 | ) | ||||
Class R4 Shares | (152,359 | ) | — | |||||
Class R5 Shares | (3,086,424 | ) | (469,362 | ) | ||||
From realized gains | ||||||||
Class A Shares | (108,430,244 | ) | (42,242,602 | ) | ||||
Class B Shares | (2,187,195 | ) | (917,829 | ) | ||||
Class C Shares | (34,058,224 | ) | (12,682,161 | ) | ||||
Class I Shares | (53,149,660 | ) | (16,701,676 | ) | ||||
Class R3 Shares | (12,229,262 | ) | (2,457,320 | ) | ||||
Class R5 Shares | (1,466,007 | ) | (259,590 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 1,139,200,293 | 1,592,927,792 | ||||||
Class B Shares | 19,169,835 | 26,257,162 | ||||||
Class C Shares | 466,723,398 | 519,539,149 | ||||||
Class I Shares | 1,923,676,047 | 943,931,604 | ||||||
Class R3 Shares | 317,048,006 | 290,585,064 | ||||||
Class R4 Shares | 36,735,755 | — | ||||||
Class R5 Shares | 338,549,227 | 30,251,506 | ||||||
Net Increase in Net Assets | 7,980,861,606 | 4,249,001,172 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 8,163,174,351 | 3,914,173,179 | ||||||
End of year | $ | 16,144,035,957 | $ | 8,163,174,351 | ||||
Undistributed net investment income | $ | 5,460,264 | $ | 11,154,896 |
See notes to financial statements.
14 Certified Annual Report
Thornburg International Value Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types.
The Fund currently offers seven classes of shares of beneficial interest: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R3, Class R4, 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 R3 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 R4 shares are sold at net asset value without a sales charge at the time of purchase, but bear a service fee, (vii) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (viii) 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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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 Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses and
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
administrative fees of $1,035,026 for Class R3 shares, $20,192 for Class R4 shares, and $17,834 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, 2007, the Distributor has advised the Fund that it earned net commissions aggregating $899,351 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $227,932 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 distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class B, Class C, and Class R3 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class B, Class C, and Class R3 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 R3 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, 2007, 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, 2007, fees paid indirectly were $343,408. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 88,417,092 | $ | 2,708,357,987 | 87,468,381 | $ | 2,184,068,553 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 4,398,998 | 126,296,864 | 2,262,190 | 54,173,870 | ||||||||||
Shares repurchased | (56,529,130 | ) | (1,695,490,555 | ) | (25,705,411 | ) | (645,390,435 | ) | ||||||
Redemption fees received** | — | 35,997 | — | 75,804 | ||||||||||
Net Increase (Decrease) | 36,286,960 | $ | 1,139,200,293 | 64,025,160 | $ | 1,592,927,792 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 900,271 | $ | 26,066,084 | 1,253,957 | $ | 29,894,373 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 66,554 | 1,752,230 | 38,925 | 851,686 | ||||||||||
Shares repurchased | (295,251 | ) | (8,649,193 | ) | (185,951 | ) | (4,489,669 | ) | ||||||
Redemption fees received** | — | 714 | — | 772 | ||||||||||
Net Increase (Decrease) | 671,574 | $ | 19,169,835 | 1,106,931 | $ | 26,257,162 | ||||||||
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 22,218,387 | $ | 645,166,990 | 25,567,387 | $ | 611,156,817 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 871,513 | 23,106,077 | 413,698 | 9,175,773 | ||||||||||
Shares repurchased | (6,906,854 | ) | (201,561,323 | ) | (4,179,001 | ) | (100,805,360 | ) | ||||||
Redemption fees received** | — | 11,654 | — | 11,919 | ||||||||||
Net Increase (Decrease) | 16,183,046 | $ | 466,723,398 | 21,802,084 | $ | 519,539,149 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 80,379,355 | $ | 2,448,318,070 | 43,224,765 | $ | 1,106,710,515 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,384,953 | 71,218,240 | 1,101,563 | 27,170,524 | ||||||||||
Shares repurchased | (19,106,830 | ) | (595,884,029 | ) | (7,420,547 | ) | (189,981,388 | ) | ||||||
Redemption fees received** | — | 23,766 | — | 31,953 | ||||||||||
Net Increase (Decrease) | 63,657,478 | $ | 1,923,676,047 | 36,905,781 | $ | 943,931,604 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 17,797,234 | $ | 542,413,469 | 14,043,775 | $ | 352,814,313 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 540,505 | 15,509,752 | 176,361 | 4,335,854 | ||||||||||
Shares repurchased | (7,865,942 | ) | (240,879,799 | ) | (2,651,401 | ) | (66,568,696 | ) | ||||||
Redemption fees received** | — | 4,584 | — | 3,593 | ||||||||||
Net Increase (Decrease) | 10,471,797 | $ | 317,048,006 | 11,568,735 | $ | 290,585,064 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 1,119,583 | $ | 37,786,085 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 3,999 | 139,613 | — | — | ||||||||||
Shares repurchased | (34,705 | ) | (1,189,970 | ) | — | — | ||||||||
Redemption fees received** | — | 27 | — | — | ||||||||||
Net Increase (Decrease) | 1,088,877 | $ | 36,735,755 | — | $ | — | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 11,580,206 | $ | 374,139,434 | 1,365,851 | $ | 35,030,651 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 140,876 | 4,458,789 | 28,818 | 726,553 | ||||||||||
Shares repurchased | (1,252,025 | ) | (40,050,137 | ) | (212,929 | ) | (5,506,089 | ) | ||||||
Redemption fees received** | — | 1,141 | — | 391 | ||||||||||
Net Increase (Decrease) | 10,469,057 | $ | 338,549,227 | 1,181,740 | $ | 30,251,506 | ||||||||
* | Effective date of Class R4 shares was February 1, 2007. |
** | 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. |
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $10,684,747,715 and $7,312,874,194, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 12,131,233,285 | ||
Gross unrealized appreciation on a tax basis | $ | 3,948,257,927 | ||
Gross unrealized depreciation on a tax basis | (50,587,036 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 3,897,670,891 | ||
Distributable earnings – ordinary income | $ | 665,769,020 | ||
Distributable capital gains | $ | 700,215,640 |
In order to account for permanent book/tax differences, the Fund increased undistributed net investment income by $7,674,123 and decreased undistributed net realized investment gain by $7,674,123. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign capital gains tax, passive foreign investment company gains/losses, and currency gains/losses.
The tax character of distributions paid during the year ended September 30, 2007, and September 30, 2006, was as follows:
2007 | 2006 | |||||
Distributions from: | ||||||
Ordinary income | $ | 136,409,922 | $ | 74,137,360 | ||
Capital gains | $ | 192,445,615 | $ | 59,147,994 | ||
Total | $ | 328,855,537 | $ | 133,285,354 | ||
At September 30, 2007, the Fund has deferred tax basis currency losses occurring subsequent to October 31, 2006 of $3,579,635. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2007, 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, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
CONTRACTS TO SELL:
Contracts | Contract Value Date | Unrealized Gain (Loss) | |||
710,000,000 Mexican Peso for 65,263,351 USD | December 06, 2007 | $ | 642,330 | ||
5,767,000,000 Mexican Peso for 530,103,870 USD | December 06, 2007 | 5,217,343 | |||
Unrealized gain from forward Sell contracts: | 5,859,673 | ||||
Net unrealized gain (loss) from forward Sell contracts: | $ | 5,859,673 | |||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
20 Certified Annual Report
Thornburg International Value Fund
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE Performance (for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 26.51 | $ | 22.80 | $ | 18.18 | $ | 14.95 | $ | 11.88 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.27 | 0.32 | 0.18 | 0.15 | 0.06 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 10.25 | 4.00 | 4.63 | 3.08 | 3.00 | |||||||||||||||
Total from investment operations | 10.52 | 4.32 | 4.81 | 3.23 | 3.06 | |||||||||||||||
Redemption fees added to paid in capital | — | — | — | — | 0.01 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.29 | ) | (0.21 | ) | (0.19 | ) | — | — | ||||||||||||
Realized capital gains | (0.65 | ) | (0.40 | ) | — | — | — | |||||||||||||
Total dividends | (0.94 | ) | (0.61 | ) | (0.19 | ) | — | — | ||||||||||||
Change in net asset value | 9.58 | 3.71 | 4.62 | 3.23 | 3.07 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 36.09 | $ | 26.51 | $ | 22.80 | $ | 18.18 | $ | 14.95 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 40.64 | % | 19.30 | % | 26.51 | % | 21.61 | % | 25.84 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.88 | % | 1.25 | % | 0.87 | % | 0.88 | % | 0.44 | % | ||||||||||
Expenses, after expense reductions | 1.29 | % | 1.33 | % | 1.44 | % | 1.49 | % | 1.59 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.29 | % | 1.33 | % | 1.44 | % | 1.49 | % | 1.59 | % | ||||||||||
Expenses, before expense reductions | 1.29 | % | 1.33 | % | 1.44 | % | 1.51 | % | 1.67 | % | ||||||||||
Portfolio turnover rate | 64.77 | % | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | ||||||||||
Net assets at end of year (000) | $ | 7,111,205 | $ | 4,261,892 | $ | 2,205,924 | $ | 948,631 | $ | 97,991 |
(a) | Sales loads are not reflected in computing total return. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 21
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class B Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 25.28 | $ | 21.82 | $ | 17.39 | $ | 14.43 | $ | 11.57 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.03 | 0.11 | 0.01 | (0.02 | ) | (0.04 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | 9.75 | 3.81 | 4.44 | 2.98 | 2.90 | |||||||||||||||
Total from investment operations | 9.78 | 3.92 | 4.45 | 2.96 | 2.86 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.08 | ) | (0.06 | ) | (0.02 | ) | — | — | ||||||||||||
Realized capital gains | (0.65 | ) | (0.40 | ) | — | — | — | |||||||||||||
Total dividends | (0.73 | ) | (0.46 | ) | (0.02 | ) | — | — | ||||||||||||
Change in net asset value | 9.05 | 3.46 | 4.43 | 2.96 | 2.86 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 34.33 | $ | 25.28 | $ | 21.82 | $ | 17.39 | $ | 14.43 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 39.55 | % | 18.32 | % | 25.59 | % | 20.51 | % | 24.72 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.11 | % | 0.44 | % | 0.04 | % | (0.12 | )% | (0.32 | )% | ||||||||||
Expenses, after expense reductions | 2.06 | % | 2.13 | % | 2.26 | % | 2.36 | % | 2.38 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.06 | % | 2.13 | % | 2.25 | % | 2.36 | % | 2.38 | % | ||||||||||
Expenses, before expense reductions | 2.06 | % | 2.13 | % | 2.27 | % | 2.42 | % | 2.84 | % | ||||||||||
Portfolio turnover rate | 64.77 | % | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | ||||||||||
Net assets at end of year (000) | $ | 135,486 | $ | 82,799 | $ | 47,306 | $ | 22,181 | $ | 6,346 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
22 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 25.37 | $ | 21.89 | $ | 17.46 | $ | 14.47 | $ | 11.60 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.05 | 0.13 | 0.03 | 0.01 | (0.04 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 9.78 | 3.82 | 4.45 | 2.98 | 2.91 | |||||||||||||||
Total from investment operations | 9.83 | 3.95 | 4.48 | 2.99 | 2.87 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.10 | ) | (0.07 | ) | (0.05 | ) | — | — | ||||||||||||
Realized capital gains | (0.65 | ) | (0.40 | ) | — | — | — | |||||||||||||
Total dividends | (0.75 | ) | (0.47 | ) | (0.05 | ) | — | — | ||||||||||||
Change in net asset value | 9.08 | 3.48 | 4.43 | 2.99 | 2.87 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 34.45 | $ | 25.37 | $ | 21.89 | $ | 17.46 | $ | 14.47 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 39.63 | % | 18.41 | % | 25.65 | % | 20.66 | % | 24.74 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.17 | % | 0.55 | % | 0.16 | % | 0.04 | % | (0.31 | )% | ||||||||||
Expenses, after expense reductions | 2.01 | % | 2.06 | % | 2.16 | % | 2.26 | % | 2.37 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.01 | % | 2.05 | % | 2.15 | % | 2.26 | % | 2.37 | % | ||||||||||
Expenses, before expense reductions | 2.01 | % | 2.06 | % | 2.16 | % | 2.26 | % | 2.45 | % | ||||||||||
Portfolio turnover rate | 64.77 | % | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | ||||||||||
Net assets at end of year (000) | $ | 2,309,487 | $ | 1,290,250 | $ | 635,833 | $ | 243,955 | $ | 55,443 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 23
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 26.99 | $ | 23.19 | $ | 18.48 | $ | 15.13 | $ | 11.96 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.41 | 0.43 | 0.28 | 0.24 | 0.14 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 10.42 | 4.06 | 4.72 | 3.11 | 3.03 | |||||||||||||||
Total from investment operations | 10.83 | 4.49 | 5.00 | 3.35 | 3.17 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.40 | ) | (0.29 | ) | (0.29 | ) | — | — | ||||||||||||
Realized capital gains | (0.65 | ) | (0.40 | ) | — | — | — | |||||||||||||
Total dividends | (1.05 | ) | (0.69 | ) | (0.29 | ) | — | — | ||||||||||||
Change in net asset value | 9.78 | 3.80 | 4.71 | 3.35 | 3.17 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 36.77 | $ | 26.99 | $ | 23.19 | $ | 18.48 | $ | 15.13 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 41.17 | % | 19.76 | % | 27.15 | % | 22.14 | % | 26.51 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.32 | % | 1.67 | % | 1.32 | % | 1.35 | % | 1.07 | % | ||||||||||
Expenses, after expense reductions | 0.90 | % | 0.94 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.90 | % | 0.94 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, before expense reductions | 0.90 | % | 0.94 | % | 1.02 | % | 1.11 | % | 1.25 | % | ||||||||||
Portfolio turnover rate | 64.77 | % | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | ||||||||||
Net assets at end of year (000) | $ | 5,113,109 | $ | 2,034,453 | $ | 892,216 | $ | 293,583 | $ | 33,511 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
24 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Year Ended September 30, | Period Ended 2003(c) | |||||||||||||||||||
2007 | 2006 | 2005 | 2004 | |||||||||||||||||
Class R3 Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | ||||||||||||||||||||
Net asset value, beginning of period | $ | 26.58 | $ | 22.88 | $ | 18.28 | $ | 15.01 | $ | 13.59 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.23 | 0.33 | 0.21 | 0.19 | 0.02 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 10.26 | 3.97 | 4.63 | 3.08 | 1.40 | |||||||||||||||
Total from investment operations | 10.49 | 4.30 | 4.84 | 3.27 | 1.42 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.24 | ) | (0.20 | ) | (0.24 | ) | — | — | ||||||||||||
Realized capital gains | (0.65 | ) | (0.40 | ) | — | — | — | |||||||||||||
Total dividend | (0.89 | ) | (0.60 | ) | (0.24 | ) | — | — | ||||||||||||
Change in net asset value | 9.60 | 3.70 | 4.60 | 3.27 | 1.42 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 36.18 | $ | 26.58 | $ | 22.88 | $ | 18.28 | $ | 15.01 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 40.43 | % | 19.15 | % | 26.54 | % | 21.79 | % | 10.45 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.75 | % | 1.29 | % | 0.99 | % | 1.08 | % | 0.65 | %(b) | ||||||||||
Expenses, after expense reductions | 1.45 | % | 1.45 | % | 1.45 | % | 1.45 | % | 1.60 | %(b) | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.45 | % | 1.45 | % | 1.45 | % | 1.45 | % | 1.60 | %(b) | ||||||||||
Expenses, before expense reductions | 1.61 | % | 1.61 | % | 1.72 | % | 2.42 | % | 30,451.98 | %(b)† | ||||||||||
Portfolio turnover rate | 64.77 | % | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | ||||||||||
Net assets at end of period (000) | $ | 984,587 | $ | 445,081 | $ | 118,436 | $ | 11,207 | $ | — | (d) |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R3 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. |
See notes to financial statements.
Certified Annual Report 25
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Period Ended September 30, 2007(c) | ||||
Class R4 Shares: | ||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 28.86 | ||
Income from investment operations: | ||||
Net investment income | 0.09 | |||
Net realized and unrealized gain (loss) on investments | 7.36 | |||
Total from investment operations | 7.45 | |||
Less dividends from: | ||||
Net investment income | (0.29 | ) | ||
Change in net asset value | 7.16 | |||
NET ASSET VALUE, end of period | $ | 36.02 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 25.90 | % | ||
Ratios to average net assets: | ||||
Net investment income | 0.42 | %(b) | ||
Expenses, after expense reductions | 1.25 | %(b) | ||
Expenses, after expense reductions and net of custody credits | 1.25 | %(b) | ||
Expenses, before expense reductions | 1.70 | %(b) | ||
Portfolio turnover rate | 64.77 | % | ||
Net assets at end of period (000) | $ | 39,217 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R4 shares was February 1, 2007. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
26 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund
Year Ended September 30, | Period Ended 2005(c) | |||||||||||
2007 | 2006 | |||||||||||
Class R5 Shares: | ||||||||||||
PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 26.97 | $ | 23.18 | $ | 20.37 | ||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.43 | 0.45 | 0.16 | |||||||||
Net realized and unrealized gain (loss) on investments | 10.39 | 4.03 | 2.84 | |||||||||
Total from investment operations | 10.82 | 4.48 | 3.00 | |||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.40 | ) | (0.29 | ) | (0.19 | ) | ||||||
Realized capital gains | (0.65 | ) | (0.40 | ) | — | |||||||
Total dividends | (1.05 | ) | (0.69 | ) | (0.19 | ) | ||||||
Change in net asset value | 9.77 | 3.79 | 2.81 | |||||||||
NET ASSET VALUE, end of period | $ | 36.74 | $ | 26.97 | $ | 23.18 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return(a) | 41.13 | % | 19.72 | % | 14.72 | % | ||||||
Ratios to average net assets: | ||||||||||||
Net investment income | 1.33 | % | 1.76 | % | 1.10 | %(b) | ||||||
Expenses, after expense reductions | 0.94 | % | 0.95 | % | 1.00 | %(b) | ||||||
Expenses, after expense reductions and net of custody credits | 0.94 | % | 0.95 | % | 0.99 | %(b) | ||||||
Expenses, before expense reductions | 0.95 | % | 0.96 | % | 2.13 | %(b) | ||||||
Portfolio turnover rate | 64.77 | % | 36.58 | % | 34.17 | % | ||||||
Net assets at end of period (000) | $ | 450,944 | $ | 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. |
See notes to financial statements.
Certified Annual Report 27
Thornburg International Value Fund | September 30, 2007 |
CUSIPS: CLASS A - 885-215-657, CLASS B - 885-215-616, CLASS C - 885-215-640, CLASS I - 885-215-566, CLASS R3 - 885-215-525, CLASS R4 - 815-215-269, CLASS R5 - 885-215-368
NASDAQ SYMBOLS: CLASS A - TGVAX, CLASS B - THGBX, CLASS C - THGCX, CLASS I - TGVIX, CLASS R3 - TGVRX, CLASS R4 - THVRX, CLASS R5 - TIVRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/07
Telecommunication Services | 14.2 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 9.2 | % | |
Materials | 8.1 | % | |
Food, Beverage & Tobacco | 7.9 | % | |
Energy | 6.4 | % | |
Banks | 5.6 | % | |
Retailing | 5.4 | % | |
Utilities | 4.9 | % | |
Diversified Financials | 4.9 | % | |
Software & Services | 4.4 | % | |
Technology Hardware & Equipment | 3.7 | % | |
Capital Goods | 3.3 | % | |
Consumer Services | 2.9 | % | |
Insurance | 2.5 | % | |
Automobiles & Components | 2.1 | % | |
Household & Personal Products | 2.1 | % | |
Consumer Durables & Apparel | 2.0 | % | |
Real Estate | 1.9 | % | |
Food & Staples Retailing | 1.3 | % | |
Transportation | 1.1 | % | |
Semiconductors & Semiconductor Equipment | 0.9 | % | |
Other Assets and Cash Equivalents | 5.2 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/07 (percent of equity holdings)
U.K. | 16.4 | % | |
Switzerland | 11.6 | % | |
France | 11.3 | % | |
Japan | 10.1 | % | |
China | 9.0 | % | |
Canada | 8.5 | % | |
Germany | 4.9 | % | |
Finland | 4.8 | % | |
Denmark | 4.2 | % | |
México | 3.7 | % | |
Israel | 2.9 | % | |
Russia | 2.6 | % | |
Spain | 2.1 | % | |
Hong Kong | 1.8 | % | |
South Korea | 1.8 | % | |
Brazil | 1.5 | % | |
Netherlands | 1.5 | % | |
Greece | 1.3 | % |
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 94.76% | |||||
AUTOMOBILES & COMPONENTS — 2.13% | |||||
AUTOMOBILES — 2.13% | |||||
Toyota Motor Corp. | 5,827,900 | $ | 343,996,535 | ||
343,996,535 | |||||
BANKS — 5.64% | |||||
COMMERCIAL BANKS — 5.64% | |||||
China Merchants Bank Co., Ltd. | 39,613,430 | 174,019,132 | |||
Lloyds TSB Group plc | 25,756,900 | 285,889,738 | |||
Sberbank-CLS | 43,135,000 | 179,872,950 | |||
Shinhan Financial Group Co. | 4,145,254 | 270,854,665 | |||
910,636,485 | |||||
CAPITAL GOODS — 3.32% | |||||
AEROSPACE & DEFENSE — 1.44% | |||||
Embraer Brasileira de Aeronáutica ADR | 5,302,345 | 232,878,992 | |||
MACHINERY — 1.88% | |||||
Fanuc Ltd. | 2,979,800 | 303,777,983 | |||
536,656,975 | |||||
CONSUMER DURABLES & APPAREL — 2.02% | |||||
TEXTILES, APPAREL & LUXURY GOODS — 2.02% | |||||
LVMH Moët Hennessy Louis Vuitton SA | 2,714,296 | 325,388,699 | |||
325,388,699 | |||||
CONSUMER SERVICES — 2.91% | |||||
HOTELS, RESTAURANTS & LEISURE — 2.91% | |||||
Carnival plc | 5,639,600 | 269,311,182 | |||
OPAP SA | 5,173,607 | 200,662,654 | |||
469,973,836 | |||||
DIVERSIFIED FINANCIALS — 4.92% | |||||
CAPITAL MARKETS — 3.21% | |||||
UBS AG | 9,638,760 | 518,261,865 | |||
DIVERSIFIED FINANCIAL SERVICES — 1.71% | |||||
Hong Kong Exchanges & Clearing Ltd. | 9,005,700 | 275,713,655 | |||
793,975,520 | |||||
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
ENERGY — 6.36% | |||||
ENERGY EQUIPMENT & SERVICES — 1.42% | |||||
Schlumberger Ltd. | 2,181,000 | $ | 229,005,000 | ||
OIL, GAS & CONSUMABLE FUELS — 4.94% | |||||
Canadian Natural Resources Ltd. | 3,884,200 | 295,068,770 | |||
China Petroleum & Chemical Corp. | 226,998,585 | 282,366,693 | |||
Gazprom ADR | 4,996,300 | 220,336,830 | |||
1,026,777,293 | |||||
FOOD & STAPLES RETAILING — 1.26% | |||||
FOOD & STAPLES RETAILING — 1.26% | |||||
Wal Mart de México SA de CV | 55,672,400 | 204,112,791 | |||
204,112,791 | |||||
FOOD, BEVERAGE & TOBACCO — 7.86% | |||||
BEVERAGES — 3.06% | |||||
Carlsberg A/S Class B | 1,632,400 | 222,944,892 | |||
Sabmiller plc | 9,551,650 | 272,033,800 | |||
FOOD PRODUCTS — 4.80% | |||||
Groupe Danone | 3,766,300 | 296,454,604 | |||
Nestlé SA-REG | 1,064,600 | 478,235,602 | |||
1,269,668,898 | |||||
HOUSEHOLD & PERSONAL PRODUCTS — 2.08% | |||||
HOUSEHOLD PRODUCTS — 1.82% | |||||
Reckitt Benckiser plc | 4,985,730 | 292,966,811 | |||
PERSONAL PRODUCTS — 0.26% | |||||
Shiseido Co., Ltd. | 1,892,200 | 42,006,791 | |||
334,973,602 | |||||
INSURANCE — 2.45% | |||||
INSURANCE — 2.45% | |||||
AXA | 8,844,600 | 395,763,144 | |||
395,763,144 | |||||
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
MATERIALS — 8.10% | |||||
CHEMICALS — 8.10% | |||||
Air Liquide | 2,837,160 | $ | 379,724,474 | ||
Basf AG | 2,268,100 | 313,717,066 | |||
Givaudan AG | 177,329 | 163,887,485 | |||
Potash Corp. of Saskatchewan, Inc. | 4,261,500 | 450,440,550 | |||
1,307,769,575 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 9.21% | |||||
PHARMACEUTICALS — 9.21% | |||||
Novartis AG | 2,618,800 | 144,520,421 | |||
Novartis AG ADR | 2,388,700 | 131,282,952 | |||
Novo Nordisk A/S | 3,523,925 | 425,332,672 | |||
Roche Holdings AG | 1,864,400 | 338,050,109 | |||
Teva Pharmaceutical Industries Ltd. ADR | 10,059,700 | 447,354,859 | |||
1,486,541,013 | |||||
REAL ESTATE — 1.87% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 1.87% | |||||
Country Garden Holdings Co.+ | 177,696,100 | 302,185,203 | |||
302,185,203 | |||||
RETAILING — 5.42% | |||||
MULTILANE RETAIL — 3.79% | |||||
Marks & Spencer Group plc | 25,503,000 | 321,162,301 | |||
Next plc | 7,234,531 | 290,708,077 | |||
SPECIALTY RETAIL — 1.63% | |||||
Kingfisher plc | 23,355,803 | 85,441,241 | |||
Yamada Denki Co., Ltd. | 1,790,654 | 177,249,258 | |||
874,560,877 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.92% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.92% | |||||
Arm Holdings plc | 47,249,000 | 148,873,903 | |||
148,873,903 | |||||
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
SOFTWARE & SERVICES — 4.39% | |||||
SOFTWARE — 4.39% | |||||
Amdocs Ltd.+ | 6,593,900 | $ | 245,227,141 | ||
Nintendo Co., Ltd. | 889,931 | 463,308,003 | |||
708,535,144 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 3.69% | |||||
COMMUNICATIONS EQUIPMENT — 2.40% | |||||
Nokia Oyj | 10,214,600 | 388,316,390 | |||
OFFICE ELECTRONICS — 1.29% | |||||
Canon, Inc. | 3,802,400 | 207,557,115 | |||
595,873,505 | |||||
TELECOMMUNICATION SERVICES — 14.20% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.00% | |||||
France Telecom SA | 9,727,100 | 325,814,651 | |||
Telefónica SA | 11,402,200 | 319,163,461 | |||
WIRELESS TELECOMMUNICATION SERVICES — 10.20% | |||||
América Móvil SA de CV | 5,750,744 | 368,047,616 | |||
China Mobile Ltd. | 37,510,172 | 613,762,020 | |||
Rogers Communications, Inc. | 8,457,800 | 385,029,090 | |||
Vodafone Group plc ADR | 7,713,055 | 279,983,896 | |||
2,291,800,734 | |||||
TRANSPORTATION — 1.09% | |||||
ROAD & RAIL — 1.09% | |||||
Canadian National Railway Co. | 3,086,900 | 176,154,873 | |||
176,154,873 | |||||
UTILITIES — 4.92% | |||||
ELECTRIC UTILITIES — 4.92% | |||||
E. ON AG | 2,388,300 | 441,569,540 | |||
Fortum Oyj | 9,604,250 | 352,513,871 | |||
794,083,411 | |||||
TOTAL COMMON STOCK (Cost $11,400,631,125) | 15,298,302,016 | ||||
32 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
SHORT TERM INVESTMENTS — 4.53% | ||||||
Abbey National, 4.77%, 10/2/2007 | $ | 100,000,000 | $ | 99,986,750 | ||
Abbey National, 4.775%, 10/1/2007 | 24,000,000 | 24,000,000 | ||||
Citigroup Funding, Inc., 4.80%, 10/3/2007 | 21,000,000 | 20,994,400 | ||||
Citigroup Funding, Inc., 4.80%, 10/5/2007 | 100,000,000 | 99,946,667 | ||||
General Electric Capital Corp., 4.66%, 10/3/2007 | 61,000,000 | 60,984,208 | ||||
General Electric Capital Corp., 4.66%, 10/4/2007 | 100,000,000 | 99,961,166 | ||||
General Electric Capital Corp., 4.70%, 10/9/2007 | 68,500,000 | 68,428,455 | ||||
General Electric Capital Corp., 4.70%, 10/10/2007 | 100,000,000 | 99,882,500 | ||||
Toyota Credit de Puerto Rico, 4.73%, 10/5/2007 | 50,000,000 | 49,973,722 | ||||
Toyota Credit de Puerto Rico, 4.73%, 10/9/2007 | 53,000,000 | 52,944,292 | ||||
Toyota Credit de Puerto Rico, 4.77%, 10/1/2007 | 53,500,000 | 53,500,000 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $730,602,160) | 730,602,160 | |||||
TOTAL INVESTMENTS — 99.29% (Cost $12,131,233,285) | $ | 16,028,904,176 | ||||
OTHER ASSETS LESS LIABILITIES — 0.71% | 115,131,781 | |||||
NET ASSETS — 100.00% | $ | 16,144,035,957 | ||||
Footnote legend
+ | Non-income producing |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR American Depository Receipt
See notes to financial statements.
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP |
New York, New York November 16, 2007 |
34 Certified Annual Report
Thornburg International Value Fund | September 30, 2007 (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 B shares within eight years of purchase;
(d) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(e) 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, 2007 and held until September 30, 2007.
Actual Expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,236.80 | $ | 7.22 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.61 | $ | 6.52 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,232.80 | $ | 11.13 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,015.10 | $ | 10.05 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,232.70 | $ | 11.21 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,015.02 | $ | 10.12 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,239.20 | $ | 5.11 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.50 | $ | 4.61 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,236.10 | $ | 8.13 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.80 | $ | 7.33 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,237.50 | $ | 7.01 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.32 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,239.30 | $ | 5.17 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.45 | $ | 4.67 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.29%; B: 1.99%; C: 2.00%; I: 0.91%; R3: 1.45%; R4: 1.25%; and R5: 0.92%) 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 for each class of shares 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, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg International Value Fund versus MSCI EAFE Index (May 28, 1998 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2007 (with sales charge)
1 Yr | 5 Yrs | Since Inception | |||||||
A Shares (Incep: 5/28/98) | 34.31 | % | 25.41 | % | 14.24 | % | |||
B Shares (Incep: 4/03/00) | 34.55 | % | 25.37 | % | 11.35 | % | |||
C Shares (Incep: 5/28/98) | 38.63 | % | 25.61 | % | 13.84 | % | |||
R3 Shares (Incep: 7/01/03) | 40.43 | % | — | 27.93 | % | ||||
R4 Shares (Incep: 2/01/07) | — | — | 25.90 | %* | |||||
R5 Shares (Incep: 2/01/05) | 41.13 | % | — | 28.24 | % | ||||
MSCI EAFE Index (Since: 5/28/98) | 24.86 | % | 23.55 | % | 7.88 | % |
* | Not annualized for periods less than one year. |
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 R3, R4 and R5 shares. Class R3, R4 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, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
38 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg International Value Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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, 2007 (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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the fiscal year ended September 30, 2007, the Fund designates long-term capital gain dividends of $192,445,615.
For the tax year ended September 30, 2007, the Thornburg International Value Fund designates 48.77% (or the maximum allowed) 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.
For the year ended September 30, 2007, foreign taxes paid and foreign source income is $20,675,448 and $932,053,889, 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, 2007. Complete information will be computed and reported in conjunction with your 2007 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 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met on September 11, 2007 to consider renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports throughout the year from the Advisor. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s investment performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to a category of mutual funds selected by an independent mutual fund analyst firm, and relative to broad-based securities indices, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and
40 Certified Annual Report
OTHER INFORMATION, CONTINUED
Thornburg International Value Fund | September 30, 2007 (Unaudited) |
other resources, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s superior investment performance in most periods relative to the performance of a “foreign large blend” category of equity mutual funds assembled by an independent mutual fund analyst firm, the Fund’s outperformance of two broad-based securities indices in most periods during both rising and falling markets, the Fund’s cumulative returns over extended periods, the Fund’s relatively low portfolio volatility and the Fund’s performance relative to comparative measures of risk.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of fees, the Trustees 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 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. The Trustees observed that the management fee charged by the Advisor to the Fund was higher to a small degree than the average and median fee rates charged to the group 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 reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients ere not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund grows in size, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 41
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
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 International Growth 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 $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 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 Fund invests primarily in foreign securities and, under normal market conditions, invests at least 75% of its assets in foreign securities or depository receipts of foreign securities. The Fund may invest in developing countries.
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 International Growth Fund
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Investing outside the United States involves additional risks, such as currency fluctuations. Risks may be associated with investments in emerging markets including illiquidity and volatility. Additionally, the Fund may invest a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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
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.
This page is not part of the Annual Report. 3
Thornburg International Value Fund
Finding Promising Companies at a Discount
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, 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. The total annual fund operating expense of Class I shares is 0.94%, as disclosed in the most recent Prospectus.
KEY PORTFOLIO ATTRIBUTES
As of 9/30/07
Portfolio P/E Trailing 12-months* | 18.3x | ||
Portfolio Price to Cash Flow* | 11.7 | ||
Portfolio Price to Book Value* | 3.5 | ||
Median Market Cap* | $ | 37.1 B | |
7-Year Beta (Thornburg vs. MSCI EAFE)* | 0.90 | ||
Holdings | 52 |
* | Source: FactSet |
Investing is both an art and a science. It requires the vision to recognize opportunity and the precision to use that opportunity to achieve a specific goal. Consistent success comes to those who strike a balance between the two. We believe Thornburg International Value Fund strikes such a balance.
The Fund seeks to find value 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 material positive returns for shareholders who have been invested since the Fund’s inception in 1998.
Our team is dedicated to providing value to shareholders. We accomplish this through the application of seasoned investment principles with hands-on, company-oriented research. We use a collaborative approach in implementing our investment research process. Our focus is on finding promising companies available at a discount to our estimate of their intrinsic value, no matter where they are located outside the United States. Geographic location is secondary to individual stock merit.
In managing the Thornburg International Value Fund, we take a bottom-up approach to stock selection. The Fund is not predisposed to a particular geographic region or industry. As of September 30, 2007, holdings cover 18 countries and 21 industries. We use a variety of valuation methods and business evaluations in an effort to gauge the intrinsic value of a company based on its past record and future potential. The continuum of process moves from screens and idea generation, through conventional “Wall Street” research and documentation, to company contact, the latter often including on-site visits. The focus of the analysis is on what’s behind the numbers, its revenue and cash-generating model. We make an effort to get to know the company’s reputation in the industry, its people and its corporate culture.
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2007
YTD | 1 yr | 3 yrs | 5 yrs | Since Inception | |||||||||||
I Shares (Incep: 3/30/01) | 27.85 | % | 41.17 | % | 29.06 | % | 27.13 | % | 16.76 | % | |||||
MSCI EAFE Index (Since: 3/30/01) | 13.15 | % | 24.86 | % | 23.24 | % | 23.55 | % | 11.83 | % |
* | Periods under one year are not annualized. |
4 This page is not part of the Annual Report.
The current posture is to maintain a portfolio of 50–65 companies diversified by country, sector, industry, market capitalization, and our three categories of stocks: Basic Value, Consistent Earners and Emerging Franchises. Because of the limited number of stocks in the portfolio, every holding counts. At the time of purchase, we set a 12–18 month price target for each stock. The target is reviewed as the fundamentals of the stock develop during the course of ownership.
The bottom line? Engendering a wide-open, collegial environment fosters information flows and critical thinking intended to benefit portfolio decision making. We do not view our location in Santa Fe, NM, as a disadvantage. While we have access to the best of Wall Street’s analysis, we are not ruled by it. Distance from the crowd serves to fortify independent and objective thinking.
Being diversified in various ways, the Fund is well positioned to take advantage of a broad array of opportunities. 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 stocks in the portfolio and employing a sell discipline has enabled the Fund to strike an effective balance between risk and reward.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/07
Top Contributors | Top Detractors | |
Hong Kong Exchanges & Clearing Ltd. | Kingfisher plc | |
China Merchants Bank Co. Ltd. | Allied Irish Banks plc | |
China Mobile Ltd. | Hyundai Motor Co. Ltd. | |
Nokia Oyj | Carrefour SA | |
Potash Corp. of Saskatchewan, Inc. | Amdocs Ltd. |
Source: FactSet
TOP TEN HOLDINGS
As of 9/30/07
China Mobile Ltd. | 3.8 | % | |
UBS AG | 3.2 | % | |
Nestlé SA-REG | 3.0 | % | |
Nintendo Co. Ltd | 2.9 | % | |
Potash Corp. of Saskatchewan, Inc. | 2.8 | % | |
Teva Pharmaceutical Industries Ltd. | 2.8 | % | |
E. ON AG | 2.7 | % | |
Novo Nordisk A/S | 2.6 | % | |
AXA SA | 2.5 | % | |
Nokia Oyj | 2.4 | % |
This page is not part of the Annual Report. 5
Thornburg International Value Fund
I Shares – September 30, 2007
7 | ||
10 | ||
12 | ||
14 | ||
15 | ||
21 | ||
22 | ||
28 | ||
29 | ||
30 | ||
31 | ||
34 |
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.
6 Certified Annual Report.
| October 18, 2007
Dear Fellow Shareholder:
The fiscal year ended September 30, 2007, was an extraordinary year for the Thornburg International Value Fund. The net asset value per share (NAV) of the Class I shares on September 30, 2007, was $36.77 versus $26.99 one year ago. Total return for the Fund’s Class I shares for the period was 41.17% compared with 24.86% for the Morgan Stanley Capital International Europe, Australasia, Far East Index (MSCI EAFE). Strong European and emerging market currencies boosted returns for U.S. investors, evidenced by the disparity of returns in local currencies versus dollars. Our lower weighting compared with the benchmark in underperforming areas such as Japan and industries such as Financials was beneficial, and reflects our bottom-up approach, as we have found more compelling value elsewhere. As usual, individual stock selection had the largest impact on performance.
Portfolio gains were spread across a variety of sectors, with notable performance from telecommunication services, materials, energy, information technology and financial issues. Positive returns by geography were also broadly based with China and related issues contributing handsomely to portfolio gains. Notable performance was also achieved by stocks in Europe and Canada. Stock selection was positive in Japan, with Nintendo Co. Ltd., a top performer in a lackluster stock market environment. For details on performance by share class, please refer to the performance summary on page 30.
These strong results were achieved in an environment that was indeed challenging. The combination of interest rate skepticism, liquidity crisis, regional and sector volatility, and the subprime debacle created investor uncertainty and, in our opinion, opportunity. Recent actions by central banks, such as the Bank of England guaranteeing deposits at Northern Rock Bank and the U.S. Federal Reserve lowering interest rates, have worked toward restoring confidence in securities markets. These actions have helped markets close at the end of our fiscal year on a strongly positive note.
China remained one of the most dynamic regions globally. On more than one occasion during the year, markets there experienced intense volatility. Three of our top five performers capitalized on the development phenomena in China. Having had a number of our portfolio management and research team members visit the region during the year, we remain optimistic about the promise of our investments there. Our top contributor, although not based in mainland China, was Hong Kong Exchanges & Clearing Ltd. It is the only approved venue for overseas investments under the Qualified Domestic Institutional Investor (QDII) arrangement. In addition, the Hong Kong government has purchased a minority interest in the exchange, which may boost average daily turnover if a potential strategic tie-up with the | |
Certified Annual Report 7
Letter to Shareholders
Continued
Chinese mainland stock exchanges occurs. China Merchants Bank Co. Ltd. continued to benefit from improving net interest margin and strong fee income growth. China Mobile Ltd. was another top performer. The company signed up another record number of new subscribers, and expectations prevailed that industry restructuring might be further delayed, allowing China Mobile to continue its industry dominance. Another emerging markets stock, Teva Pharmaceutical Industries Ltd., went from being one of our bottom ten contributors in 2006 to a star performer in 2007, as the culmination of fears surrounding Wal-Mart’s $4 generic offering, incorporating the $7.5 billion acquisition of Ivax, and a new CEO proved to be benign events to the future of the company. Teva is the world’s largest manufacturer of generic drugs, exposed to billions of dollars of branded product coming off patent.
The strong performance of our emerging market holdings, where our average weighting for the year hovered around 20%, complemented excellent performance generated from holdings based in developed markets. Nokia Oyj has been successful in introducing new mobile devices that cross the mid-to-high end of the market, and continues to gain market share in the fast growing developing markets. Potash Corporation of Saskatchewan Inc., one of the Fund’s top five contributors, is the world’s largest fertilizer company by capacity. There are limited potash deposits around the world and most of Potash’s competitors are operating at or near capacity. Rogers Communications Inc. continues to benefit from market share gains in cable TV, broadband access and mobile communications in the robust Canadian market. Nintendo’s Wii and DS platforms have dominated the electronic game market this year and sales have exceeded expectations. Schlumberger Ltd. benefited from higher oil prices and strong demand for oilfield services in the Middle East, the former Soviet Union, and in the deepwater offshore production market. Alliance Boots plc rose sharply on a bid by private equity firm Kohlberg Kravis Roberts and was sold from the portfolio.
Detractors, although similarly diverse in nature, were much less significant in magnitude to the impact of the overall performance of the Fund than the contributors. Many stocks that are directly related to the consumer were penalized, such as home improvement retailer Kingfisher plc., Carrefour SA, and Hyundai Motor Co. Ltd. Kingfisher suffered, as not only is the U.K. consumer sensitive to interest rate increases given the predominance of adjustable mortgages, but some of the wettest months on record were experienced in the U.K. throughout the summer. Additionally, any enthusiasm surrounding a potential private equity bid was quickly eliminated as the credit crunch unfolded. Other poor performers included financials, which reacted to the negative news flow stemming from the U.S. subprime crisis, causing negative contribution from stocks such as Allied Irish Banks plc, UBS AG, and Intesa Sanpaolo in Italy. Rounding out the bottom ten were Amdocs Ltd., Samsung Electronics Co. Ltd., Marks & Spencer Group plc, and Bank of Yokohama Ltd. Samsung Electronics was eliminated from the portfolio during the year.
Economic activity globally remains healthy in most sectors, with growth in most countries outpacing the United States. Emerging markets continue to expand at rates well above those in developed markets. Reflecting this expansion and improving earnings, stocks in emerging markets generally continue to perform well. High individual savings rates, stable currencies and a dearth of alternative investments is likely contributing to strength in some of these markets, particularly China. It also seems that western investors are growing more comfortable allocating at least a portion of their assets to emerging market securities.
8 Certified Annual Report
Despite volatile markets during the last year, our results were good. With the aforementioned volatility comes opportunity and subsequent activity. We have established new positions in stocks that we consider to be leading franchises such as Nestlé SA, Marks & Spencer Group plc, and Groupe Danone, each of which had fallen out of favor. We feel that our additions and eliminations in the portfolio have been taken with the appropriate risk considerations in mind. Our investment goal remains to participate in rising markets, yet be cognizant of the risk to the downside that is ever present in equity markets. Our positive performance through this year’s challenging summer months was particularly gratifying. For well selected stock portfolios, we believe the potential remains for earnings and interest rate driven capital appreciation in the period ahead. The Thornburg International Value Fund is, we believe, one such portfolio.
We invite you to visit our web site at www.thornburg.com where you will find useful information on the Thornburg International Value Fund as well our other funds and investment topics.
Thank you for your trust and confidence.
Sincerely,
![]() | ![]() | ![]() | ||
William V. Fries,CFA | Wendy Q. Trevisani | Lei Wang,CFA | ||
Co-Portfolio Manager Managing Director | Co-Portfolio Manager Managing Director | 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 9
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg International Value Fund | September 30, 2007 |
ASSETS | |||
Investments at value (cost $12,131,233,285) (Note 2) | $ | 16,028,904,176 | |
Cash | 4,083,372 | ||
Cash denominated in foreign currency (cost $ 9,423,365) | 9,481,639 | ||
Receivable for investments sold | 544,860,262 | ||
Receivable for fund shares sold | 145,929,312 | ||
Unrealized gain on forward exchange contracts (Note 7) | 5,859,673 | ||
Dividends receivable | 23,320,151 | ||
Prepaid expenses and other assets | 80,838 | ||
Total Assets | 16,762,519,423 | ||
LIABILITIES | |||
Payable for securities purchased | 584,830,379 | ||
Payable for fund shares redeemed | 17,202,589 | ||
Payable to investment advisor and other affiliates (Note 3) | 13,258,438 | ||
Accounts payable and accrued expenses | 3,176,991 | ||
Dividends payable | 15,069 | ||
Total liabilities | 618,483,466 | ||
NET ASSETS | $ | 16,144,035,957 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 5,460,264 | |
Net unrealized appreciation on investments | 3,904,036,914 | ||
Accumulated net realized gain (loss) | 1,350,112,704 | ||
Net capital paid in on shares of beneficial interest | 10,884,426,075 | ||
$ | 16,144,035,957 | ||
10 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($7,111,205,134 applicable to 197,042,328 shares of beneficial interest outstanding—Note 4) | $ | 36.09 | |
Maximum sales charge, 4.50% of offering price | 1.70 | ||
Maximum offering price per share | $ | 37.79 | |
Class B Shares: | |||
Net asset value and offering price per share * ($135,486,475 applicable to 3,946,854 shares of beneficial interest outstanding—Note 4) | $ | 34.33 | |
Class C Shares: | |||
Net asset value and offering price per share * ($2,309,487,297 applicable to 67,035,550 shares of beneficial interest outstanding—Note 4) | $ | 34.45 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($5,113,108,610 applicable to 139,037,967 shares of beneficial interest outstanding—Note 4) | $ | 36.77 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($984,587,375 applicable to 27,215,915 shares of beneficial interest outstanding—Note 4) | $ | 36.18 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($39,217,487 applicable to 1,088,877 shares of beneficial interest outstanding—Note 4) | $ | 36.02 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($450,943,579 applicable to 12,274,454 shares of beneficial interest outstanding—Note 4) | $ | 36.74 | |
* | 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 11
STATEMENT OF OPERATIONS | ||
Thornburg International Value Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $ 20,687,076) | $ | 234,456,109 | ||
Interest income | 18,222,772 | |||
Total Income | 252,678,881 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 80,553,444 | |||
Administration fees (Note 3) | ||||
Class A Shares | 6,652,187 | |||
Class B Shares | 131,841 | |||
Class C Shares | 2,157,090 | |||
Class I Shares | 1,773,228 | |||
Class R3 Shares | 853,351 | |||
Class R4 Shares | 5,601 | |||
Class R5 Shares | 88,481 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 13,305,200 | |||
Class B Shares | 1,056,675 | |||
Class C Shares | 17,303,822 | |||
Class R3 Shares | 3,420,945 | |||
Class R4 Shares | 11,970 | |||
Transfer agent fees | ||||
Class A Shares | 7,959,105 | |||
Class B Shares | 163,999 | |||
Class C Shares | 2,000,350 | |||
Class I Shares | 2,916,430 | |||
Class R3 Shares | 1,445,374 | |||
Class R4 Shares | 6,404 | |||
Class R5 Shares | 219,420 | |||
Registration and filing fees | ||||
Class A Shares | 167,280 | |||
Class B Shares | 20,053 | |||
Class C Shares | 79,383 | |||
Class I Shares | 136,325 | |||
Class R3 Shares | 28,023 | |||
Class R4 Shares | 18,209 | |||
Class R5 Shares | 23,392 | |||
Custodian fees (Note 3) | 4,867,907 | |||
Professional fees | 248,545 | |||
Accounting fees | 430,265 | |||
Trustee fees | 161,320 | |||
Other expenses | 1,923,532 | |||
Total Expenses | 150,129,151 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,073,052 | ) | ||
Fees paid indirectly (Note 3) | (343,408 | ) | ||
Net Expenses | 148,712,691 | |||
Net Investment Income | $ | 103,966,190 | ||
12 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
Thornburg International Value Fund | Year Ended September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 1,494,470,799 | ||
Foreign currency transactions | (66,025,711 | ) | ||
1,428,445,088 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $393,320) | 2,529,250,741 | |||
Foreign currency translations | 6,952,563 | |||
2,536,203,304 | ||||
Net Realized and Unrealized Gain | 3,964,648,392 | |||
Net Increase in Net Assets Resulting From Operations | $ | 4,068,614,582 | ||
See notes to financial statements.
Certified Annual Report 13
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg International Value Fund
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 103,966,190 | $ | 74,614,709 | ||||
Net realized gain on investments and foreign currency transactions | 1,428,445,088 | 117,445,836 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, foreign currency translation, and deferred taxes | 2,536,203,304 | 786,733,704 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 4,068,614,582 | 978,794,249 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (51,935,263 | ) | (31,195,911 | ) | ||||
Class B Shares | (290,064 | ) | (183,287 | ) | ||||
Class C Shares | (5,990,504 | ) | (3,436,661 | ) | ||||
Class I Shares | (49,998,965 | ) | (19,772,460 | ) | ||||
Class R3 Shares | (5,881,366 | ) | (2,966,495 | ) | ||||
Class R4 Shares | (152,359 | ) | — | |||||
Class R5 Shares | (3,086,424 | ) | (469,362 | ) | ||||
From realized gains | ||||||||
Class A Shares | (108,430,244 | ) | (42,242,602 | ) | ||||
Class B Shares | (2,187,195 | ) | (917,829 | ) | ||||
Class C Shares | (34,058,224 | ) | (12,682,161 | ) | ||||
Class I Shares | (53,149,660 | ) | (16,701,676 | ) | ||||
Class R3 Shares | (12,229,262 | ) | (2,457,320 | ) | ||||
Class R5 Shares | (1,466,007 | ) | (259,590 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 1,139,200,293 | 1,592,927,792 | ||||||
Class B Shares | 19,169,835 | 26,257,162 | ||||||
Class C Shares | 466,723,398 | 519,539,149 | ||||||
Class I Shares | 1,923,676,047 | 943,931,604 | ||||||
Class R3 Shares | 317,048,006 | 290,585,064 | ||||||
Class R4 Shares | 36,735,755 | — | ||||||
Class R5 Shares | 338,549,227 | 30,251,506 | ||||||
Net Increase in Net Assets | 7,980,861,606 | 4,249,001,172 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 8,163,174,351 | 3,914,173,179 | ||||||
End of year | $ | 16,144,035,957 | $ | 8,163,174,351 | ||||
Undistributed net investment income | $ | 5,460,264 | $ | 11,154,896 |
See notes to financial statements.
14 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg International Value Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types.
The Fund currently offers seven classes of shares of beneficial interest: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R3, Class R4, 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 R3 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 R4 shares are sold at net asset value without a sales charge at the time of purchase, but bear a service fee, (vii) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (viii) 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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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 Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $1,035,026 for Class R3 shares, $20,192 for Class R4 shares, and $17,834 for Class R5 shares.
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
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, 2007, the Distributor has advised the Fund that it earned net commissions aggregating $899,351 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $227,932 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 distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class B, Class C, and Class R3 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class B, Class C, and Class R3 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 R3 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, 2007, 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, 2007, fees paid indirectly were $343,408. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 88,417,092 | $ | 2,708,357,987 | 87,468,381 | $ | 2,184,068,553 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 4,398,998 | 126,296,864 | 2,262,190 | 54,173,870 | ||||||||||
Shares repurchased | (56,529,130 | ) | (1,695,490,555 | ) | (25,705,411 | ) | (645,390,435 | ) | ||||||
Redemption fees received** | — | 35,997 | — | 75,804 | ||||||||||
Net Increase (Decrease) | 36,286,960 | $ | 1,139,200,293 | 64,025,160 | $ | 1,592,927,792 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 900,271 | $ | 26,066,084 | 1,253,957 | $ | 29,894,373 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 66,554 | 1,752,230 | 38,925 | 851,686 | ||||||||||
Shares repurchased | (295,251 | ) | (8,649,193 | ) | (185,951 | ) | (4,489,669 | ) | ||||||
Redemption fees received** | — | 714 | — | 772 | ||||||||||
Net Increase (Decrease) | 671,574 | $ | 19,169,835 | 1,106,931 | $ | 26,257,162 | ||||||||
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 22,218,387 | $ | 645,166,990 | 25,567,387 | $ | 611,156,817 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 871,513 | 23,106,077 | 413,698 | 9,175,773 | ||||||||||
Shares repurchased | (6,906,854 | ) | (201,561,323 | ) | (4,179,001 | ) | (100,805,360 | ) | ||||||
Redemption fees received** | — | 11,654 | — | 11,919 | ||||||||||
Net Increase (Decrease) | 16,183,046 | $ | 466,723,398 | 21,802,084 | $ | 519,539,149 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 80,379,355 | $ | 2,448,318,070 | 43,224,765 | $ | 1,106,710,515 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,384,953 | 71,218,240 | 1,101,563 | 27,170,524 | ||||||||||
Shares repurchased | (19,106,830 | ) | (595,884,029 | ) | (7,420,547 | ) | (189,981,388 | ) | ||||||
Redemption fees received** | — | 23,766 | — | 31,953 | ||||||||||
Net Increase (Decrease) | 63,657,478 | $ | 1,923,676,047 | 36,905,781 | $ | 943,931,604 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 17,797,234 | $ | 542,413,469 | 14,043,775 | $ | 352,814,313 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 540,505 | 15,509,752 | 176,361 | 4,335,854 | ||||||||||
Shares repurchased | (7,865,942 | ) | (240,879,799 | ) | (2,651,401 | ) | (66,568,696 | ) | ||||||
Redemption fees received** | — | 4,584 | — | 3,593 | ||||||||||
Net Increase (Decrease) | 10,471,797 | $ | 317,048,006 | 11,568,735 | $ | 290,585,064 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 1,119,583 | $ | 37,786,085 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 3,999 | 139,613 | — | — | ||||||||||
Shares repurchased | (34,705 | ) | (1,189,970 | ) | — | — | ||||||||
Redemption fees received** | — | 27 | — | — | ||||||||||
Net Increase (Decrease) | 1,088,877 | $ | 36,735,755 | — | $ | — | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 11,580,206 | $ | 374,139,434 | 1,365,851 | $ | 35,030,651 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 140,876 | 4,458,789 | 28,818 | 726,553 | ||||||||||
Shares repurchased | (1,252,025 | ) | (40,050,137 | ) | (212,929 | ) | (5,506,089 | ) | ||||||
Redemption fees received** | — | 1,141 | — | 391 | ||||||||||
Net Increase (Decrease) | 10,469,057 | $ | 338,549,227 | 1,181,740 | $ | 30,251,506 | ||||||||
* | Effective date of Class R4 shares was February 1, 2007. |
** | 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. |
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $10,684,747,715 and $7,312,874,194, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 12,131,233,285 | ||
Gross unrealized appreciation on a tax basis | $ | 3,948,257,927 | ||
Gross unrealized depreciation on a tax basis | (50,587,036 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 3,897,670,891 | ||
Distributable earnings – ordinary income | $ | 665,769,020 | ||
Distributable capital gains | $ | 700,215,640 |
In order to account for permanent book/tax differences, the Fund increased undistributed net investment income by $7,674,123 and decreased undistributed net realized investment gain by $7,674,123. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign capital gains tax, passive foreign investment company gains/losses, and currency gains/losses.
The tax character of distributions paid during the year ended September 30, 2007, and September 30, 2006, was as follows:
2007 | 2006 | |||||
Distributions from: | ||||||
Ordinary income | $ | 136,409,922 | $ | 74,137,360 | ||
Capital gains | $ | 192,445,615 | $ | 59,147,994 | ||
Total | $ | 328,855,537 | $ | 133,285,354 | ||
At September 30, 2007, the Fund has deferred tax basis currency losses occurring subsequent to October 31, 2006 of $3,579,635. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
NOTE 7 – FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2007, 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, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
CONTRACTS TO SELL:
Contracts | Contract Value Date | Unrealized Gain (Loss) | |||
710,000,000 Mexican Peso for 65,263,351 USD | December 06, 2007 | $ | 642,330 | ||
5,767,000,000 Mexican Peso for 530,103,870 USD | December 06, 2007 | 5,217,343 | |||
Unrealized gain from forward | |||||
Sell contracts: | 5,859,673 | ||||
Net unrealized gain (loss) from forward | |||||
Sell contracts: | $ | 5,859,673 | |||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
20 Certified Annual Report
Thornburg International Value Fund |
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 26.99 | $ | 23.19 | $ | 18.48 | $ | 15.13 | $ | 11.96 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.41 | 0.43 | 0.28 | 0.24 | 0.14 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 10.42 | 4.06 | 4.72 | 3.11 | 3.03 | |||||||||||||||
Total from investment operations | 10.83 | 4.49 | 5.00 | 3.35 | 3.17 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.40 | ) | (0.29 | ) | (0.29 | ) | — | — | ||||||||||||
Realized capital gains | (0.65 | ) | (0.40 | ) | — | — | — | |||||||||||||
Total dividends | (1.05 | ) | (0.69 | ) | (0.29 | ) | — | — | ||||||||||||
Change in net asset value | 9.78 | 3.80 | 4.71 | 3.35 | 3.17 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 36.77 | $ | 26.99 | $ | 23.19 | $ | 18.48 | $ | 15.13 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 41.17 | % | 19.76 | % | 27.15 | % | 22.14 | % | 26.51 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.32 | % | 1.67 | % | 1.32 | % | 1.35 | % | 1.07 | % | ||||||||||
Expenses, after expense reductions | 0.90 | % | 0.94 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 0.90 | % | 0.94 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses, before expense reductions | 0.90 | % | 0.94 | % | 1.02 | % | 1.11 | % | 1.25 | % | ||||||||||
Portfolio turnover rate | 64.77 | % | 36.58 | % | 34.17 | % | 35.84 | % | 58.35 | % | ||||||||||
Net assets at end of year (000) | $ | 5,113,109 | $ | 2,034,453 | $ | 892,216 | $ | 293,583 | $ | 33,511 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 21
Thornburg International Value Fund | September 30, 2007 |
CUSIPS: CLASS A - 885-215-657, CLASS B - 885-215-616, CLASS C - 885-215-640, CLASS I - 885-215-566, CLASS R3 - 885-215-525, CLASS R4 - 815-215-269, CLASS R5 - 885-215-368
NASDAQ SYMBOLS: CLASS A - TGVAX, CLASS B - THGBX, CLASS C - THGCX, CLASS I - TGVIX, CLASS R3 - TGVRX, CLASS R4 - THVRX, CLASS R5 - TIVRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/07
Telecommunication Services | 14.2 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 9.2 | % | |
Materials | 8.1 | % | |
Food, Beverage & Tobacco | 7.9 | % | |
Energy | 6.4 | % | |
Banks | 5.6 | % | |
Retailing | 5.4 | % | |
Utilities | 4.9 | % | |
Diversified Financials | 4.9 | % | |
Software & Services | 4.4 | % | |
Technology Hardware & Equipment | 3.7 | % | |
Capital Goods | 3.3 | % | |
Consumer Services | 2.9 | % | |
Insurance | 2.5 | % | |
Automobiles & Components | 2.1 | % | |
Household & Personal Products | 2.1 | % | |
Consumer Durables & Apparel | 2.0 | % | |
Real Estate | 1.9 | % | |
Food & Staples Retailing | 1.3 | % | |
Transportation | 1.1 | % | |
Semiconductors & Semiconductor Equipment | 0.9 | % | |
Other Assets and Cash Equivalents | 5.2 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/07 (percent of equity holdings)
U.K. | 16.4 | % | |
Switzerland | 11.6 | % | |
France | 11.3 | % | |
Japan | 10.1 | % | |
China | 9.0 | % | |
Canada | 8.5 | % | |
Germany | 4.9 | % | |
Finland | 4.8 | % | |
Denmark | 4.2 | % | |
México | 3.7 | % | |
Israel | 2.9 | % | |
Russia | 2.6 | % | |
Spain | 2.1 | % | |
Hong Kong | 1.8 | % | |
South Korea | 1.8 | % | |
Brazil | 1.5 | % | |
Netherlands | 1.5 | % | |
Greece | 1.3 | % |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 94.76% | |||||
AUTOMOBILES & COMPONENTS — 2.13% | |||||
AUTOMOBILES — 2.13% | |||||
Toyota Motor Corp. | 5,827,900 | $ | 343,996,535 | ||
343,996,535 | |||||
BANKS — 5.64% | |||||
COMMERCIAL BANKS — 5.64% | |||||
China Merchants Bank Co., Ltd. | 39,613,430 | 174,019,132 | |||
Lloyds TSB Group plc | 25,756,900 | 285,889,738 | |||
Sberbank-CLS | 43,135,000 | 179,872,950 | |||
Shinhan Financial Group Co. | 4,145,254 | 270,854,665 | |||
910,636,485 | |||||
CAPITAL GOODS — 3.32% | |||||
AEROSPACE & DEFENSE — 1.44% | |||||
Embraer Brasileira de Aeronáutica ADR | 5,302,345 | 232,878,992 | |||
MACHINERY — 1.88% | |||||
Fanuc Ltd. | 2,979,800 | 303,777,983 | |||
536,656,975 | |||||
CONSUMER DURABLES & APPAREL — 2.02% | |||||
TEXTILES, APPAREL & LUXURY GOODS — 2.02% | |||||
LVMH Moët Hennessy Louis Vuitton SA | 2,714,296 | 325,388,699 | |||
325,388,699 | |||||
CONSUMER SERVICES — 2.91% | |||||
HOTELS, RESTAURANTS & LEISURE — 2.91% | |||||
Carnival plc | 5,639,600 | 269,311,182 | |||
OPAP SA | 5,173,607 | 200,662,654 | |||
469,973,836 | |||||
DIVERSIFIED FINANCIALS — 4.92% | |||||
CAPITAL MARKETS — 3.21% | |||||
UBS AG | 9,638,760 | 518,261,865 | |||
DIVERSIFIED FINANCIAL SERVICES — 1.71% | |||||
Hong Kong Exchanges & Clearing Ltd. | 9,005,700 | 275,713,655 | |||
793,975,520 | |||||
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
ENERGY — 6.36% | |||||
ENERGY EQUIPMENT & SERVICES — 1.42% | |||||
Schlumberger Ltd. | 2,181,000 | $ | 229,005,000 | ||
OIL, GAS & CONSUMABLE FUELS — 4.94% | |||||
Canadian Natural Resources Ltd. | 3,884,200 | 295,068,770 | |||
China Petroleum & Chemical Corp. | 226,998,585 | 282,366,693 | |||
Gazprom ADR | 4,996,300 | 220,336,830 | |||
1,026,777,293 | |||||
FOOD & STAPLES RETAILING — 1.26% | |||||
FOOD & STAPLES RETAILING — 1.26% | |||||
Wal Mart de México SA de CV | 55,672,400 | 204,112,791 | |||
204,112,791 | |||||
FOOD, BEVERAGE & TOBACCO — 7.86% | |||||
BEVERAGES — 3.06% | |||||
Carlsberg A/S Class B | 1,632,400 | 222,944,892 | |||
Sabmiller plc | 9,551,650 | 272,033,800 | |||
FOOD PRODUCTS — 4.80% | |||||
Groupe Danone | 3,766,300 | 296,454,604 | |||
Nestlé SA-REG | 1,064,600 | 478,235,602 | |||
1,269,668,898 | |||||
HOUSEHOLD & PERSONAL PRODUCTS — 2.08% | |||||
HOUSEHOLD PRODUCTS — 1.82% | |||||
Reckitt Benckiser plc | 4,985,730 | 292,966,811 | |||
PERSONAL PRODUCTS — 0.26% | |||||
Shiseido Co., Ltd. | 1,892,200 | 42,006,791 | |||
334,973,602 | |||||
INSURANCE — 2.45% | |||||
INSURANCE — 2.45% | |||||
AXA | 8,844,600 | 395,763,144 | |||
395,763,144 | |||||
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
MATERIALS — 8.10% | |||||
CHEMICALS — 8.10% | |||||
Air Liquide | 2,837,160 | $ | 379,724,474 | ||
Basf AG | 2,268,100 | 313,717,066 | |||
Givaudan AG | 177,329 | 163,887,485 | |||
Potash Corp. of Saskatchewan, Inc. | 4,261,500 | 450,440,550 | |||
1,307,769,575 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 9.21% | |||||
PHARMACEUTICALS — 9.21% | |||||
Novartis AG | 2,618,800 | 144,520,421 | |||
Novartis AG ADR | 2,388,700 | 131,282,952 | |||
Novo Nordisk A/S | 3,523,925 | 425,332,672 | |||
Roche Holdings AG | 1,864,400 | 338,050,109 | |||
Teva Pharmaceutical Industries Ltd. ADR | 10,059,700 | 447,354,859 | |||
1,486,541,013 | |||||
REAL ESTATE — 1.87% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 1.87% | |||||
Country Garden Holdings Co.+ | 177,696,100 | 302,185,203 | |||
302,185,203 | |||||
RETAILING — 5.42% | |||||
MULTILINE RETAIL — 3.79% | |||||
Marks & Spencer Group plc | 25,503,000 | 321,162,301 | |||
Next plc | 7,234,531 | 290,708,077 | |||
SPECIALTY RETAIL — 1.63% | |||||
Kingfisher plc | 23,355,803 | 85,441,241 | |||
Yamada Denki Co., Ltd. | 1,790,654 | 177,249,258 | |||
874,560,877 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.92% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.92% | |||||
Arm Holdings plc | 47,249,000 | 148,873,903 | |||
148,873,903 | |||||
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
SOFTWARE & SERVICES — 4.39% | |||||
SOFTWARE — 4.39% | |||||
Amdocs Ltd.+ | 6,593,900 | $ | 245,227,141 | ||
Nintendo Co., Ltd. | 889,931 | 463,308,003 | |||
708,535,144 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 3.69% | |||||
COMMUNICATIONS EQUIPMENT — 2.40% | |||||
Nokia Oyj | 10,214,600 | 388,316,390 | |||
OFFICE ELECTRONICS — 1.29% | |||||
Canon, Inc. | 3,802,400 | 207,557,115 | |||
595,873,505 | |||||
TELECOMMUNICATION SERVICES — 14.20% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.00% | |||||
France Telecom SA | 9,727,100 | 325,814,651 | |||
Telefónica SA | 11,402,200 | 319,163,461 | |||
WIRELESS TELECOMMUNICATION SERVICES — 10.20% | |||||
América Móvil SA de CV | 5,750,744 | 368,047,616 | |||
China Mobile Ltd. | 37,510,172 | 613,762,020 | |||
Rogers Communications, Inc. | 8,457,800 | 385,029,090 | |||
Vodafone Group plc ADR | 7,713,055 | 279,983,896 | |||
2,291,800,734 | |||||
TRANSPORTATION — 1.09% | |||||
ROAD & RAIL — 1.09% | |||||
Canadian National Railway Co. | 3,086,900 | 176,154,873 | |||
176,154,873 | |||||
UTILITIES — 4.92% | |||||
ELECTRIC UTILITIES — 4.92% | |||||
E. ON AG | 2,388,300 | 441,569,540 | |||
Fortum Oyj | 9,604,250 | 352,513,871 | |||
794,083,411 | |||||
TOTAL COMMON STOCK (Cost $11,400,631,125) | 15,298,302,016 | ||||
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
SHORT TERM INVESTMENTS — 4.53% | ||||||
Abbey National, 4.77%, 10/2/2007 | $ | 100,000,000 | $ | 99,986,750 | ||
Abbey National, 4.775%, 10/1/2007 | 24,000,000 | 24,000,000 | ||||
Citigroup Funding, Inc., 4.80%, 10/3/2007 | 21,000,000 | 20,994,400 | ||||
Citigroup Funding, Inc., 4.80%, 10/5/2007 | 100,000,000 | 99,946,667 | ||||
General Electric Capital Corp., 4.66%, 10/3/2007 | 61,000,000 | 60,984,208 | ||||
General Electric Capital Corp., 4.66%, 10/4/2007 | 100,000,000 | 99,961,166 | ||||
General Electric Capital Corp., 4.70%, 10/9/2007 | 68,500,000 | 68,428,455 | ||||
General Electric Capital Corp., 4.70%, 10/10/2007 | 100,000,000 | 99,882,500 | ||||
Toyota Credit de Puerto Rico, 4.73%, 10/5/2007 | 50,000,000 | 49,973,722 | ||||
Toyota Credit de Puerto Rico, 4.73%, 10/9/2007 | 53,000,000 | 52,944,292 | ||||
Toyota Credit de Puerto Rico, 4.77%, 10/1/2007 | 53,500,000 | 53,500,000 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $730,602,160) | 730,602,160 | |||||
TOTAL INVESTMENTS — 99.29% (Cost $12,131,233,285) | $ | 16,028,904,176 | ||||
OTHER ASSETS LESS LIABILITIES — 0.71% | 115,131,781 | |||||
NET ASSETS — 100.00% | $ | 16,144,035,957 | ||||
Footnote legend
+ Non-income producing
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
See notes to financial statements.
Certified Annual Report 27
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
28 Certified Annual Report
Thornburg International Value Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,239.20 | $ | 5.11 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.50 | $ | 4.61 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.91%) 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
Thornburg International Value Fund | September 30, 2007 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2007
1 Yr | 5 Yrs | Since Inception | |||||||
I Shares (Incep: 3/30/01) | 41.17 | % | 27.13 | % | 16.76 | % | |||
MSCI EAFE Index (Since: 3/30/01) | 24.86 | % | 23.55 | % | 11.83 | % |
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.
30 Certified Annual Report
Thornburg International Value Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 International Value Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
32 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg International Value Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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
Thornburg International Value Fund | September 30, 2007 (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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the fiscal year ended September 30, 2007, the Fund designates long-term capital gain dividends of $192,445,615.
For the tax year ended September 30, 2007, the Thornburg International Value Fund designates 48.77% (or the maximum allowed) 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.
For the year ended September 30, 2007, foreign taxes paid and foreign source income is $20,675,448 and $932,053,889, 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, 2007. Complete information will be computed and reported in conjunction with your 2007 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 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met on September 11, 2007 to consider renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports throughout the year from the Advisor. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s investment performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to a category of mutual funds selected by an independent mutual fund analyst firm, and relative to broad-based securities indices, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and
34 Certified Annual Report
OTHER INFORMATION, CONTINUED
Thornburg International Value Fund | September 30, 2007 (Unaudited) |
other resources, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s superior investment performance in most periods relative to the performance of a “foreign large blend” category of equity mutual funds assembled by an independent mutual fund analyst firm, the Fund’s outperformance of two broad-based securities indices in most periods during both rising and falling markets, the Fund’s cumulative returns over extended periods, the Fund’s relatively low portfolio volatility and the Fund’s performance relative to comparative measures of risk.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of fees, the Trustees 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 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. The Trustees observed that the management fee charged by the Advisor to the Fund was higher to a small degree than the average and median fee rates charged to the group 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 reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients ere not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund grows in size, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 35
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
36 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.
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 International Growth 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 $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 Core Growth Fund
The Fund seeks long-term growth of capital by investing in equity securities selected for their growth potential.
The Fund expects to invest primarily in domestic equity securities (primarily common stocks) selected for their growth potential. However, the Fund may own a variety of securities, including foreign equity securities and debt securities. The Fund may also invest in developing countries.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Investing outside the United States involves additional risks, such as currency fluctuations. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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.
To determine a fund’s Morningstar Rating™, funds with at least a three-year history are ranked in their categories by their Morningstar Risk-Adjusted Return scores. The top 10% receive 5 stars; the next 22.5%, 4 stars; the middle 35%, 3 stars; the next 22.5%, 2 stars; and the bottom 10% receive 1 star. The Risk-Adjusted Return accounts for variation in a fund’s performance (including the effects of all sales charges), placing more emphasis on downward variations and rewarding consistent performance. Other share classes may have different performance characteristics. © 2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
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.
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
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, 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% . Class A shares are subject to a 1% 30-day redemption fee. The total annual fund operating expense of Class A shares is 1.48% , as disclosed in the most recent Prospectus.
PORTFOLIO MANAGER
Alexander M.V. Motola,CFA
KEY PORTFOLIO ATTRIBUTES
As of 9/30/07
Portfolio P/E Trailing 12-months* | 30.0x | ||
Portfolio Price to Cash Flow* | 15.8 | ||
Portfolio Price to Book Value* | 5.9 | ||
Median Market Cap* | $ | 7.3 B | |
5-Year Beta (Thornburg vs. NASDAQ)* | 0.77 | ||
Holdings | 35 |
* | Source: FactSet |
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 may potentially 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 the 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
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2007
YTD | 1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||
A Shares (Incep: 12/27/00) | |||||||||||||||
Without Sales Charge | 15.95 | % | 26.50 | % | 24.68 | % | 26.71 | % | 8.76 | % | |||||
With Sales Charge | 10.74 | % | 20.82 | % | 22.79 | % | 25.56 | % | 8.03 | % | |||||
NASDAQ Composite Index | 11.85 | % | 19.62 | % | 12.51 | % | 18.18 | % | 0.92 | % | |||||
Russell 3000 Growth Index | 12.38 | % | 19.31 | % | 12.36 | % | 14.19 | % | 0.47 | % |
* | Periods under one year are not annualized. |
4 This page is not part of the Annual Report.
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.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/07
Top Contributors | Top Detractors | |
Las Vegas Sands Corp. | Nuvelo, Inc. | |
Cytyc Corp. | CB Richard Ellis Group, Inc. | |
ON Semiconductor Corp. | Caremark Rx, Inc. | |
Google, Inc. | Aspreva Pharmaceuticals Corp. | |
Copa Holdings SA | Santarus, Inc. |
Source: FactSet
MARKET CAPITALIZATION EXPOSURE
As Of 9/30/07
TOP TEN HOLDINGS TOP TEN
As of 9/30/07
Las Vegas Sands Corp. | 6.2 | % | |
Google, Inc. | 4.8 | % | |
CME Group, Inc. | 4.3 | % | |
Neustar, Inc. | 3.9 | % | |
América Móvil SA de CV | 3.9 | % | |
Intel Corp. | 3.9 | % | |
Amdocs Ltd. | 3.8 | % | |
Gilead Sciences, Inc. | 3.7 | % | |
Carlsberg A/S | 3.6 | % | |
Cytyc Corp. | 3.4 | % |
BASKET STRUCTURE
As Of 9/30/07
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Awards and Ratings
Thornburg Core Growth Fund
2007 Lipper Fund Award
Multi-cap Growth Category Class I shares won for the 3-year period, among 371 funds Class A shares won for the 5-year period, among 294 funds
Lipper Fund Awards are granted annually to the fund in each Lipper classification that consistently delivered the strongest risk-adjusted performance (calculated with dividends reinvested and without sales charges). Awards are given for three-year, five-year, and ten-year periods. The Fund received the 2007 award for all eligible time periods. | ||
2007 Excellence in Fund Management Award
All Cap Growth Category Issued by Standard & Poor’s/BusinessWeek
Excellence in Fund Management Award winners are selected based on in-depth interviews with portfolio managers. Winners were chosen from 830 funds rated A or B+ for the five years ended December 31, 2006, in the BusinessWeek 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 man- ager with at least five years tenure, and minimum investments of less than $26,000. | ||
Morningstar Rating
Mid-Cap Growth Category | ||
Overall Morningstar rating for Class A shares, based on risk-adjusted returns, uses a weighted average of the Fund’s three- and five-year ratings; respectively, 5 stars and 5 stars among 816 and 675 Mid-Cap Growth funds, as of 9/30/07. | ||
Past performance does not guarantee future results. |
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September 30, 2007
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.
8 Certified Annual Report
Alexander M.V. Motola, CFA Portfolio Manager | October 17, 2007
Dear Fellow Shareholder:
For the fiscal year ended September 30, 2007, the Thornburg Core Growth Fund had strong relative and absolute performance. On September 30, 2006, the net asset value (NAV) for the Class A shares was $16.38. As of the end of this fiscal year, the Fund’s NAV was $20.72. The Fund’s Class A shares outperformed its benchmarks with a total return of 26.50% (at NAV) over that period. The NASDAQ Composite Index returned 19.62% and the Russell 3000 Growth Index returned 19.31% from September 30, 2006, through September 30, 2007.
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, our two largest sectors were Information Technology and Health Care. While Information Technology has remained our largest exposure, and has in fact increased versus last year, our Health Care exposure has declined by a third, and is now slightly smaller than our Consumer Discretionary exposure. We have more exposure to Telecommunication Services and Consumer Staples, and we have kept a modest exposure to Industrials, Utilities, and Energy. Our Financials weighting has remained static, and continues to be represented by less traditional businesses – exchanges and specialty insurers, for example.
As with last year at this time, Growth Industry Leaders is our largest basket, followed by Emerging Growth Companies, then Consistent Growers. We continue to target approximately 33% of the portfolio exposure to each of the three baskets. A year ago, our small cap exposure was around 31% of the portfolio, but today it is just over 10%. We continue to view the small cap market as attractive and more inefficient, but most of the stocks we have found there fail to meet our valuation parameters. This has hurt performance, since these expensive stocks have become more expensive, but we always believe that valuation is a very important part of our investment process. We are not comfortable taking excessive valuation risk just to achieve our more balanced target portfolio. Large caps as a percentage of the portfolio have crept up to over 50%. 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., Cytyc Corp., ON Semiconductor Corp., Google Inc., Copa Holdings SA, América Móvil SA de CV, MEMC Electronic Materials Inc., and CBOT Holdings. Las Vegas Sands and Copa Holdings were both top contributors to returns last year as well. ON Semiconductor Corp. (ONNN) was added to the portfolio last November and has continued to develop nicely. Almost a year ago, we felt ONNN was a cheap stock with opportunities to improve both its business and its capital structure. Business has |
Certified Annual Report 9
Letter to Shareholders | ||
Continued |
improved, and the company has repurchased a material amount of stock and has refinanced and paid down debt. Opportunities exist for ONNN to continue their improvement as well as the possibility to improve their valuation. CBOT Holdings was purchased by the Chicago Mercantile Exchange Group Inc. (CME), and therefore continues to be a contributor to the portfolio, as we expect both volumes and volatility to grow over time. This is a fixed-cost, technologically driven business. These factors, coupled with management’s expertise in product development, make us encouraged about the future of their business.
We pride ourselves on our risk management: we invest in a “high expectations” area of the market in a concentrated fashion, and we believe our best risk-mitigation mechanism is outstanding research, with an eye towards “what can go wrong.” This approach has allowed us to minimize “big downs.” Our worst performer was Nuvelo Inc., which suffered mightily due to a disastrous Phase III trial for their lead drug, Alfimeprase. Health Care as a whole was a challenging area for us during the fiscal year. Other stocks in that sector with poor returns included Caremark Rx Inc., Aspreva Pharmaceuticals Corp., and Santaurus Inc. Non-Health Care underperformers included long-time holding Amdocs Ltd. (a top performer last year), CB Richard Ellis Group Inc., Western Union Co., and recent purchase Bare Escentuals Inc. CB Richard Ellis (CBG) has a great business, but they were obviously caught up in the real estate melt down over the summer. “Caught up” in the sense that investors considered their business at risk; the commercial real estate business has done much, much better than the U.S. residential real estate market, and more than half of CBG’s business is recurring in nature. We remain constructive on the company. Bare Escentuals’ negative impact on returns was slight, but was still a top 10 negative contributor. We were able to buy Bare Escentuals in the wake of their second quarter report – after the company had sold off due to slowing in their infomercial distribution channel. This created the opportunity for us to own this fast growing, niche producer of organic mineral cosmetics at a reasonable price.
It is important to understand our focus on risk management. Although we hope our statistical risk is low (standard deviation of returns), our focus is on appropriate diversification and stock specific risk management. “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 manage risk through consciously diversifying our portfolio by capitalization range, by sector and within sectors, and by basket (Growth Industry Leaders, Consistent Growth Companies, 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. It appears this may be changing – growth has done better than value in recent months, driven by modest or nonexistent premiums for higher growth business. Investors seem more willing to reward organic growth in a period when it appears the U.S. economy may slow. We feel many of the larger
10 Certified Annual Report
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 0.06% of total return to the Fund during the fiscal year.
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 minimizing 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,
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, 2007 |
ASSETS | ||||
Investments at value (Note 2) | ||||
Non-controlled affiliated issuers (cost $272,181,176) | $ | 293,766,164 | ||
Non-affiliated issuers (cost $2,515,781,748) | 3,069,852,171 | |||
Cash | 737,995 | |||
Receivable for investments sold | 8,163,658 | |||
Receivable for fund shares sold | 32,505,351 | |||
Prepaid expenses and other assets | 41,942 | |||
Total Assets | 3,405,067,281 | |||
LIABILITIES | ||||
Payable for securities purchased | 42,190,276 | |||
Payable for fund shares redeemed | 4,908,061 | |||
Unrealized loss on forward exchange contracts (Note 7) | 2,063,534 | |||
Payable to investment advisor and other affiliates (Note 3) | 3,110,079 | |||
Accounts payable and accrued expenses | 521,226 | |||
Total liabilities | 52,793,176 | |||
NET ASSETS | $ | 3,352,274,105 | ||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (419,110 | ) | |
Net unrealized appreciation on investments | 573,591,876 | |||
Accumulated net realized gain (loss) | 1,835,288 | |||
Net capital paid in on shares of beneficial interest | 2,777,266,051 | |||
$ | 3,352,274,105 | |||
12 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($1,470,020,115 applicable to 70,937,443 shares of beneficial interest outstanding - Note 4) | $ | 20.72 | |
Maximum sales charge, 4.50% of offering price | 0.98 | ||
Maximum offering price per share | $ | 21.70 | |
Class C Shares: | |||
Net asset value and offering price per share * ($664,251,728 applicable to 33,941,815 shares of beneficial interest outstanding - Note 4) | $ | 19.57 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($642,143,138 applicable to 30,343,595 shares of beneficial interest outstanding - Note 4) | $ | 21.16 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($414,267,051 applicable to 19,961,709 shares of beneficial interest outstanding - Note 4) | $ | 20.75 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($3,507,747 applicable to 169,204 shares of beneficial interest outstanding - Note 4) | $ | 20.73 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($158,084,326 applicable to 7,473,829 shares of beneficial interest outstanding - Note 4) | $ | 21.15 | |
* | 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, 2007 |
INVESTMENT INCOME: | ||||
Dividend income from non-affiliated issuers (net of foreign taxes withheld of $263,031) | $ | 6,634,903 | ||
Interest income | 5,924,463 | |||
Total Income | 12,559,366 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 17,001,119 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,251,261 | |||
Class C Shares | 533,325 | |||
Class I Shares | 216,420 | |||
Class R3 Shares | 308,063 | |||
Class R4 Shares | 345 | |||
Class R5 Shares | 30,809 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 2,508,318 | |||
Class C Shares | 4,266,617 | |||
Class R3 Shares | 1,232,260 | |||
Class R4 Shares | 690 | |||
Transfer agent fees | ||||
Class A Shares | 1,407,415 | |||
Class C Shares | 586,520 | |||
Class I Shares | 293,273 | |||
Class R3 Shares | 416,707 | |||
Class R4 Shares | 952 | |||
Class R5 Shares | 34,629 | |||
Registration and filing fees | ||||
Class A Shares | 109,838 | |||
Class C Shares | 62,342 | |||
Class I Shares | 103,292 | |||
Class R3 Shares | 21,401 | |||
Class R4 Shares | 19,815 | |||
Class R5 Shares | 17,981 | |||
Custodian fees (Note 3) | 464,113 | |||
Professional fees | 82,175 | |||
Accounting fees | 71,480 | |||
Trustee fees | 29,435 | |||
Other expenses | 602,007 | |||
Total Expenses | 31,672,602 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (388,384 | ) | ||
Fees paid indirectly (Note 3) | (162,098 | ) | ||
Net Expenses | 31,122,120 | |||
Net Investment loss | $ | (18,562,754 | ) | |
14 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Core Growth Fund | Year Ended September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 6,184,445 | ||
Foreign currency transactions | (3,090,252 | ) | ||
3,094,193 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $246,409) | 471,253,007 | |||
Foreign currency translations | (1,943,501 | ) | ||
469,309,506 | ||||
Net Realized and unrealized Gain | 472,403,699 | |||
Net Increase in Net Assets Resulting From operations | $ | 453,840,945 | ||
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF CHANGES IN NET ASSETS
Thornburg Core Growth Fund
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (18,562,754 | ) | $ | (5,787,915 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | 3,094,193 | (3,429,810 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, foreign currency translation, and deferred taxes | 469,309,506 | 71,928,633 | ||||||
Net Increase (Decrease) in Net Assets Resulting from operations | 453,840,945 | 62,710,908 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From realized gains | ||||||||
Class A Shares | — | (2,295,746 | ) | |||||
Class C Shares | — | (899,989 | ) | |||||
Class I Shares | — | (998,879 | ) | |||||
Class R3 Shares | — | (228,837 | ) | |||||
Class R5 Shares | — | (1 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 752,891,071 | 361,920,829 | ||||||
Class C Shares | 390,687,789 | 134,311,126 | ||||||
Class I Shares | 362,304,238 | 125,861,734 | ||||||
Class R3 Shares | 274,389,436 | 78,841,386 | ||||||
Class R4 Shares | 3,331,607 | — | ||||||
Class R5 Shares | 146,669,595 | 43,038 | ||||||
Net Increase in Net Assets | 2,384,114,681 | 759,265,569 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 968,159,424 | 208,893,855 | ||||||
End of year | $ | 3,352,274,105 | $ | 968,159,424 | ||||
See notes to financial statements.
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Core Growth Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund seeks long-term capital appreciation by investing in equity securities selected for their growth potential.
The Fund currently offers six classes of shares of beneficial interest: Class A, Class C, Institutional Class (Class I), and Retirement Classes (Class R3, Class R4, 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 R3 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, (v) Class R4 shares are sold at net asset value without sales charge at the time of purchase, but bear a service 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 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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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
Certified Annual Report. 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 |
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.
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 liabilities 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.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 |
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, 2007, 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 Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $21,978 for Class I shares, $336,313 for Class R3 shares, $20,213 for Class R4 shares, and $9,880 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, 2007, the Distributor has advised the Fund that it earned commissions aggregating $730,685 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $136,101 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 distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class C and Class R3 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C and Class R3 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 and Class R3 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, 2007, 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, 2007, fees paid indirectly were $162,098. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 54,188,818 | $ | 1,016,770,034 | 31,205,445 | $ | 490,887,835 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 145,954 | 2,090,059 | ||||||||||
Shares repurchased | (13,920,905 | ) | (263,891,441 | ) | (8,482,187 | ) | (131,249,232 | ) | ||||||
Redemption fees received** | — | 12,478 | — | 192,167 | ||||||||||
Net Increase (Decrease) | 40,267,913 | $ | 752,891,071 | 22,869,212 | $ | 361,920,829 | ||||||||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 24,042,126 | $ | 428,699,736 | 9,826,021 | $ | 147,394,797 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 54,556 | 748,508 | ||||||||||
Shares repurchased | (2,109,546 | ) | (38,017,920 | ) | (932,965 | ) | (13,875,119 | ) | ||||||
Redemption fees received** | — | 5,973 | — | 42,940 | ||||||||||
Net Increase (Decrease) | 21,932,580 | $ | 390,687,789 | 8,947,612 | $ | 134,311,126 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 24,674,852 | $ | 471,936,086 | 12,137,575 | $ | 193,746,428 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 63,694 | 923,572 | ||||||||||
Shares repurchased | (5,639,994 | ) | (109,638,046 | ) | (4,369,477 | ) | (68,872,491 | ) | ||||||
Redemption fees received** | — | 6,198 | — | 64,225 | ||||||||||
Net Increase (Decrease) | 19,034,858 | $ | 362,304,238 | 7,831,792 | $ | 125,861,734 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 17,655,868 | $ | 335,551,232 | 5,664,323 | $ | 88,572,584 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 15,760 | 226,474 | ||||||||||
Shares repurchased | (3,183,342 | ) | (61,165,475 | ) | (635,940 | ) | (9,972,757 | ) | ||||||
Redemption fees received** | — | 3,679 | — | 15,085 | ||||||||||
Net Increase (Decrease) | 14,472,526 | $ | 274,389,436 | 5,044,143 | $ | 78,841,386 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 172,095 | $ | 3,388,183 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||
Shares repurchased | (2,891 | ) | (56,581 | ) | — | — | ||||||||
Redemption fees received** | — | 5 | — | — | ||||||||||
Net Increase (Decrease) | 169,204 | $ | 3,331,607 | — | $ | — | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 8,452,082 | $ | 166,122,436 | 2,707 | $ | 43,064 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | 1 | ||||||||||
Shares repurchased | (980,958 | ) | (19,454,052 | ) | (2 | ) | (35 | ) | ||||||
Redemption fees received** | — | 1,211 | — | 8 | ||||||||||
Net Increase (Decrease) | 7,471,124 | $ | 146,669,595 | 2,705 | $ | 43,038 | ||||||||
* | Effective date of Class R4 shares was February 1, 2007. |
** | 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. |
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $3,584,027,594 and $1,674,975,430, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 2,788,119,786 | ||
Gross unrealized appreciation on a tax basis | $ | 584,771,527 | ||
Gross unrealized depreciation on a tax basis | (9,272,978 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 575,498,549 | ||
Distributable capital gains | $ | 1,992,150 |
At September 30, 2007, the Fund has deferred tax basis currency losses occurring subsequent to October 31, 2006 of $419,110. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $20,096,687, decreased accumulated net realized investment loss by $1,871,076, and decreased net investment loss by $18,225,611. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from net operating loss, foreign currency transactions, and foreign capital gain taxes.
The tax character of distributions paid during the year ended September 30, 2007, and September 30, 2006, was as follows:
2007 | 2006 | |||||
Distributions from: | ||||||
Capital gains | $ | — | $ | 4,423,452 |
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2007, 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, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
CONTRACTS TO SELL:
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||
2,900,000,000 Philippine Peso for 62,125,107 USD | December 18, 2007 | $ | (2,063,534 | ) | ||
Net unrealized gain (loss) from forward Sell contracts: | $ | (2,063,534 | ) | |||
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 |
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
22 Certified Annual Report
FINANCIAL HIGHLIGHTS | ||
Thornburg Core Growth Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 16.38 | $ | 14.21 | $ | 10.87 | $ | 10.11 | $ | 6.45 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.15 | ) | (0.14 | ) | (0.14 | ) | (0.15 | ) | (0.13 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 4.49 | 2.54 | 3.48 | 0.90 | 3.77 | |||||||||||||||
Total from investment operations | 4.34 | 2.40 | 3.34 | 0.75 | 3.64 | |||||||||||||||
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 | 4.34 | 2.17 | 3.34 | 0.76 | 3.66 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 20.72 | $ | 16.38 | $ | 14.21 | $ | 10.87 | $ | 10.11 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 26.50 | % | 17.20 | % | 30.73 | % | 7.52 | % | 56.74 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.78 | )% | (0.86 | )% | (1.14 | )% | (1.37 | )% | (1.43 | )% | ||||||||||
Expenses, after expense reductions | 1.37 | % | 1.48 | % | 1.60 | % | 1.62 | % | 1.65 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.36 | % | 1.46 | % | 1.57 | % | 1.61 | % | 1.63 | % | ||||||||||
Expenses, before expense reductions | 1.37 | % | 1.48 | % | 1.60 | % | 1.70 | % | 2.03 | % | ||||||||||
Portfolio turnover rate | 82.37 | % | 98.00 | % | 115.37 | % | 108.50 | % | 102.91 | % | ||||||||||
Net assets at end of year (000) | $ | 1,470,020 | $ | 502,345 | $ | 110,836 | $ | 40,899 | $ | 36,247 |
(a) | Sales loads are not reflected in computing total return. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 23
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Year Ended September 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 15.59 | $ | 13.63 | $ | 10.51 | $ | 9.85 | $ | 6.38 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.28 | ) | (0.24 | ) | (0.23 | ) | (0.22 | ) | (0.18 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 4.26 | 2.43 | 3.35 | 0.88 | 3.65 | |||||||||||||||
Total from investment operations | 3.98 | 2.19 | 3.12 | 0.66 | 3.47 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Realized capital gains | — | (0.24 | ) | — | — | — | ||||||||||||||
Redemption fees added to paid in capital | — | 0.01 | — | — | — | |||||||||||||||
Change in net asset value | 3.98 | 1.96 | 3.12 | 0.66 | 3.47 | |||||||||||||||
NET ASSET VALUE, end of year | $ | 19.57 | $ | 15.59 | $ | 13.63 | $ | 10.51 | $ | 9.85 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return | 25.53 | % | 16.38 | % | 29.69 | % | 6.70 | % | 54.39 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.53 | )% | (1.63 | )% | (1.91 | )% | (2.13 | )% | (2.19 | )% | ||||||||||
Expenses, after expense reductions | 2.12 | % | 2.25 | % | 2.37 | % | 2.38 | % | 2.40 | % | ||||||||||
Expenses, after expense reductions and net of custody credits | 2.11 | % | 2.23 | % | 2.34 | % | 2.37 | % | 2.38 | % | ||||||||||
Expenses, before expense reductions | 2.12 | % | 2.25 | % | 2.37 | % | 2.52 | % | 3.35 | % | ||||||||||
Portfolio turnover rate | 82.37 | % | 98.00 | % | 115.37 | % | 108.50 | % | 102.91 | % | ||||||||||
Net assets at end of year (000) | $ | 664,252 | $ | 187,180 | $ | 41,737 | $ | 14,693 | $ | 7,146 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
24 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Year Ended September 30, | Period Ended September 30, | |||||||||||||||
2007 | 2006 | 2005 | 2004(c) | |||||||||||||
Class I Shares: | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 16.66 | $ | 14.37 | $ | 10.93 | $ | 10.87 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | (0.08 | ) | (0.06 | ) | (0.07 | ) | (0.08 | ) | ||||||||
Net realized and unrealized gain (loss) on investments | 4.58 | 2.58 | 3.51 | 0.14 | ||||||||||||
Total from investment operations | 4.50 | 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 | 4.50 | 2.29 | 3.44 | 0.06 | ||||||||||||
NET ASSET VALUE, end of period | $ | 21.16 | $ | 16.66 | $ | 14.37 | $ | 10.93 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 27.01 | % | 17.85 | % | 31.47 | % | 0.55 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) | (0.39 | )% | (0.40 | )% | (0.55 | )% | (0.74 | )% (b) | ||||||||
Expenses, after expense reductions | 0.98 | % | 1.01 | % | 1.02 | % | 1.00 | % (b) | ||||||||
Expenses, after expense reductions and net of custody credits | 0.97 | % | 0.99 | % | 0.99 | % | 0.99 | % (b) | ||||||||
Expenses, before expense reductions | 0.98 | % | 1.10 | % | 1.15 | % | 1.31 | % (b) | ||||||||
Portfolio turnover rate | 82.37 | % | 98.00 | % | 115.37 | % | 108.50 | % | ||||||||
Net assets at end of period (000) | $ | 642,143 | $ | 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. |
See notes to financial statements.
Certified Annual Report 25
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Year Ended September 30, | Period Ended September 30, | |||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003(c) | ||||||||||||||||
Class R3 Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||||||
Net asset value, beginning of period | $ | 16.43 | $ | 14.26 | $ | 10.90 | $ | 10.11 | $ | 9.59 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.18 | ) | (0.14 | ) | (0.14 | ) | (0.12 | ) | (0.03 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 4.50 | 2.54 | 3.50 | 0.91 | 0.55 | |||||||||||||||
Total from investment operations | 4.32 | 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 | 4.32 | 2.17 | 3.36 | 0.79 | 0.52 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 20.75 | $ | 16.43 | $ | 14.26 | $ | 10.90 | $ | 10.11 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 26.29 | % | 17.14 | % | 30.83 | % | 7.81 | % | 5.42 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.91 | )% | (0.90 | )% | (1.08 | )% | (1.17 | )% | (1.06 | )% (b) | ||||||||||
Expenses, after expense reductions | 1.51 | % | 1.53 | % | 1.52 | % | 1.50 | % | 1.65 | % (b) | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.50 | % | 1.50 | % | 1.49 | % | 1.49 | % | 1.65 | % (b) | ||||||||||
Expenses, before expense reductions | 1.64 | % | 1.73 | % | 3.56 | % | 722.79 | %† | 22,219.77 | % (b)† | ||||||||||
Portfolio turnover rate | 82.37 | % | 98.00 | % | 115.37 | % | 108.50 | % | 102.91 | % | ||||||||||
Net assets at end of period (000) | $ | 414,267 | $ | 90,167 | $ | 6,345 | $ | 16 | $ | — | (d) |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R3 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. |
See notes to financial statements.
26 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Period Ended September 30, | ||||
2007(c) | ||||
Class R4 Shares: | ||||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 18.90 | ||
Income from investment operations: | ||||
Net investment income | (0.12 | ) | ||
Net realized and unrealized gain (loss) on investments | 1.95 | |||
Total from investment operations | 1.83 | |||
Less dividends from: | ||||
Realized capital gains | — | |||
Redemption fees added to paid in capital | — | |||
Change in net asset value | 1.83 | |||
NET ASSET VALUE, end of period | $ | 20.73 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 9.68 | % | ||
Ratios to average net assets: | ||||
Net investment income (loss) | (0.93 | )% (b) | ||
Expenses, after expense reductions | 1.41 | % (b) | ||
Expenses, after expense reductions and net of custody credits | 1.40 | % (b) | ||
Expenses, before expense reductions | 8.74 | % (b)† | ||
Portfolio turnover rate | 82.37 | % | ||
Net assets at end of period (000) | $ | 3,508 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R4 Shares was February 1, 2007. |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 27
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Year Ended September 30, | Period Ended September 30, | |||||||
Class R5 Shares: | 2007 | 2006(c) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 16.65 | $ | 14.43 | ||||
Income from investment operations: | ||||||||
Net investment income | (0.07 | ) | (0.06 | ) | ||||
Net realized and unrealized gain (loss) on investments | 4.57 | 2.51 | ||||||
Total from investment operations | 4.50 | 2.45 | ||||||
Less dividends from: | ||||||||
Realized capital gains | — | (0.24 | ) | |||||
Redemption fees added to paid in capital | — | 0.01 | ||||||
Change in net asset value | 4.50 | 2.22 | ||||||
NET ASSET VALUE, end of period | $ | 21.15 | $ | 16.65 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return(a) | 27.03 | % | 17.29 | % | ||||
Ratios to average net assets: | ||||||||
Net investment income (loss) | (0.37 | )% | (0.38 | )% (b) | ||||
Expenses, after expense reductions | 0.95 | % | 1.01 | % (b) | ||||
Expenses, after expense reductions and net of custody credits | 0.95 | % | 0.99 | % (b) | ||||
Expenses, before expense reductions | 0.97 | % | 176.54 | % (b)† | ||||
Portfolio turnover rate | 82.37 | % | 98.00 | % | ||||
Net assets at end of period (000) | $ | 158,084 | $ | 45 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | 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. |
See notes to financial statements.
28 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Core Growth Fund | September 30, 2007 |
CUSIPS: CLASS A - 885-215-582, CLASS C - 885-215-574, CLASS I - 885-215-475, CLASS R3 - 885-215-517, CLASS R4 - 885-215-251, CLASS R5 - 885-215-350 NASDAQ SYMBOLS: CLASS A - THCGX, CLASS C - TCGCX, CLASS I - THIGX, CLASS R3 - THCRX, CLASS R4 - TCGRX, CLASS R5 - THGRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/07
Software & Services | 17.3 | % | |
Consumer Services | 12.3 | % | |
Semiconductors & Semiconductor Equipment | 12.3 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 8.4 | % | |
Diversified Financials | 8.2 | % | |
Telecommunication Services | 7.8 | % | |
Health Care Equipment & Services | 5.7 | % | |
Technology, Hardware & Equipment | 4.5 | % | |
Food, Beverage & Tobacco | 3.6 | % | |
Transportation | 2.8 | % | |
Utilities | 2.8 | % | |
Media | 2.7 | % | |
Consumer Durables & Apparel | 2.6 | % | |
Energy | 2.6 | % | |
Household & Personal Products | 2.3 | % | |
Real Estate | 2.0 | % | |
Other Assets and Cash Equivalents | 2.1 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/07 (percent of equity holdings)
United States of America | 84.8 | % | |
México | 4.0 | % | |
United Kingdom | 3.8 | % | |
Denmark | 3.7 | % | |
Philippines | 2.8 | % | |
China | 0.9 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 97.86% | |||||
CONSUMER DURABLES & APPAREL — 2.61% | |||||
HOUSEHOLD DURABLES — 2.61% | |||||
Tempur-Pedic International, Inc. | 2,444,725 | $ | 87,398,919 | ||
87,398,919 | |||||
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
CONSUMER SERVICES — 12.31% | |||||
DIVERSIFIED CONSUMER SERVICES — 1.40% | |||||
Bright Horizons Family Solutions, Inc.+ | 1,095,413 | $ | 46,927,493 | ||
HOTELS, RESTAURANTS & LEISURE — 10.91% | |||||
FUJI Food & Catering Services | 9,582,500 | 29,460,531 | |||
Las Vegas Sands Corp.+ | 1,545,736 | 206,232,097 | |||
Wyndham Worldwide Corp.+ | 1,033,600 | 33,860,736 | |||
Wynn Resorts Ltd.+ | 610,900 | 96,253,404 | |||
412,734,261 | |||||
DIVERSIFIED FINANCIALS — 8.23% | |||||
DIVERSIFIED FINANCIAL SERVICES — 8.23% | |||||
CME Group, Inc. | 247,800 | 145,545,330 | |||
Nymex Holdings, Inc. | 464,700 | 60,494,646 | |||
NYSE Euronext Co. | 883,346 | 69,934,503 | |||
275,974,479 | |||||
ENERGY — 2.55% | |||||
OIL, GAS & CONSUMABLE FUELS — 2.55% | |||||
ATP Oil & Gas Corp.+(1) | 1,817,631 | 85,483,186 | |||
85,483,186 | |||||
FOOD, BEVERAGE & TOBACCO — 3.60% | |||||
BEVERAGES — 3.60% | |||||
Carlsberg A/S Class B | 882,500 | 120,527,363 | |||
120,527,363 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 5.70% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 3.36% | |||||
Cytyc Corp.+ | 2,368,400 | 112,854,260 | |||
HEALTH CARE PROVIDERS & SERVICES — 2.34% | |||||
WellPoint, Inc.+ | 992,500 | 78,328,100 | |||
191,182,360 | |||||
HOUSEHOLD & PERSONAL PRODUCTS — 2.27% | |||||
PERSONAL PRODUCTS — 2.27% | |||||
Bare Escentuals, Inc.+ | 3,065,200 | 76,231,524 | |||
76,231,524 | |||||
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
MEDIA — 2.67% | |||||
MEDIA — 2.67% | |||||
DIRECTV Group, Inc.+ | 3,691,421 | $ | 89,627,702 | ||
89,627,702 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 8.45% | |||||
BIOTECHNOLOGY — 8.45% | |||||
Celgene Corp.+ | 927,900 | 66,168,549 | |||
Genentech, Inc.+ | 1,195,741 | 93,291,713 | |||
Gilead Sciences, Inc.+ | 3,024,600 | 123,615,402 | |||
283,075,664 | |||||
REAL ESTATE — 1.96% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 1.96% | |||||
CB Richard Ellis Group, Inc. Class A+ | 2,364,629 | 65,831,271 | |||
65,831,271 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 12.28% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 12.28% | |||||
Intel Corp. | 5,061,200 | 130,882,632 | |||
MEMC Electronic Materials, Inc.+ | 1,774,057 | 104,420,995 | |||
ON Semiconductor Corp.+ | 7,959,603 | 99,972,614 | |||
Trident Microsystems, Inc.+(1) | 4,804,400 | 76,341,916 | |||
411,618,157 | |||||
SOFTWARE & SERVICES — 17.31% | |||||
INTERNET SOFTWARE & SERVICES — 9.33% | |||||
Equinix, Inc.+ | 1,096,544 | 97,252,487 | |||
Google, Inc.+ | 281,350 | 159,601,415 | |||
Vistaprint Ltd.+ | 1,498,945 | 56,015,575 | |||
IT SERVICES — 2.06% | |||||
Western Union Co. | 3,301,691 | 69,236,460 | |||
SOFTWARE — 5.92% | |||||
Amdocs Ltd.+ | 3,389,609 | 126,059,559 | |||
Microsoft Corp. | 2,452,400 | 72,247,704 | |||
580,413,200 | |||||
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 4.48% | |||||||
COMMUNICATIONS EQUIPMENT — 2.14% | |||||||
Riverbed Technology, Inc.+ | 1,777,292 | $ | 71,784,824 | ||||
COMPUTERS & PERIPHERALS — 2.34% | |||||||
Data Domain, Inc.+ | 2,527,932 | 78,239,495 | |||||
150,024,319 | |||||||
TELECOMMUNICATION SERVICES — 7.85% | |||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 3.94% | |||||||
Neustar, Inc. Class A+(1) | 3,847,800 | 131,941,062 | |||||
WIRELESS TELECOMMUNICATION SERVICES — 3.91% | |||||||
América Móvil SA de CV | 40,944,300 | 131,022,958 | |||||
262,964,020 | |||||||
TRANSPORTATION — 2.82% | |||||||
ROAD & RAIL — 2.82% | |||||||
Hertz Global Holdings, Inc.+ | 4,165,600 | 94,642,432 | |||||
94,642,432 | |||||||
UTILITIES — 2.77% | |||||||
INDEPENDENT power producers & ENERGY TRADERS — 2.77% | |||||||
PNOC Energy Development Corp. | 653,922,560 | 92,899,098 | |||||
92,899,098 | |||||||
TOTAL COMMON STOCK (COST $ 2,704,972,544) | 3,280,627,955 | ||||||
SHORT TERM INVESTMENTS — 2.48% | |||||||
General Electric Capital Corp., 4.68%, 10/2/2007 | $ | 30,000,000 | 29,996,100 | ||||
General Electric Capital Corp., 4.68%, 10/3/2007 | 22,000,000 | 21,994,280 | |||||
Toyota Credit de Puerto Rico, 4.70%, 10/1/2007 | 31,000,000 | 31,000,000 | |||||
TOTAL SHORT TERM INVESTMENTS (COST $ 82,990,380) | 82,990,380 | ||||||
TOTAL INVESTMENTS — 100.34% (COST $ 2,787,962,924) | $ | 3,363,618,335 | |||||
LIABILITIES NET OF OTHER ASSETS — (0.34)% | (11,344,230 | ) | |||||
NET ASSETS — 100.00% | $ | 3,352,274,105 | |||||
32 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 |
Footnote legend
+ | Non-income producing |
(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, 2006 | Gross Additions | Gross Reductions | Shares at Sept. 30, 2007 | Market Value Sept. 30, 2007 | Dividend Income | ||||||||
ATP Oil & Gas Corp. | — | 1,817,631 | — | 1,817,631 | $ | 85,483,186 | $ | — | ||||||
Neustar, Inc-Class A | — | 3,847,800 | — | 3,847,800 | 131,941,062 | — | ||||||||
Trident Microsystems, Inc | — | 4,804,400 | — | 4,804,400 | 76,341,916 | — | ||||||||
$ | 293,766,164 | $ | — | |||||||||||
Total non-controlled “affiliated companies” — 8.76% of net assets.
See notes to financial statements.
Certified Annual Report 33
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP |
New York, New York |
November 16, 2007 |
34 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Core Growth Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
Actual Expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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 for each class of shares 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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,108.00 | $ | 7.20 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.24 | $ | 6.89 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,104.40 | $ | 11.10 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.52 | $ | 10.63 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,110.80 | $ | 5.10 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.24 | $ | 4.88 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,107.30 | $ | 7.91 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.56 | $ | 7.57 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,108.60 | $ | 7.40 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.05 | $ | 7.08 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,110.80 | $ | 4.98 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.35 | $ | 4.77 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.36%; C: 2.10%; I: 0.96%; R3: 1.50%; R4: 1.40% and R5: 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. |
Certified Annual Report 35
INDEX COMPARISON | ||
Thornburg Core Growth Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Core Growth Fund versus NASDAQ Composite Index (December 27, 2000 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2007 (with sales charge)
1 Yr | 5 Yrs | Since Inception | |||||||
A Shares (Incep: 12/27/00) | 20.82 | % | 25.56 | % | 8.03 | % | |||
C Shares (Incep: 12/27/00) | 24.53 | % | 25.56 | % | 7.86 | % | |||
R3 Shares (Incep: 7/1/03) | 26.29 | % | — | 20.39 | % | ||||
R4 Shares (Incep: 2/1/07) | — | — | 9.68 | %* | |||||
R5 Shares (Incep: 10/3/05) | 27.03 | % | — | 22.16 | % | ||||
NASDAQ Composite Index (Since: 12/27/00) | 19.62 | % | 18.18 | % | 0.92 | % |
* | Not annualized for periods less than one year. |
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 R3, R4, and R5 shares. Class R3, R4, 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.
36 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Core Growth Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 Core Growth Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
38 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thorn-burg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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 Core Growth Fund | September 30, 2007 (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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
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 web site at www. thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2007. Complete information will be computed and reported in conjunction with your 2007 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 web site 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 web site at www. thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT 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 11, 2007.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time, relative to a category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to broad-based securities indices, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, trade execution, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s above average or better investment performance in most periods
40 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2007 (Unaudited) |
relative to the average performance of funds in a category of “mid cap” growth equity mutual funds selected by an independent mutual fund analyst firm, the Fund’s higher performance relative to two broad-based securities indices in each year since its inception, the Fund’s relative performance in periods of negative market conditions and record of owning growth stocks that perform well in periods of economic growth, data showing lower share price volatility for the Fund, and the Fund’s cumulative returns.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of fees charged by the Advisor to the Fund, the Trustees 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 multi-capitalization growth 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. The Trustees observed that the management fee charged by the Advisor fell within the range of such fees charged to other funds and was higher to a small degree than the median and average fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio was to some extent lower than the average and median expense ratios for the same fund group. The Trustees reviewed information about the fee rates charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 41
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
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 International Growth 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 $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 Core Growth Fund
The Fund seeks long-term growth of capital by investing in equity securities selected for their growth potential.
The Fund expects to invest primarily in domestic equity securities (primarily common stocks) selected for their growth potential. However, the Fund may own a variety of securities, including foreign equity securities and debt securities. The Fund may also invest in developing countries.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Investing outside the United States involves additional risks, such as currency fluctuations. Additionally, the Fund invests a portion of the assets in small capitalization companies which may increase the risk of greater price fluctuations. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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.
To determine a fund’s Morningstar Rating™, funds with at least a three-year history are ranked in their categories by their Morningstar Risk-Adjusted Return scores. The top 10% receive 5 stars; the next 22.5%, 4 stars; the middle 35%, 3 stars; the next 22.5%, 2 stars; and the bottom 10% receive 1 star. The Risk-Adjusted Return accounts for variation in a fund’s performance (including the effects of all sales charges), placing more emphasis on downward variations and rewarding consistent performance. Other share classes may have different performance characteristics. © 2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
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.
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.
This page is not part of the Annual Report. 3
Thornburg Core Growth Fund
Continually Evaluating the Risk Equation
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, 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.
The total annual fund operating expense of Class I shares is 1.10%, as disclosed in the most recent Prospectus. Thornburg Investment Management intends to waive fees and reimburse expenses so that actual expenses do not exceed 0.99%. The subsidized expense ratio reflects the annual operating expenses of the Fund minus any fee waivers or expense reimbursements. The fee waivers and expense reimbursements are voluntary and may be terminated at any time.
KEY PORTFOLIO ATTRIBUTES
As of 9/30/07
Portfolio P/E Trailing 12-months* | 30.0x | ||
Portfolio Price to Cash Flow* | 15.8 | ||
Portfolio Price to Book Value* | 5.9 | ||
Median Market Cap* | $ | 7.3 B | |
5-Year Beta (Thornburg vs. NASDAQ)* | 0.77 | ||
Holdings | 35 |
* | Source: FactSet |
Growth stocks are often referred to as “glamour” stock. . . 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 may potentially 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 the 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
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 2007
YTD | 1 Yr | 3 Yrs | Since Inception | |||||||||
I Shares (Incep: 11/3/03) | 16.33 | % | 27.01 | % | 25.32 | % | 19.07 | % | ||||
NASDAQ Composite Index | 11.85 | % | 19.62 | % | 12.51 | % | 8.44 | % | ||||
Russell 3000 Growth Index | 12.38 | % | 19.31 | % | 12.36 | % | 9.63 | % |
* | Periods under one year are not annualized. |
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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.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/07
Top Contributors | Top Detractors | |
Las Vegas Sands Corp. | Nuvelo, Inc. | |
Cytyc Corp. | CB Richard Ellis Group, Inc. | |
ON Semiconductor Corp. | Caremark Rx, Inc. | |
Google, Inc. | Aspreva Pharmaceuticals Corp. | |
Copa Holdings SA | Santarus, Inc. | |
Source: FactSet |
MARKET CAPITALIZATION EXPOSURE
As of 9/30/07
TOP TEN HOLDINGS
As of 9/30/07
Las Vegas Sands Corp. | 6.2 | % | |
Google, Inc. | 4.8 | % | |
CME Group, Inc. | 4.3 | % | |
Neustar, Inc. | 3.9 | % | |
América Móvil SA de CV | 3.9 | % | |
Intel Corp. | 3.9 | % | |
Amdocs Ltd. | 3.8 | % | |
Gilead Sciences, Inc. | 3.7 | % | |
Carlsberg A/S | 3.6 | % | |
Cytyc Corp. | 3.4 | % |
BASKET STRUCTURE
As of 9/30/07
This page is not part of the Annual Report. 5
Awards and Ratings
Thornburg Core Growth Fund
![]() | 2007 Lipper Fund Award | |
Multi-cap Growth Category | ||
Class I shares won for the 3-year period, among 371 funds Class A shares won for the 5-year period, among 294 funds | ||
Lipper Fund Awards are granted annually to the fund in each Lipper classification that consistently delivered the strongest risk-adjusted performance (calculated with dividends reinvested and without sales charges). Awards are given for three-year, five-year, and ten-year periods. The Fund received the 2007 award for all eligible time periods. | ||
2007 Excellence in Fund Management Award | ||
All Cap Growth Category | ||
Issued by Standard & Poor’s/BusinessWeek | ||
Excellence in Fund Management Award winners are selected based on in-depth interviews with portfolio managers. Winners were chosen from 830 funds rated A or B+ for the five years ended December 31, 2006, in the BusinessWeek 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 five years tenure, and minimum investments of less than $26,000. | ||
Morningstar Rating | ||
Mid-Cap Growth Category | ||
Overall Morningstar rating for Class I shares, based on risk-adjusted returns, uses the Fund’s three-year rating of 5 stars among 816 Mid-Cap Growth funds, as of 9/30/07. | ||
Past performance does not guarantee future results. |
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I Shares – September 30, 2007
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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.
8 Certified Annual Report
Alexander M.V. Motola,CFA Portfolio Manager | October 17, 2007
Dear Fellow Shareholder:
For the fiscal year ended September 30, 2007, the Thornburg Core Growth Fund had strong relative and absolute performance. On September 30, 2006, the net asset value (NAV) for the Class I shares was $16.66. As of the end of this fiscal year, the NAV was $21.16. The Fund’s Class I shares outperformed its benchmarks with a total return of 27.01% over that period. The NASDAQ Composite Index returned 19.62% and the Russell 3000 Growth Index returned 19.31% from September 30, 2006, through September 30, 2007.
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, our two largest sectors were Information Technology and Health Care. While Information Technology has remained our largest exposure, and has in fact increased versus last year, our Health Care exposure has declined by a third, and is now slightly smaller than our Consumer Discretionary exposure. We have more exposure to Telecommunication Services and Consumer Staples, and we have kept a modest exposure to Industrials, Utilities, and Energy. Our Financials weighting has remained static, and continues to be represented by less traditional businesses – exchanges and specialty insurers, for example.
As with last year at this time, Growth Industry Leaders is our largest basket, followed by Emerging Growth Companies, then Consistent Growers. We continue to target approximately 33% of the portfolio exposure to each of the three baskets. A year ago, our small cap exposure was around 31% of the portfolio, but today it is just over 10%. We continue to view the small cap market as attractive and more inefficient, but most of the stocks we have found there fail to meet our valuation parameters. This has hurt performance, since these expensive stocks have become more expensive, but we always believe that valuation is a very important part of our investment process. We are not comfortable taking excessive valuation risk just to achieve our more balanced target portfolio. Large caps as a percentage of the portfolio have crept up to over 50%. 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., Cytyc Corp., ON Semiconductor Corp., Google Inc., Copa Holdings SA, América Móvil SA de CV, MEMC Electronic Materials Inc., and CBOT Holdings. Las Vegas Sands and Copa Holdings were both top contributors to returns last year as well. ON Semiconductor Corp. (ONNN) was added to the portfolio last November and has continued to develop nicely. Almost a year ago, we felt ONNN was a cheap stock with opportunities to improve both its business and its capital structure. Business has |
Certified Annual Report 9
Letter to Shareholders
Continued
improved, and the company has repurchased a material amount of stock and has refinanced and paid down debt. Opportunities exist for ONNN to continue their improvement as well as the possibility to improve their valuation. CBOT Holdings was purchased by the Chicago Mercantile Exchange Group Inc. (CME), and therefore continues to be a contributor to the portfolio, as we expect both volumes and volatility to grow over time. This is a fixed-cost, technologically driven business. These factors, coupled with management’s expertise in product development, make us encouraged about the future of their business.
We pride ourselves on our risk management: we invest in a “high expectations” area of the market in a concentrated fashion, and we believe our best risk-mitigation mechanism is outstanding research, with an eye towards “what can go wrong.” This approach has allowed us to minimize “big downs.” Our worst performer was Nuvelo Inc., which suffered mightily due to a disastrous Phase III trial for their lead drug, Alfimeprase. Health Care as a whole was a challenging area for us during the fiscal year. Other stocks in that sector with poor returns included Caremark Rx Inc., Aspreva Pharmaceuticals Corp., and Santaurus Inc. Non-Health Care underperformers included long-time holding Amdocs Ltd. (a top performer last year), CB Richard Ellis Group Inc., Western Union Co., and recent purchase Bare Escentuals Inc. CB Richard Ellis (CBG) has a great business, but they were obviously caught up in the real estate melt down over the summer. “Caught up” in the sense that investors considered their business at risk; the commercial real estate business has done much, much better than the U.S. residential real estate market, and more than half of CBG’s business is recurring in nature. We remain constructive on the company. Bare Escentuals’ negative impact on returns was slight, but was still a top 10 negative contributor. We were able to buy Bare Escentuals in the wake of their second quarter report – after the company had sold off due to slowing in their infomercial distribution channel. This created the opportunity for us to own this fast growing, niche producer of organic mineral cosmetics at a reasonable price.
It is important to understand our focus on risk management. Although we hope our statistical risk is low (standard deviation of returns), our focus is on appropriate diversification and stock specific risk management. “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 manage risk through consciously diversifying our portfolio by capitalization range, by sector and within sectors, and by basket (Growth Industry Leaders, Consistent Growth Companies, 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. It appears this may be changing – growth has done better than value in recent months, driven by modest or nonexistent premiums for higher growth business. Investors seem more willing to reward organic growth in a period when it appears the U.S. economy may slow. We feel many of the larger
10 Certified Annual Report
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 0.06% of total return to the Fund during the fiscal year.
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 minimizing 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,
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, 2007 |
ASSETS | ||||
Investments at value (Note 2) | ||||
Non-controlled affiliated issuers (cost $272,181,176) | $ | 293,766,164 | ||
Non-affiliated issuers (cost $2,515,781,748) | 3,069,852,171 | |||
Cash | 737,995 | |||
Receivable for investments sold | 8,163,658 | |||
Receivable for fund shares sold | 32,505,351 | |||
Prepaid expenses and other assets | 41,942 | |||
Total Assets | 3,405,067,281 | |||
LIABILITIES | ||||
Payable for securities purchased | 42,190,276 | |||
Payable for fund shares redeemed | 4,908,061 | |||
Unrealized loss on forward exchange contracts (Note 7) | 2,063,534 | |||
Payable to investment advisor and other affiliates (Note 3) | 3,110,079 | |||
Accounts payable and accrued expenses | 521,226 | |||
Total Liabilities | 52,793,176 | |||
NET ASSETS | $ | 3,352,274,105 | ||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (419,110 | ) | |
Net unrealized appreciation on investments | 573,591,876 | |||
Accumulated net realized gain (loss) | 1,835,288 | |||
Net capital paid in on shares of beneficial interest | 2,777,266,051 | |||
$ | 3,352,274,105 | |||
12 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($1,470,020,115 applicable to 70,937,443 shares of beneficial interest outstanding—Note 4) | $ | 20.72 | |
Maximum sales charge, 4.50% of offering price | 0.98 | ||
Maximum offering price per share | $ | 21.70 | |
Class C Shares: | |||
Net asset value and offering price per share * ($664,251,728 applicable to 33,941,815 shares of beneficial interest outstanding—Note 4) | $ | 19.57 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($642,143,138 applicable to 30,343,595 shares of beneficial interest outstanding—Note 4) | $ | 21.16 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($414,267,051 applicable to 19,961,709 shares of beneficial interest outstanding—Note 4) | $ | 20.75 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($3,507,747 applicable to 169,204 shares of beneficial interest outstanding—Note 4) | $ | 20.73 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($158,084,326 applicable to 7,473,829 shares of beneficial interest outstanding—Note 4) | $ | 21.15 | |
* | 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 Core Growth Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income from non-affiliated issuers (net of foreign taxes withheld of $263,031) | $ | 6,634,903 | ||
Interest income | 5,924,463 | |||
Total Income | 12,559,366 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 17,001,119 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,251,261 | |||
Class C Shares | 533,325 | |||
Class I Shares | 216,420 | |||
Class R3 Shares | 308,063 | |||
Class R4 Shares | 345 | |||
Class R5 Shares | 30,809 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 2,508,318 | |||
Class C Shares | 4,266,617 | |||
Class R3 Shares | 1,232,260 | |||
Class R4 Shares | 690 | |||
Transfer agent fees | ||||
Class A Shares | 1,407,415 | |||
Class C Shares | 586,520 | |||
Class I Shares | 293,273 | |||
Class R3 Shares | 416,707 | |||
Class R4 Shares | 952 | |||
Class R5 Shares | 34,629 | |||
Registration and filing fees | ||||
Class A Shares | 109,838 | |||
Class C Shares | 62,342 | |||
Class I Shares | 103,292 | |||
Class R3 Shares | 21,401 | |||
Class R4 Shares | 19,815 | |||
Class R5 Shares | 17,981 | |||
Custodian fees (Note 3) | 464,113 | |||
Professional fees | 82,175 | |||
Accounting fees | 71,480 | |||
Trustee fees | 29,435 | |||
Other expenses | 602,007 | |||
Total Expenses | 31,672,602 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (388,384 | ) | ||
Fees paid indirectly (Note 3) | (162,098 | ) | ||
Net Expenses | 31,122,120 | |||
Net Investment loss | $ | (18,562,754 | ) | |
14 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
Thornburg Core Growth Fund | Year Ended September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 6,184,445 | ||
Foreign currency transactions | (3,090,252 | ) | ||
3,094,193 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $246,409) | 471,253,007 | |||
Foreign currency translations | (1,943,501 | ) | ||
469,309,506 | ||||
Net Realized and Unrealized Gain | 472,403,699 | |||
Net Increase in Net Assets Resulting From Operations | $ | 453,840,945 | ||
See notes to financial statements.
Certified Annual Report 15
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Core Growth Fund |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (18,562,754 | ) | $ | (5,787,915 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | 3,094,193 | (3,429,810 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, foreign currency translation, and deferred taxes | 469,309,506 | 71,928,633 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 453,840,945 | 62,710,908 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From realized gains | ||||||||
Class A Shares | — | (2,295,746 | ) | |||||
Class C Shares | — | (899,989 | ) | |||||
Class I Shares | — | (998,879 | ) | |||||
Class R3 Shares | — | (228,837 | ) | |||||
Class R5 Shares | — | (1 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 752,891,071 | 361,920,829 | ||||||
Class C Shares | 390,687,789 | 134,311,126 | ||||||
Class I Shares | 362,304,238 | 125,861,734 | ||||||
Class R3 Shares | 274,389,436 | 78,841,386 | ||||||
Class R4 Shares | 3,331,607 | — | ||||||
Class R5 Shares | 146,669,595 | 43,038 | ||||||
Net Increase in Net Assets | 2,384,114,681 | 759,265,569 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 968,159,424 | 208,893,855 | ||||||
End of year | $ | 3,352,274,105 | $ | 968,159,424 | ||||
See notes to financial statements.
16 Certified Annual Report
Thornburg Core Growth Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund seeks long-term capital appreciation by investing in equity securities selected for their growth potential.
The Fund currently offers six classes of shares of beneficial interest: Class A, Class C, Institutional Class (Class I), and Retirement Classes (Class R3, Class R4, 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 R3 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, (v) Class R4 shares are sold at net asset value without sales charge at the time of purchase, but bear a service 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 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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 |
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.
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 liabilities 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.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 |
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, 2007, 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 Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $21,978 for Class I shares, $336,313 for Class R3 shares, $20,213 for Class R4 shares, and $9,880 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, 2007, the Distributor has advised the Fund that it earned commissions aggregating $730,685 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $136,101 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 distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class C and Class R3 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C and Class R3 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 and Class R3 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, 2007, 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, 2007, fees paid indirectly were $162,098. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 54,188,818 | $ | 1,016,770,034 | 31,205,445 | $ | 490,887,835 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 145,954 | 2,090,059 | ||||||||||
Shares repurchased | (13,920,905 | ) | (263,891,441 | ) | (8,482,187 | ) | (131,249,232 | ) | ||||||
Redemption fees received** | — | 12,478 | — | 192,167 | ||||||||||
Net Increase (Decrease) | 40,267,913 | $ | 752,891,071 | 22,869,212 | $ | 361,920,829 | ||||||||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 24,042,126 | $ | 428,699,736 | 9,826,021 | $ | 147,394,797 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 54,556 | 748,508 | ||||||||||
Shares repurchased | (2,109,546 | ) | (38,017,920 | ) | (932,965 | ) | (13,875,119 | ) | ||||||
Redemption fees received** | — | 5,973 | — | 42,940 | ||||||||||
Net Increase (Decrease) | 21,932,580 | $ | 390,687,789 | 8,947,612 | $ | 134,311,126 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 24,674,852 | $ | 471,936,086 | 12,137,575 | $ | 193,746,428 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 63,694 | 923,572 | ||||||||||
Shares repurchased | (5,639,994 | ) | (109,638,046 | ) | (4,369,477 | ) | (68,872,491 | ) | ||||||
Redemption fees received** | — | 6,198 | — | 64,225 | ||||||||||
Net Increase (Decrease) | 19,034,858 | $ | 362,304,238 | 7,831,792 | $ | 125,861,734 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 17,655,868 | $ | 335,551,232 | 5,664,323 | $ | 88,572,584 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 15,760 | 226,474 | ||||||||||
Shares repurchased | (3,183,342 | ) | (61,165,475 | ) | (635,940 | ) | (9,972,757 | ) | ||||||
Redemption fees received** | — | 3,679 | — | 15,085 | ||||||||||
Net Increase (Decrease) | 14,472,526 | $ | 274,389,436 | 5,044,143 | $ | 78,841,386 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 172,095 | $ | 3,388,183 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||
Shares repurchased | (2,891 | ) | (56,581 | ) | — | — | ||||||||
Redemption fees received** | — | 5 | — | — | ||||||||||
Net Increase (Decrease) | 169,204 | $ | 3,331,607 | — | $ | — | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 8,452,082 | $ | 166,122,436 | 2,707 | $ | 43,064 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | 1 | ||||||||||
Shares repurchased | (980,958 | ) | (19,454,052 | ) | (2 | ) | (35 | ) | ||||||
Redemption fees received** | — | 1,211 | — | 8 | ||||||||||
Net Increase (Decrease) | 7,471,124 | $ | 146,669,595 | 2,705 | $ | 43,038 | ||||||||
* | Effective date of Class R4 shares was February 1, 2007. |
** | 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. |
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $3,584,027,594 and $1,674,975,430, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 2,788,119,786 | ||
Gross unrealized appreciation on a tax basis | $ | 584,771,527 | ||
Gross unrealized depreciation on a tax basis | (9,272,978 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 575,498,549 | ||
Distributable capital gains | $ | 1,992,150 |
At September 30, 2007, the Fund has deferred tax basis currency losses occurring subsequent to October 31, 2006 of $419,110. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $20,096,687, decreased accumulated net realized investment loss by $1,871,076, and decreased net investment loss by $18,225,611. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from net operating loss, foreign currency transactions, and foreign capital gain taxes.
The tax character of distributions paid during the year ended September 30, 2007, and September 30, 2006, was as follows:
2007 | 2006 | |||||
Distributions from: | ||||||
Capital gains | $ | — | $ | 4,423,452 |
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2007, 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, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
CONTRACTS TO SELL: | ||||||
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||
2,900,000,000 Philippine Peso for 62,125,107 USD | December 18, 2007 | $ | (2,063,534 | ) | ||
Net unrealized gain (loss) from forward | $ | (2,063,534 | ) | |||
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 |
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
22 Certified Annual Report
Thornburg Core Growth Fund |
Year Ended September 30, | Period Ended September 30, 2004(c) | |||||||||||||||
2007 | 2006 | 2005 | ||||||||||||||
Class I Shares: | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 16.66 | $ | 14.37 | $ | 10.93 | $ | 10.87 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | (0.08 | ) | (0.06 | ) | (0.07 | ) | (0.08 | ) | ||||||||
Net realized and unrealized gain (loss) on investments | 4.58 | 2.58 | 3.51 | 0.14 | ||||||||||||
Total from investment operations | 4.50 | 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 | 4.50 | 2.29 | 3.44 | 0.06 | ||||||||||||
NET ASSET VALUE, end of period | $ | 21.16 | $ | 16.66 | $ | 14.37 | $ | 10.93 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 27.01 | % | 17.85 | % | 31.47 | % | 0.55 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) | (0.39 | )% | (0.40 | )% | (0.55 | )% | (0.74 | )%(b) | ||||||||
Expenses, after expense reductions | 0.98 | % | 1.01 | % | 1.02 | % | 1.00 | %(b) | ||||||||
Expenses, after expense reductions and net of custody credits | 0.97 | % | 0.99 | % | 0.99 | % | 0.99 | %(b) | ||||||||
Expenses, before expense reductions | 0.98 | % | 1.10 | % | 1.15 | % | 1.31 | %(b) | ||||||||
Portfolio turnover rate | 82.37 | % | 98.00 | % | 115.37 | % | 108.50 | % | ||||||||
Net assets at end of period (000) | $ | 642,143 | $ | 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. |
See notes to financial statements.
Certified Annual Report 23
Thornburg Core Growth Fund | September 30, 2007 |
CUSIPS: CLASS A—885-215-582, CLASS C—885-215-574, CLASS I—885-215-475, CLASS R3—885-215-517, CLASS R4—885-215-251, CLASS R5—885-215-350
NASDAQ SYMBOLS: CLASS A—THCGX, CLASS C—TCGCX, CLASS I—THIGX, CLASS R3—THCRX, CLASS R4—TCGRX, CLASS R5—THGRX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/07
Software & Services | 17.3 | % | |
Consumer Services | 12.3 | % | |
Semiconductors & Semiconductor Equipment | 12.3 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 8.4 | % | |
Diversified Financials | 8.2 | % | |
Telecommunication Services | 7.8 | % | |
Health Care Equipment & Services | 5.7 | % | |
Technology, Hardware & Equipment | 4.5 | % | |
Food, Beverage & Tobacco | 3.6 | % | |
Transportation | 2.8 | % | |
Utilities | 2.8 | % | |
Media | 2.7 | % | |
Consumer Durables & Apparel | 2.6 | % | |
Energy | 2.6 | % | |
Household & Personal Products | 2.3 | % | |
Real Estate | 2.0 | % | |
Other Assets and Cash Equivalents | 2.1 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/07 (percent of equity holdings)
United States of America | 84.8 | % | |
México | 4.0 | % | |
United Kingdom | 3.8 | % | |
Denmark | 3.7 | % | |
Philippines | 2.8 | % | |
China | 0.9 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 97.86% | |||||
CONSUMER DURABLES & APPAREL — 2.61% | |||||
HOUSEHOLD DURABLES — 2.61% | |||||
Tempur-Pedic International, Inc. | 2,444,725 | $ | 87,398,919 | ||
87,398,919 | |||||
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
CONSUMER SERVICES — 12.31% | |||||
DIVERSIFIED CONSUMER SERVICES — 1.40% | |||||
Bright Horizons Family Solutions, Inc.+ | 1,095,413 | $ | 46,927,493 | ||
HOTELS, RESTAURANTS & LEISURE — 10.91% | |||||
FU JI Food & Catering Services | 9,582,500 | 29,460,531 | |||
Las Vegas Sands Corp.+ | 1,545,736 | 206,232,097 | |||
Wyndham Worldwide Corp.+ | 1,033,600 | 33,860,736 | |||
Wynn Resorts Ltd.+ | 610,900 | 96,253,404 | |||
412,734,261 | |||||
DIVERSIFIED FINANCIALS — 8.23% | |||||
DIVERSIFIED FINANCIAL SERVICES — 8.23% | |||||
CME Group, Inc. | 247,800 | 145,545,330 | |||
Nymex Holdings, Inc. | 464,700 | 60,494,646 | |||
NYSE Euronext Co. | 883,346 | 69,934,503 | |||
275,974,479 | |||||
ENERGY — 2.55% | |||||
OIL, GAS & CONSUMABLE FUELS — 2.55% | |||||
ATP Oil & Gas Corp.+(1) | 1,817,631 | 85,483,186 | |||
85,483,186 | |||||
FOOD, BEVERAGE & TOBACCO — 3.60% | |||||
BEVERAGES — 3.60% | |||||
Carlsberg A/S Class B | 882,500 | 120,527,363 | |||
120,527,363 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 5.70% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 3.36% | |||||
Cytyc Corp.+ | 2,368,400 | 112,854,260 | |||
HEALTH CARE PROVIDERS & SERVICES — 2.34% | |||||
WellPoint, Inc.+ | 992,500 | 78,328,100 | |||
191,182,360 | |||||
HOUSEHOLD & PERSONAL PRODUCTS — 2.27% | |||||
PERSONAL PRODUCTS — 2.27% | |||||
Bare Escentuals, Inc.+ | 3,065,200 | 76,231,524 | |||
76,231,524 | |||||
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
MEDIA — 2.67% | |||||
MEDIA — 2.67% | |||||
DIRECTV Group, Inc.+ | 3,691,421 | $ | 89,627,702 | ||
89,627,702 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 8.45% | |||||
BIOTECHNOLOGY — 8.45% | |||||
Celgene Corp.+ | 927,900 | 66,168,549 | |||
Genentech, Inc.+ | 1,195,741 | 93,291,713 | |||
Gilead Sciences, Inc.+ | 3,024,600 | 123,615,402 | |||
283,075,664 | |||||
REAL ESTATE — 1.96% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 1.96% | |||||
CB Richard Ellis Group, Inc. Class A+ | 2,364,629 | 65,831,271 | |||
65,831,271 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 12.28% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 12.28% | |||||
Intel Corp. | 5,061,200 | 130,882,632 | |||
MEMC Electronic Materials, Inc.+ | 1,774,057 | 104,420,995 | |||
ON Semiconductor Corp.+ | 7,959,603 | 99,972,614 | |||
Trident Microsystems, Inc.+(1) | 4,804,400 | 76,341,916 | |||
411,618,157 | |||||
SOFTWARE & SERVICES — 17.31% | |||||
INTERNET SOFTWARE & SERVICES — 9.33% | |||||
Equinix, Inc.+ | 1,096,544 | 97,252,487 | |||
Google, Inc.+ | 281,350 | 159,601,415 | |||
Vistaprint Ltd.+ | 1,498,945 | 56,015,575 | |||
IT SERVICES — 2.06% | |||||
Western Union Co. | 3,301,691 | 69,236,460 | |||
SOFTWARE — 5.92% | |||||
Amdocs Ltd.+ | 3,389,609 | 126,059,559 | |||
Microsoft Corp. | 2,452,400 | 72,247,704 | |||
580,413,200 | |||||
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 4.48% | |||||||
COMMUNICATIONS EQUIPMENT — 2.14% | |||||||
Riverbed Technology, Inc.+ | 1,777,292 | $ | 71,784,824 | ||||
COMPUTERS & PERIPHERALS — 2.34% | |||||||
Data Domain, Inc.+ | 2,527,932 | 78,239,495 | |||||
150,024,319 | |||||||
TELECOMMUNICATION SERVICES — 7.85% | |||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 3.94% | |||||||
Neustar, Inc. Class A+(1) | 3,847,800 | 131,941,062 | |||||
WIRELESS TELECOMMUNICATION SERVICES — 3.91% | |||||||
América Móvil SA de CV | 40,944,300 | 131,022,958 | |||||
262,964,020 | |||||||
TRANSPORTATION — 2.82% | |||||||
ROAD & RAIL — 2.82% | |||||||
Hertz Global Holdings, Inc.+ | 4,165,600 | 94,642,432 | |||||
94,642,432 | |||||||
UTILITIES — 2.77% | |||||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 2.77% | |||||||
PNOC Energy Development Corp. | 653,922,560 | 92,899,098 | |||||
92,899,098 | |||||||
TOTAL COMMON STOCK (Cost $2,704,972,544) | 3,280,627,955 | ||||||
SHORT TERM INVESTMENTS — 2.48% | |||||||
General Electric Capital Corp., 4.68%, 10/2/2007 | $ | 30,000,000 | 29,996,100 | ||||
General Electric Capital Corp., 4.68%, 10/3/2007 | 22,000,000 | 21,994,280 | |||||
Toyota Credit de Puerto Rico, 4.70%, 10/1/2007 | 31,000,000 | 31,000,000 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $82,990,380) | 82,990,380 | ||||||
TOTAL INVESTMENTS — 100.34% (Cost $2,787,962,924) | $ | 3,363,618,335 | |||||
LIABILITIES NET OF OTHER ASSETS — (0.34)% | (11,344,230 | ) | |||||
NET ASSETS — 100.00% | $ | 3,352,274,105 | |||||
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 |
Footnote legend
+ | Non-income producing |
(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, 2006 | Gross Additions | Gross Reductions | Shares at Sept. 30, 2007 | Market Value Sept. 30, 2007 | Dividend Income | ||||||||
ATP Oil & Gas Corp. | — | 1,817,631 | — | 1,817,631 | $ | 85,483,186 | $ | — | ||||||
Neustar, Inc-Class A | — | 3,847,800 | — | 3,847,800 | 131,941,062 | — | ||||||||
Trident Microsystems, Inc | — | 4,804,400 | — | 4,804,400 | 76,341,916 | — | ||||||||
$ | 293,766,164 | $ | — | |||||||||||
Total non-controlled “affiliated companies” — 8.76% of net assets.
See notes to financial statements.
28 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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
Certified Annual Report 29
Thornburg Core Growth Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,110.80 | $ | 5.10 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.24 | $ | 4.88 |
† | Expenses are equal to the annualized expense ratio for Class I shares (0.96%) 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 Core Growth Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Core Growth Fund versus NASDAQ Composite Index (November 3, 2003 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2007
1 Yr | 3 Yrs | Since Inception | |||||||
I Shares (Incep: 11/3/03) | 27.01 | % | 25.32 | % | 19.07 | % | |||
NASDAQ Composite Index | |||||||||
(Since: 11/3/03) | 19.62 | % | 12.51 | % | 8.44 | % |
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 31
Thornburg Core Growth Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||||
INTERESTED TRUSTEES(1)(2)(4) | ||||||
Garrett Thornburg, 61 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, 51 Trustee since 2001, Member of Governance & | 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, 62 Trustee since 1994, Member of Audit Committee and | 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, 66 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, 61 Chairman of Governance & 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, 58 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, 53 Trustee since 2004, Member of Governance & | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||||
James W. Weyhrauch, 48 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 Core Growth Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||||
Vinson Walden, 37 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. | Not applicable | ||||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||||
Lei Wang, 36 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 to 2002. | Not applicable | ||||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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 Core Growth Fund | September 30, 2007 (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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2007. Complete information will be computed and reported in conjunction with your 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT 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 11, 2007.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time, relative to a category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to broad-based securities indices, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, trade execution, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s above average or better investment performance in most periods
Certified Annual Report 35
OTHER INFORMATION, CONTINUED
Thornburg Core Growth Fund | September 30, 2007 (Unaudited) |
relative to the average performance of funds in a category of “mid cap” growth equity mutual funds selected by an independent mutual fund analyst firm, the Fund’s higher performance relative to two broad-based securities indices in each year since its inception, the Fund’s relative performance in periods of negative market conditions and record of owning growth stocks that perform well in periods of economic growth, data showing lower share price volatility for the Fund, and the Fund’s cumulative returns.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of fees charged by the Advisor to the Fund, the Trustees 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 multi-capitalization growth 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. The Trustees observed that the management fee charged by the Advisor fell within the range of such fees charged to other funds and was higher to a small degree than the median and average fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio was to some extent lower than the average and median expense ratios for the same fund group. The Trustees reviewed information about the fee rates charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
36 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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 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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
38 This page is not part of the Annual Report.
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 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 may invest in any domestic or foreign equity or debt security which Thornburg Investment Management believes may assist the Fund in pursuing its investment goals, although the Fund expects that equity securities in its portfolio will normally be weighted in favor of companies that pay dividends.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Investing outside the United States involves additional risks, such as currency fluctuations. 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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
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. 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. 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 June 2006, 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 June 2006, 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 June 2006, the MSCI EM Latin America Index consisted of the following emerging market country indices: Argentina, Brazil, Chile, Colombia, Mexico, and Peru.
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.
Fed Funds Rate – The Fed Funds Rate is the interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
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.
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!
The Top 100 Dividend Yields
Russell 1000 Index | Russell 2000 Index | |||||
Real Estate | 6 | % | 53 | % | ||
Other Financials | 51 | % | 21 | % | ||
Total Financials | 57 | % | 74 | % | ||
Health Care | 14 | % | 0 | % | ||
Utilities | 10 | % | 0 | % | ||
Consumer Staples | 10 | % | 2 | % | ||
Materials | 4 | % | 0 | % | ||
Consumer Discretionary | 1 | % | 7 | % | ||
Energy | 1 | % | 8 | % | ||
Telecommunication Services | 1 | % | 5 | % | ||
Industrials | 1 | % | 3 | % |
Source: FactSet, as of September 2007. (Numbers may not add to 100% due to rounding.)
In the (large cap) Russell 1000 Index, 57% of the top 100 dividend payers are in the Financials sector. In the (small cap) Russell 2000 Index, 74% of the top 100 dividend-yielding stocks are financial companies. In order to construct a diversified portfolio of attractive yielding stocks, one must look beyond this sector. We do!
Dividend yield is a ratio that shows how much a company pays out in dividends each year relative to its share price.
This page is not part of the Annual Report. 5
The Dividend Landscape
Continued
Global Diversification Can Improve the Portfolio Yield
Since firms outside the U.S. tend to pay higher dividends than U.S. firms, particularly outside the 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.
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%. Class A shares are subject to a 1% 30-day redemption fee. The total annual fund operating expense of Class A shares is 1.38%, as disclosed in the most recent Prospectus.
MANAGEMENT TEAM
PORTFOLIO COMPOSITION AS OF 9/30/07
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.
QUARTERLY DIVIDEND HISTORY | |||||||||||||||
Q1 | Q2 | Q3 | Q4 | Total | |||||||||||
Class A Shares | |||||||||||||||
2007 | 14.2 | ¢ | 18.5 | ¢ | 21.5 | ¢ | N/A | N/A | |||||||
2006 | 12.5 | ¢ | 16.0 | ¢ | 19.2 | ¢ | 33.0 | ¢ | 80.7 | ¢ | |||||
2005 | 11.0 | ¢ | 13.6 | ¢ | 17.4 | ¢ | 29.0 | ¢ | 71.0 | ¢ | |||||
2004 | 10.2 | ¢ | 12.5 | ¢ | 15.0 | ¢ | 21.8 | ¢ | 59.5 | ¢ | |||||
Class C Shares | |||||||||||||||
2007 | 11.2 | ¢ | 15.1 | ¢ | 18.1 | ¢ | N/A | N/A | |||||||
2006 | 10.2 | ¢ | 13.5 | ¢ | 16.5 | ¢ | 30.2 | ¢ | 70.4 | ¢ | |||||
2005 | 9.1 | ¢ | 11.7 | ¢ | 15.6 | ¢ | 26.8 | ¢ | 63.2 | ¢ | |||||
2004 | 8.4 | ¢ | 10.9 | ¢ | 13.7 | ¢ | 20.2 | ¢ | 53.2 | ¢ |
KEY PORTFOLIO ATTRIBUTES
Equity Statistics | ||||
Portfolio P/E (12-mo. trailing) | 15.9x | |||
Median Market Cap | $ | 15.8 B | ||
Equity Holdings | 63 | |||
Fixed Income Statistics | ||||
Weighted Average Coupon | 5.9 | % | ||
Average Credit Quality | A | |||
Average Maturity | 4.2 yrs | |||
Duration | 1.6 yrs | |||
Bond Holdings | 56 | |||
30-day SEC Yield (A Shares) | 3.25 | % |
TOP TEN EQUITY HOLDINGS
Telefónica SA | 4.3 | % | |
Intel Corp. | 2.9 | % | |
Energy East Corp. | 2.7 | % | |
Chevron Corp. | 2.6 | % | |
Enel SpA | 2.5 | % | |
Vodafone Group plc | 2.4 | % | |
OPAP SA | 2.4 | % | |
Eni SpA | 2.4 | % | |
General Electric Co. | 2.3 | % | |
Inmarsat plc | 2.2 | % |
AVERAGE ANNUAL TOTAL RETURNS*
For periods ending September 30, 2007
YTD | 1 Yr | 3 Yrs | Since Inception | |||||||||
A Shares (Incep: 12/24/02) | ||||||||||||
Without Sales Charge | 17.44 | % | 27.40 | % | 20.79 | % | 20.65 | % | ||||
With Sales Charge | 12.16 | % | 21.68 | % | 18.94 | % | 19.49 | % | ||||
Blended Index** (Since: 12/24/02) | 9.78 | % | 16.98 | % | 14.41 | % | 14.70 | % | ||||
S&P 500 Index (Since: 12/24/02) | 9.13 | % | 16.44 | % | 13.14 | % | 13.98 | % |
* | Periods under one year are not annualized. |
** | Blended Index: 75% MSCI World Equity Index/25% Lehman Brothers Aggregate Bond Index |
This page is not part of the Annual Report. 7
Portfolio Overview
Continued
The primary 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 generally grow, subject to periodic fluctuations, over the years on a per share basis. 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 9/30/07
Telecommunication Services | 14.8 | % | |
Utilities | 12.8 | % | |
Diversified Financials | 11.2 | % | |
Energy | 10.9 | % | |
Banks | 10.2 | % | |
Food, Beverage & Tobacco | 8.4 | % | |
Consumer Services | 5.0 | % | |
Semiconductors & Semi Equipment | 4.4 | % | |
Transportation | 4.1 | % | |
Materials | 3.7 | % | |
TOP TEN INDUSTRIES | |||
As of 6/30/07 | |||
Banks | 12.5 | % | |
Telecommunication Services | 12.3 | % | |
Energy | 10.9 | % | |
Diversified Financials | 9.5 | % | |
Utilities | 8.4 | % | |
Food, Beverage & Tobacco | 6.2 | % | |
Semiconductors & Semi Equipment | 5.1 | % | |
Transportation | 4.5 | % | |
Consumer Services | 4.2 | % | |
Materials | 3.0 | % | |
TOP TEN INDUSTRIES | |||
As of 3/31/07 | |||
Banks | 13.8 | % | |
Energy | 12.6 | % | |
Telecommunication Services | 11.6 | % | |
Utilities | 10.4 | % | |
Diversified Financials | 9.9 | % | |
Consumer Services | 7.3 | % | |
Food, Beverage & Tobacco | 5.9 | % | |
Transportation | 4.8 | % | |
Capital Goods | 3.1 | % | |
Materials | 2.9 | % | |
TOP TEN INDUSTRIES | |||
As of 12/31/06 | |||
Banks | 14.3 | % | |
Telecommunication Services | 12.8 | % | |
Energy | 10.1 | % | |
Utilities | 8.8 | % | |
Diversified Financials | 8.4 | % | |
Food, Beverage & Tobacco | 6.3 | % | |
Commercial Services & Supplies | 5.0 | % | |
Transportation | 4.9 | % | |
Consumer Services | 4.0 | % | |
Capital Goods | 3.5 | % |
8 This page is not part of the Annual Report.
Thornburg Investment Income Builder Fund
September 30, 2007
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 9
October 15, 2007
Dear Fellow Shareholder:
Thornburg Investment Income Builder Fund paid dividends of 87.2¢ per Class A share for the fiscal year ended September 30, 2007, up 13.7% over the prior year. In addition, your Fund’s net asset value per Class A share increased by $3.77 (19.3%) during the one-year period, from $19.58 to $23.35, even after payment of 51¢ in capital gains in November 2006. In the six months ended September 30, 2007, your Fund paid dividends of 40.0¢ per Class A share, up 13.6% from the 35.2¢ paid in the comparable prior year period. The dividend per share was higher for Class I and Class R5 shares and lower on the Class C and Class R3 shares, to account for varying class specific expenses. The net asset value per Class A share increased 11.4% during the six-month period, from $20.96 to $23.35. 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 15% over the year-earlier level. This reflects improving ability and willingness to pay dividends by most of the firms included in your Fund. Under the surface of this dividend landscape, there is a more complicated dynamic. Many management boards hoard the earnings & profits of their firms. The share of earnings paid as dividends by firms included in the S&P 500 Index has dwindled to below 30%, far below historical averages. During calendar 2006, the S&P 500 firms used approximately $826 billion of operating profits to fund $183 billion of shareholder dividends and $329 billion (net amount) of share buybacks. Despite the large expenditure for share buybacks, the number of shares outstanding for the group actually increased during the first three calendar quarters of 2006, before falling very slightly in recent quarters. This quantifies the dilutive effect of options issuance to shareholder returns from corporate cash flows. Shareholder dilution from management stock options, an issue particular to the United States, is a major reason why Thornburg Investment Income Builder Fund currently holds more foreign stocks than U.S. stocks. We prefer that cash flows be directed to dividends or to share buyback programs which actually reduce the number of shares outstanding.
We have commented in previous letters about your portfolio’s significant weighting in hydrocarbon producers, particularly oil & gas producers. Cash flows generated by these firms are enormous, given today’s prices for their hydrocarbon output. We know that these cash flows are cyclical, and we notice that exploration and production costs are skyrocketing, so we remain guarded about our investment exposure to this area. During the fiscal year, Chevron Corp. and Diamond Offshore Drilling Inc. were among your portfolio’s better performers. Another group with attractive cash flows and modest valuations is the telecom services industry, which now has the highest weighting of any single sector in your portfolio. Here, we are particularly interested in those firms that obtain a growing percentage of revenues from mobile telephony and broadband services. China Mobile Ltd., France Telecom SA, Telefónica SA, and Vodafone Group plc were all among your portfolio’s top performers during the year.
Your portfolio’s bank and diversified financial services holdings, in general, performed poorly during the last six months, accounting for six of the portfolio’s ten worst performers in this period. These included the U.K.’s Barclays plc, Italy’s Intesa Sanpaolo, Sweden’s Carnegie & Co., Spain’s Banco Bilbao Vizcaya Argentaria (BBVA), Switzerland’s UBS AG, and U.S. Bancorp. All of these except BBVA joined the list of underperformers for the fiscal year. One financial, Hong Kong Exchanges & Clearing Ltd., was your portfolio’s best performer during the most recent six months, and for the fiscal year.
10 Certified Annual Report
Other strong portfolio performers during the fiscal year included Southern Copper Corp. (copper mining), Macquarie Airports (airport operator), FU JI Food & Catering Services (Chinese food service operator), and Entergy Corp. (utility). Other weak portfolio performers during the year included Highland Hospitality (motel REIT), Sanofi Aventis and Pfizer (pharmaceuticals), Precision Drilling Trust (Canadian oil & gas driller), and Steelcase (commercial furniture & fixtures). In general, the positive contributions of the best performers exceeded the losses from the worst performers during the year.
Bond yields, while improved from their lows of last year, are not yet truly interesting. The reward for taking corporate credit risk remains underwhelming, although we got a glimpse of significantly more interesting yields during the August liquidity squeeze. In many cases, owners of bonds that sought to sell them did not trade the bonds at the bid prices that were available. Beginning in September, a 0.5% cut in the Federal Funds rate provided enough liquidity to allow bond prices to remain firm. Subprime mortgage headlines notwithstanding, corporate credit metrics appear to be generally sound. The duration of the cash/bond component of the Income Builder Fund, now around 14% of Fund assets, is around 2.1 years. Domestic stocks, including preferred stocks, comprise around 40% of the portfolio, foreign stocks around 47%.
We look forward to the coming quarters, recognizing that 2008 will present challenges. Increasingly, percentage growth in profits lags that of revenues, particularly in “developed” markets. This indicates profit margins are being squeezed. In the U.S., consensus operating earnings per unit of the S&P 500 Index, around $88 for 2006, are forecast to be $94 for 2007 and about $99 in 2008. Dividend payouts on both U.S. and European corporate earnings are modest; nevertheless, slowing earnings growth will eventually lead to decelerating growth of dividend payments.
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 | Jason Brady, CFA | ||
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 11
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
ASSETS | |||
Investments at value (Note 2) | |||
Non-controlled affiliated issuers (cost $105,254,079) | $ | 113,326,066 | |
Non-affiliated issuers (cost $3,177,766,617) | 3,798,802,323 | ||
Cash | 789,088 | ||
Cash denominated in foreign currency (cost $9,715,793) | 9,847,859 | ||
Receivable for investments sold | 65,991,198 | ||
Receivable for fund shares sold | 35,741,906 | ||
Dividends receivable | 10,670,218 | ||
Interest receivable | 4,753,237 | ||
Prepaid expenses and other assets | 34,269 | ||
Total Assets | 4,039,956,164 | ||
LIABILITIES | |||
Payable for securities purchased | 119,497,569 | ||
Payable for fund shares redeemed | 2,866,096 | ||
Unrealized loss on forward exchange contracts (Note 7) | 26,467,005 | ||
Payable to investment advisor and other affiliates (Note 3) | 3,897,083 | ||
Accounts payable and accrued expenses | 1,018,496 | ||
Dividends payable | 1,706,910 | ||
Total Liabilities | 155,453,159 | ||
NET ASSETS | $ | 3,884,503,005 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 20,548,540 | |
Net unrealized appreciation on investments | 602,798,485 | ||
Accumulated net realized gain (loss) | 106,071,579 | ||
Net capital paid in on shares of beneficial interest | 3,155,084,401 | ||
$ | 3,884,503,005 | ||
12 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($1,697,061,166 applicable to 72,665,325 shares of beneficial interest outstanding—Note 4) | $ | 23.35 | |
Maximum sales charge, 4.50% of offering price | 1.10 | ||
Maximum offering price per share | $ | 24.45 | |
Class C Shares: | |||
Net asset value and offering price per share * ($1,535,532,304 applicable to 65,713,189 shares of beneficial interest outstanding—Note 4) | $ | 23.37 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($644,294,014 applicable to 27,410,975 shares of beneficial interest outstanding—Note 4) | $ | 23.50 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($7,543,687 applicable to 323,174 shares of beneficial interest outstanding—Note 4) | $ | 23.34 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($71,834 applicable to 3,055 shares of beneficial interest outstanding—Note 4) | $ | 23.51 | |
* | 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 Investment Income Builder Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income | ||||
Non-controlled affiliated issuers | $ | 4,114,024 | ||
Non-affiliated issuers (net of foreign taxes withheld of $9,016,093) | 123,441,854 | |||
Interest income (net of premium amortized of $258,388 and foreign taxes withheld of $11,068) | 28,756,504 | |||
Total Income | 156,312,382 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 21,050,253 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,551,987 | |||
Class C Shares | 1,310,244 | |||
Class I Shares | 227,468 | |||
Class R3 Shares | 5,103 | |||
Class R5 Shares | 3 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 3,118,122 | |||
Class C Shares | 10,481,992 | |||
Class R3 Shares | 20,411 | |||
Transfer agent fees | ||||
Class A Shares | 1,003,300 | |||
Class C Shares | 954,435 | |||
Class I Shares | 227,430 | |||
Class R3 Shares | 10,106 | |||
Class R5 Shares | 927 | |||
Registration and filing fees | ||||
Class A Shares | 107,506 | |||
Class C Shares | 85,677 | |||
Class I Shares | 51,641 | |||
Class R3 Shares | 18,823 | |||
Class R5 Shares | 20,447 | |||
Custodian fees (Note 3) | 1,011,597 | |||
Professional fees | 125,460 | |||
Accounting fees | 106,325 | |||
Trustee fees | 39,005 | |||
Other expenses | 587,008 | |||
Total Expenses | 42,115,270 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,739,426 | ) | ||
Fees paid indirectly (Note 3) | (106,047 | ) | ||
Net Expenses | 40,269,797 | |||
Net Investment Income | $ | 116,042,585 | ||
14 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 127,813,879 | ||
Foreign currency transactions | (19,453,487 | ) | ||
108,360,392 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 462,756,937 | |||
Foreign currency translations | (27,441,631 | ) | ||
435,315,306 | ||||
Net Realized and Unrealized Gain | 543,675,698 | |||
Net Increase in Net Assets Resulting From Operations | $ | 659,718,283 | ||
See notes to financial statements.
Certified Annual Report 15
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Investment Income Builder Fund |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 116,042,585 | $ | 54,422,706 | ||||
Net realized gain on investments and foreign currency transactions | 108,360,392 | 53,507,046 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 435,315,306 | 85,783,248 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 659,718,283 | 193,713,000 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (50,204,595 | ) | (27,097,402 | ) | ||||
Class C Shares | (35,449,856 | ) | (16,063,539 | ) | ||||
Class I Shares | (19,870,628 | ) | (8,357,488 | ) | ||||
Class R3 Shares | (149,347 | ) | (25,242 | ) | ||||
Class R5 Shares | (317 | ) | — | |||||
From realized gains | ||||||||
Class A Shares | (25,096,354 | ) | (10,140,082 | ) | ||||
Class C Shares | (18,583,927 | ) | (6,660,050 | ) | ||||
Class I Shares | (8,637,003 | ) | (2,568,880 | ) | ||||
Class R3 Shares | (52,085 | ) | (6,756 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 568,545,293 | 325,267,307 | ||||||
Class C Shares | 706,003,815 | 257,138,902 | ||||||
Class I Shares | 252,258,521 | 161,508,626 | ||||||
Class R3 Shares | 5,498,993 | 952,708 | ||||||
Class R5 Shares | 67,758 | — | ||||||
Net Increase in Net Assets | 2,034,048,551 | 867,661,104 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 1,850,454,454 | 982,793,350 | ||||||
End of year | $ | 3,884,503,005 | $ | 1,850,454,454 | ||||
Undistributed net investment income | $ | 20,548,540 | $ | 12,565,595 |
See notes to financial statements.
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary investment goal is 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 goal is long-term capital appreciation.
The Fund currently offers five classes of shares of beneficial interest: Class A, Class C, Institutional Class (Class I), and Retirement Classes (Class R3 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 R3 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, (v) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (vi) 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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
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 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 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 liabilities 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, 2007, 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 Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,690,940 for Class C shares, $27,122 for Class R3 shares, and $21,364 for Class R5 shares.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
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, 2007, the Distributor has advised the Fund that it earned commissions aggregating $1,129,674 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $177,641 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 distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class C and Class R3 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C and Class R3 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 and Class R3 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, 2007, 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, 2007, fees paid indirectly were $106,047. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 32,442,895 | $ | 692,883,081 | 20,476,188 | $ | 383,476,280 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,915,652 | 61,056,323 | 1,620,907 | 29,347,480 | ||||||||||
Shares repurchased | (8,821,730 | ) | (185,406,263 | ) | (4,735,350 | ) | (87,574,938 | ) | ||||||
Redemption fees received** | — | 12,152 | — | 18,485 | ||||||||||
Net Increase (Decrease) | 26,536,817 | $ | 568,545,293 | 17,361,745 | $ | 325,267,307 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 34,745,769 | $ | 739,818,421 | 14,763,665 | $ | 277,357,697 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,908,232 | 40,045,995 | 887,275 | 16,040,689 | ||||||||||
Shares repurchased | (3,442,710 | ) | (73,871,246 | ) | (1,951,047 | ) | (36,264,521 | ) | ||||||
Redemption fees received** | — | 10,645 | — | 5,037 | ||||||||||
Net Increase (Decrease) | 33,211,291 | $ | 706,003,815 | 13,699,893 | $ | 257,138,902 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 14,887,196 | $ | 318,805,598 | 8,727,511 | $ | 165,649,392 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,043,149 | 22,020,961 | 486,642 | 8,942,006 | ||||||||||
Shares repurchased | (4,191,444 | ) | (88,572,580 | ) | (701,013 | ) | (13,090,059 | ) | ||||||
Redemption fees received** | — | 4,542 | — | 7,287 | ||||||||||
Net Increase (Decrease) | 11,738,901 | $ | 252,258,521 | 8,513,140 | $ | 161,508,626 | ||||||||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 313,697 | $ | 6,751,609 | 51,927 | $ | 972,264 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 9,170 | 195,546 | 1,712 | 31,478 | ||||||||||
Shares repurchased | (66,150 | ) | (1,448,208 | ) | (2,776 | ) | (51,042 | ) | ||||||
Redemption fees received** | — | 46 | — | 8 | ||||||||||
Net Increase (Decrease) | 256,717 | $ | 5,498,993 | 50,863 | $ | 952,708 | ||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 3,057 | $ | 67,798 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 3 | 64 | — | — | ||||||||||
Shares repurchased | (5 | ) | (104 | ) | — | — | ||||||||
Redemption fees received** | — | — | — | — | ||||||||||
Net Increase (Decrease) | 3,055 | $ | 67,758 | — | $ | — | ||||||||
* | Effective date for R5 shares was February 1, 2007. |
** | 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. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $3,029,826,851 and $1,604,539,361, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 3,288,528,385 | ||
Gross unrealized appreciation on a tax basis | $ | 656,969,485 | ||
Gross unrealized depreciation on a tax basis | (33,369,481 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 623,600,004 | ||
Distributable earnings – ordinary income | $ | 69,318,573 | ||
Distributable capital gains | $ | 38,860,043 |
At September 30, 2007, the Fund had deferred tax basis currency losses occurring subsequent to October 31, 2006 of $268,838. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $2,384,897, increased accumulated net realized investment gain by $2,018,926, and increased capital paid in on shares of beneficial interest by $365,971. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency transactions, investments in REITs, partnerships, and redemptions used as distributions.
The tax character of distributions paid during the year ended September 30, 2007, and September 30, 2006, was as follows:
2007 | 2006 | |||||
Distributions from: | ||||||
Ordinary income | $ | 125,439,291 | $ | 54,324,964 | ||
Capital gains | $ | 32,604,821 | $ | 16,594,475 | ||
Total | $ | 158,044,112 | $ | 70,919,439 | ||
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2007, 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, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
CONTRACTS TO SELL:
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
46,000,000 | Greater British Pound for 90,627,360 USD | November 07, 2007 | $ | (3,404,482 | ) | |||
307,000,000 | Euro Dollar for 415,122,330 USD | November 07, 2007 | (23,062,523 | ) | ||||
Unrealized loss from forward | ||||||||
Sell contracts: | (26,467,005 | ) | ||||||
Net unrealized gain (loss) from forward | ||||||||
Exchange contracts | $ | (26,467,005 | ) |
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 21
Thornburg Investment Income Builder Fund
Year Ended September 30, | Period Ended September 30, | |||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003(c) | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||||||
Net asset value, beginning of period | $ | 19.58 | $ | 17.93 | $ | 15.60 | $ | 13.77 | $ | 11.94 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.93 | 0.78 | 0.73 | 0.72 | 0.56 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 4.23 | 1.98 | 2.24 | 1.66 | 1.60 | |||||||||||||||
Total from investment operations | 5.16 | 2.76 | 2.97 | 2.38 | 2.16 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.88 | ) | (0.77 | ) | (0.64 | ) | (0.55 | ) | (0.33 | ) | ||||||||||
Net realized gains | (0.51 | ) | (0.34 | ) | — | — | — | |||||||||||||
Total dividends | (1.39 | ) | (1.11 | ) | (0.64 | ) | (0.55 | ) | (0.33 | ) | ||||||||||
Change in net asset value | 3.77 | 1.65 | 2.33 | 1.83 | 1.83 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 23.35 | $ | 19.58 | $ | 17.93 | $ | 15.60 | $ | 13.77 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 27.40 | % | 16.05 | % | 19.21 | % | 17.40 | % | 18.25 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 4.39 | % | 4.22 | % | 4.26 | % | 4.72 | % | 5.65 | % (b) | ||||||||||
Expenses, after expense reductions | 1.30 | % | 1.38 | % | 1.47 | % | 1.50 | % | 1.61 | % (b) | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.30 | % | 1.38 | % | 1.47 | % | 1.49 | % | 1.60 | % (b) | ||||||||||
Expenses, before expense reductions | 1.30 | % | 1.38 | % | 1.47 | % | 1.50 | % | 1.74 | % (b) | ||||||||||
Portfolio turnover rate | 62.60 | % | 55.29 | % | 76.76 | % | 109.21 | % | 52.10 | % | ||||||||||
Net assets at end of period (000) | $ | 1,697,061 | $ | 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. |
See notes to financial statements.
22 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Investment Income Builder Fund
Year Ended September 30, | Period Ended September 30, | |||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003(c) | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||||||
Net asset value, beginning of period | $ | 19.60 | $ | 17.95 | $ | 15.62 | $ | 13.79 | $ | 11.94 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.81 | 0.70 | 0.66 | 0.66 | 0.51 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 4.22 | 1.97 | 2.24 | 1.66 | 1.62 | |||||||||||||||
Total from investment operations | 5.03 | 2.67 | 2.90 | 2.32 | 2.13 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.75 | ) | (0.68 | ) | (0.57 | ) | (0.49 | ) | (0.28 | ) | ||||||||||
Net realized gains | (0.51 | ) | (0.34 | ) | — | — | — | |||||||||||||
Total dividends | (1.26 | ) | (1.02 | ) | (0.57 | ) | (0.49 | ) | (0.28 | ) | ||||||||||
Change in net asset value | 3.77 | 1.65 | 2.33 | 1.83 | 1.85 | |||||||||||||||
NET ASSET VALUE, end of period | $ | 23.37 | $ | 19.60 | $ | 17.95 | $ | 15.62 | $ | 13.79 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return(a) | 26.64 | % | 15.45 | % | 18.70 | % | 16.89 | % | 18.01 | % | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income | 3.79 | % | 3.73 | % | 3.84 | % | 4.33 | % | 5.10 | % (b) | ||||||||||
Expenses, after expense reductions | 1.90 | % | 1.90 | % | 1.90 | % | 1.89 | % | 1.91 | % (b) | ||||||||||
Expenses, after expense reductions and net of custody credits | 1.89 | % | 1.90 | % | 1.89 | % | 1.89 | % | 1.90 | % (b) | ||||||||||
Expenses, before expense reductions | 2.06 | % | 2.15 | % | 2.23 | % | 2.25 | % | 2.55 | % (b) | ||||||||||
Portfolio turnover rate | 62.60 | % | 55.29 | % | 76.76 | % | 109.21 | % | 52.10 | % | ||||||||||
Net assets at end of period (000) | $ | 1,535,532 | $ | 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. |
See notes to financial statements.
Certified Annual Report 23
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Investment Income Builder Fund
Year Ended September 30, | Period Ended September 30, | |||||||||||||||
2007 | 2006 | 2005 | 2004(c) | |||||||||||||
Class I Shares: | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 19.71 | $ | 18.03 | $ | 15.64 | $ | 14.45 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 1.02 | 0.88 | 0.84 | 0.74 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 4.24 | 1.98 | 2.22 | 1.01 | ||||||||||||
Total from investment operations | 5.26 | 2.86 | 3.06 | 1.75 | ||||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.96 | ) | (0.84 | ) | (0.67 | ) | (0.56 | ) | ||||||||
Net realized gains | (0.51 | ) | (0.34 | ) | — | — | ||||||||||
Total dividends | (1.47 | ) | (1.18 | ) | (0.67 | ) | (0.56 | ) | ||||||||
Change in net asset value | 3.79 | 1.68 | 2.39 | 1.19 | ||||||||||||
NET ASSET VALUE, end of period | $ | 23.50 | $ | 19.71 | $ | 18.03 | $ | 15.64 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 27.80 | % | 16.53 | % | 19.73 | % | 12.19 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) | 4.74 | % | 4.68 | % | 4.86 | % | 5.33 | % (b) | ||||||||
Expenses, after expense reductions | 0.95 | % | 0.99 | % | 1.00 | % | 0.99 | % (b) | ||||||||
Expenses, after expense reductions and net of custody credits | 0.94 | % | 0.98 | % | 0.99 | % | 0.99 | % (b) | ||||||||
Expenses, before expense reductions | 0.95 | % | 1.02 | % | 1.09 | % | 1.21 | % (b) | ||||||||
Portfolio turnover rate | 62.60 | % | 55.29 | % | 76.76 | % | 109.21 | % | ||||||||
Net assets at end of period (000) | $ | 644,294 | $ | 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. |
See notes to financial statements.
24 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Investment Income Builder Fund
Year Ended September 30, | Period Ended September 30, 2005(c) | |||||||||||
2007 | 2006 | |||||||||||
Class R3 Shares: | ||||||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 19.58 | $ | 17.93 | $ | 16.98 | ||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.86 | 0.82 | 0.50 | |||||||||
Net realized and unrealized gain (loss) on investments | 4.24 | 1.92 | 0.79 | |||||||||
Total from investment operations | 5.10 | 2.74 | 1.29 | |||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.83 | ) | (0.75 | ) | (0.34 | ) | ||||||
Net realized gains | (0.51 | ) | (0.34 | ) | — | |||||||
Total dividends | (1.34 | ) | (1.09 | ) | (0.34 | ) | ||||||
Change in net asset value | 3.76 | 1.65 | 0.95 | |||||||||
NET ASSET VALUE, end of period | $ | 23.34 | $ | 19.58 | $ | 17.93 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return(a) | 27.10 | % | 15.91 | % | 7.67 | % | ||||||
Ratios to average net assets: | ||||||||||||
Net investment income | 4.00 | % | 4.36 | % | 4.27 | % (b) | ||||||
Expenses, after expense reductions | 1.50 | % | 1.50 | % | 1.50 | % (b) | ||||||
Expenses, after expense reductions and net of custody credits | 1.50 | % | 1.50 | % | 1.49 | % (b) | ||||||
Expenses, before expense reductions | 2.16 | % | 6.05 | % | 28.93 | % (b)† | ||||||
Portfolio turnover rate | 62.60 | % | 55.29 | % | 76.76 | % | ||||||
Net assets at end of period (000) | $ | 7,544 | $ | 1,301 | $ | 280 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R3 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. |
See notes to financial statements.
Certified Annual Report 25
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Investment Income Builder Fund
Period Ended September 30, | ||||
Class R5 Shares: | ||||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 20.74 | ||
Income from investment operations: | ||||
Net investment income | 0.46 | |||
Net realized and unrealized gain (loss) on investments | 2.87 | |||
Total from investment operations | 3.33 | |||
Less dividends from: | ||||
Net investment income | (0.56 | ) | ||
Net realized gains | — | |||
Total dividends | (0.56 | ) | ||
Change in net asset value | 2.77 | |||
NET ASSET VALUE, end of period | $ | 23.51 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 16.19 | % | ||
Ratios to average net assets: | ||||
Net investment income | 3.17 | % (b) | ||
Expenses, after expense reductions | 0.99 | % (b) | ||
Expenses, after expense reductions and net of custody credits | 0.98 | % (b) | ||
Expenses, before expense reductions | 278.77 | % (b)† | ||
Portfolio turnover rate | 62.60 | % | ||
Net assets at end of period (000) | $ | 72 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Effective date of Class R5 Shares was February 1, 2007. |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
26 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
CUSIPS: CLASS A - 885-215-558, CLASS C - 885-215-541, CLASS I - 885-215-467, CLASS R3 - 885-215-384, CLASS R5 - 885-215-236
NASDAQ SYMBOLS: CLASS A - TIBAX, CLASS C - TIBCX, CLASS I - TIBIX, CLASS R3 - TIBRX, CLASS R5 - TIBMX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/07
Telecommunication Services | 14.8 | % | |
Utilities | 12.8 | % | |
Diversified Financials | 11.2 | % | |
Energy | 10.9 | % | |
Banks | 10.2 | % | |
Food, Beverage & Tobacco | 8.4 | % | |
Consumer Services | 5.0 | % | |
Semiconductors & Semiconductor Equipment | 4.4 | % | |
Transportation | 4.1 | % | |
Materials | 3.7 | % | |
Capital Goods | 2.5 | % | |
Media | 1.9 | % | |
Software & Services | 1.7 | % | |
Real Estate | 1.2 | % | |
Food & Staples Retailing | 0.3 | % | |
Retailing | 0.2 | % | |
Technology Hardware & Equipment | 0.1 | % | |
Consumer Durables & Apparel | 0.1 | % | |
Insurance | 0.1 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 0.1 | % | |
U.S. Government Agencies | 0.5 | % | |
U.S. Treasury Securities | 0.3 | % | |
Taxable Municipal Bonds | 0.1 | % | |
Other Securities | 0.3 | % | |
Other Assets & Cash Equivalents | 5.1 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/07
United States | 46.9 | % | |
Italy | 7.9 | % | |
Spain | 7.0 | % | |
U.K. | 6.2 | % | |
China | 4.1 | % | |
Greece | 3.4 | % | |
Switzerland | 3.3 | % | |
Canada | 3.2 | % | |
Hong Kong | 2.1 | % | |
France | 2.1 | % | |
Taiwan | 1.6 | % | |
South Africa | 1.6 | % | |
Australia | 1.5 | % | |
Brazil | 1.1 | % | |
Germany | 1.0 | % | |
Turkey | 0.9 | % | |
Malaysia | 0.6 | % | |
Russia | 0.3 | % | |
México | 0.1 | % | |
Other Assets & Cash Equivalents | 5.1 | % |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 85.86% | |||||
BANKS — 8.79% | |||||
COMMERCIAL BANKS — 8.79% | |||||
Barclays plc | 3,000,000 | $ | 36,551,756 | ||
BBVA | 2,850,000 | 66,811,448 | |||
EFG Eurobank Ergasias | 1,133,333 | 39,852,431 | |||
Intesa Sanpaolo | 8,800,000 | 67,949,356 | |||
Liechtensteinische Landesbank AG | 600,000 | 56,740,391 | |||
Lloyds TSB Group plc | 1,500,000 | 16,649,310 | |||
US Bancorp | 1,750,000 | 56,927,500 | |||
341,482,192 | |||||
CAPITAL GOODS — 2.29% | |||||
INDUSTRIAL CONGLOMERATES — 2.29% | |||||
General Electric Co. | 2,150,000 | 89,010,000 | |||
89,010,000 | |||||
CONSUMER SERVICES — 4.88% | |||||
HOTELS, RESTAURANTS & LEISURE — 4.88% | |||||
Berjaya Sports Toto Berhad | 17,000,000 | 24,944,974 | |||
FU JI Food & Catering Services | 13,000,000 | 39,967,326 | |||
McDonald’s Corp. | 579,800 | 31,581,706 | |||
OPAP SA | 2,400,000 | 93,085,998 | |||
189,580,004 | |||||
DIVERSIFIED FINANCIALS — 9.31% | |||||
CAPITAL MARKETS — 3.70% | |||||
AllianceBernstein Holdings LP | 350,000 | 30,824,500 | |||
GMP Capital Trust | 1,756,100 | 38,506,551 | |||
Nuveen Investments, Inc. | 72,000 | 4,459,680 | |||
UBS AG | 1,300,000 | 69,899,077 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.61% | |||||
Bank of America Corp. | 1,400,000 | 70,378,000 | |||
Bolsas y Mercados Españoles | 600,000 | 37,251,510 | |||
Hong Kong Exchanges & Clearing Ltd. | 2,200,000 | 67,354,014 | |||
KKR Financial Holdings, LLC | 2,556,500 | 43,077,025 | |||
361,750,357 | |||||
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
ENERGY — 9.77% | |||||
ENERGY EQUIPMENT & SERVICES — 1.90% | |||||
Diamond Offshore Drilling, Inc. | 650,000 | $ | 73,638,500 | ||
OIL, GAS & CONSUMABLE FUELS — 7.87% | |||||
Canadian Oil Sands Trust | 1,525,000 | 50,595,687 | |||
Centennial Coal Co. Ltd. | 7,426,895 | 24,581,653 | |||
Chevron Corp. | 1,100,000 | 102,938,000 | |||
Eni SpA | 2,500,000 | 92,651,083 | |||
Tupras-Turkiye Petrol Rafine | 1,325,000 | 35,128,417 | |||
379,533,340 | |||||
FOOD, BEVERAGE & TOBACCO — 8.12% | |||||
BEVERAGES — 1.92% | |||||
Coca Cola Co. | 1,300,000 | 74,711,000 | |||
FOOD PRODUCTS — 3.25% | |||||
Kraft Foods, Inc. A | 2,000,000 | 69,020,000 | |||
Reddy Ice Holdings, Inc.(1) | 2,174,471 | 57,340,800 | |||
TOBACCO — 2.95% | |||||
Altria Group, Inc. | 1,100,000 | 76,483,000 | |||
Universal Corp. | 776,000 | 37,985,200 | |||
315,540,000 | |||||
MATERIALS — 3.56% | |||||
METALS & MINING — 3.56% | |||||
Impala Platinum Holdings Ltd. | 1,750,000 | 60,964,104 | |||
Southern Copper Corp. | 625,000 | 77,393,750 | |||
138,357,854 | |||||
MEDIA — 1.78% | |||||
MEDIA — 1.78% | |||||
Mediaset SpA | 5,000,000 | 51,619,380 | |||
Sinclair Broadcast Group, Inc. | 1,452,107 | 17,483,368 | |||
69,102,748 | |||||
REAL ESTATE — 0.95% | |||||
REAL ESTATE INVESTMENT TRUSTS — 0.95% | |||||
Equity Inns, Inc. | 800,000 | 18,064,000 | |||
Quadra Realty Trust, Inc.(1) | 1,981,800 | 18,886,554 | |||
36,950,554 | |||||
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
RETAILING — 0.15% | |||||
SPECIALTY RETAIL — 0.15% | |||||
Guitar Center, Inc.+ | 98,678 | $ | 5,851,605 | ||
5,851,605 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.44% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.44% | |||||
Intel Corp. | 4,300,000 | 111,198,000 | |||
Taiwan Semiconductor Mfg. Co. Ltd. ADR | 6,029,995 | 61,023,549 | |||
172,221,549 | |||||
SOFTWARE & SERVICES — 1.69% | |||||
IT SERVICES — 1.69% | |||||
Paychex, Inc. | 1,600,000 | 65,600,000 | |||
65,600,000 | |||||
TELECOMMUNICATION SERVICES — 14.21% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 9.68% | |||||
Brasil Telecom | 1,650,000 | 44,009,002 | |||
France Telecom SA | 2,400,000 | 80,389,341 | |||
Inmarsat plc | 9,000,000 | 83,737,589 | |||
Telefónica SA | 6,000,000 | 167,948,358 | |||
WIRELESS TELECOMMUNICATION SERVICES — 4.53% | |||||
China Mobile Ltd. | 5,000,000 | 81,812,744 | |||
Vodafone Group plc | 26,000,000 | 93,890,854 | |||
551,787,888 | |||||
TRANSPORTATION — 3.93% | |||||
TRANSPORTATION INFRASTRUCTURE — 3.93% | |||||
Hopewell Highway | 15,643,500 | 14,871,070 | |||
Macquarie Airports | 19,000,000 | 73,339,480 | |||
Macquarie Infrastructure Co. LLC | 691,000 | 26,665,690 | |||
Shenzhen Chiwan Wharf Holdings Ltd. | 14,665,727 | 37,919,578 | |||
152,795,818 | |||||
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
UTILITIES — 11.99% | ||||||
ELECTRIC UTILITIES — 5.44% | ||||||
E. ON AG | 212,900 | $ | 39,362,792 | |||
Enel SpA | 8,500,000 | 96,237,346 | ||||
Entergy Corp. | 700,000 | 75,803,000 | ||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.96% | ||||||
Algonquin Power Income Fund Trust(1) | 4,183,700 | 37,098,712 | ||||
MULTI-UTILITIES — 5.59% | ||||||
Consolidated Edison, Inc. | 939,395 | 43,493,989 | ||||
Dominion Resources, Inc. | 800,000 | 67,440,000 | ||||
Energy East Corp. | 3,923,700 | 106,136,085 | ||||
465,571,924 | ||||||
TOTAL COMMON STOCK (Cost $2,705,559,847) | 3,335,135,833 | |||||
PREFERRED STOCK — 0.83% | ||||||
BANKS — 0.42% | ||||||
COMMERCIAL BANKS — 0.42% | ||||||
Barclays plc | 200,000 | 5,030,000 | ||||
First Tennessee Bank | 12,000 | 11,242,500 | ||||
16,272,500 | ||||||
DIVERSIFIED FINANCIALS — 0.41% | ||||||
CAPITAL MARKETS — 0.08% | ||||||
Morgan Stanley | 120,000 | 3,060,000 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.33% | ||||||
Lehman Brothers Holdings, Inc. | 140,000 | 3,365,600 | ||||
Merrill Lynch & Co., Inc. | 420,000 | 9,723,000 | ||||
16,148,600 | ||||||
TOTAL PREFERRED STOCK (Cost $33,981,250) | 32,421,100 | |||||
CORPORATE BONDS — 6.69% | ||||||
BANKS — 0.75% | ||||||
COMMERCIAL BANKS — 0.58% | ||||||
Alfa Diversified, 7.694%, 3/15/2012 | $ | 7,000,000 | 7,148,890 | |||
First Tennessee Bank, 5.316%, 12/8/2008 | 10,000,000 | 10,002,900 | ||||
National City Bank, 7.25%, 7/15/2010 | 5,000,000 | 5,248,380 |
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
THRIFTS & MORTGAGE FINANCE — 0.17% | ||||||
Countrywide Home Loan, 5.126%, 11/24/2008 | $ | 5,000,000 | $ | 6,718,719 | ||
29,118,889 | ||||||
CAPITAL GOODS — 0.20% | ||||||
INDUSTRIAL CONGLOMERATES — 0.20% | ||||||
General Electric Capital Australia, 5.25%, 8/15/2008 | 9,000,000 | 7,854,219 | ||||
7,854,219 | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.02% | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.02% | ||||||
Allied Waste North America, Inc., 6.375%, 4/15/2011 | 500,000 | 501,250 | ||||
Waste Management, Inc., 7.375%, 8/1/2010 | 175,000 | 185,221 | ||||
686,471 | ||||||
CONSUMER DURABLES & APPAREL — 0.10% | ||||||
HOUSEHOLD DURABLES — 0.10% | ||||||
K. Hovnanian Enterprises, Inc., 6.25%, 1/15/2015 | 5,000,000 | 3,800,000 | ||||
3,800,000 | ||||||
CONSUMER SERVICES — 0.15% | ||||||
HOTELS, RESTAURANTS & LEISURE — 0.15% | ||||||
Seneca Nation of Indians Capital Improvements Authority, 6.75%, 12/1/2013 | 6,000,000 | 5,974,440 | ||||
5,974,440 | ||||||
DIVERSIFIED FINANCIALS — 1.35% | ||||||
CAPITAL MARKETS — 0.46% | ||||||
Goldman Sachs Group, Inc., 5.625%, 1/15/2017 | 8,000,000 | 7,761,992 | ||||
Lehman Brothers Holdings, Inc., 6.00%, 7/19/2012 | 10,000,000 | 10,155,010 | ||||
CONSUMER FINANCE — 0.67% | ||||||
Capital One Bank, 6.70%, 5/15/2008 | 655,000 | 660,133 | ||||
Capital One Bank, 6.50%, 6/13/2013 | 1,500,000 | 1,520,332 | ||||
Capital One Financial Corp., 6.15%, 9/1/2016 | 14,500,000 | 14,144,808 | ||||
SLM Corp. CPI Floating Rate Note, 3.89%, 3/2/2009 | 5,500,000 | 5,069,735 | ||||
SLM Corp. Floating Rate, 5.66%, 1/27/2014 | 5,000,000 | 4,363,740 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.22% | ||||||
CIT Group, Inc., 5.00%, 2/13/2014 | 9,500,000 | 8,577,997 | ||||
52,253,747 | ||||||
32 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
ENERGY — 1.18% | ||||||
ENERGY EQUIPMENT & SERVICES — 0.19% | ||||||
Calfrac Holdings, 7.75%, 2/15/2015 | $ | 6,500,000 | $ | 6,256,250 | ||
Seitel, Inc., 9.75%, 2/15/2014 | 1,000,000 | 945,000 | ||||
OIL, GAS & CONSUMABLE FUELS — 0.99% | ||||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 5,000,000 | 4,580,170 | ||||
Gazprom, 7.25%, 2/22/2010 (RUB) | 125,000,000 | 5,035,290 | ||||
Griffin Coal Mining Ltd., 9.50%, 12/1/2016 | 22,000,000 | 21,890,000 | ||||
Murphy Oil Corp., 6.375%, 5/1/2012 | 5,000,000 | 5,207,450 | ||||
Teppco Partners LP, 7.00%, 6/1/2067 | 2,000,000 | 1,815,152 | ||||
45,729,312 | ||||||
FOOD & STAPLES RETAILING — 0.30% | ||||||
FOOD & STAPLES RETAILING — 0.30% | ||||||
Rite Aid Corp., 8.625%, 3/1/2015 | 3,000,000 | 2,715,000 | ||||
Rite Aid Corp., 9.375%, 12/15/2015 | 9,500,000 | 8,835,000 | ||||
11,550,000 | ||||||
FOOD, BEVERAGE & TOBACCO — 0.23% | ||||||
BEVERAGES — 0.10% | ||||||
Diageo Capital plc, 5.50%, 9/30/2016 | 4,000,000 | 3,908,528 | ||||
FOOD PRODUCTS — 0.13% | ||||||
Kraft Foods, Inc., 6.50%, 8/11/2017 | 5,000,000 | 5,164,755 | ||||
9,073,283 | ||||||
INSURANCE — 0.08% | ||||||
INSURANCE — 0.08% | ||||||
AAG Holding Co., Inc., 6.875%, 6/1/2008 | 335,000 | 336,565 | ||||
Liberty Mutual Group, Inc., 5.75%, 3/15/2014 | 1,000,000 | 978,088 | ||||
Pacific Life Global Funding CPI Floating Rate Note, 4.867%, 2/6/2016 | 2,000,000 | 1,834,780 | ||||
3,149,433 | ||||||
MATERIALS — 0.18% | ||||||
CONSTRUCTION MATERIALS — 0.05% | ||||||
C8 Capital Ltd., 6.64%, 12/31/2049 | 2,000,000 | 1,943,920 | ||||
METALS & MINING — 0.13% | ||||||
Bemax Resources, 9.375%, 7/15/2014 | 5,000,000 | 5,100,000 | ||||
7,043,920 | ||||||
Certified Annual Report 33
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
MEDIA — 0.16% | ||||||
MEDIA — 0.16% | ||||||
AOL Time Warner, Inc., 6.875%, 5/1/2012 | $ | 425,000 | $ | 445,944 | ||
Comcast Corp., 6.30%, 11/15/2017 | 5,000,000 | 5,082,170 | ||||
Independent News & Media plc, 5.75%, 5/17/2009 (EUR) | 600,000 | 855,570 | ||||
6,383,684 | ||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.07% | ||||||
BIOTECHNOLOGY — 0.07% | ||||||
Tiers Inflation Linked Trust Series Wyeth 2004 21 Trust Certificate | ||||||
CPI Floating Rate Note, 4.537%, 2/1/2014 | 3,000,000 | 2,692,350 | ||||
2,692,350 | ||||||
REAL ESTATE — 0.27% | ||||||
REAL ESTATE — 0.27% | ||||||
Agile Property Holdings Ltd, 9.00%, 9/22/2013 | 10,000,000 | 10,300,000 | ||||
10,300,000 | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.14% | ||||||
COMPUTERS & PERIPHERALS — 0.09% | ||||||
Jabil Circuit, Inc., 5.875%, 7/15/2010 | 3,485,000 | 3,517,031 | ||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.05% | ||||||
Cisco Systems, Inc., 5.44%, 2/20/2009 | 2,000,000 | 1,996,228 | ||||
5,513,259 | ||||||
TELECOMMUNICATION SERVICES — 0.55% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.55% | ||||||
Level 3 Financing, Inc, 9.25%, 11/1/2014 | 12,500,000 | 12,312,500 | ||||
Level 3 Financing, Inc. Senior Notes, 12.25%, 3/15/2013 | 6,000,000 | 6,615,000 | ||||
TCI Communications, Inc., 7.875%, 8/1/2013 | 2,285,000 | 2,500,706 | ||||
21,428,206 | ||||||
TRANSPORTATION — 0.13% | ||||||
AIR FREIGHT & LOGISTICS — 0.13% | ||||||
FedEx Corp., 5.50%, 8/15/2009 | 5,000,000 | 5,055,915 | ||||
5,055,915 | ||||||
34 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
UTILITIES — 0.83% | ||||||
ELECTRIC UTILITIES — 0.39% | ||||||
Entergy New Orleans, Inc., 3.875%, 8/1/2008 | $ | 8,500,000 | $ | 8,340,923 | ||
Monongahela Power, 5.70%, 3/15/2017 | 7,000,000 | 6,889,988 | ||||
GAS UTILITIES — 0.44% | ||||||
Oneok Partners, LP Senior Notes, 5.90%, 4/1/2012 | 3,000,000 | 3,035,670 | ||||
Southern Union Co., 7.20%, 11/1/2066 | 14,000,000 | 14,063,826 | ||||
32,330,407 | ||||||
TOTAL CORPORATE BONDS (Cost $259,423,465) | 259,937,535 | |||||
CONVERTIBLE BONDS — 0.35% | ||||||
BANKS — 0.24% | ||||||
THRIFTS & MORTGAGE FINANCE — 0.24% | ||||||
Countrywide Financial Corp., 1.86%, 4/15/2037 | 10,000,000 | 9,126,000 | ||||
9,126,000 | ||||||
DIVERSIFIED FINANCIALS — 0.11% | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.11% | ||||||
KKR Financial Holdings, LLC, 7.00%, 7/15/2012 | 5,000,000 | 4,412,500 | ||||
4,412,500 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $13,272,424) | 13,538,500 | |||||
TAXABLE MUNICIPAL BONDS — 0.14% | ||||||
Short Pump Town Center Community Development, 6.26%, 2/1/2009 | 2,000,000 | 2,018,960 | ||||
Victor New York, 9.05%, 5/1/2008 | 1,175,000 | 1,180,758 | ||||
Victor New York, 9.20%, 5/1/2014 | 2,000,000 | 2,051,800 | ||||
TOTAL TAXABLE MUNICIPAL BONDS (Cost $5,310,425) | 5,251,518 | |||||
U.S. GOVERNMENT AGENCIES — 0.52% | ||||||
Federal National Mortgage Association CPI Floating Rate Note, 3.50%, 2/17/2009 | 2,000,000 | 1,962,480 | ||||
Federal National Mortgage Association REMIC Series 2006-B1 Class AB, 6.00%, 6/25/2016 | 17,773,376 | 18,131,932 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $19,702,179) | 20,094,412 | |||||
Certified Annual Report 35
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||||
U.S. TREASURY SECURITIES — 0.26% | |||||||
U.S. Treasury Notes Inflation Indexed, 3.625%, 1/15/2008 | $ | 10,314,720 | $ | 10,301,408 | |||
TOTAL U.S. TREASURY SECURITIES (Cost $10,323,023) | 10,301,408 | ||||||
OTHER SECURITIES — 0.26% | |||||||
LOAN PARTICIPATIONS — 0.26% | |||||||
Mylan Laboratories, Inc. Floating Rate Loan, 9.729%, 10/2/2017 | 10,000,000 | 10,000,000 | |||||
TOTAL OTHER SECURITIES (Cost $10,000,000) | 10,000,000 | ||||||
SHORT TERM INVESTMENTS — 5.80% | |||||||
Citigroup Funding, Inc., 4.70%, 10/1/2007 | 50,000,000 | 50,000,000 | |||||
Citigroup Funding, Inc., 4.80%, 10/2/2007 | 54,500,000 | 54,492,733 | |||||
General Electric Capital Corp., 4.70%, 10/5/2007 | 50,000,000 | 49,973,889 | |||||
Toyota Credit de Puerto Rico, 4.70%, 10/3/2007 | 33,000,000 | 32,991,383 | |||||
Toyota Credit de Puerto Rico, 4.70%, 10/3/2007 | 38,000,000 | 37,990,078 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $225,448,083) | 225,448,083 | ||||||
TOTAL INVESTMENTS — 100.71% (Cost $3,283,020,696) | $ | 3,912,128,389 | |||||
LIABILITIES NET OF OTHER ASSETS — (0.71)% | (27,625,384 | ) | |||||
NET ASSETS — 100.00% | $ | 3,884,503,005 | |||||
Footnote Legend
+ | Non-income producing |
(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, 2006 | Gross Additions | Gross Reductions | Shares at Sept. 30, 2007 | Market value Sept. 30, 2007 | Dividend Income | ||||||||
Algonquin Power Income Trust | — | 4,183,700 | — | 4,183,700 | $ | 37,098,712 | $ | 1,205,712 | ||||||
Reddy Ice Holdings, Inc. | 1,200,000 | 974,471 | — | 2,174,471 | 57,340,800 | 2,873,004 | ||||||||
Quadra Realty Trust, Inc. | — | 1,981,800 | — | 1,981,800 | 18,886,554 | 35,308 | ||||||||
$ | 113,326,066 | $ | 4,114,024 | |||||||||||
Total non-controlled “affiliated companies” — 2.92% of net assets.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
EUR | Euro Dollar denominated |
REMIC | Real Estate Mortgage Investment Conduit |
RUB | Russian Ruble denominated |
See notes to financial statements.
36 Certified Annual Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Investment Income Builder Fund
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
Certified Annual Report 37
EXPENSE EXAMPLE | ||
Thornburg Investment Income Builder Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
Actual Expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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.
Beginning Account value | Ending Account value 9/30/07 | Expenses Paid During Period† | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,133.70 | $ | 6.89 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.61 | $ | 6.52 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,130.80 | $ | 10.08 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,015.60 | $ | 9.54 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,135.40 | $ | 5.03 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.36 | $ | 4.76 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,132.70 | $ | 7.99 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.57 | $ | 7.56 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,135.70 | $ | 5.26 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.14 | $ | 4.98 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.29%; C: 1.89%; I: 0.94%; R3: 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. |
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 for each class of shares 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.
38 Certified Annual Report
INDEX COMPARISON | ||
Thornburg Investment Income Builder Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Investment Income Builder Fund versus S&P 500 Index and Blended Index
(December 24, 2002 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2007 (with sales charge)
1 Yr | Since Inception | |||||
A Shares (Incep: 12/24/02) | 21.68 | % | 19.49 | % | ||
C Shares (Incep: 12/24/02) | 25.64 | % | 20.10 | % | ||
R3 Shares (Incep: 2/1/05) | 27.10 | % | 18.94 | % | ||
R5 Shares (Incep: 2/1/07) | — | 16.19 | %* | |||
Blended Index (Since: 12/24/02) | 16.98 | % | 14.70 | % | ||
S&P 500 Index (Since: 12/24/02) | 16.44 | % | 13.98 | % |
* | Not annualized for periods less than one year. |
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 R3 or R5 shares. Class R3 and R5 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 bonds included in the index. 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. The index is calculated with net dividends reinvested, in U.S. dollars.
The S&P 500 Index, an unmanaged broad measure of the U.S. stock market, does not reflect sales charges or expenses. Investors cannot invest directly in an index.
Certified Annual Report 39
TRUSTEES AND OFFICERS | ||
Thornburg Investment Income Builder Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 |
40 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 41
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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.
42 Certified Annual Report
OTHER INFORMATION | ||
Thornburg Investment Income Builder Fund | September 30, 2007 (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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the fiscal year ended September 30, 2007, the Fund designates long-term capital gain dividends of $32,604,821.
For the tax year ended September 30, 2007, the Thornburg Investment Income Builder Fund designates 72.19% (or the maximum allowed) 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.
29.63% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2007 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, 2007. Complete information will be computed and reported in conjunction with your 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for the purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, including specific dividend growth data, (iii) measures of the Fund’s investment returns over different periods of time relative to a “world allocation” category of 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 (iv) comparative measures of portfolio volatility, risk and return.
Certified Annual Report 43
OTHER INFORMATION, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 (Unaudited) |
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, trade execution, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) 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 world allocation category of funds 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, tax efficiency and the positive effects of the Fund’s cumulative returns.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor had received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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. The Trustees observed that the overall expense ratio of the Fund was higher to a small extent than average and median expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, and that the management fee was somewhat higher than the average and median fee rates for the same group of funds, but that the differences were not significant in view of their degree and the investment performance of the Fund. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
44 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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. 45
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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
46 This page is not part of the Annual Report.
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 may invest in any domestic or foreign equity or debt security which Thornburg Investment Management believes may assist the Fund in pursuing its investment goals, although the Fund expects that equity securities in its portfolio will normally be weighted in favor of companies that pay dividends.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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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www.thornburg.com/edelivery |
2 This page is not part of the Annual Report.
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Investing outside the United States involves additional risks, such as currency fluctuations. 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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. 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. 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 June 2006, 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 June 2006, 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 June 2006, the MSCI EM Latin America Index consisted of the following emerging market country indices: Argentina, Brazil, Chile, Colombia, Mexico, and Peru.
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.
Fed Funds Rate – The Fed Funds Rate is the interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
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.
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!
The Top 100 Dividend Yields
Russell 1000 Index | Russell 2000 Index | |||||
Real Estate | 6 | % | 53 | % | ||
Other Financials | 51 | % | 21 | % | ||
Total Financials | 57 | % | 74 | % | ||
Health Care | 14 | % | 0 | % | ||
Utilities | 10 | % | 0 | % | ||
Consumer Staples | 10 | % | 2 | % | ||
Materials | 4 | % | 0 | % | ||
Consumer Discretionary | 1 | % | 7 | % | ||
Energy | 1 | % | 8 | % | ||
Telecommunication Services | 1 | % | 5 | % | ||
Industrials | 1 | % | 3 | % |
Source: FactSet, as of September 2007. (Numbers may not add to 100% due to rounding.)
In the (large cap) Russell 1000 Index, 57% of the top 100 dividend payers are in the Financials sector. In the (small cap) Russell 2000 Index, 74% of the top 100 dividend-yielding stocks are financial companies. In order to construct a diversified portfolio of attractive yielding stocks, one must look beyond this sector. We do!
Dividend yield is a ratio that shows how much a company pays out in dividends each year relative to its share price.
This page is not part of the Annual Report. 5
The Dividend Landscape
Continued |
Global Diversification Can Improve the Portfolio Yield
Since firms outside the U.S. tend to pay higher dividends than U.S. firms, particularly outside the 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.
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. Class I shares are subject to a 1% 30-day redemption fee. The total annual fund operating expense of Class I shares is 1.02%, as disclosed in the most recent Prospectus. Thornburg Investment Management intends to waive fees and reimburse expenses so that actual expenses do not exceed 0.99%. The subsidized expense ratio reflects the annual operating expenses of the Fund minus any fee waivers or expense reimbursements. The fee waivers and expense reimbursements are voluntary and may be terminated at any time.
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.
QUARTERLY DIVIDEND HISTORY
Q1 | Q2 | Q3 | Q4 | Total | |||||||||||
Class I Shares | |||||||||||||||
2007 | 16.2 | ¢ | 20.6 | ¢ | 23.6 | ¢ | N/A | N/A | |||||||
2006 | 14.4 | ¢ | 18.0 | ¢ | 21.2 | ¢ | 35.0 | ¢ | 88.6 | ¢ | |||||
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) | 15.9x | |||
Median Market Cap | $ | 15.8 B | ||
Equity Holdings | 63 | |||
Fixed Income Statistics | ||||
Weighted Average Coupon | 5.9 | % | ||
Average Credit Quality | A | |||
Average Maturity | 4.2 yrs | |||
Duration | 1.6 yrs | |||
Bond Holdings | 56 | |||
30-day SEC Yield (I Shares) | 3.70 | % |
TOP TEN EQUITY HOLDINGS
Telefónica SA | 4.3 | % | |
Intel Corp. | 2.9 | % | |
Energy East Corp. | 2.7 | % | |
Chevron Corp. | 2.6 | % | |
Enel SpA | 2.5 | % | |
Vodafone Group plc | 2.4 | % | |
OPAP SA | 2.4 | % | |
Eni SpA | 2.4 | % | |
General Electric Co. | 2.3 | % | |
Inmarsat plc | 2.2 | % |
AVERAGE ANNUAL TOTAL RETURNS*
For periods ending September 30, 2007
YTD | 1 Yr | 3 Yrs | Since Inception | |||||||||
I Shares (Incep: 11/3/03) | 17.76 | % | 27.80 | % | 21.27 | % | 19.41 | % | ||||
Blended Index** (Since: 11/3/03) | 9.78 | % | 16.98 | % | 14.41 | % | 13.30 | % | ||||
S&P 500 Index (Since: 11/3/03) | 9.13 | % | 16.44 | % | 13.14 | % | 11.83 | % |
* | Periods under one year are not annualized. |
** | Blended Index: 75% MSCI World Equity Index/25% Lehman Brothers Aggregate Bond Index |
This page is not part of the Annual Report. 7
Portfolio Overview
Continued |
The primary 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 generally grow, subject to periodic fluctuations, over the years on a per share basis. 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 9/30/07
Telecommunication Services | 14.8 | % | |
Utilities | 12.8 | % | |
Diversified Financials | 11.2 | % | |
Energy | 10.9 | % | |
Banks | 10.2 | % | |
Food, Beverage & Tobacco | 8.4 | % | |
Consumer Services | 5.0 | % | |
Semiconductors & Semi Equipment | 4.4 | % | |
Transportation | 4.1 | % | |
Materials | 3.7 | % |
TOP TEN INDUSTRIES
As of 6/30/07
Banks | 12.5 | % | |
Telecommunication Services | 12.3 | % | |
Energy | 10.9 | % | |
Diversified Financials | 9.5 | % | |
Utilities | 8.4 | % | |
Food, Beverage & Tobacco | 6.2 | % | |
Semiconductors & Semi Equipment | 5.1 | % | |
Transportation | 4.5 | % | |
Consumer Services | 4.2 | % | |
Materials | 3.0 | % |
TOP TEN INDUSTRIES
As of 3/31/07
Banks | 13.8 | % | |
Energy | 12.6 | % | |
Telecommunication Services | 11.6 | % | |
Utilities | 10.4 | % | |
Diversified Financials | 9.9 | % | |
Consumer Services | 7.3 | % | |
Food, Beverage & Tobacco | 5.9 | % | |
Transportation | 4.8 | % | |
Capital Goods | 3.1 | % | |
Materials | 2.9 | % |
TOP TEN INDUSTRIES
As of 12/31/06
Banks | 14.3 | % | |
Telecommunication Services | 12.8 | % | |
Energy | 10.1 | % | |
Utilities | 8.8 | % | |
Diversified Financials | 8.4 | % | |
Food, Beverage & Tobacco | 6.3 | % | |
Commercial Services & Supplies | 5.0 | % | |
Transportation | 4.9 | % | |
Consumer Services | 4.0 | % | |
Capital Goods | 3.5 | % |
8 This page is not part of the Annual Report.
Thornburg Investment Income Builder Fund
I Shares – September 30, 2007
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
October 15, 2007
Dear Fellow Shareholder:
Thornburg Investment Income Builder Fund paid dividends of 95.4¢ per Class I share for the fiscal year ended September 30, 2007, up 14.5% over the prior year. In addition, your Fund’s net asset value per Class I share increased by $3.79 (19.2%) during the one-year period, from $19.71 to $23.50, even after payment of 51¢ in capital gains in November 2006. In the six months ended September 30, 2007, your Fund paid dividends of 44.2¢ per Class I share, up 12.8% from the 39.2¢ paid in the comparable prior year period. The net asset value per Class I share increased 11.4% during the six-month period, from $21.10 to $23.50. 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 15% over the year-earlier level. This reflects improving ability and willingness to pay dividends by most of the firms included in your Fund. Under the surface of this dividend landscape, there is a more complicated dynamic. Many management boards hoard the earnings & profits of their firms. The share of earnings paid as dividends by firms included in the S&P 500 Index has dwindled to below 30%, far below historical averages. During calendar 2006, the S&P 500 firms used approximately $826 billion of operating profits to fund $183 billion of shareholder dividends and $329 billion (net amount) of share buybacks. Despite the large expenditure for share buybacks, the number of shares outstanding for the group actually increased during the first three calendar quarters of 2006, before falling very slightly in recent quarters. This quantifies the dilutive effect of options issuance to shareholder returns from corporate cash flows. Shareholder dilution from management stock options, an issue particular to the United States, is a major reason why Thornburg Investment Income Builder Fund currently holds more foreign stocks than U.S. stocks. We prefer that cash flows be directed to dividends or to share buyback programs which actually reduce the number of shares outstanding.
We have commented in previous letters about your portfolio’s significant weighting in hydrocarbon producers, particularly oil & gas producers. Cash flows generated by these firms are enormous, given today’s prices for their hydrocarbon output. We know that these cash flows are cyclical, and we notice that exploration and production costs are skyrocketing, so we remain guarded about our investment exposure to this area. During the fiscal year, Chevron Corp. and Diamond Offshore Drilling Inc. were among your portfolio’s better performers. Another group with attractive cash flows and modest valuations is the telecom services industry, which now has the highest weighting of any single sector in your portfolio. Here, we are particularly interested in those firms that obtain a growing percentage of revenues from mobile telephony and broadband services. China Mobile Ltd., France Telecom SA, Telefónica SA, and Vodafone Group plc were all among your portfolio’s top performers during the year.
Your portfolio’s bank and diversified financial services holdings, in general, performed poorly during the last six months, accounting for six of the portfolio’s ten worst performers in this period. These included the U.K.’s Barclays plc, Italy’s Intesa Sanpaolo, Sweden’s Carnegie & Co., Spain’s Banco Bilbao Vizcaya Argentaria (BBVA), Switzerland’s UBS AG, and U.S. Bancorp. All of these except BBVA joined the list of underperformers for the fiscal year. One financial, Hong Kong Exchanges & Clearing Ltd., was your portfolio’s best performer during the most recent six months, and for the fiscal year.
10 Certified Annual Report
Other strong portfolio performers during the fiscal year included Southern Copper Corp. (copper mining), Macquarie Airports (airport operator), FU JI Food & Catering Services (Chinese food service operator), and Entergy Corp. (utility). Other weak portfolio performers during the year included Highland Hospitality (motel REIT), Sanofi Aventis and Pfizer (pharmaceuticals), Precision Drilling Trust (Canadian oil & gas driller), and Steelcase (commercial furniture & fixtures). In general, the positive contributions of the best performers exceeded the losses from the worst performers during the year.
Bond yields, while improved from their lows of last year, are not yet truly interesting. The reward for taking corporate credit risk remains underwhelming, although we got a glimpse of significantly more interesting yields during the August liquidity squeeze. In many cases, owners of bonds that sought to sell them did not trade the bonds at the bid prices that were available. Beginning in September, a 0.5% cut in the Federal Funds rate provided enough liquidity to allow bond prices to remain firm. Subprime mortgage headlines notwithstanding, corporate credit metrics appear to be generally sound. The duration of the cash/bond component of the Income Builder Fund, now around 14% of Fund assets, is around 2.1 years. Domestic stocks, including preferred stocks, comprise around 40% of the portfolio, foreign stocks around 47%.
We look forward to the coming quarters, recognizing that 2008 will present challenges. Increasingly, percentage growth in profits lags that of revenues, particularly in “developed” markets. This indicates profit margins are being squeezed. In the U.S., consensus operating earnings per unit of the S&P 500 Index, around $88 for 2006, are forecast to be $94 for 2007 and about $99 in 2008. Dividend payouts on both U.S. and European corporate earnings are modest; nevertheless, slowing earnings growth will eventually lead to decelerating growth of dividend payments.
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 | Jason Brady,CFA | ||
Co-Portfolio Manager President & Chief Investment Officer | Co-Portfolio Manager Managing Director | 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 Investment Income Builder Fund | September 30, 2007 |
ASSETS | |||
Investments at value (Note 2) | |||
Non-controlled affiliated issuers (cost $105,254,079) | $ | 113,326,066 | |
Non-affiliated issuers (cost $3,177,766,617) | 3,798,802,323 | ||
Cash | 789,088 | ||
Cash denominated in foreign currency (cost $9,715,793) | 9,847,859 | ||
Receivable for investments sold | 65,991,198 | ||
Receivable for fund shares sold | 35,741,906 | ||
Dividends receivable | 10,670,218 | ||
Interest receivable | 4,753,237 | ||
Prepaid expenses and other assets | 34,269 | ||
Total Assets | 4,039,956,164 | ||
LIABILITIES | |||
Payable for securities purchased | 119,497,569 | ||
Payable for fund shares redeemed | 2,866,096 | ||
Unrealized loss on forward exchange contracts (Note 7) | 26,467,005 | ||
Payable to investment advisor and other affiliates (Note 3) | 3,897,083 | ||
Accounts payable and accrued expenses | 1,018,496 | ||
Dividends payable | 1,706,910 | ||
Total Liabilities | 155,453,159 | ||
NET ASSETS | $ | 3,884,503,005 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 20,548,540 | |
Net unrealized appreciation on investments | 602,798,485 | ||
Accumulated net realized gain (loss) | 106,071,579 | ||
Net capital paid in on shares of beneficial interest | 3,155,084,401 | ||
$ | 3,884,503,005 | ||
12 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($1,697,061,166 applicable to 72,665,325 shares of beneficial interest outstanding - Note 4) | $ | 23.35 | |
Maximum sales charge, 4.50% of offering price | 1.10 | ||
Maximum offering price per share | $ | 24.45 | |
Class C Shares: | |||
Net asset value and offering price per share * ($1,535,532,304 applicable to 65,713,189 shares of beneficial interest outstanding - Note 4) | $ | 23.37 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($644,294,014 applicable to 27,410,975 shares of beneficial interest outstanding - Note 4) | $ | 23.50 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($7,543,687 applicable to 323,174 shares of beneficial interest outstanding - Note 4) | $ | 23.34 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($71,834 applicable to 3,055 shares of beneficial interest outstanding - Note 4) | $ | 23.51 | |
* | 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 Investment Income Builder Fund | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income | ||||
Non-controlled affiliated issuers | $ | 4,114,024 | ||
Non-affiliated issuers (net of foreign taxes withheld of $9,016,093) | 123,441,854 | |||
Interest income (net of premium amortized of $258,388 and foreign taxes withheld of $11,068) | 28,756,504 | |||
Total Income | 156,312,382 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 21,050,253 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,551,987 | |||
Class C Shares | 1,310,244 | |||
Class I Shares | 227,468 | |||
Class R3 Shares | 5,103 | |||
Class R5 Shares | 3 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 3,118,122 | |||
Class C Shares | 10,481,992 | |||
Class R3 Shares | 20,411 | |||
Transfer agent fees | ||||
Class A Shares | 1,003,300 | |||
Class C Shares | 954,435 | |||
Class I Shares | 227,430 | |||
Class R3 Shares | 10,106 | |||
Class R5 Shares | 927 | |||
Registration and filing fees | ||||
Class A Shares | 107,506 | |||
Class C Shares | 85,677 | |||
Class I Shares | 51,641 | |||
Class R3 Shares | 18,823 | |||
Class R5 Shares | 20,447 | |||
Custodian fees (Note 3) | 1,011,597 | |||
Professional fees | 125,460 | |||
Accounting fees | 106,325 | |||
Trustee fees | 39,005 | |||
Other expenses | 587,008 | |||
Total Expenses | 42,115,270 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,739,426 | ) | ||
Fees paid indirectly (Note 3) | (106,047 | ) | ||
Net Expenses | 40,269,797 | |||
Net Investment Income | $ | 116,042,585 | ||
14 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
Thornburg Investment Income Builder Fund | Year Ended September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 127,813,879 | ||
Foreign currency transactions | (19,453,487 | ) | ||
108,360,392 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 462,756,937 | |||
Foreign currency translations | (27,441,631 | ) | ||
435,315,306 | ||||
Net Realized and Unrealized Gain | 543,675,698 | |||
Net Increase in Net Assets Resulting From operations | $ | 659,718,283 | ||
See notes to financial statements.
Certified Annual Report 15
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Investment Income Builder Fund
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 116,042,585 | $ | 54,422,706 | ||||
Net realized gain on investments and foreign currency transactions | 108,360,392 | 53,507,046 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 435,315,306 | 85,783,248 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 659,718,283 | 193,713,000 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (50,204,595 | ) | (27,097,402 | ) | ||||
Class C Shares | (35,449,856 | ) | (16,063,539 | ) | ||||
Class I Shares | (19,870,628 | ) | (8,357,488 | ) | ||||
Class R3 Shares | (149,347 | ) | (25,242 | ) | ||||
Class R5 Shares | (317 | ) | — | |||||
From realized gains | ||||||||
Class A Shares | (25,096,354 | ) | (10,140,082 | ) | ||||
Class C Shares | (18,583,927 | ) | (6,660,050 | ) | ||||
Class I Shares | (8,637,003 | ) | (2,568,880 | ) | ||||
Class R3 Shares | (52,085 | ) | (6,756 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 568,545,293 | 325,267,307 | ||||||
Class C Shares | 706,003,815 | 257,138,902 | ||||||
Class I Shares | 252,258,521 | 161,508,626 | ||||||
Class R3 Shares | 5,498,993 | 952,708 | ||||||
Class R5 Shares | 67,758 | — | ||||||
Net Increase in Net Assets | 2,034,048,551 | 867,661,104 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 1,850,454,454 | 982,793,350 | ||||||
End of year | $ | 3,884,503,005 | $ | 1,850,454,454 | ||||
Undistributed net investment income | $ | 20,548,540 | $ | 12,565,595 |
See notes to financial statements.
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
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 twelve 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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary investment goal is 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 goal is long-term capital appreciation.
The Fund currently offers five classes of shares of beneficial interest: Class A, Class C, Institutional Class (Class I), and Retirement Classes (Class R3 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 R3 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, (v) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (vi) 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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2007 |
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 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 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 liabilities 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, 2007, 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 Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,690,940 for Class C shares, $27,122 for Class R3 shares, and $21,364 for Class R5 shares.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
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, 2007, the Distributor has advised the Fund that it earned commissions aggregating $1,129,674 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $177,641 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 distribution plans pursuant to Rule 12b-1, applicable only to the Fund’s Class C and Class R3 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C and Class R3 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 and Class R3 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, 2007, 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, 2007, fees paid indirectly were $106,047. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 32,442,895 | $ | 692,883,081 | 20,476,188 | $ | 383,476,280 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,915,652 | 61,056,323 | 1,620,907 | 29,347,480 | ||||||||||
Shares repurchased | (8,821,730 | ) | (185,406,263 | ) | (4,735,350 | ) | (87,574,938 | ) | ||||||
Redemption fees received** | — | 12,152 | — | 18,485 | ||||||||||
Net Increase (Decrease) | 26,536,817 | $ | 568,545,293 | 17,361,745 | $ | 325,267,307 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 34,745,769 | $ | 739,818,421 | 14,763,665 | $ | 277,357,697 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,908,232 | 40,045,995 | 887,275 | 16,040,689 | ||||||||||
Shares repurchased | (3,442,710 | ) | (73,871,246 | ) | (1,951,047 | ) | (36,264,521 | ) | ||||||
Redemption fees received** | — | 10,645 | — | 5,037 | ||||||||||
Net Increase (Decrease) | 33,211,291 | $ | 706,003,815 | 13,699,893 | $ | 257,138,902 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 14,887,196 | $ | 318,805,598 | 8,727,511 | $ | 165,649,392 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,043,149 | 22,020,961 | 486,642 | 8,942,006 | ||||||||||
Shares repurchased | (4,191,444 | ) | (88,572,580 | ) | (701,013 | ) | (13,090,059 | ) | ||||||
Redemption fees received** | — | 4,542 | — | 7,287 | ||||||||||
Net Increase (Decrease) | 11,738,901 | $ | 252,258,521 | 8,513,140 | $ | 161,508,626 | ||||||||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 313,697 | $ | 6,751,609 | 51,927 | $ | 972,264 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 9,170 | 195,546 | 1,712 | 31,478 | ||||||||||
Shares repurchased | (66,150 | ) | (1,448,208 | ) | (2,776 | ) | (51,042 | ) | ||||||
Redemption fees received** | — | 46 | — | 8 | ||||||||||
Net Increase (Decrease) | 256,717 | $ | 5,498,993 | 50,863 | $ | 952,708 | ||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 3,057 | $ | 67,798 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 3 | 64 | — | — | ||||||||||
Shares repurchased | (5 | ) | (104 | ) | — | — | ||||||||
Redemption fees received** | — | — | — | — | ||||||||||
Net Increase (Decrease) | 3,055 | $ | 67,758 | — | $ | — | ||||||||
* | Effective date for R5 shares was February 1, 2007. |
** | 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. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $3,029,826,851 and $1,604,539,361, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 3,288,528,385 | ||
Gross unrealized appreciation on a tax basis | $ | 656,969,485 | ||
Gross unrealized depreciation on a tax basis | (33,369,481 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 623,600,004 | ||
Distributable earnings – ordinary income | $ | 69,318,573 | ||
Distributable capital gains | $ | 38,860,043 |
At September 30, 2007, the Fund had deferred tax basis currency losses occurring subsequent to October 31, 2006 of $268,838. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $2,384,897, increased accumulated net realized investment gain by $2,018,926, and increased capital paid in on shares of beneficial interest by $365,971. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency transactions, investments in REITs, partnerships, and redemptions used as distributions.
The tax character of distributions paid during the year ended September 30, 2007, and September 30, 2006, was as follows:
2007 | 2006 | |||||
Distributions from: | ||||||
Ordinary income | $ | 125,439,291 | $ | 54,324,964 | ||
Capital gains | $ | 32,604,821 | $ | 16,594,475 | ||
Total | $ | 158,044,112 | $ | 70,919,439 | ||
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2007, 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, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
CONTRACTS TO SELL:
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||
46,000,000 Greater British Pound for 90,627,360 USD | November 07, 2007 | $ | (3,404,482 | ) | ||
307,000,000 Euro Dollar for 415,122,330 USD | November 07, 2007 | (23,062,523 | ) | |||
Unrealized loss from forward Sell contracts: | (26,467,005 | ) | ||||
Net unrealized gain (loss) from forward Exchange contracts | $ | (26,467,005 | ) | |||
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September��15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 21
Thornburg Investment Income Builder Fund
Year Ended September 30, | Period Ended September 30, | |||||||||||||||
2007 | 2006 | 2005 | 2004(c) | |||||||||||||
Class I Shares: | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 19.71 | $ | 18.03 | $ | 15.64 | $ | 14.45 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 1.02 | 0.88 | 0.84 | 0.74 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 4.24 | 1.98 | 2.22 | 1.01 | ||||||||||||
Total from investment operations | 5.26 | 2.86 | 3.06 | 1.75 | ||||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.96 | ) | (0.84 | ) | (0.67 | ) | (0.56 | ) | ||||||||
Net realized gains | (0.51 | ) | (0.34 | ) | — | — | ||||||||||
Total dividends | (1.47 | ) | (1.18 | ) | (0.67 | ) | (0.56 | ) | ||||||||
Change in net asset value | 3.79 | 1.68 | 2.39 | 1.19 | ||||||||||||
NET ASSET VALUE, end of period | $ | 23.50 | $ | 19.71 | $ | 18.03 | $ | 15.64 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return(a) | 27.80 | % | 16.53 | % | 19.73 | % | 12.19 | % | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) | 4.74 | % | 4.68 | % | 4.86 | % | 5.33 | % (b) | ||||||||
Expenses, after expense reductions | 0.95 | % | 0.99 | % | 1.00 | % | 0.99 | % (b) | ||||||||
Expenses, after expense reductions and net of custody credits | 0.94 | % | 0.98 | % | 0.99 | % | 0.99 | % (b) | ||||||||
Expenses, before expense reductions | 0.95 | % | 1.02 | % | 1.09 | % | 1.21 | % (b) | ||||||||
Portfolio turnover rate | 62.60 | % | 55.29 | % | 76.76 | % | 109.21 | % | ||||||||
Net assets at end of period (000) | $ | 644,294 | $ | 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. |
See notes to financial statements.
22 Certified Annual Report
Thornburg Investment Income Builder Fund | September 30, 2007 |
CUSIPS: CLASS A - 885-215-558, CLASS C - 885-215-541, CLASS I - 885-215-467, CLASS R3 - 885-215-384, CLASS R5 - 885-215-236
NASDAQ SYMBOLS: CLASS A - TIBAX, CLASS C - TIBCX, CLASS I - TIBIX, CLASS R3 - TIBRX, CLASS R5 - TIBMX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/07
Telecommunication Services | 14.8 | % | Real Estate | 1.2 | % | |||
Utilities | 12.8 | % | Food & Staples Retailing | 0.3 | % | |||
Diversified Financials | 11.2 | % | Retailing | 0.2 | % | |||
Energy | 10.9 | % | Technology Hardware & Equipment | 0.1 | % | |||
Banks | 10.2 | % | Consumer Durables & Apparel | 0.1 | % | |||
Food, Beverage & Tobacco | 8.4 | % | Insurance | 0.1 | % | |||
Consumer Services | 5.0 | % | Pharmaceuticals, Biotechnology & Life Sciences | 0.1 | % | |||
Semiconductors & Semiconductor Equipment | 4.4 | % | ||||||
Transportation | 4.1 | % | U.S. Government Agencies | 0.5 | % | |||
Materials | 3.7 | % | U.S. Treasury Securities | 0.3 | % | |||
Capital Goods | 2.5 | % | Taxable Municipal Bonds | 0.1 | % | |||
Media | 1.9 | % | Other Securities | 0.3 | % | |||
Software & Services | 1.7 | % | Other Assets & Cash Equivalents | 5.1 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/07
United States | 46.9 | % | Canada | 3.2 | % | Germany | 1.0 | % | |||||
Italy | 7.9 | % | Hong Kong | 2.1 | % | Turkey | 0.9 | % | |||||
Spain | 7.0 | % | France | 2.1 | % | Malaysia | 0.6 | % | |||||
U.K. | 6.2 | % | Taiwan | 1.6 | % | Russia | 0.3 | % | |||||
China | 4.1 | % | South Africa | 1.6 | % | México | 0.1 | % | |||||
Greece | 3.4 | % | Australia | 1.5 | % | Other Assets & Cash Equivalents | 5.1 | % | |||||
Switzerland | 3.3 | % | Brazil | 1.1 | % |
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 85.86% | |||||
BANKS — 8.79% | |||||
COMMERCIAL BANKS — 8.79% | |||||
Barclays plc | 3,000,000 | $ | 36,551,756 | ||
BBVA | 2,850,000 | 66,811,448 | |||
EFG Eurobank Ergasias | 1,133,333 | 39,852,431 | |||
Intesa Sanpaolo | 8,800,000 | 67,949,356 | |||
Liechtensteinische Landesbank AG | 600,000 | 56,740,391 | |||
Lloyds TSB Group plc | 1,500,000 | 16,649,310 | |||
US Bancorp | 1,750,000 | 56,927,500 | |||
341,482,192 | |||||
CAPITAL GOODS — 2.29% | |||||
INDUSTRIAL CONGLOMERATES — 2.29% | |||||
General Electric Co. | 2,150,000 | 89,010,000 | |||
89,010,000 | |||||
CONSUMER SERVICES — 4.88% | |||||
HOTELS, RESTAURANTS & LEISURE — 4.88% | |||||
Berjaya Sports Toto Berhad | 17,000,000 | 24,944,974 | |||
FU JI Food & Catering Services | 13,000,000 | 39,967,326 | |||
McDonald’s Corp. | 579,800 | 31,581,706 | |||
OPAP SA | 2,400,000 | 93,085,998 | |||
189,580,004 | |||||
DIVERSIFIED FINANCIALS — 9.31% | |||||
CAPITAL MARKETS — 3.70% | |||||
AllianceBernstein Holdings LP | 350,000 | 30,824,500 | |||
GMP Capital Trust | 1,756,100 | 38,506,551 | |||
Nuveen Investments, Inc. | 72,000 | 4,459,680 | |||
UBS AG | 1,300,000 | 69,899,077 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.61% | |||||
Bank of America Corp. | 1,400,000 | 70,378,000 | |||
Bolsas y Mercados Españoles | 600,000 | 37,251,510 | |||
Hong Kong Exchanges & Clearing Ltd. | 2,200,000 | 67,354,014 | |||
KKR Financial Holdings, LLC | 2,556,500 | 43,077,025 | |||
361,750,357 | |||||
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
ENERGY — 9.77% | |||||
ENERGY EQUIPMENT & SERVICES — 1.90% | |||||
Diamond Offshore Drilling, Inc. | 650,000 | $ | 73,638,500 | ||
OIL, GAS & CONSUMABLE FUELS — 7.87% | |||||
Canadian Oil Sands Trust | 1,525,000 | 50,595,687 | |||
Centennial Coal Co. Ltd. | 7,426,895 | 24,581,653 | |||
Chevron Corp. | 1,100,000 | 102,938,000 | |||
Eni SpA | 2,500,000 | 92,651,083 | |||
Tupras-Turkiye Petrol Rafine | 1,325,000 | 35,128,417 | |||
379,533,340 | |||||
FOOD, BEVERAGE & TOBACCO — 8.12% | |||||
BEVERAGES — 1.92% | |||||
Coca Cola Co. | 1,300,000 | 74,711,000 | |||
FOOD PRODUCTS — 3.25% | |||||
Kraft Foods, Inc. A | 2,000,000 | 69,020,000 | |||
Reddy Ice Holdings, Inc.(1) | 2,174,471 | 57,340,800 | |||
TOBACCO — 2.95% | |||||
Altria Group, Inc. | 1,100,000 | 76,483,000 | |||
Universal Corp. | 776,000 | 37,985,200 | |||
315,540,000 | |||||
MATERIALS — 3.56% | |||||
METALS & MINING — 3.56% | |||||
Impala Platinum Holdings Ltd. | 1,750,000 | 60,964,104 | |||
Southern Copper Corp. | 625,000 | 77,393,750 | |||
138,357,854 | |||||
MEDIA — 1.78% | |||||
MEDIA — 1.78% | |||||
Mediaset SpA | 5,000,000 | 51,619,380 | |||
Sinclair Broadcast Group, Inc. | 1,452,107 | 17,483,368 | |||
69,102,748 | |||||
REAL ESTATE — 0.95% | |||||
REAL ESTATE INVESTMENT TRUSTS — 0.95% | |||||
Equity Inns, Inc. | 800,000 | 18,064,000 | |||
Quadra Realty Trust, Inc.(1) | 1,981,800 | 18,886,554 | |||
36,950,554 | |||||
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
RETAILING — 0.15% | |||||
SPECIALTY RETAIL — 0.15% | |||||
Guitar Center, Inc.+ | 98,678 | $ | 5,851,605 | ||
5,851,605 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.44% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.44% | |||||
Intel Corp. | 4,300,000 | 111,198,000 | |||
Taiwan Semiconductor Mfg. Co. Ltd. ADR | 6,029,995 | 61,023,549 | |||
172,221,549 | |||||
SOFTWARE & SERVICES — 1.69% | |||||
IT SERVICES — 1.69% | |||||
Paychex, Inc. | 1,600,000 | 65,600,000 | |||
65,600,000 | |||||
TELECOMMUNICATION SERVICES — 14.21% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 9.68% | |||||
Brasil Telecom | 1,650,000 | 44,009,002 | |||
France Telecom SA | 2,400,000 | 80,389,341 | |||
Inmarsat plc | 9,000,000 | 83,737,589 | |||
Telefónica SA | 6,000,000 | 167,948,358 | |||
WIRELESS TELECOMMUNICATION SERVICES — 4.53% | |||||
China Mobile Ltd. | 5,000,000 | 81,812,744 | |||
Vodafone Group plc | 26,000,000 | 93,890,854 | |||
551,787,888 | |||||
TRANSPORTATION — 3.93% | |||||
TRANSPORTATION INFRASTRUCTURE — 3.93% | |||||
Hopewell Highway | 15,643,500 | 14,871,070 | |||
Macquarie Airports | 19,000,000 | 73,339,480 | |||
Macquarie Infrastructure Co. LLC | 691,000 | 26,665,690 | |||
Shenzhen Chiwan Wharf Holdings Ltd. | 14,665,727 | 37,919,578 | |||
152,795,818 | |||||
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
UTILITIES — 11.99% | ||||||
ELECTRIC UTILITIES — 5.44% | ||||||
E. ON AG | 212,900 | $ | 39,362,792 | |||
Enel SpA | 8,500,000 | 96,237,346 | ||||
Entergy Corp. | 700,000 | 75,803,000 | ||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.96% | ||||||
Algonquin Power Income Fund Trust(1) | 4,183,700 | 37,098,712 | ||||
MULTI-UTILITIES — 5.59% | ||||||
Consolidated Edison, Inc. | 939,395 | 43,493,989 | ||||
Dominion Resources, Inc. | 800,000 | 67,440,000 | ||||
Energy East Corp. | 3,923,700 | 106,136,085 | ||||
465,571,924 | ||||||
TOTAL COMMON STOCK (Cost $2,705,559,847) | 3,335,135,833 | |||||
PREFERRED STOCK — 0.83% | ||||||
BANKS — 0.42% | ||||||
COMMERCIAL BANKS — 0.42% | ||||||
Barclays plc | 200,000 | 5,030,000 | ||||
First Tennessee Bank | 12,000 | 11,242,500 | ||||
16,272,500 | ||||||
DIVERSIFIED FINANCIALS — 0.41% | ||||||
CAPITAL MARKETS — 0.08% | ||||||
Morgan Stanley | 120,000 | 3,060,000 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.33% | ||||||
Lehman Brothers Holdings, Inc. | 140,000 | 3,365,600 | ||||
Merrill Lynch & Co., Inc. | 420,000 | 9,723,000 | ||||
16,148,600 | ||||||
TOTAL PREFERRED STOCK (Cost $33,981,250) | 32,421,100 | |||||
CORPORATE BONDS — 6.69% | ||||||
BANKS — 0.75% | ||||||
COMMERCIAL BANKS — 0.58% | ||||||
Alfa Diversified, 7.694%, 3/15/2012 | $ | 7,000,000 | 7,148,890 | |||
First Tennessee Bank, 5.316%, 12/8/2008 | 10,000,000 | 10,002,900 | ||||
National City Bank, 7.25%, 7/15/2010 | 5,000,000 | 5,248,380 |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
THRIFTS & MORTGAGE FINANCE — 0.17% | ||||||
Countrywide Home Loan, 5.126%, 11/24/2008 | $ | 5,000,000 | $ | 6,718,719 | ||
29,118,889 | ||||||
CAPITAL GOODS — 0.20% | ||||||
INDUSTRIAL CONGLOMERATES — 0.20% | ||||||
General Electric Capital Australia, 5.25%, 8/15/2008 | 9,000,000 | 7,854,219 | ||||
7,854,219 | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.02% | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.02% | ||||||
Allied Waste North America, Inc., 6.375%, 4/15/2011 | 500,000 | 501,250 | ||||
Waste Management, Inc., 7.375%, 8/1/2010 | 175,000 | 185,221 | ||||
686,471 | ||||||
CONSUMER DURABLES & APPAREL — 0.10% | ||||||
HOUSEHOLD DURABLES — 0.10% | ||||||
K. Hovnanian Enterprises, Inc., 6.25%, 1/15/2015 | 5,000,000 | 3,800,000 | ||||
3,800,000 | ||||||
CONSUMER SERVICES — 0.15% | ||||||
HOTELS, RESTAURANTS & LEISURE — 0.15% | ||||||
Seneca Nation of Indians Capital Improvements Authority, 6.75%, 12/1/2013 | 6,000,000 | 5,974,440 | ||||
5,974,440 | ||||||
DIVERSIFIED FINANCIALS — 1.35% | ||||||
CAPITAL MARKETS — 0.46% | ||||||
Goldman Sachs Group, Inc., 5.625%, 1/15/2017 | 8,000,000 | 7,761,992 | ||||
Lehman Brothers Holdings, Inc., 6.00%, 7/19/2012 | 10,000,000 | 10,155,010 | ||||
CONSUMER FINANCE — 0.67% | ||||||
Capital One Bank, 6.70%, 5/15/2008 | 655,000 | 660,133 | ||||
Capital One Bank, 6.50%, 6/13/2013 | 1,500,000 | 1,520,332 | ||||
Capital One Financial Corp., 6.15%, 9/1/2016 | 14,500,000 | 14,144,808 | ||||
SLM Corp. CPI Floating Rate Note, 3.89%, 3/2/2009 | 5,500,000 | 5,069,735 | ||||
SLM Corp. Floating Rate, 5.66%, 1/27/2014 | 5,000,000 | 4,363,740 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.22% | ||||||
CIT Group, Inc., 5.00%, 2/13/2014 | 9,500,000 | 8,577,997 | ||||
52,253,747 | ||||||
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
ENERGY — 1.18% | ||||||
ENERGY EQUIPMENT & SERVICES — 0.19% | ||||||
Calfrac Holdings, 7.75%, 2/15/2015 | $ | 6,500,000 | $ | 6,256,250 | ||
Seitel, Inc., 9.75%, 2/15/2014 | 1,000,000 | 945,000 | ||||
OIL, GAS & CONSUMABLE FUELS — 0.99% | ||||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 5,000,000 | 4,580,170 | ||||
Gazprom, 7.25%, 2/22/2010 (RUB) | 125,000,000 | 5,035,290 | ||||
Griffin Coal Mining Ltd., 9.50%, 12/1/2016 | 22,000,000 | 21,890,000 | ||||
Murphy Oil Corp., 6.375%, 5/1/2012 | 5,000,000 | 5,207,450 | ||||
Teppco Partners LP, 7.00%, 6/1/2067 | 2,000,000 | 1,815,152 | ||||
45,729,312 | ||||||
FOOD & STAPLES RETAILING — 0.30% | ||||||
FOOD & STAPLES RETAILING — 0.30% | ||||||
Rite Aid Corp., 8.625%, 3/1/2015 | 3,000,000 | 2,715,000 | ||||
Rite Aid Corp., 9.375%, 12/15/2015 | 9,500,000 | 8,835,000 | ||||
11,550,000 | ||||||
FOOD, BEVERAGE & TOBACCO — 0.23% | ||||||
BEVERAGES — 0.10% | ||||||
Diageo Capital plc, 5.50%, 9/30/2016 | 4,000,000 | 3,908,528 | ||||
FOOD PRODUCTS — 0.13% | ||||||
Kraft Foods, Inc., 6.50%, 8/11/2017 | 5,000,000 | 5,164,755 | ||||
9,073,283 | ||||||
INSURANCE — 0.08% | ||||||
INSURANCE — 0.08% | ||||||
AAG Holding Co., Inc., 6.875%, 6/1/2008 | 335,000 | 336,565 | ||||
Liberty Mutual Group, Inc., 5.75%, 3/15/2014 | 1,000,000 | 978,088 | ||||
Pacific Life Global Funding CPI Floating Rate Note, 4.867%, 2/6/2016 | 2,000,000 | 1,834,780 | ||||
3,149,433 | ||||||
MATERIALS — 0.18% | ||||||
CONSTRUCTION MATERIALS — 0.05% | ||||||
C8 Capital Ltd., 6.64%, 12/31/2049 | 2,000,000 | 1,943,920 | ||||
METALS & MINING — 0.13% | ||||||
Bemax Resources, 9.375%, 7/15/2014 | 5,000,000 | 5,100,000 | ||||
7,043,920 | ||||||
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
MEDIA — 0.16% | ||||||
MEDIA — 0.16% | ||||||
AOL Time Warner, Inc., 6.875%, 5/1/2012 | $ | 425,000 | $ | 445,944 | ||
Comcast Corp., 6.30%, 11/15/2017 | 5,000,000 | 5,082,170 | ||||
Independent News & Media plc, 5.75%, 5/17/2009 (EUR) | 600,000 | 855,570 | ||||
6,383,684 | ||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.07% | ||||||
BIOTECHNOLOGY — 0.07% | ||||||
Tiers Inflation Linked Trust Series Wyeth 2004 21 Trust Certificate CPI Floating Rate Note, 4.537%, 2/1/2014 | 3,000,000 | 2,692,350 | ||||
2,692,350 | ||||||
REAL ESTATE — 0.27% | ||||||
REAL ESTATE — 0.27% | ||||||
Agile Property Holdings Ltd, 9.00%, 9/22/2013 | 10,000,000 | 10,300,000 | ||||
10,300,000 | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.14% | ||||||
COMPUTERS & PERIPHERALS — 0.09% | ||||||
Jabil Circuit, Inc., 5.875%, 7/15/2010 | 3,485,000 | 3,517,031 | ||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.05% | ||||||
Cisco Systems, Inc., 5.44%, 2/20/2009 | 2,000,000 | 1,996,228 | ||||
5,513,259 | ||||||
TELECOMMUNICATION SERVICES — 0.55% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.55% | ||||||
Level 3 Financing, Inc, 9.25%, 11/1/2014 | 12,500,000 | 12,312,500 | ||||
Level 3 Financing, Inc. Senior Notes, 12.25%, 3/15/2013 | 6,000,000 | 6,615,000 | ||||
TCI Communications, Inc., 7.875%, 8/1/2013 | 2,285,000 | 2,500,706 | ||||
21,428,206 | ||||||
TRANSPORTATION — 0.13% | ||||||
AIR FREIGHT & LOGISTICS — 0.13% | ||||||
FedEx Corp., 5.50%, 8/15/2009 | 5,000,000 | 5,055,915 | ||||
5,055,915 | ||||||
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
UTILITIES — 0.83% | ||||||
ELECTRIC UTILITIES — 0.39% | ||||||
Entergy New Orleans, Inc., 3.875%, 8/1/2008 | $ | 8,500,000 | $ | 8,340,923 | ||
Monongahela Power, 5.70%, 3/15/2017 | 7,000,000 | 6,889,988 | ||||
GAS UTILITIES — 0.44% | ||||||
Oneok Partners, LP Senior Notes, 5.90%, 4/1/2012 | 3,000,000 | 3,035,670 | ||||
Southern Union Co., 7.20%, 11/1/2066 | 14,000,000 | 14,063,826 | ||||
32,330,407 | ||||||
TOTAL CORPORATE BONDS (Cost $259,423,465) | 259,937,535 | |||||
CONVERTIBLE BONDS — 0.35% | ||||||
BANKS — 0.24% | ||||||
THRIFTS & MORTGAGE FINANCE — 0.24% | ||||||
Countrywide Financial Corp., 1.86%, 4/15/2037 | 10,000,000 | 9,126,000 | ||||
9,126,000 | ||||||
DIVERSIFIED FINANCIALS — 0.11% | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.11% | ||||||
KKR Financial Holdings, LLC, 7.00%, 7/15/2012 | 5,000,000 | 4,412,500 | ||||
4,412,500 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $13,272,424) | 13,538,500 | |||||
TAXABLE MUNICIPAL BONDS — 0.14% | ||||||
Short Pump Town Center Community Development, 6.26%, 2/1/2009 | 2,000,000 | 2,018,960 | ||||
Victor New York, 9.05%, 5/1/2008 | 1,175,000 | 1,180,758 | ||||
Victor New York, 9.20%, 5/1/2014 | 2,000,000 | 2,051,800 | ||||
TOTAL TAXABLE MUNICIPAL BONDS (Cost $5,310,425) | 5,251,518 | |||||
U.S. GOVERNMENT AGENCIES — 0.52% | ||||||
Federal National Mortgage Association CPI Floating Rate Note, 3.50%, 2/17/2009 | 2,000,000 | 1,962,480 | ||||
Federal National Mortgage Association REMIC Series 2006-B1 Class AB, 6.00%, 6/25/2016 | 17,773,376 | 18,131,932 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $19,702,179) | 20,094,412 | |||||
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||||
U.S. TREASURY SECURITIES — 0.26% | |||||||
U.S. Treasury Notes Inflation Indexed, 3.625%, 1/15/2008 | $ | 10,314,720 | $ | 10,301,408 | |||
TOTAL U.S. TREASURY SECURITIES (Cost $10,323,023) | 10,301,408 | ||||||
OTHER SECURITIES — 0.26% | |||||||
LOAN PARTICIPATIONS — 0.26% | |||||||
Mylan Laboratories, Inc. Floating Rate Loan, 9.729%, 10/2/2017 | 10,000,000 | 10,000,000 | |||||
TOTAL OTHER SECURITIES (Cost $10,000,000) | 10,000,000 | ||||||
SHORT TERM INVESTMENTS — 5.80% | |||||||
Citigroup Funding, Inc., 4.70%, 10/1/2007 | 50,000,000 | 50,000,000 | |||||
Citigroup Funding, Inc., 4.80%, 10/2/2007 | 54,500,000 | 54,492,733 | |||||
General Electric Capital Corp., 4.70%, 10/5/2007 | 50,000,000 | 49,973,889 | |||||
Toyota Credit de Puerto Rico, 4.70%, 10/3/2007 | 33,000,000 | 32,991,383 | |||||
Toyota Credit de Puerto Rico, 4.70%, 10/3/2007 | 38,000,000 | 37,990,078 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $225,448,083) | 225,448,083 | ||||||
TOTAL INVESTMENTS — 100.71% (Cost $3,283,020,696) | $ | 3,912,128,389 | |||||
LIABILITIES NET OF OTHER ASSETS — (0.71)% | (27,625,384 | ) | |||||
NET ASSETS — 100.00% | $ | 3,884,503,005 | |||||
Footnote Legend
+ | Non-income producing |
(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, 2006 | Gross Additions | Gross Reductions | Shares at Sept. 30, 2007 | Market value Sept. 30, 2007 | Dividend Income | ||||||||
Algonquin Power Income Trust | — | 4,183,700 | — | 4,183,700 | $ | 37,098,712 | $ | 1,205,712 | ||||||
Reddy Ice Holdings, Inc. | 1,200,000 | 974,471 | — | 2,174,471 | 57,340,800 | 2,873,004 | ||||||||
Quadra Realty Trust, Inc. | — | 1,981,800 | — | 1,981,800 | 18,886,554 | 35,308 | ||||||||
$ | 113,326,066 | $ | 4,114,024 | |||||||||||
Total non-controlled “affiliated companies” — 2.92% of net assets.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt | |
EUR | Euro Dollar denominated | |
REMIC | Real Estate Mortgage Investment Conduit | |
RUB | Russian Ruble denominated |
See notes to financial statements.
32 Certified Annual Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Investment Income Builder Fund
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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
Certified Annual Report 33
Thornburg Investment Income Builder Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,135.40 | $ | 5.03 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.36 | $ | 4.76 |
† | 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. |
34 Certified Annual Report
Thornburg Investment Income Builder Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Investment Income Builder Fund versus S&P 500 Index and Blended Index
(November 3, 2003 to September 30, 2007)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2007
1 Yr | Since Inception | |||||
I Shares (Incep: 11/3/03) | 27.80 | % | 19.41 | % | ||
Blended Index (Since: 11/3/03) | 16.98 | % | 13.30 | % | ||
S&P 500 Index (Since: 11/3/03) | 16.44 | % | 11.83 | % |
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 bonds included in the index. 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. The index is calculated with net dividends reinvested, in U.S. dollars.
The S&P 500 Index, an unmanaged broad measure of the U.S. stock market, does not reflect sales charges or expenses. Investors cannot invest directly in an index.
Certified Annual Report 35
Thornburg Investment Income Builder Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 |
36 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 37
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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.
38 Certified Annual Report
Thornburg Investment Income Builder Fund | September 30, 2007 (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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the fiscal year ended September 30, 2007, the Fund designates long-term capital gain dividends of $32,604,821.
For the tax year ended September 30, 2007, the Thornburg Investment Income Builder Fund designates 72.19% (or the maximum allowed) 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.
29.63% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2007 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, 2007. Complete information will be computed and reported in conjunction with your 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT 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 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for the purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, including specific dividend growth data, (iii) measures of the Fund’s investment returns over different periods of time relative to a “world allocation” category of 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 (iv) comparative measures of portfolio volatility, risk and return.
Certified Annual Report 39
OTHER INFORMATION, CONTINUED
Thornburg Investment Income Builder Fund | September 30, 2007 (Unaudited) |
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, trade execution, the Advisor’s performance of 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 strategies, as described in its prospectuses, likely will vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) 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 world allocation category of funds 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, tax efficiency and the positive effects of the Fund’s cumulative returns.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor had received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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. The Trustees observed that the overall expense ratio of the Fund was higher to a small extent than average and median expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, and that the management fee was somewhat higher than the average and median fee rates for the same group of funds, but that the differences were not significant in view of their degree and the investment performance of the Fund. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
40 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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. 41
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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
42 This page is not part of the Annual Report.
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 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 Fund pursues its investment goals by investing primarily in a broad range of equity securities, including common stocks, preferred stocks, real estate investment trusts, and other equity trusts. The Fund may invest in any equity security which the investment advisor believes may assist the Fund in pursuing its goals, including smaller companies with market capitalizations of less than $500 million.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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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www.thornburg.com/edelivery |
2 This page is not part of the Annual Report.
Thornburg Global Opportunities Fund
September 30, 2007
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 3
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4 Certified Annual Report
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Investing outside the United States involves additional risks, such as currency fluctuations. 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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.
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 5
October 15, 2007
Dear Fellow Shareholder:
September 30, 2007 marks the end of the fiscal year for Thornburg Global Opportunities Fund. On September 30, 2006 the net asset value (NAV) of the Class A shares was $12.86, while on September 30, 2007 the NAV increased to $20.06. Total return of the Fund’s Class A shares for the fiscal year ended September 30, 2007, was 57.75% at NAV compared with 24.01% for the MSCI All Country World Index.
Thornburg Global Opportunities Fund (NASDAQ symbol THOAX for the Class A Shares) was launched on July 28th, 2006 with an NAV per share of $11.94. 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 of the same basic characteristics of other funds managed by Thornburg Investment Management 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 funds contribute opinions, data, and ideas to this portfolio. Unique to our mutual fund lineup, Thornburg Global Opportunities gives its shareholders a single fund with 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 seen in the marketplace. The Fund reached over $475 million of assets as of September 30, 2007. 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 more than 80% of the sector assets, and these funds average more than 230 different stocks each in their portfolios. Since your Fund holds around 35 stocks, it is certainly different.
The performance drivers for the fiscal year were broad-based, with 51 stocks giving positive returns and seven showing negative returns. Four of our top performers were basic materials producers (Southern Copper Corp. and Freeport-McMoRan Copper & Gold, Inc. of the U.S., Canada’s Eastern Platinum Ltd., and China Shenhua Energy), extending the positive contribution from firms of this nature to our portfolio return. Two Chinese consumer businesses also contributed significantly to performance: mobile telephony giant China Mobile Ltd., and homebuilder Country Garden Holdings Co. Ltd. Hong Kong based Hong Kong Exchanges & Clearing Ltd. turned in strong business and stock price performances. Its trading volumes expanded significantly due to increased trading activity from local investors, mainland Chinese investors, and other investors worldwide. Other strong performers were a diverse set of firms: China’s Industrial & Commercial Bank of China, Korea’s Shinhan Financial Group, Co. Ltd., and the Philippines’ geothermal energy producer PNOC Energy Development Corp. The strong gains from the Asian stocks in your portfolio were caused by good operating performances by these firms, aided by multiple expansions resulting from continued robust economic growth in the region, a dose of currency appreciation, and expectations among investors for continuing currency appreciation. These factors were particularly apparent among the Chinese stocks in your portfolio.
The negative contributors during the fiscal year were also a diverse lot: U.S. digital communications infrastructure operator Level 3 Communications Inc.; Austrian semiconductor firm Austriamicrosystems AG; Swiss banking/financial services giant UBS AG; Italian television broadcaster Mediaset SpA; and U.S.
6 Certified Annual Report
cable and broadband communications firm Comcast Corp. The first two of these had unexpected problems handling incoming business, while the others were subject to investor anxiety regarding industry developments or company specific issues. In general, the magnitudes of price declines among negative contributors during the period were significantly less than the magnitude of the price increases from the positive performers. As the fiscal year drew to a close, we attempted to increase the tax efficiency of your Fund by realizing losses on specific tax lots of stocks held in your portfolio.
Your portfolio’s most significant sector weighting is Telecommunication Services. Four of these firms were among the portfolio’s 15 best performers during the last six months of the period. The businesses of China Mobile Ltd., France Telecom SA, Crown Castle International, and Level 3 Communications are quite different. Each of these occupies a unique position in a dynamic industry. You will also notice significant sector weightings in Energy, Materials, and Diversified Financials.
You can find additional descriptive information about most of the holdings in your portfolio by going to our web site, www.thornburg.com/funds, Global Opportunities Fund. We believe your portfolio is an interesting collection of stocks.
Thank you for your interest in Thornburg Global Opportunities Fund.
Sincerely,
![]() | ![]() | |
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, 2007 |
ASSETS | |||
Investments at value (cost $437,636,984) (Note 2) | $ | 495,289,860 | |
Cash | 870,444 | ||
Receivable for investments sold | 18,398,175 | ||
Receivable for fund shares sold | 11,920,861 | ||
Unrealized gain on forward exchange contracts (Note 7) | 167,206 | ||
Dividends receivable | 125,705 | ||
Prepaid expenses and other assets | 34,977 | ||
Total Assets | 526,807,228 | ||
LIABILITIES | |||
Payable for securities purchased | 47,319,225 | ||
Payable for fund shares redeemed | 317,208 | ||
Unrealized loss on forward exchange contracts (Note 7) | 369,857 | ||
Payable to investment advisor and other affiliates (Note 3) | 451,602 | ||
Accounts payable and accrued expenses | 115,279 | ||
Total Liabilities | 48,573,171 | ||
NET ASSETS | $ | 478,234,057 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 652,672 | |
Net unrealized appreciation on investments | 57,454,352 | ||
Accumulated net realized gain (loss) | 16,459,671 | ||
Net capital paid in on shares of beneficial interest | 403,667,362 | ||
$ | 478,234,057 | ||
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($262,475,383 applicable to 13,081,394 shares of beneficial interest outstanding - Note 4) | $ | 20.06 | |
Maximum sales charge, 4.50% of offering price | 0.95 | ||
Maximum offering price per share | $ | 21.01 | |
Class C Shares: | |||
Net asset value and offering price per share * ($107,297,802 applicable to 5,400,287 shares of beneficial interest outstanding - Note 4) | $ | 19.87 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($108,460,872 applicable to 5,379,323 shares of beneficial interest outstanding - Note 4) | $ | 20.16 | |
* | 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 | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $211,629) | $ | 2,847,520 | ||
Interest income | 631,688 | |||
Total Income | 3,479,208 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,573,698 | |||
Administration fees (Note 3) | ||||
Class A Shares | 113,383 | |||
Class C Shares | 48,871 | |||
Class I Shares | 25,024 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 226,769 | |||
Class C Shares | 390,966 | |||
Transfer agent fees | ||||
Class A Shares | 79,485 | |||
Class C Shares | 50,144 | |||
Class I Shares | 26,978 | |||
Registration and filing fees | ||||
Class A Shares | 48,133 | |||
Class C Shares | 18,873 | |||
Class I Shares | 25,338 | |||
Custodian fees (Note 3) | 133,566 | |||
Professional fees | 78,168 | |||
Accounting fees | 3,081 | |||
Trustee fees | 2,496 | |||
Other expenses | 71,310 | |||
Total expenses | 2,916,283 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (66,556 | ) | ||
Management fees waived by investment advisor (Note 3) | (90,476 | ) | ||
Fees paid indirectly (Note 3) | (8,906 | ) | ||
Net Expenses | 2,750,345 | |||
Net Investment Income | $ | 728,863 | ||
Certified Annual Report 9
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Global Opportunities Fund | Year Ended September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 17,091,597 | ||
Foreign currency transactions | (274,678 | ) | ||
16,816,919 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 56,756,702 | |||
Foreign currency translations | (198,479 | ) | ||
56,558,223 | ||||
Net Realized and Unrealized Gain | 73,375,142 | |||
Net Increase in Net Assets Resulting From Operations | $ | 74,104,005 | ||
See notes to financial statements.
10 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Global Opportunities Fund
Year Ended September 30, 2007 | For the period from July 28, 2006 to September 30, 2006 | ||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | |||||||
OPERATIONS: | |||||||
Net investment income | $ | 728,863 | $ | 10,879 | |||
Net realized gain on investments and foreign currency transactions | 16,816,919 | 108,032 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 56,558,223 | 896,129 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 74,104,005 | 1,015,040 | |||||
DIVIDENDS TO SHAREHOLDERS: | |||||||
From net investment income | |||||||
Class A Shares | (2,647 | ) | — | ||||
Class I Shares | (17,567 | ) | — | ||||
From realized gains | |||||||
Class A Shares | (223,855 | ) | — | ||||
Class C Shares | (86,617 | ) | — | ||||
Class I Shares | (226,047 | ) | — | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | |||||||
Class A Shares | 217,027,928 | 8,191,425 | |||||
Class C Shares | 87,907,758 | 3,351,987 | |||||
Class I Shares | 74,800,459 | 12,392,188 | |||||
Net Increase in Net Assets | 453,283,417 | 24,950,640 | |||||
NET ASSETS: | |||||||
Beginning of period | 24,950,640 | — | |||||
End of period | $ | 478,234,057 | $ | 24,950,640 | |||
Undistributed net investment income | $ | 652,672 | $ | 12,732 |
See notes to financial statements.
Certified Annual Report 11
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
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 twelve 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, Thornburg Investment Income Builder Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund 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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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.
12 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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 year ended September 30, 2007, the Advisor voluntarily waived investment Advisory fees of $90,476. The Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $66,556 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, 2007, the Distributor has advised the Fund that it earned commissions aggregating $183,687 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $17,360 from redemptions of Class C shares of the Fund.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
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 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% per annum of the average daily net assets attributable to Class C 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, 2007, 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, 2007, fees paid indirectly were $8,906. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year ended | Year ended* | |||||||||||||
September 30, 2007 | September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 13,660,081 | $ | 238,770,592 | 659,222 | $ | 8,193,500 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 14,864 | 208,773 | — | — | ||||||||||
Shares repurchased | (1,252,603 | ) | (21,960,678 | ) | (170 | ) | (2,075 | ) | ||||||
Redemption fees received** | — | 9,241 | — | — | ||||||||||
Net Increase (Decrease) | 12,422,342 | $ | 217,027,928 | 659,052 | $ | 8,191,425 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 5,344,378 | $ | 91,693,393 | 278,996 | $ | 3,429,727 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 4,462 | 62,462 | — | — | ||||||||||
Shares repurchased | (221,453 | ) | (3,852,049 | ) | (6,096 | ) | (77,740 | ) | ||||||
Redemption fees received** | — | 3,952 | — | — | ||||||||||
Net Increase (Decrease) | 5,127,387 | $ | 87,907,758 | 272,900 | $ | 3,351,987 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 4,793,763 | $ | 81,916,342 | 1,007,805 | $ | 12,393,212 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 16,374 | 230,652 | — | — | ||||||||||
Shares repurchased | (438,535 | ) | (7,351,459 | ) | (84 | ) | (1,024 | ) | ||||||
Redemption fees received** | — | 4,924 | — | — | ||||||||||
Net Increase (Decrease) | 4,371,602 | $ | 74,800,459 | 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. |
14 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $479,034,333 and $155,674,528, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 439,066,289 | ||
Gross unrealized appreciation on a tax basis | $ | 61,513,434 | ||
Gross unrealized depreciation on a tax basis | (5,289,863 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 56,223,571 | ||
Distributable earnings – ordinary income | $ | 16,998,061 | ||
Distributable capital gains | $ | 1,759,437 |
In order to account for permanent book/tax differences, the Fund increased undistributed net realized investment gains by $68,709, and decreased undistributed net investment income by $68,709. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains/losses.
At September 30, 2007, the Fund had deferred tax basis currency losses occurring subsequent to October 31, 2006 of $67,816. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
The tax character of distributions paid by the Fund for the year ended September 30, 2007 was $556,733 from the distribution of ordinary income.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2007, 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, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
CONTRACTS TO SELL: | ||||||||
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
165,800,000 | Philippine Peso for 3,554,126 USD | December 18, 2007 | $ | (115,693 | ) | |||
278,905,000 | Philippine Peso for 5,974,829 USD | December 18, 2007 | (198,458 | ) | ||||
244,100,000 | Philippine Peso for 5,347,207 USD | December 18, 2007 | (55,706 | ) | ||||
Unrealized gain (loss) from forward | ||||||||
Sell contracts: | $ | (369,857 | ) | |||||
CONTRACTS TO BUY: | ||||||||
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
190,000,000 | Philippine Peso for 4,038,257 USD | December 18, 2007 | $ | 167,206 | ||||
Net unrealized gain (loss) from forward | ||||||||
Buy contracts: | $ | 167,206 | ||||||
Net unrealized gain (loss) from forward | ||||||||
Exchange contracts: | $ | (202,651 | ) | |||||
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
16 Certified Annual Report
Thornburg Global Opportunities Fund
Year Ended September 30, 2007 | 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 | $ | 12.86 | $ | 11.94 | ||||
Income from investment operations: | ||||||||
Net investment income | 0.07 | 0.01 | ||||||
Net realized and unrealized gain (loss) on investments | 7.29 | 0.91 | ||||||
Total from investment operations | 7.36 | 0.92 | ||||||
Less dividends from: | ||||||||
Net investment income | (0.00 | )(d) | — | |||||
Net realized gains | (0.16 | ) | — | |||||
Total dividends | (0.16 | ) | — | |||||
Change in net asset value | 7.20 | 0.92 | ||||||
NET ASSET VALUE, end of period | $ | 20.06 | $ | 12.86 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return(a) | 57.75 | % | 7.71 | % | ||||
Ratios to average net assets: | ||||||||
Net investment income | 0.41 | % | 0.34 | %(b) | ||||
Expenses, after expense reductions | 1.51 | % | 1.70 | %(b) | ||||
Expenses, after expense reductions and net of custody credits | 1.50 | % | 1.63 | %(b) | ||||
Expenses, before expense reductions | 1.55 | % | 6.12 | %(b)† | ||||
Portfolio turnover rate | 91.02 | % | 6.08 | % | ||||
Net assets at end of period (000) | $ | 262,475 | $ | 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. |
(d) | Dividends from net investment income per share was less than $(0.01). |
† | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding. |
See notes to the financial statements.
Certified Annual Report 17
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Global Opportunities Fund |
Year Ended September 30, 2007 | 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 | $ | 12.84 | $ | 11.94 | ||||
Income from investment operations: | ||||||||
Net investment income | (0.06 | ) | (0.01 | ) | ||||
Net realized and unrealized gain (loss) on investments | 7.25 | 0.91 | ||||||
Total from investment operations | 7.19 | 0.90 | ||||||
Less dividends from: | ||||||||
Net realized gains | (0.16 | ) | — | |||||
Change in net asset value | 7.03 | 0.90 | ||||||
NET ASSET VALUE, end of period | $ | 19.87 | $ | 12.84 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return(a) | 56.48 | % | 7.54 | % | ||||
Ratios to average net assets: | ||||||||
Net investment income (loss) | (0.34 | )% | (0.40 | )%(b) | ||||
Expenses, after expense reductions | 2.28 | % | 2.41 | %(b) | ||||
Expenses, after expense reductions and net of custody credits | 2.28 | % | 2.35 | %(b) | ||||
Expenses, before expense reductions | 2.33 | % | 9.01 | %(b)† | ||||
Portfolio turnover rate | 91.02 | % | 6.08 | % | ||||
Net assets at end of period (000) | $ | 107,298 | $ | 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. |
See notes to the financial statements.
18 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Global Opportunities Fund |
Year Ended September 30, 2007 | 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 | $ | 12.87 | $ | 11.94 | ||||
Income from investment operations: | ||||||||
Net investment income | 0.17 | 0.02 | ||||||
Net realized and unrealized gain (loss) on investments | 7.29 | 0.91 | ||||||
Total from investment operations | 7.46 | 0.93 | ||||||
Less dividends from: | ||||||||
Net investment income | (0.01 | ) | — | |||||
Net realized gains | (0.16 | ) | — | |||||
Total dividends | (0.17 | ) | — | |||||
Change in net asset value | 7.29 | 0.93 | ||||||
NET ASSET VALUE, end of period | $ | 20.16 | $ | 12.87 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return(a) | 58.51 | % | 7.79 | % | ||||
Ratios to average net assets: | ||||||||
Net investment income | 0.97 | % | 0.90 | %(b) | ||||
Expenses, after expense reductions | 1.00 | % | 1.04 | %(b) | ||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.99 | %(b) | ||||
Expenses, before expense reductions | 1.20 | % | 2.98 | %(b) | ||||
Portfolio turnover rate | 91.02 | % | 6.08 | % | ||||
Net assets at end of period (000) | $ | 108,461 | $ | 12,968 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Fund commenced operations on July 28, 2006. |
+ | Based on weighted average shares outstanding. |
See notes to the financial statements.
Certified Annual Report 19
SCHEDULE OF INVESTMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
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 9/30/07
Telecommunication Services | 20.4 | % | |
Energy | 11.9 | % | |
Materials | 9.1 | % | |
Diversified Financials | 8.4 | % | |
Health Care Equipment & Services | 7.3 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 3.8 | % | |
Banks | 3.6 | % | |
Capital Goods | 3.4 | % | |
Consumer Services | 3.4 | % | |
Insurance | 3.1 | % | |
Utilities | 2.9 | % | |
Real Estate | 2.9 | % | |
Technology Hardware & Equipment | 2.8 | % | |
Transportation | 2.3 | % | |
Media | 1.5 | % | |
Semiconductors & Semiconductor Equipment | 0.8 | % | |
Other Assets and Cash Equivalents | 12.4 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/07 (percent of equity holdings)
United States of America | 39.0 | % | |
China | 12.2 | % | |
Greece | 5.9 | % | |
Switzerland | 5.6 | % | |
Canada | 5.6 | % | |
México | 5.1 | % | |
France | 4.1 | % | |
South Korea | 4.1 | % | |
Ireland | 3.9 | % | |
Philippines | 3.3 | % | |
Hong Kong | 3.1 | % | |
Italy | 2.6 | % | |
Brazil | 2.3 | % | |
Israel | 1.4 | % | |
Panama | 0.9 | % | |
Austria | 0.9 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 87.64% | |||||
BANKS — 3.55% | |||||
COMMERCIAL BANKS — 3.55% | |||||
Shinhan Financial Group Co., Ltd. | 260,000 | $ | 16,988,636 | ||
16,988,636 | |||||
CAPITAL GOODS — 3.44% | |||||
TRADING COMPANIES & DISTRIBUTORS — 3.44% | |||||
Babcock & Brown Air Ltd. ADR+ | 721,600 | 16,452,480 | |||
16,452,480 | |||||
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
CONSUMER SERVICES — 3.41% | |||||
HOTELS, RESTAURANTS & LEISURE — 3.41% | |||||
OPAP SA | 420,800 | $ | 16,321,078 | ||
16,321,078 | |||||
DIVERSIFIED FINANCIALS — 8.35% | |||||
CAPITAL MARKETS — 2.70% | |||||
Charles Schwab Corp. | 387,000 | 8,359,200 | |||
UBS AG | 85,125 | 4,577,045 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.65% | |||||
Hong Kong Exchanges & Clearing Ltd. | 197,600 | 6,049,615 | |||
KKR Financial Holdings LLC | 1,244,329 | 20,966,944 | |||
39,952,804 | |||||
ENERGY — 11.92% | |||||
OIL, GAS & CONSUMABLE FUELS — 11.92% | |||||
Apache Corp. | 161,550 | 14,549,193 | |||
Capital Product Partners LP | 334,157 | 8,250,336 | |||
Chevron Corp. | 157,750 | 14,762,245 | |||
China Petroleum & Chemical Corp. | 11,000,000 | 13,683,053 | |||
Eni SpA | 155,100 | 5,748,073 | |||
56,992,900 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 7.34% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 1.99% | |||||
Cremer SA+ | 815,800 | 9,502,089 | |||
HEALTH CARE PROVIDERS & SERVICES — 0.99% | |||||
WellPoint, Inc.+ | 60,000 | 4,735,200 | |||
HEALTH CARE TECHNOLOGY — 4.36% | |||||
Eclipsys Corp.+ | 894,700 | 20,864,404 | |||
35,101,693 | |||||
INSURANCE — 3.11% | |||||
INSURANCE — 3.11% | |||||
American International Group, Inc. | 121,600 | 8,226,240 | |||
Swiss Re | 74,325 | 6,620,144 | |||
14,846,384 | |||||
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
MATERIALS — 9.13% | |||||
METALS & MINING — 9.13% | |||||
Eastern Platinum Ltd.+ | 10,314,000 | $ | 23,435,017 | ||
Freeport-McMoRan Copper & Gold, Inc. | 193,000 | 20,243,770 | |||
43,678,787 | |||||
MEDIA — 1.53% | |||||
MEDIA — 1.53% | |||||
Comcast Corp.+ | 87,800 | �� | 2,103,688 | ||
Mediaset SpA | 504,300 | 5,206,331 | |||
7,310,019 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 3.78% | |||||
LIFE SCIENCES TOOLS & SERVICES — 2.59% | |||||
Bachem Holding AG | 146,500 | 12,363,002 | |||
PHARMACEUTICALS — 1.19% | |||||
Teva Pharmaceutical Industries Ltd. ADR | 128,200 | 5,701,054 | |||
18,064,056 | |||||
REAL ESTATE — 2.88% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 2.88% | |||||
Country Garden Holdings Co. Ltd.+ | 8,100,000 | 13,774,642 | |||
13,774,642 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.79% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.79% | |||||
Austriamicrosystems AG+ | 71,565 | 3,761,888 | |||
3,761,888 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.81% | |||||
COMPUTERS & PERIPHERALS — 2.81% | |||||
Dell Inc.+ | 486,000 | 13,413,600 | |||
13,413,600 | |||||
TELECOMMUNICATION SERVICES — 20.41% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 7.26% | |||||
France Telecom SA | 514,200 | 17,223,416 | |||
Level 3 Communications, Inc.+ | 3,760,700 | 17,487,255 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
Shares/ | |||||||
Principal Amount | Value | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 13.15% | |||||||
América Móvil SA de CV | 335,000 | $ | 21,440,000 | ||||
China Mobile Ltd. | 1,457,000 | 23,840,234 | |||||
Crown Castle International Corp.+ | 434,000 | 17,633,420 | |||||
97,624,325 | |||||||
TRANSPORTATION — 2.28% | |||||||
AIRLINES — 0.82% | |||||||
Copa Holdings SA | 97,900 | 3,920,895 | |||||
TRANSPORTATION INFRASTRUCTURE — 1.46% | |||||||
Shenzhen Chiwan Wharf Holdings Ltd. | 2,706,848 | 6,998,803 | |||||
10,919,698 | |||||||
UTILITIES — 2.91% | |||||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 2.91% | |||||||
PNOC Energy Development Corp. | 97,814,100 | 13,895,899 | |||||
13,895,899 | |||||||
TOTAL COMMON STOCK (Cost $361,446,013) | 419,098,889 | ||||||
SHORT TERM INVESTMENTS — 15.93% | |||||||
Abbey National, 4.775%, 10/1/2007 | $ | 6,800,000 | 6,800,000 | ||||
General Electric Capital Corp., 4.68%, 10/2/2007 | 55,000,000 | 54,992,850 | |||||
Toyota Credit de Puerto Rico, 4.70%, 10/2/2007 | 14,400,000 | 14,398,121 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $76,190,971) | 76,190,971 | ||||||
TOTAL INVESTMENTS — 103.57% (Cost $437,636,984) | $ | 495,289,860 | |||||
LIABILITIES NET OF OTHER ASSETS — (3.57)% | (17,055,803 | ) | |||||
NET ASSETS — 100.00% | $ | 478,234,057 | |||||
Footnote Legend
+ | Non-income producing |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
See notes to financial statements.
Certified Annual Report 23
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, 2007, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and for the period July 28, 2006 (commencement of operations) through 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 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
24 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Global Opportunities Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
Actual Expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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.
Beginning Account value 3/31/07 | Ending Account value 9/30/07 | Expenses paid During period† 3/31/07–9/30/07 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,252.20 | $ | 8.47 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.58 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,247.30 | $ | 12.79 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.68 | $ | 11.46 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,255.30 | $ | 5.60 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.50%; C: 2.27%; 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. |
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 for each class of shares 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 25
INDEX COMPARISON | ||
Thornburg Global Opportunities Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 IN VESTMENT
Thornburg Global opportunities Fund versus MSCI AC World Index
(July 28, 2006 to September 30, 2007)*
* | Hypothetical chart is based on daily performance of the fund and index. |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2007 (with sales charge)
1 Yr | Since Inception | |||||
A Shares (Incep: 07/28/06) | 50.60 | % | 50.98 | % | ||
C Shares (Incep: 07/28/06) | 55.48 | % | 55.71 | % | ||
MSCI All Country | ||||||
World Index (Since: 07/28/06) | 24.01 | % | 23.89 | % |
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.
26 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Global Opportunities Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 27
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
28 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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 29
Thornburg Global Opportunities Fund | September 30, 2007 (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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
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 web site at www.thornburg. com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the tax year ended September 30, 2007, the Thornburg Global Opportunities Fund designates 15.06% (or the maximum allowed) 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.
4.83% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2007 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, 2007. Complete information will be computed and reported in conjunction with your 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT 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 Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met on September 11, 2007 to consider renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance since its inception in 2006 relative to a “world stock” category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to a broad-based securities index, and (iv) a comparative measure of estimated portfolio earnings per share growth.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, trade execution, performance of 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 strategies, as described in its prospectuses,
30 Certified Annual Report
likely will vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s superior investment performance in most periods relative to the performance of the category of equity mutual funds selected by the independent mutual fund analyst firm, and the Fund’s having outperformed a broad-based securities index in each measuring period since the Fund’s inception.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 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. The Trustees observed that the management fee charged to the Fund was somewhat higher than the average and median fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, but that the overall expense ratio was comparable to the average expense ratio and higher to a small degree than the median expense ratio for the same fund group. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 31
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
32 Certified 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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
This page is not part of the Annual Report. 33
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 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 Fund pursues its investment goals by investing primarily in a broad range of equity securities, including common stocks, preferred stocks, real estate investment trusts, and other equity trusts. The Fund may invest in any equity security which the investment advisor believes may assist the Fund in pursuing its goals, including smaller companies with market capitalizations of less than $500 million.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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. |
Thornburg Global Opportunities Fund
I Shares – September 30, 2007
Table of Contents | ||
6 | ||
8 | ||
9 | ||
11 | ||
12 | ||
17 | ||
18 | ||
22 | ||
23 | ||
24 | ||
25 | ||
28 |
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 | 3 |
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4 | Certified Annual Report |
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Investing outside the United States involves additional risks, such as currency fluctuations. 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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.
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 | 5 |
October 15, 2007
Dear Fellow Shareholder:
September 30, 2007 marks the end of the fiscal year for Thornburg Global Opportunities Fund. On September 30, 2006 the net asset value (NAV) per Class I share was $12.87, while on September 30, 2007 the NAV increased to $20.16. Total return of the Fund’s Class I shares for the fiscal year ended September 30, 2007, was 58.51% at NAV compared with 24.01% for the MSCI All Country World Index.
Thornburg Global Opportunities Fund (NASDAQ symbol THOIX for the Class I Shares) was launched on July 28th, 2006 with an NAV per share of $11.94. 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 of the same basic characteristics of other funds managed by Thornburg Investment Management 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 funds contribute opinions, data, and ideas to this portfolio. Unique to our mutual fund lineup, Thornburg Global Opportunities gives its shareholders a single fund with 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 seen in the marketplace. The Fund reached over $475 million of assets as of September 30, 2007. 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 more than 80% of the sector assets, and these funds average more than 230 different stocks each in their portfolios. Since your Fund holds around 35 stocks, it is certainly different.
The performance drivers for the fiscal year were broad-based, with 51 stocks giving positive returns and seven showing negative returns. Four of our top performers were basic materials producers (Southern Copper Corp. and Freeport-McMoRan Copper & Gold, Inc. of the U.S., Canada’s Eastern Platinum Ltd., and China Shenhua Energy), extending the positive contribution from firms of this nature to our portfolio return. Two Chinese consumer businesses also contributed significantly to performance: mobile telephony giant China Mobile Ltd., and homebuilder Country Garden Holdings Co. Ltd. Hong Kong based Hong Kong Exchanges & Clearing Ltd. turned in strong business and stock price performances. Its trading volumes expanded significantly due to increased trading activity from local investors, mainland Chinese investors, and other investors worldwide. Other strong performers were a diverse set of firms: China’s Industrial & Commercial Bank of China, Korea’s Shinhan Financial Group, Co. Ltd., and the Philippines’ geothermal energy producer PNOC Energy Development Corp. The strong gains from the Asian stocks in your portfolio were caused by good operating performances by these firms, aided by multiple expansions resulting from continued robust economic growth in the region, a dose of currency appreciation, and expectations among investors for continuing currency appreciation. These factors were particularly apparent among the Chinese stocks in your portfolio.
The negative contributors during the fiscal year were also a diverse lot: U.S. digital communications infrastructure operator Level 3 Communications Inc.; Austrian semiconductor firm Austriamicrosystems AG; Swiss banking/financial services giant UBS AG; Italian television broadcaster Mediaset SpA; and U.S.
6 | Certified Annual Report |
cable and broadband communications firm Comcast Corp. The first two of these had unexpected problems handling incoming business, while the others were subject to investor anxiety regarding industry developments or company specific issues. In general, the magnitudes of price declines among negative contributors during the period were significantly less than the magnitude of the price increases from the positive performers. As the fiscal year drew to a close, we attempted to increase the tax efficiency of your Fund by realizing losses on specific tax lots of stocks held in your portfolio.
Your portfolio’s most significant sector weighting is Telecommunication Services. Four of these firms were among the portfolio’s 15 best performers during the last six months of the period. The businesses of China Mobile Ltd., France Telecom SA, Crown Castle International, and Level 3 Communications are quite different. Each of these occupies a unique position in a dynamic industry. You will also notice significant sector weightings in Energy, Materials, and Diversified Financials.
You can find additional descriptive information about most of the holdings in your portfolio by going to our web site, www.thornburg.com/funds, Global Opportunities Fund. We believe your portfolio is an interesting collection of stocks.
Thank you for your interest in Thornburg Global Opportunities Fund.
Sincerely,
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Brian McMahon Co-Portfolio Manager President & Chief Investment Officer | W. Vinson Walden,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 | 7 |
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
ASSETS | |||
Investments at value (cost $437,636,984) (Note 2) | $ | 495,289,860 | |
Cash | 870,444 | ||
Receivable for investments sold | 18,398,175 | ||
Receivable for fund shares sold | 11,920,861 | ||
Unrealized gain on forward exchange contracts (Note 7) | 167,206 | ||
Dividends receivable | 125,705 | ||
Prepaid expenses and other assets | 34,977 | ||
Total Assets | 526,807,228 | ||
LIABILITIES | |||
Payable for securities purchased | 47,319,225 | ||
Payable for fund shares redeemed | 317,208 | ||
Unrealized loss on forward exchange contracts (Note 7) | 369,857 | ||
Payable to investment advisor and other affiliates (Note 3) | 451,602 | ||
Accounts payable and accrued expenses | 115,279 | ||
Total Liabilities | 48,573,171 | ||
NET ASSETS | $ | 478,234,057 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 652,672 | |
Net unrealized appreciation on investments | 57,454,352 | ||
Accumulated net realized gain (loss) | 16,459,671 | ||
Net capital paid in on shares of beneficial interest | 403,667,362 | ||
$ | 478,234,057 | ||
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($262,475,383 applicable to 13,081,394 shares of beneficial interest outstanding - Note 4) | $ | 20.06 | |
Maximum sales charge, 4.50% of offering price | 0.95 | ||
Maximum offering price per share | $ | 21.01 | |
Class C Shares: | |||
Net asset value and offering price per share * ($107,297,802 applicable to 5,400,287 shares of beneficial interest outstanding - Note 4) | $ | 19.87 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($108,460,872 applicable to 5,379,323 shares of beneficial interest outstanding - Note 4) | $ | 20.16 | |
* | 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 | Year Ended September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $211,629) | $ | 2,847,520 | ||
Interest income | 631,688 | |||
Total Income | 3,479,208 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,573,698 | |||
Administration fees (Note 3) | ||||
Class A Shares | 113,383 | |||
Class C Shares | 48,871 | |||
Class I Shares | 25,024 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 226,769 | |||
Class C Shares | 390,966 | |||
Transfer agent fees | ||||
Class A Shares | 79,485 | |||
Class C Shares | 50,144 | |||
Class I Shares | 26,978 | |||
Registration and filing fees | ||||
Class A Shares | 48,133 | |||
Class C Shares | 18,873 | |||
Class I Shares | 25,338 | |||
Custodian fees (Note 3) | 133,566 | |||
Professional fees | 78,168 | |||
Accounting fees | 3,081 | |||
Trustee fees | 2,496 | |||
Other expenses | 71,310 | |||
Total Expenses | 2,916,283 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (66,556 | ) | ||
Management fees waived by investment advisor (Note 3) | (90,476 | ) | ||
Fees paid indirectly (Note 3) | (8,906 | ) | ||
Net Expenses | 2,750,345 | |||
Net Investment Income | $ | 728,863 | ||
Certified Annual Report | 9 |
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Global Opportunities Fund | Year Ended September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 17,091,597 | ||
Foreign currency transactions | (274,678 | ) | ||
16,816,919 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 56,756,702 | |||
Foreign currency translations | (198,479 | ) | ||
56,558,223 | ||||
Net Realized and Unrealized Gain | 73,375,142 | |||
Net Increase in Net Assets Resulting From Operations | $ | 74,104,005 | ||
See notes to financial statements.
10 | Certified Annual Report |
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Global Opportunities Fund |
Year ended September 30, 2007 | For the period from of operations on | ||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | |||||||
OPERATIONS: | |||||||
Net investment income | $ | 728,863 | $ | 10,879 | |||
Net realized gain on investments and foreign currency transactions | 16,816,919 | 108,032 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 56,558,223 | 896,129 | |||||
Net Increase (Decrease) in Net Assets | |||||||
Resulting from Operations | 74,104,005 | 1,015,040 | |||||
DIVIDENDS TO SHAREHOLDERS: | |||||||
From net investment income | |||||||
Class A Shares | (2,647 | ) | — | ||||
Class I Shares | (17,567 | ) | — | ||||
From realized gains | |||||||
Class A Shares | (223,855 | ) | — | ||||
Class C Shares | (86,617 | ) | — | ||||
Class I Shares | (226,047 | ) | — | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | |||||||
Class A Shares | 217,027,928 | 8,191,425 | |||||
Class C Shares | 87,907,758 | 3,351,987 | |||||
Class I Shares | 74,800,459 | 12,392,188 | |||||
Net Increase in Net Assets | 453,283,417 | 24,950,640 | |||||
NET ASSETS: | |||||||
Beginning of period | 24,950,640 | — | |||||
End of period | $ | 478,234,057 | $ | 24,950,640 | |||
Undistributed net investment income | $ | 652,672 | $ | 12,732 |
See notes to financial statements.
Certified Annual Report | 11 |
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
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 twelve 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, Thornburg Investment Income Builder Fund, and Thornburg International Growth Fund. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund 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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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.
12 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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 year ended September 30, 2007, the Advisor voluntarily waived investment Advisory fees of $90,476. The Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $66,556 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, 2007, the Distributor has advised the Fund that it earned commissions aggregating $183,687 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $17,360 from redemptions of Class C shares of the Fund.
Certified Annual Report | 13 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
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 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% per annum of the average daily net assets attributable to Class C 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, 2007, 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, 2007, fees paid indirectly were $8,906. 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, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2007 | Year Ended* September 30, 2006 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 13,660,081 | $ | 238,770,592 | 659,222 | $ | 8,193,500 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 14,864 | 208,773 | — | — | ||||||||||
Shares repurchased | (1,252,603 | ) | (21,960,678 | ) | (170 | ) | (2,075 | ) | ||||||
Redemption fees received** | — | 9,241 | — | — | ||||||||||
Net Increase (Decrease) | 12,422,342 | $ | 217,027,928 | 659,052 | $ | 8,191,425 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 5,344,378 | $ | 91,693,393 | 278,996 | $ | 3,429,727 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 4,462 | 62,462 | — | — | ||||||||||
Shares repurchased | (221,453 | ) | (3,852,049 | ) | (6,096 | ) | (77,740 | ) | ||||||
Redemption fees received** | — | 3,952 | — | — | ||||||||||
Net Increase (Decrease) | 5,127,387 | $ | 87,907,758 | 272,900 | $ | 3,351,987 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 4,793,763 | $ | 81,916,342 | 1,007,805 | $ | 12,393,212 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 16,374 | 230,652 | — | — | ||||||||||
Shares repurchased | (438,535 | ) | (7,351,459 | ) | (84 | ) | (1,024 | ) | ||||||
Redemption fees received** | — | 4,924 | — | — | ||||||||||
Net Increase (Decrease) | 4,371,602 | $ | 74,800,459 | 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. |
14 | Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $479,034,333 and $155,674,528, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 439,066,289 | ||
Gross unrealized appreciation on a tax basis | $ | 61,513,434 | ||
Gross unrealized depreciation on a tax basis | (5,289,863 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 56,223,571 | ||
Distributable earnings – ordinary income | $ | 16,998,061 | ||
Distributable capital gains | $ | 1,759,437 |
In order to account for permanent book/tax differences, the Fund increased undistributed net realized investment gains by $68,709, and decreased undistributed net investment income by $68,709. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains/losses.
At September 30, 2007, the Fund had deferred tax basis currency losses occurring subsequent to October 31, 2006 of $67,816. For tax purposes, such losses will be reflected in the year ending September 30, 2008.
The tax character of distributions paid by the Fund for the year ended September 30, 2007 was $556,733 from the distribution of ordinary income.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2007, 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, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
Certified Annual Report | 15 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
CONTRACTS TO SELL:
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
165,800,000 | Philippine Peso for 3,554,126 USD | December 18, 2007 | $ | (115,693 | ) | |||
278,905,000 | Philippine Peso for 5,974,829 USD | December 18, 2007 | (198,458 | ) | ||||
244,100,000 | Philippine Peso for 5,347,207 USD | December 18, 2007 | (55,706 | ) | ||||
Unrealized gain (loss) from forward Sell contracts: | $ | (369,857 | ) | |||||
CONTRACTS TO BUY:
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
190,000,000 | Philippine Peso for 4,038,257 USD | December 18, 2007 | $ | 167,206 | ||||
Net unrealized gain (loss) from forward Buy contracts: | $ | 167,206 | ||||||
Net unrealized gain (loss) from forward Exchange contracts: | $ | (202,651 | ) | |||||
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements.
16 | Certified Annual Report |
Thornburg Global Opportunities Fund
Year Ended September 30, 2007 | 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 | $ | 12.87 | $ | 11.94 | ||||
Income from investment operations: | ||||||||
Net investment income | 0.17 | 0.02 | ||||||
Net realized and unrealized gain (loss) on investments | 7.29 | 0.91 | ||||||
Total from investment operations | 7.46 | 0.93 | ||||||
Less dividends from: | ||||||||
Net investment income | (0.01 | ) | — | |||||
Net realized gains | (0.16 | ) | — | |||||
Total dividends | (0.17 | ) | — | |||||
Change in net asset value | 7.29 | 0.93 | ||||||
NET ASSET VALUE, end of period | $ | 20.16 | $ | 12.87 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return(a) | 58.51 | % | 7.79 | % | ||||
Ratios to average net assets: | ||||||||
Net investment income | 0.97 | % | 0.90 | %(b) | ||||
Expenses, after expense reductions | 1.00 | % | 1.04 | %(b) | ||||
Expenses, after expense reductions and net of custody credits | 0.99 | % | 0.99 | %(b) | ||||
Expenses, before expense reductions | 1.20 | % | 2.98 | %(b) | ||||
Portfolio turnover rate | 91.02 | % | 6.08 | % | ||||
Net assets at end of period (000) | $ | 108,461 | $ | 12,968 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Fund commenced operations on July 28, 2006. |
+ | Based on weighted average shares outstanding. |
See notes to the financial statements.
Certified Annual Report | 17 |
SCHEDULE OF INVESTMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
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 9/30/07
Telecommunication Services | 20.4 | % | |
Energy | 11.9 | % | |
Materials | 9.1 | % | |
Diversified Financials | 8.4 | % | |
Health Care Equipment & Services | 7.3 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 3.8 | % | |
Banks | 3.6 | % | |
Capital Goods | 3.4 | % | |
Consumer Services | 3.4 | % | |
Insurance | 3.1 | % | |
Utilities | 2.9 | % | |
Real Estate | 2.9 | % | |
Technology Hardware & Equipment | 2.8 | % | |
Transportation | 2.3 | % | |
Media | 1.5 | % | |
Semiconductors & Semiconductor Equipment | 0.8 | % | |
Other Assets and Cash Equivalents | 12.4 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/07 (percent of equity holdings)
United States of America | 39.0 | % | |
China | 12.2 | % | |
Greece | 5.9 | % | |
Switzerland | 5.6 | % | |
Canada | 5.6 | % | |
México | 5.1 | % | |
France | 4.1 | % | |
South Korea | 4.1 | % | |
Ireland | 3.9 | % | |
Philippines | 3.3 | % | |
Hong Kong | 3.1 | % | |
Italy | 2.6 | % | |
Brazil | 2.3 | % | |
Israel | 1.4 | % | |
Panama | 0.9 | % | |
Austria | 0.9 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 87.64% | |||||
BANKS — 3.55% | |||||
COMMERCIAL BANKS — 3.55% | |||||
Shinhan Financial Group Co., Ltd. | 260,000 | $ | 16,988,636 | ||
16,988,636 | |||||
CAPITAL GOODS — 3.44% | |||||
TRADING COMPANIES & DISTRIBUTORS — 3.44% | |||||
Babcock & Brown Air Ltd. ADR+ | 721,600 | 16,452,480 | |||
16,452,480 | |||||
18 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
shares/ Principal Amount | Value | ||||
CONSUMER SERVICES — 3.41% | |||||
HOTELS, RESTAURANTS & LEISURE — 3.41% | |||||
OPAP SA | 420,800 | $ | 16,321,078 | ||
16,321,078 | |||||
DIVERSIFIED FINANCIALS — 8.35% | |||||
CAPITAL MARKETS — 2.70% | |||||
Charles Schwab Corp. | 387,000 | 8,359,200 | |||
UBS AG | 85,125 | 4,577,045 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.65% | |||||
Hong Kong Exchanges & Clearing Ltd. | 197,600 | 6,049,615 | |||
KKR Financial Holdings LLC | 1,244,329 | 20,966,944 | |||
39,952,804 | |||||
ENERGY — 11.92% | |||||
OIL, GAS & CONSUMABLE FUELS — 11.92% | |||||
Apache Corp. | 161,550 | 14,549,193 | |||
Capital Product Partners LP | 334,157 | 8,250,336 | |||
Chevron Corp. | 157,750 | 14,762,245 | |||
China Petroleum & Chemical Corp. | 11,000,000 | 13,683,053 | |||
Eni SpA | 155,100 | 5,748,073 | |||
56,992,900 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 7.34% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 1.99% | |||||
Cremer SA+ | 815,800 | 9,502,089 | |||
HEALTH CARE PROVIDERS & SERVICES — 0.99% | |||||
WellPoint, Inc.+ | 60,000 | 4,735,200 | |||
HEALTH CARE TECHNOLOGY — 4.36% | |||||
Eclipsys Corp.+ | 894,700 | 20,864,404 | |||
35,101,693 | |||||
INSURANCE — 3.11% | |||||
INSURANCE — 3.11% | |||||
American International Group, Inc. | 121,600 | 8,226,240 | |||
Swiss Re | 74,325 | 6,620,144 | |||
14,846,384 | |||||
Certified Annual Report | 19 |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
MATERIALS — 9.13% | |||||
METALS & MINING — 9.13% | |||||
Eastern Platinum Ltd.+ | 10,314,000 | $ | 23,435,017 | ||
Freeport-McMoRan Copper & Gold, Inc. | 193,000 | 20,243,770 | |||
43,678,787 | |||||
MEDIA — 1.53% | |||||
MEDIA — 1.53% | |||||
Comcast Corp.+ | 87,800 | 2,103,688 | |||
Mediaset SpA | 504,300 | 5,206,331 | |||
7,310,019 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 3.78% | |||||
LIFE SCIENCES TOOLS & SERVICES — 2.59% | |||||
Bachem Holding AG | 146,500 | 12,363,002 | |||
PHARMACEUTICALS — 1.19% | |||||
Teva Pharmaceutical Industries Ltd. ADR | 128,200 | 5,701,054 | |||
18,064,056 | |||||
REAL ESTATE — 2.88% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 2.88% | |||||
Country Garden Holdings Co. Ltd.+ | 8,100,000 | 13,774,642 | |||
13,774,642 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.79% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.79% | |||||
Austriamicrosystems AG+ | 71,565 | 3,761,888 | |||
3,761,888 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.81% | |||||
COMPUTERS & PERIPHERALS — 2.81% | |||||
Dell Inc.+ | 486,000 | 13,413,600 | |||
13,413,600 | |||||
TELECOMMUNICATION SERVICES — 20.41% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 7.26% | |||||
France Telecom SA | 514,200 | 17,223,416 | |||
Level 3 Communications, Inc.+ | 3,760,700 | 17,487,255 |
20 | Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 13.15% | |||||||
América Móvil SA de CV | 335,000 | $ | 21,440,000 | ||||
China Mobile Ltd. | 1,457,000 | 23,840,234 | |||||
Crown Castle International Corp.+ | 434,000 | 17,633,420 | |||||
97,624,325 | |||||||
TRANSPORTATION — 2.28% | |||||||
AIRLINES — 0.82% | |||||||
Copa Holdings SA | 97,900 | 3,920,895 | |||||
TRANSPORTATION INFRASTRUCTURE — 1.46% | |||||||
Shenzhen Chiwan Wharf Holdings Ltd. | 2,706,848 | 6,998,803 | |||||
10,919,698 | |||||||
UTILITIES — 2.91% | |||||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 2.91% | |||||||
PNOC Energy Development Corp. | 97,814,100 | 13,895,899 | |||||
13,895,899 | |||||||
TOTAL COMMON STOCK (Cost $361,446,013) | 419,098,889 | ||||||
SHORT TERM INVESTMENTS — 15.93% | |||||||
Abbey National, 4.775%, 10/1/2007 | $ | 6,800,000 | 6,800,000 | ||||
General Electric Capital Corp., 4.68%, 10/2/2007 | 55,000,000 | 54,992,850 | |||||
Toyota Credit de Puerto Rico, 4.70%, 10/2/2007 | 14,400,000 | 14,398,121 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $76,190,971) | 76,190,971 | ||||||
TOTAL INVESTMENTS — 103.57% (Cost $437,636,984) | $ | 495,289,860 | |||||
LIABILITIES NET OF OTHER ASSETS — (3.57)% | (17,055,803 | ) | |||||
NET ASSETS — 100.00% | $ | 478,234,057 | |||||
Footnote Legend
+ Non-income producing
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
See notes to financial statements.
Certified Annual Report | 21 |
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, 2007, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the Class I shares for the year then ended and for the period July 28, 2006 (commencement of operations) through 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 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
22 | Certified Annual Report |
EXPENSE EXAMPLE | ||
Thornburg Global Opportunities Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,255.30 | $ | 5.60 | |||
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. |
Certified Annual Report | 23 |
INDEX COMPARISON | ||
Thornburg Global Opportunities Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Global opportunities Fund versus MSCI AC World Index
(July 28, 2006 to September 30, 2007)*
* | Hypothetical chart is based on daily performance of the fund and index. |
AVERAGE ANNUAL TOTAL RETURNS
For period ended September 30, 2007
1 Yr | Since Inception | |||||
I Shares (Incep: 07/28/06) | 58.51 | % | 57.73 | % | ||
MSCI All Country | ||||||
World Index (Since: 07/28/06) | 24.01 | % | 23.89 | % |
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 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 |
TRUSTEES AND OFFICERS | ||
Thornburg Global Opportunities Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
26 | Certified Annual Report |
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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 Global Opportunities Fund | September 30, 2007 (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 web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
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 web site at www.thornburg. com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the tax year ended September 30, 2007, the Thornburg Global Opportunities Fund designates 15.06% (or the maximum allowed) 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.
4.83% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2007 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, 2007. Complete information will be computed and reported in conjunction with your 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT 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 Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2007.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met on September 11, 2007 to consider renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance since its inception in 2006 relative to a “world stock” category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to a broad-based securities index, and (iv) a comparative measure of estimated portfolio earnings per share growth.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, trade execution, performance of 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 strategies, as described in its prospectuses,
28 | Certified Annual Report |
OTHER INFORMATION, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2007 (Unaudited) |
likely will vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objectives. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the Fund’s superior investment performance in most periods relative to the performance of the category of equity mutual funds selected by the independent mutual fund analyst firm, and the Fund’s having outperformed a broad-based securities index in each measuring period since the Fund’s inception.
The Trustees concluded, based upon these and other considerations, that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. 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; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 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. The Trustees observed that the management fee charged to the Fund was somewhat higher than the average and median fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, but that the overall expense ratio was comparable to the average expense ratio and higher to a small degree than the median expense ratio for the same fund group. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report | 29 |
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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.
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 International Growth 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 $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 International Growth Fund
Comprehensive International Growth Investing
The Fund seeks long-term growth of capital by investing in equity securities selected for their growth potential.
The Fund normally invests at least 75% of its assets in foreign securities or depository receipts of foreign securities. However, the Fund may own a variety of securities, including debt securities. The Fund may also invest in developing countries and in smaller companies with market capitalizations of less than $500 million.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Thornburg International Growth Fund
September 30, 2007
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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.
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4 Certified Annual Report
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Investing outside the United States involves additional risks, such as currency fluctuations. 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 ex-U.S. Growth Index – The Morgan Stanley Capital International All Country World ex-U.S. Growth Index includes growth companies in developed and emerging markets throughout the world, excluding the United States. Indices do not take into account fees and expenses. Investors cannot make direct investments in an index.
Certified Annual Report 5
Alexander M.V. Motola, CFA Co-Portfolio Manager
Brian Summers,CFA Co-Portfolio Manager |
October 17, 2007
Dear Fellow Shareholder:
For the period ended September 30, 2007, the Thornburg International Growth Fund had strong relative and absolute performance over the eight months since the Fund’s inception on February 1, 2007. On September 30, 2007, the net asset value (NAV) for the Class A shares was $14.92. At inception on February 1, 2007, the Fund’s NAV was $11.94. The Fund’s Class A shares outperformed its benchmark with a total return of 24.96% (at NAV) compared to 18.16% during the same time period for the MSCI AC World ex-US Growth Index. During the performance period, currency translation as measured by the MSCI AC World ex-US Growth Index had a positive influence on returns for international markets. Initial public offerings contributed 8.86% of total return to the Fund during the performance period.
During the period from inception to the end of the third quarter of 2007, the Fund’s performance was aided by the health care, telecommunication services, utilities and consumer discretionary sectors. Within health care, Medial Saude (MEDI3 BZ) stood out. The company operates a managed care organization and network of hospitals and clinics in Brazil. Medial Saude’s business development performed to our investment thesis during our holding period but the valuation multiple tracked well ahead. We took our profits and remain interested in following the company’s future and the market’s valuation assessment.
Telecommunication services is one sector well represented in the portfolio with América Móvil SA de CV, Telefónica SA, MTN Group Ltd. and PT Telekomunikasi Indonesia. América Móvil continues to extend its leadership in the Mexican mobile market as well as build a stronger presence across Latin America. While América Móvil delivered the best returns in the group during the performance period, we see similar potential in both MTN Group and Telekomunikasi Indonesia to develop into leading players in low penetration markets with populations experiencing rising incomes and aspirations for a higher quality of life.
Another area where we were relatively successful this year is renewable energy. Our best contributor in this area thus far has been PNOC Energy Development Corp., a company based in the Philippines, which operates over 1,100 MWs of geothermal energy fields. Geothermal is an attractive renewable energy source that generates high operating margins, and it is these characteristics that engaged our interest. We were very familiar with the company at the time of the Fund’s launch due to our ownership in the Thornburg Core Growth Fund. During the performance period, we had the opportunity to participate in a secondary offering where the Philippine government reduced its stake in PNOC. The terms of the secondary offering were very interesting to us as participating investors were able to purchase the shares at a discount to the last available market price. Subsequent to the secondary offering, the company is now engaged in an auction process to sell the government’s remaining share ownership to qualified strategic buyers. These developments have accelerated the process of crystallizing the value of the business with the market, a valuation which we felt previously undervalued the assets and potential. We have made subsequent investments in related areas, including Verbund, an Austrian hydroelectric power generator. |
6 Certified Annual Report
The highlight of the fiscal year was Las Vegas Sands Corp. Leading up to and following the opening of the Venetian Macao on the Cotai Strip in Macau, the stock went on a breathtaking move to new highs. We believe that the leadership at Sands have the rare combination of vision and ability to execute the details. We are excited to be part of the development as shareholders in Sands and look forward to watching management execute their game plan.
Our worst performers didn’t hurt as much as the winners helped, but they were still present and never pleasant. Among our most disappointing holdings were Soitec Securities Npv, FAVA International, Temenos Group, Takeuchi Manufacturing Co. Ltd., Nice SpA, and SXC Health Solutions. For the most part these securities have not lived up to our initial assessment of the business potential. Consequently, we have reallocated the money into securities with investment theses that we hope offer our shareholders more opportunity. The research efforts directed toward these securities may not have proven out, but we strive to execute our investment process with diligence and a consistent focus on risk management.
Striving to provide consistent investment returns requires thoughtful and comprehensive approaches to managing risk. Although we hope our statistical risk is low (standard deviation of returns), we attempt to manage risk in two ways, appropriate diversification and stock specific risk evaluation. We consciously diversify our portfolio by geography, sector (and within sectors), and by our own baskets (Growth Industry Leaders, Consistent Growth Companies, and Emerging Growth Companies). Secondly, 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. With this approach we feel we are managing risk at the most basic and important level: the individual security level. “Knowing what you own” is our mantra. It is our belief that adhering to an investment strategy focused on valuation, growth, and rigorous analysis will reward our shareholders.
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 International Growth Fund. Best wishes for a wonderful holiday season and New Year.
Regards,
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Alexander M.V. Motola,CFA | Brian Summers,CFA | |
Managing Director | Managing Director | |
Co-Portfolio Manager | Co-Portfolio Manager |
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 International Growth Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $57,325,379) (Note 2) | $ | 63,449,369 | ||
Cash | 902,165 | |||
Receivable for fund shares sold | 2,464,344 | |||
Dividends receivable | 15,303 | |||
Prepaid expenses and other assets | 17,817 | |||
Total Assets | 66,848,998 | |||
LIABILITIES | ||||
Payable for securities purchased | 1,525,016 | |||
Payable for fund shares redeemed | 24,066 | |||
Unrealized loss on forward exchange contracts (Note 7) | 41,271 | |||
Payable to investment advisor and other affiliates (Note 3) | 38,600 | |||
Accounts payable and accrued expenses | 39,177 | |||
Total Liabilities | 1,668,130 | |||
NET ASSETS | $ | 65,180,868 | ||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (38,135 | ) | |
Net unrealized appreciation on investments | 6,085,646 | |||
Accumulated net realized gain (loss) | 1,968,309 | |||
Net capital paid in on shares of beneficial interest | 57,165,048 | |||
$ | 65,180,868 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($25,145,474 applicable to 1,685,429 shares of beneficial interest outstanding - Note 4) | $ | 14.92 | ||
Maximum sales charge, 4.50% of offering price | 0.70 | |||
Maximum offering price per share | $ | 15.62 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($12,376,256 applicable to 833,278 shares of beneficial interest outstanding - Note 4) | $ | 14.85 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($27,659,138 applicable to 1,845,233 shares of beneficial interest outstanding - Note 4) | $ | 14.99 | ||
* | 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
For the period from commencement of operations on | ||
Thornburg International Growth Fund | February 1, 2007 to September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $35,185) | $ | 251,232 | ||
Interest income | 94,183 | |||
Total Income | 345,415 | |||
Expenses: | ||||
Investment advisory fees (Note 3) | 213,955 | |||
Administration fees (Note 3) | ||||
Class A Shares | 9,923 | |||
Class C Shares | 4,301 | |||
Class I Shares | 6,536 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 19,977 | |||
Class C Shares | 34,410 | |||
Transfer agent fees | ||||
Class A Shares | 10,015 | |||
Class C Shares | 6,335 | |||
Class I Shares | 5,275 | |||
Registration and filing fees | ||||
Class A Shares | 23,444 | |||
Class C Shares | 22,213 | |||
Class I Shares | 22,594 | |||
Custodian fees (Note 3) | 61,993 | |||
Professional fees | 31,988 | |||
Accounting fees | 692 | |||
Trustee fees | 692 | |||
Other expenses | 17,813 | |||
Total Expenses | 492,156 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (57,883 | ) | ||
Management fees waived by investment advisor (Note 3) | (89,948 | ) | ||
Fees paid indirectly (Note 3) | (4,783 | ) | ||
Net Expenses | 339,542 | |||
Net Investment Income | $ | 5,873 | ||
Certified Annual Report 9
STATEMENT OF OPERATIONS, CONTINUED
For the period from commencement of operations on | ||
Thornburg International Growth Fund | February 1, 2007 to September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 2,086,024 | ||
Foreign currency transactions | (161,723 | ) | ||
1,924,301 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments sold | 6,123,990 | |||
Foreign currency translations | (38,344 | ) | ||
6,085,646 | ||||
Net Realized and Unrealized Gain | 8,009,947 | |||
Net Increase in Net Assets Resulting From Operations | $ | 8,015,820 | ||
See notes to financial statements.
10 Certified Annual Report
STATEMENT OF CHANGES IN NET ASSETS
Thornburg International Growth Fund |
For the period from commencement of operations on February 1, 2007 to September 30, 2007 | |||
INCREASE (DECREASE) IN NET ASSETS FROM: | |||
OPERATIONS: | |||
Net investment income | $ | 5,873 | |
Net realized gain on investments and foreign currency transactions | 1,924,301 | ||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 6,085,646 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | 8,015,820 | ||
FUND SHARE TRANSACTIONS (NOTE 4): | |||
Class A Shares | 22,548,699 | ||
Class C Shares | 11,229,605 | ||
Class I Shares | 23,386,744 | ||
Net Increase in Net Assets | 65,180,868 | ||
NET ASSETS: | |||
Beginning of period | — | ||
End of period | $ | 65,180,868 | |
See notes to financial statements.
Certified Annual Report 11
Thornburg International Growth Fund | September 30, 2007 |
NOTE 1 – ORGANIZATION
Thornburg International Growth Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on February 1, 2007. 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 twelve 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, 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 both foreign and domestic equity securities selected for their growth potential.
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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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.
12 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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, 2007, the Advisor voluntarily waived investment Advisory fees of $89,948. The Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $7,387 for Class A shares, $16,091 for Class C shares, and $34,405 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.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2007 |
For the period ended September 30, 2007, the Distributor has advised the Fund that it earned commissions aggregating $40,619 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $252 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 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% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by the Distributor for each class of shares of the Fund under their respective Service and Distribution Plans for the period ended September 30, 2007, 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, 2007, fees paid indirectly were $4,783. 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, 2007, 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, 2007* | |||||||
Shares | Amount | ||||||
Class A Shares | |||||||
Shares sold | 1,859,640 | $ | 24,943,384 | ||||
Shares repurchased | (174,211 | ) | (2,395,601 | ) | |||
Redemption fees received** | — | 916 | |||||
Net Increase (Decrease) | 1,685,429 | $ | 22,548,699 | ||||
Class C Shares | |||||||
Shares sold | 842,383 | $ | 11,352,704 | ||||
Shares repurchased | (9,105 | ) | (123,492 | ) | |||
Redemption fees received** | — | 393 | |||||
Net Increase (Decrease) | 833,278 | $ | 11,229,605 | ||||
Class I Shares | |||||||
Shares sold | 1,901,175 | $ | 24,150,347 | ||||
Shares repurchased | (55,942 | ) | (764,907 | ) | |||
Redemption fees received** | — | 1,304 | |||||
Net Increase (Decrease) | 1,845,233 | $ | 23,386,744 | ||||
* | The Fund commenced operations on February 1, 2007. |
** | 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 advisors, its owners, employees, and affiliated entities of the Advisor have invested amounts in the Fund valued at $18,214,184, representing 27.94% of the net asset value as of September 30, 2007.
NOTE 5 – SECURITIES TRANSACTIONS
For the period ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $95,446,175 and $43,206,826, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 57,325,379 | ||
Gross unrealized appreciation on a tax basis | $ | 6,339,510 | ||
Gross unrealized depreciation on a tax basis | (215,520 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 6,123,990 | ||
Distributable earnings – ordinary income | $ | 2,028,207 |
In order to account for permanent book/tax differences, the Fund increased undistributed net realized investment gains by $44,008 and decreased undistributed net investment income by $44,008. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains/losses.
At September 30, 2007, the Fund had deferred tax basis currency and capital losses occurring subsequent to inception date of February 1, 2007 of $44,008 and $54,025, respectively. For tax purposes, such losses will be reflected in the period ending September 30, 2008.
14 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2007 |
NOTE 7 – FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the period ended September 30, 2007, 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, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
CONTRACTS TO SELL: | ||||||||
Contracts | Contract Value Date | Unrealized Gain (Loss) | ||||||
58,000,000 | Philippine Peso for 1,242,502 USD | December 18, 2007 | $ | (41,271 | ) | |||
Net unrealized gain (loss) from forward exchange contracts | $ | (41,271 | ) | |||||
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 15
Thornburg International Growth Fund |
Period Ended September 30, | ||||
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 | (0.03 | ) | ||
Net realized and unrealized gain (loss) on investments | 3.01 | |||
Total from investment operations | 2.98 | |||
Less dividends from: | ||||
Net investment income | — | |||
Change in net asset value | 2.98 | |||
NET ASSET VALUE, end of period | $ | 14.92 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 24.96 | % | ||
Ratios to average net assets: | ||||
Net investment income | (0.29 | )%(b) | ||
Expenses, after expense reductions | 1.64 | %(b) | ||
Expenses, after expense reductions and net of custody credits | 1.62 | %(b) | ||
Expenses, before expense reductions | 2.10 | %(b) | ||
Portfolio turnover rate | 113.34 | % | ||
Net assets at end of period (000) | $ | 25,145 |
(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 February 1, 2007. |
+ | Based on weighted average shares outstanding. |
See notes to the financial statements.
16 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Growth Fund |
Period Ended September 30, | ||||
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 | (0.10 | ) | ||
Net realized and unrealized gain (loss) on investments | 3.01 | |||
Total from investment operations | 2.91 | |||
Less dividends from: | ||||
Net investment income | — | |||
Change in net asset value | 2.91 | |||
NET ASSET VALUE, end of period | $ | 14.85 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 24.37 | % | ||
Ratios to average net assets: | ||||
Net investment income | (1.13 | )%(b) | ||
Expenses, after expense reductions | 2.39 | %(b) | ||
Expenses, after expense reductions and net of custody credits | 2.38 | %(b) | ||
Expenses, before expense reductions | 3.23 | %(b) | ||
Portfolio turnover rate | 113.34 | % | ||
Net assets at end of period (000) | $ | 12,376 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Fund commenced operations on February 1, 2007. |
+ | Based on weighted average shares outstanding. |
See notes to the financial statements.
Certified Annual Report 17
FINANCIAL HIGHLIGHTS, CONTINUED Thornburg International Growth Fund |
Period Ended September 30, | ||||
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 | 0.05 | |||
Net realized and unrealized gain (loss) on investments | 3.00 | |||
Total from investment operations | 3.05 | |||
Less dividends from: | ||||
Net investment income | — | |||
Change in net asset value | 3.05 | |||
NET ASSET VALUE, end of period | $ | 14.99 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 25.54 | % | ||
Ratios to average net assets: | ||||
Net investment income | 0.52 | %(b) | ||
Expenses, after expense reductions | 1.01 | %(b) | ||
Expenses, after expense reductions and net of custody credits | 0.99 | %(b) | ||
Expenses, before expense reductions | 1.64 | %(b) | ||
Portfolio turnover rate | 113.34 | % | ||
Net assets at end of period (000) | $ | 27,659 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Fund commenced operations on February 1, 2007. |
+ | Based on weighted average shares outstanding. |
See notes to the financial statements.
18 Certified Annual Report
Thornburg International Growth Fund | September 30, 2007 |
CUSIPS: CLASS A – 885-215-319, CLASS C – 885-215-293, CLASS I – 885-215-244
NASDAQ SYMBOLS: CLASS A – TIGAX, CLASS C – TIGCX, CLASS I – TINGX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/07
Food, Beverage & Tobacco | 14.9 | % | |
Utilities | 14.9 | % | |
Telecommunication Services | 12.5 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 9.7 | % | |
Consumer Services | 6.6 | % | |
Diversified Financials | 6.6 | % | |
Banks | 6.2 | % | |
Software and Services | 4.1 | % | |
Transportation | 3.8 | % | |
Technology Hardware & Equipment | 2.9 | % | |
Capital Goods | 2.7 | % | |
Materials | 2.2 | % | |
Real Estate | 2.2 | % | |
Consumer Durables & Apparel | 1.9 | % | |
Media | 1.5 | % | |
Other Assets & Cash Equivalents | 7.3 | % | |
SUMMARY OF COUNTRY EXPOSURE As of 9/30/07 (percent of equity holdings) |
| ||
Italy | 8.6 | % | |
Germany | 8.5 | % | |
Switzerland | 8.3 | % | |
United Kingdom | 8.2 | % | |
Netherlands | 7.7 | % | |
Denmark | 7.6 | % | |
Czech Republic | 6.5 | % | |
México | 6.2 | % | |
Greece | 5.7 | % | |
South Africa | 5.2 | % | |
United States of America | 5.2 | % | |
China | 4.4 | % | |
Philippines | 4.3 | % | |
Austria | 3.7 | % | |
Spain | 3.0 | % | |
India | 3.0 | % | |
Turkey | 2.2 | % | |
Estonia | 1.7 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 92.74% | |||||
BANKS — 6.24% | |||||
COMMERCIAL BANKS — 6.24% | |||||
Capitalia SpA | 211,000 | $ | 2,015,865 | ||
EFG Eurobank Ergasias | 53,130 | 1,868,259 | |||
UniCredito Italiano SpA | 21,000 | 179,670 | |||
4,063,794 | |||||
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED Thornburg International Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
CAPITAL GOODS — 2.68% | |||||
MACHINERY — 2.68% | |||||
Bolzoni SpA | 256,700 | $ | 1,749,677 | ||
1,749,677 | |||||
CONSUMER DURABLES & APPAREL — 1.92% | |||||
TEXTILES, APPAREL & LUXURY GOODS — 1.92% | |||||
Antichi Pellettieri SpA | 93,600 | 1,253,940 | |||
1,253,940 | |||||
CONSUMER SERVICES — 6.64% | |||||
HOTELS, RESTAURANTS & LEISURE — 6.64% | |||||
FU JI Food & Catering Services | 394,000 | 1,211,317 | |||
Las Vegas Sands Corp.+ | 23,364 | 3,117,225 | |||
4,328,542 | |||||
DIVERSIFIED FINANCIALS — 6.63% | |||||
CAPITAL MARKETS — 2.43% | |||||
EFG International | 33,600 | 1,581,516 | |||
DIVERSIFIED FINANCIAL SERVICES — 4.20% | |||||
Deutsche Börse AG | 20,100 | 2,737,182 | |||
4,318,698 | |||||
FOOD, BEVERAGE & TOBACCO — 14.91% | |||||
BEVERAGES — 10.65% | |||||
Carlsberg A/S Class A | 14,300 | 1,857,285 | |||
Carlsberg A/S Class B | 7,000 | 956,024 | |||
Coca Cola Icecek A/S | 162,300 | 1,358,103 | |||
Heineken Holding NV | 48,300 | 2,768,710 | |||
FOOD PRODUCTS — 4.26% | |||||
Nestlé SA-REG | 6,181 | 2,776,605 | |||
9,716,727 | |||||
MATERIALS — 2.19% | |||||
CONSTRUCTION MATERIALS — 2.19% | |||||
Cemex SAB de C.V. ADR+ | 47,700 | 1,427,184 | |||
1,427,184 | |||||
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED Thornburg International Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
MEDIA — 1.49% | |||||
MEDIA — 1.49% | |||||
Naspers Ltd. | 35,000 | $ | 970,447 | ||
970,447 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 9.63% | |||||
PHARMACEUTICALS — 9.63% | |||||
Glaxosmithkline ADR | 26,200 | 1,393,840 | |||
Glaxosmithkline plc | 33,600 | 891,629 | |||
Novo Nordisk A/S | 14,600 | 1,762,199 | |||
Roche Holdings AG | 12,300 | 2,230,217 | |||
6,277,885 | |||||
REAL ESTATE — 2.19% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 2.19% | |||||
Orco Property Group | 9,500 | 1,426,076 | |||
1,426,076 | |||||
SOFTWARE & SERVICES — 4.14% | |||||
SOFTWARE — 4.14% | |||||
Amdocs Ltd.+ | 72,600 | 2,699,994 | |||
2,699,994 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.88% | |||||
ELECTRONIC EQUIPMENT & INSTRUMENTS — 2.88% | |||||
Smartrac NV+ | 36,100 | 1,878,903 | |||
1,878,903 | |||||
TELECOMMUNICATION SERVICES — 12.50% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 5.59% | |||||
PT Telekomunikasi Indonesia | 1,498,500 | 1,802,460 | |||
Telefónica SA | 65,800 | 1,841,834 | |||
WIRELESS TELECOMMUNICATION SERVICES — 6.91% | |||||
América Móvil SA de CV | 729,900 | 2,335,701 | |||
MTN Group Ltd. | 142,800 | 2,166,055 | |||
8,146,050 | |||||
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED Thornburg International Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
TRANSPORTATION — 3.80% | ||||||
MARINE — 1.59% | ||||||
AS Tallink Grupp+ | 575,700 | $ | 1,034,358 | |||
TRANSPORTATION INFRASTRUCTURE — 2.21% | ||||||
China Merchants Holdings International Co., Ltd. | 232,000 | 1,444,433 | ||||
2,478,791 | ||||||
UTILITIES — 14.90% | ||||||
ELECTRIC UTILITIES — 7.29% | ||||||
ČEZ As | 40,825 | 2,516,859 | ||||
Oest Elektrizitats | 38,800 | 2,236,311 | ||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 3.96% | ||||||
PNOC Energy Development Corp. | 18,178,100 | 2,582,460 | ||||
MULTI-UTILITIES — 3.65% | ||||||
RWE AG | 18,900 | 2,377,031 | ||||
9,712,661 | ||||||
TOTAL COMMON STOCK (Cost $54,325,379) | 60,449,369 | |||||
SHORT TERM INVESTMENTS — 4.60% | ||||||
General Electric Capital Corp., 4.68%, 10/1/2007 | $ | 3,000,000 | 3,000,000 | |||
TOTAL SHORT TERM INVESTMENTS (Cost $3,000,000) | 3,000,000 | |||||
TOTAL INVESTMENTS — 97.34% (Cost $57,325,379) | $ | 63,449,369 | ||||
OTHER ASSETS LESS LIABILITIES — 2.66% | 1,731,499 | |||||
NET ASSETS — 100.00% | $ | 65,180,868 | ||||
Footnote Legend
+ | Non-income producing |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
See notes to financial statements.
22 Certified Annual Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg International Growth Fund
To the Trustees and Shareholders of
Thornburg International 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 International Growth Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2007, and the results of its operations, the changes in its net assets and the financial highlights for the period February 1, 2007 (commencement of operations) through September 30, 2007, 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, 2007 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
Certified Annual Report 23
Thornburg International Growth Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
Actual expenses
For each class of shares, 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 for your class of shares 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
For each class of shares, 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.
Beginning Account Value 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,183.20 | $ | 8.85 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,016.96 | $ | 8.17 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,178.60 | $ | 12.97 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.16 | $ | 11.99 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,186.90 | $ | 5.43 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.62%; C: 2.38%; 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. |
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 for each class of shares 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.
24 Certified Annual Report
Thornburg International Growth Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg International Growth Fund versus MSCI AC World ex U.S. Growth Index
(February 1, 2007 to September 30, 2007)*
* | Hypothetical chart is based on daily performance of the fund and index. |
TOTAL RETURNS*
For periods ended September 30, 2007 (with sales charge)
Since Inception | |||
A Shares (Incep: 2/1/07) | 19.36 | % | |
C shares (Incep: 2/1/07) | 23.37 | % | |
MSCI All Country World ex-U.S. Growth Index (Since: 2/1/07) | 18.16 | % |
* | 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 ex-U.S. Growth Index (MSCI AC World ex-U.S. Growth Index) includes growth companies in developed and emerging markets throughout the world, excluding the United States. Indices do not take into account fees and expenses. Investors cannot make direct investments in an index.
Certified Annual Report 25
Thornburg International Growth Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 |
26 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED Thornburg International Growth Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 27
TRUSTEES AND OFFICERS, CONTINUED Thornburg International Growth Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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.
28 Certified Annual Report
Thornburg International Growth Fund | September 30, 2007 (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.
Information regarding how proxies were voted is available on or before August 31 for the five months from the Fund’s inception of February 1, 2007 to June 30, 2007. 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 period ended September 30, 2007, foreign taxes paid and foreign source income is $35,185 and $2,377,248, 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, 2007. Complete information will be computed and reported in conjunction with your 2007 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 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg International Growth 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 December 3-4, 2006. The Trustees reviewed and approved the continuance of the agreement again on September 11, 2007.
In anticipation of their initial consideration of the advisory agreement for the Fund, the independent Trustees met in independent session on December 3, 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. Following this session, the Trustees met on December 4, 2006 to consider the 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, and in accordance with their established practice, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) a measure of the Fund’s investment performance since inception, relative to a broad-based securities index, and (iv) a comparative measure of earnings growth.
Certified Annual Report 29
OTHER INFORMATION, CONTINUED Thornburg International Growth Fund | September 30, 2007 (Unaudited) |
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, trade execution, the Advisor’s performance of 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 strategies, as described in its prospectuses, are unique or may vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objective. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the superior total returns of the Fund since its inception as compared to a broad-based securities index and a foreign small/mid cap growth category of equity mutual funds selected by an independent mutual fund analyst firm, and a comparative measure of projected earnings growth.
The Trustees concluded, based upon these and other observations, that the Advisor had satisfactorily pursued the Fund’s stated investment objective. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objective and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 management fee, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a group of international multi-capitalization growth equity mutual funds assembled by an independent mutual fund analyst firm. The Trustees also considered that the overall expense ratio of the Fund (net of fee waivers by the Advisor) fell between the median and average expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, and that the management fee (net of fee waivers by the Advisor) was higher than the average and comparable to the median fee rates for the same group of funds. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. The Trustees also noted in this regard, however, that the Advisor’s profitability from its services for the Fund was likely to be reduced in the initial period of the Fund’s operations. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as the Fund increases in size due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
30 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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. 31
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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
32 This page is not part of the Annual Report.
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
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 Growth Fund
Comprehensive International Growth Investing
The Fund seeks long-term growth of capital by investing in equity securities selected for their growth potential.
The Fund normally invests at least 75% of its assets in foreign securities or depository receipts of foreign securities. However, the Fund may own a variety of securities, including debt securities. The Fund may also invest in developing countries and in smaller companies with market capitalizations of less than $500 million.
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 International Growth Fund |
Thornburg’s equity research uses a fundamental and comprehensive analytical approach. 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.
Thornburg International Growth Fund
I Shares – September 30, 2007
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 3
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4 Certified Annual Report
Important Information
The information presented on the following pages was current as of September 30, 2007. 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.
Investments in the Fund carry risks including possible loss of principal. Investing outside the United States involves additional risks, such as currency fluctuations. 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. Please see the Fund’s Prospectus for a discussion of the risks associated with an investment in the Fund. Investments 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 ex-U.S. Growth Index – The Morgan Stanley Capital International All Country World ex-U.S. Growth Index includes growth companies in developed and emerging markets throughout the world, excluding the United States. Indices do not take into account fees and expenses. Investors cannot make direct investments in an index.
Certified Annual Report 5
Alexander M.V. Motola, CPA Co-Portfolio Manager
Brian Summers, CPA Co-Portfolio Manager |
October 17, 2007
Dear Fellow Shareholder:
For the period ended September 30, 2007, the Thornburg International Growth Fund had strong relative and absolute performance over the eight months since the Fund’s inception on February 1, 2007. On September 30, 2007, the net asset value (NAV) for the Class I shares was $14.99. At inception on February 1, 2007, the Fund’s NAV was $11.94. The Fund’s Class I shares outperformed its benchmark with a total return of 25.54% compared to 18.16% during the same time period for the MSCI AC World ex-US Growth Index. During the performance period, currency translation as measured by the MSCI AC World ex-US Growth Index had a positive influence on returns for international markets. Initial public offerings contributed 8.86% of total return to the Fund during the performance period.
During the period from inception to the end of the third quarter of 2007, the Fund’s performance was aided by the health care, telecommunication services, utilities and consumer discretionary sectors. Within health care, Medial Saude (MEDI3 BZ) stood out. The company operates a managed care organization and network of hospitals and clinics in Brazil. Medial Saude’s business development performed to our investment thesis during our holding period but the valuation multiple tracked well ahead. We took our profits and remain interested in following the company’s future and the market’s valuation assessment.
Telecommunication services is one sector well represented in the portfolio with América Móvil SA de CV, Telefónica SA, MTN Group Ltd. and PT Telekomunikasi Indonesia. América Móvil continues to extend its leadership in the Mexican mobile market as well as build a stronger presence across Latin America. While América Móvil delivered the best returns in the group during the performance period, we see similar potential in both MTN Group and Telekomunikasi Indonesia to develop into leading players in low penetration markets with populations experiencing rising incomes and aspirations for a higher quality of life.
Another area where we were relatively successful this year is renewable energy. Our best contributor in this area thus far has been PNOC Energy Development Corp., a company based in the Philippines, which operates over 1,100 MWs of geothermal energy fields. Geothermal is an attractive renewable energy source that generates high operating margins, and it is these characteristics that engaged our interest. We were very familiar with the company at the time of the Fund’s launch due to our ownership in the Thornburg Core Growth Fund. During the performance period, we had the opportunity to participate in a secondary offering where the Philippine government reduced its stake in PNOC. The terms of the secondary offering were very interesting to us as participating investors were able to purchase the shares at a discount to the last available market price. Subsequent to the secondary offering, the company is now engaged in an auction process to sell the government’s remaining share ownership to qualified strategic buyers. These developments have accelerated the process of crystallizing the value of the business with the market, a valuation which we felt previously undervalued the assets and potential. We have made subsequent investments in related areas, including Verbund, an Austrian hydroelectric power generator. |
6 Certified Annual Report
The highlight of the fiscal year was Las Vegas Sands Corp. Leading up to and following the opening of the Venetian Macao on the Cotai Strip in Macau, the stock went on a breathtaking move to new highs. We believe that the leadership at Sands have the rare combination of vision and ability to execute the details. We are excited to be part of the development as shareholders in Sands and look forward to watching management execute their game plan.
Our worst performers didn’t hurt as much as the winners helped, but they were still present and never pleasant. Among our most disappointing holdings were Soitec Securities Npv, FAVA International, Temenos Group, Takeuchi Manufacturing Co. Ltd., Nice SpA, and SXC Health Solutions. For the most part these securities have not lived up to our initial assessment of the business potential. Consequently, we have reallocated the money into securities with investment theses that we hope offer our shareholders more opportunity. The research efforts directed toward these securities may not have proven out, but we strive to execute our investment process with diligence and a consistent focus on risk management.
Striving to provide consistent investment returns requires thoughtful and comprehensive approaches to managing risk. Although we hope our statistical risk is low (standard deviation of returns), we attempt to manage risk in two ways, appropriate diversification and stock specific risk evaluation. We consciously diversify our portfolio by geography, sector (and within sectors), and by our own baskets (Growth Industry Leaders, Consistent Growth Companies, and Emerging Growth Companies). Secondly, 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. With this approach we feel we are managing risk at the most basic and important level: the individual security level. “Knowing what you own” is our mantra. It is our belief that adhering to an investment strategy focused on valuation, growth, and rigorous analysis will reward our shareholders.
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 International Growth Fund. Best wishes for a wonderful holiday season and New Year.
Regards, | ||||
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Alexander M.V. Motola, CFA | Brian Summers, CFA | |||
Managing Director | Managing Director | |||
Co-Portfolio Manager | Co-Portfolio Manager |
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 International Growth Fund | September 30, 2007 |
ASSETS | ||||
Investments at value (cost $57,325,379) (Note 2) | $ | 63,449,369 | ||
Cash | 902,165 | |||
Receivable for fund shares sold | 2,464,344 | |||
Dividends receivable | 15,303 | |||
Prepaid expenses and other assets | 17,817 | |||
Total Assets | 66,848,998 | |||
LIABILITIES | ||||
Payable for securities purchased | 1,525,016 | |||
Payable for fund shares redeemed | 24,066 | |||
Unrealized loss on forward exchange contracts (Note 7) | 41,271 | |||
Payable to investment advisor and other affiliates (Note 3) | 38,600 | |||
Accounts payable and accrued expenses | 39,177 | |||
Total Liabilities | 1,668,130 | |||
NET ASSETS | $ | 65,180,868 | ||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (38,135 | ) | |
Net unrealized appreciation on investments | 6,085,646 | |||
Accumulated net realized gain (loss) | 1,968,309 | |||
Net capital paid in on shares of beneficial interest | 57,165,048 | |||
$ | 65,180,868 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($25,145,474 applicable to 1,685,429 shares of beneficial interest outstanding—Note 4) | $ | 14.92 | ||
Maximum sales charge, 4.50% of offering price | 0.70 | |||
Maximum offering price per share | $ | 15.62 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($12,376,256 applicable to 833,278 shares of beneficial interest outstanding—Note 4) | $ | 14.85 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($27,659,138 applicable to 1,845,233 shares of beneficial interest outstanding—Note 4) | $ | 14.99 | ||
* | 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
For the period from commencement of operations on |
Thornburg International Growth Fund | February 1, 2007 to September 30, 2007 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $35,185) | $ | 251,232 | ||
Interest income | 94,183 | |||
Total Income | 345,415 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 213,955 | |||
Administration fees (Note 3) | ||||
Class A Shares | 9,923 | |||
Class C Shares | 4,301 | |||
Class I Shares | 6,536 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 19,977 | |||
Class C Shares | 34,410 | |||
Transfer agent fees | ||||
Class A Shares | 10,015 | |||
Class C Shares | 6,335 | |||
Class I Shares | 5,275 | |||
Registration and filing fees | ||||
Class A Shares | 23,444 | |||
Class C Shares | 22,213 | |||
Class I Shares | 22,594 | |||
Custodian fees (Note 3) | 61,993 | |||
Professional fees | 31,988 | |||
Accounting fees | 692 | |||
Trustee fees | 692 | |||
Other expenses | 17,813 | |||
Total expenses | 492,156 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (57,883 | ) | ||
Management fees waived by investment advisor (Note 3) | (89,948 | ) | ||
Fees paid indirectly (Note 3) | (4,783 | ) | ||
Net Expenses | 339,542 | |||
Net Investment Income | $ | 5,873 | ||
Certified Annual Report 9
STATEMENT OF OPERATIONS, CONTINUED | For the period from commencement of operations on | |
Thornburg International Growth Fund | February 1, 2007 to September 30, 2007 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | 2,086,024 | ||
Foreign currency transactions | (161,723 | ) | ||
1,924,301 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments sold | 6,123,990 | |||
Foreign currency translations | (38,344 | ) | ||
6,085,646 | ||||
Net Realized and Unrealized Gain | 8,009,947 | |||
Net Increase in Net Assets Resulting From operations | $ | 8,015,820 | ||
See notes to financial statements.
10 Certified Annual Report
STATEMENT OF CHANGES IN NET ASSETS
Thornburg International Growth Fund
For the period from commencement of operations on February 1, 2007 to September 30, 2007 | |||
INCREASE (DECREASE) IN NET ASSETS FROM: | |||
OPERATIONS: | |||
Net investment income | $ | 5,873 | |
Net realized gain on investments and foreign currency transactions | 1,924,301 | ||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | 6,085,646 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | 8,015,820 | ||
FUND SHARE TRANSACTIONS (NOTE 4): | |||
Class A Shares | 22,548,699 | ||
Class C Shares | 11,229,605 | ||
Class I Shares | 23,386,744 | ||
Net Increase in net Assets | 65,180,868 | ||
NET ASSETS: | |||
Beginning of period | — | ||
End of period | $ | 65,180,868 | |
See notes to financial statements.
Certified Annual Report 11
Thornburg International Growth Fund | September 30, 2007 |
NOTE 1 – ORGANIZATION
Thornburg International Growth Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on February 1, 2007. 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 twelve 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, 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 both foreign and domestic equity securities selected for their growth potential.
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: Portfolio securities listed or traded on a national securities exchange are valued on the valuation date at the last reported sale price on the exchange that is the primary market for the security. Portfolio securities traded on an exchange for which there has been no sale that day and other equity securities traded in the over-the-counter market are valued at the mean between the last reported bid and asked prices. Portfolio securities reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign security traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the security’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation. Quotations for foreign securities in foreign currencies are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
Any debt securities held by the Fund have a primary market over the counter and are valued by an independent pricing service approved by the Trustees of the Trust. The pricing service ordinarily values debt securities at quoted bid prices. When quotations are not available, debt securities held by the Fund are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt securities of comparable quality, type of issue, coupon, maturity, and rating, indications as to value from dealers and general market conditions. Short-term obligations having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value.
In any case where the market value of an equity security held by the Fund is not readily available, the Trust’s valuation and pricing committee determines a fair value for the security using factors approved by the Trustees. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value. In any case where a pricing service fails to provide a price for a debt security held by the Fund, the valuation and pricing committee determines a fair value for the debt security using factors approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt security held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt security.
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.
12 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2007 |
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 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 liabilities 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, 2007, 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, 2007, the Advisor voluntarily waived investment Advisory fees of $89,948. The Trust also has entered into administrative services agreements 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, 2007, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $7,387 for Class A shares, $16,091 for Class C shares, and $34,405 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.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2007 |
For the period ended September 30, 2007, the Distributor has advised the Fund that it earned commissions aggregating $40,619 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $252 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 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% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by the Distributor for each class of shares of the Fund under their respective Service and Distribution Plans for the period ended September 30, 2007, 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, 2007, fees paid indirectly were $4,783. 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, 2007, 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, 2007* | |||||||
Shares | Amount | ||||||
Class A Shares | |||||||
Shares sold | 1,859,640 | $ | 24,943,384 | ||||
Shares repurchased | (174,211 | ) | (2,395,601 | ) | |||
Redemption fees received** | — | 916 | |||||
Net Increase (Decrease) | 1,685,429 | $ | 22,548,699 | ||||
Class C Shares | |||||||
Shares sold | 842,383 | $ | 11,352,704 | ||||
Shares repurchased | (9,105 | ) | (123,492 | ) | |||
Redemption fees received** | — | 393 | |||||
Net Increase (Decrease) | 833,278 | $ | 11,229,605 | ||||
Class I Shares | |||||||
Shares sold | 1,901,175 | $ | 24,150,347 | ||||
Shares repurchased | (55,942 | ) | (764,907 | ) | |||
Redemption fees received** | — | 1,304 | |||||
Net Increase (Decrease) | 1,845,233 | $ | 23,386,744 | ||||
* | The Fund commenced operations on February 1, 2007. |
** | 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 advisors, its owners, employees, and affiliated entities of the Advisor have invested amounts in the Fund valued at $18,214,184, representing 27.94% of the net asset value as of September 30, 2007.
NOTE 5 – SECURITIES TRANSACTIONS
For the period ended September 30, 2007, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $95,446,175 and $43,206,826, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2007, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 57,325,379 | ||
Gross unrealized appreciation on a tax basis | $ | 6,339,510 | ||
Gross unrealized depreciation on a tax basis | (215,520 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 6,123,990 | ||
Distributable earnings – ordinary income | $ | 2,028,207 |
In order to account for permanent book/tax differences, the Fund increased undistributed net realized investment gains by $44,008 and decreased undistributed net investment income by $44,008. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains/losses.
At September 30, 2007, the Fund had deferred tax basis currency and capital losses occurring subsequent to inception date of February 1, 2007 of $44,008 and $54,025, respectively. For tax purposes, such losses will be reflected in the period ending September 30, 2008.
14 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2007 |
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the period ended September 30, 2007, 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, economic and political instability, confiscation, inability or delays in selling foreign investments, and reduced legal protection for investments.
CONTRACTS TO SELL:
Unrealized | ||||||
Contracts | Contract Value Date | Gain (Loss) | ||||
58,000,000 Philippine Peso for 1,242,502 USD | December 18, 2007 | $ | (41,271 | ) | ||
Net unrealized gain (loss) from forward exchange contracts | $ | (41,271 | ) | |||
OTHER NOTES:
FASB Interpretation No. 48:
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 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, and, upon implementation, is applicable to all open tax years. On December 22, 2006, the Securities and Exchange Commission extended the first required financial statement reporting period for its fiscal year beginning after December 15, 2006, which for the Fund is March 31, 2008. As of the date of this report, management of the Fund has not identified any material effect on the Fund’s financial statements resulting from the implementation of FIN 48.
Statement of Accounting Standards No. 157:
On September 15, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (the “Statement”). The Statement defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based upon market data obtained from sources independent of the reporting entity (observable inputs) and (ii) the entity’s own assumptions about market participant assumptions developed based upon the best information available under the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the first fiscal year for which the Statement is applied. Management is evaluating the Statement, 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 15
Thornburg International Growth Fund
Period ended September 30, 2007(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 | 0.05 | |||
Net realized and unrealized gain (loss) on investments | 3.00 | |||
Total from investment operations | 3.05 | |||
Less dividends from: | ||||
Net investment income | — | |||
Change in net asset value | 3.05 | |||
NET ASSET VALUE, end of period | $ | 14.99 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return(a) | 25.54 | % | ||
Ratios to average net assets: | ||||
Net investment income | 0.52 | % (b) | ||
Expenses, after expense reductions | 1.01 | % (b) | ||
Expenses, after expense reductions and net of custody credits | 0.99 | % (b) | ||
Expenses, before expense reductions | 1.64 | % (b) | ||
Portfolio turnover rate | 113.34 | % | ||
Net assets at end of period (000) | $ | 27,659 |
(a) | Not annualized for periods less than one year. |
(b) | Annualized. |
(c) | Fund commenced operations on February 1, 2007. |
+ | Based on weighted average shares outstanding. |
See notes to the financial statements.
16 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg International Growth Fund | September 30, 2007 |
CUSIPS: CLASS A - 885-215-319, CLASS C - 885-215-293, CLASS I - 885-215-244
NASDAQ SYMBOLS: CLASS A – TIGAX, CLASS C – TIGCX, CLASS I – TINGX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/07
Food, Beverage & Tobacco | 14.9 | % | |
Utilities | 14.9 | % | |
Telecommunication Services | 12.5 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 9.7 | % | |
Consumer Services | 6.6 | % | |
Diversified Financials | 6.6 | % | |
Banks | 6.2 | % | |
Software and Services | 4.1 | % | |
Transportation | 3.8 | % | |
Technology Hardware & Equipment | 2.9 | % | |
Capital Goods | 2.7 | % | |
Materials | 2.2 | % | |
Real Estate | 2.2 | % | |
Consumer Durables & Apparel | 1.9 | % | |
Media | 1.5 | % | |
Other Assets & Cash Equivalents | 7.3 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/07 (percent of equity holdings)
Italy | 8.6 | % | |
Germany | 8.5 | % | |
Switzerland | 8.3 | % | |
United Kingdom | 8.2 | % | |
Netherlands | 7.7 | % | |
Denmark | 7.6 | % | |
Czech Republic | 6.5 | % | |
México | 6.2 | % | |
Greece | 5.7 | % | |
South Africa | 5.2 | % | |
United States of America | 5.2 | % | |
China | 4.4 | % | |
Philippines | 4.3 | % | |
Austria | 3.7 | % | |
Spain | 3.0 | % | |
India | 3.0 | % | |
Turkey | 2.2 | % | |
Estonia | 1.7 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 92.74% | |||||
BANKS — 6.24% | |||||
COMMERCIAL BANKS — 6.24% | |||||
Capitalia SpA | 211,000 | $ | 2,015,865 | ||
EFG Eurobank Ergasias | 53,130 | 1,868,259 | |||
UniCredito Italiano SpA | 21,000 | 179,670 | |||
4,063,794 | |||||
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
CAPITAL GOODS — 2.68% | |||||
MACHINERY — 2.68% | |||||
Bolzoni SpA | 256,700 | $ | 1,749,677 | ||
1,749,677 | |||||
CONSUMER DURABLES & APPAREL — 1.92% | |||||
TEXTILES, APPAREL & LUXURY GOODS — 1.92% | |||||
Antichi Pellettieri SpA | 93,600 | 1,253,940 | |||
1,253,940 | |||||
CONSUMER SERVICES — 6.64% | |||||
HOTELS RESTAURANTS & LEISURE — 6.64% | |||||
FU JI Food & Catering Services | 394,000 | 1,211,317 | |||
Las Vegas Sands Corp.+ | 23,364 | 3,117,225 | |||
4,328,542 | |||||
DIVERSIFIED FINANCIALS — 6.63% | |||||
CAPITAL MARKETS — 2.43% | |||||
EFG International | 33,600 | 1,581,516 | |||
DIVERSIFIED FINANCIAL SERVICES — 4.20% | |||||
Deutsche Börse AG | 20,100 | 2,737,182 | |||
4,318,698 | |||||
FOOD, BEVERAGE & TOBACCO — 14.91% | |||||
BEVERAGES — 10.65% | |||||
Carlsberg A/S Class A | 14,300 | 1,857,285 | |||
Carlsberg A/S Class B | 7,000 | 956,024 | |||
Coca Cola Icecek A/S | 162,300 | 1,358,103 | |||
Heineken Holding NV | 48,300 | 2,768,710 | |||
FOOD PRODUCTS — 4.26% | |||||
Nestlé SA-REG | 6,181 | 2,776,605 | |||
9,716,727 | |||||
MATERIALS — 2.19% | |||||
CONSTRUCTION MATERIALS — 2.19% | |||||
Cemex SAB de C.V. ADR+ | 47,700 | 1,427,184 | |||
1,427,184 | |||||
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | ||||
MEDIA — 1.49% | |||||
MEDIA — 1.49% | |||||
Naspers Ltd. | 35,000 | $ | 970,447 | ||
970,447 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 9.63% | |||||
PHARMACEUTICALS — 9.63% | |||||
Glaxosmithkline ADR | 26,200 | 1,393,840 | |||
Glaxosmithkline plc | 33,600 | 891,629 | |||
Novo Nordisk A/S | 14,600 | 1,762,199 | |||
Roche Holdings AG | 12,300 | 2,230,217 | |||
6,277,885 | |||||
REAL ESTATE — 2.19% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 2.19% | |||||
Orco Property Group | 9,500 | 1,426,076 | |||
1,426,076 | |||||
SOFTWARE & SERVICES — 4.14% | |||||
SOFTWARE — 4.14% | |||||
Amdocs Ltd.+ | 72,600 | 2,699,994 | |||
2,699,994 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.88% | |||||
ELECTRONIC EQUIPMENT & INSTRUMENTS — 2.88% | |||||
Smartrac NV+ | 36,100 | 1,878,903 | |||
1,878,903 | |||||
TELECOMMUNICATION SERVICES — 12.50% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 5.59% | |||||
PT Telekomunikasi Indonesia | 1,498,500 | 1,802,460 | |||
Telefónica SA | 65,800 | 1,841,834 | |||
WIRELESS TELECOMMUNICATION SERVICES — 6.91% | |||||
América Móvil SA de CV | 729,900 | 2,335,701 | |||
MTN Group Ltd. | 142,800 | 2,166,055 | |||
8,146,050 | |||||
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2007 |
Shares/ Principal Amount | Value | |||||
TRANSPORTATION — 3.80% | ||||||
MARINE — 1.59% | ||||||
AS Tallink Grupp+ | 575,700 | $ | 1,034,358 | |||
TRANSPORTATION INFRASTRUCTURE — 2.21% | ||||||
China Merchants Holdings International Co., Ltd. | 232,000 | 1,444,433 | ||||
2,478,791 | ||||||
UTILITIES — 14.90% | ||||||
ELECTRIC UTILITIES — 7.29% | ||||||
ČEZ As | 40,825 | 2,516,859 | ||||
Oest Elektrizitats | 38,800 | 2,236,311 | ||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 3.96% | ||||||
PNOC Energy Development Corp. | 18,178,100 | 2,582,460 | ||||
MULTI-UTILITIES — 3.65% | ||||||
RWE AG | 18,900 | 2,377,031 | ||||
9,712,661 | ||||||
TOTAL COMMON STOCK (Cost $54,325,379) | 60,449,369 | |||||
SHORT TERM INVESTMENTS — 4.60% | ||||||
General Electric Capital Corp., 4.68%, 10/1/2007 | $ | 3,000,000 | 3,000,000 | |||
TOTAL SHORT TERM INVESTMENTS (Cost $3,000,000) | 3,000,000 | |||||
TOTAL INVESTMENTS — 97.34% (Cost $57,325,379) | $ | 63,449,369 | ||||
OTHER ASSETS LESS LIABILITIES — 2.66% | 1,731,499 | |||||
NET ASSETS — 100.00% | $ | 65,180,868 | ||||
Footnote Legend
+ | Non-income producing |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
See notes to financial statements.
20 Certified Annual Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg International Growth Fund
To the Trustees and Class I Shareholders of
Thornburg International 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 International Growth Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2007, and the results of its operations, the changes in its net assets and the financial highlights for the Class I shares for the period February 1, 2007 (commencement of operations) through September 30, 2007, 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, 2007 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 16, 2007
Certified Annual Report 21
EXPENSE EXAMPLE | ||
Thornburg International Growth Fund | September 30, 2007 (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, 2007 and held until September 30, 2007.
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 3/31/07 | Ending Account Value 9/30/07 | Expenses Paid During Period† 3/31/07–9/30/07 | |||||||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,186.90 | $ | 5.43 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for Class I share (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. |
22 Certified Annual Report
INDEX COMPARISON | ||
Thornburg International Growth Fund | September 30, 2007 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg International Growth Fund versus MSCI AC World ex U.S. Growth Index
(February 1, 2007 to September 30, 2007)*
TOTAL RETURNS*
For periods ended September 30, 2007
Since Inception | |||
I shares (Incep: 2/1/07) | 25.54 | % | |
MSCI all Country World ex-U.S. Growth Index (Since: 2/1/07) | 18.16 | % |
* | Not annualized |
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 All Country World ex-U.S. Growth Index (MSCI AC World ex-U.S. Growth Index) includes growth companies in developed and emerging markets throughout the world, excluding the United States. Indices do not take into account fees and expenses. Investors cannot make direct investments in an index.
Certified Annual Report 23
TRUSTEES AND OFFICERS | ||
Thornburg International Growth Fund | September 30, 2007 (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, 61 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, 51 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, 62 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, 66 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, 61 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, 58 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, 53 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, 48 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 |
24 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2007 (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) | ||||
George T. Strickland, 44 Vice President since 1996 | Portfolio Manager, Co-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, 68 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 40 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, 53 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, 37 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 36 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, 44 Vice President since 1999 | Co-Portfolio Manager since 2007, 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, 39 Vice President since 1999 | Co-Portfolio Manager since 2002, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 37 Vice President since 2003 | Co-Portfolio Manager since 2007, 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, 41 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. since 2002; Senior Staff Accountant, Farm Bureau Life Insurance Co. to 2002. | Not applicable | ||
Sasha Wilcoxon, 33 Vice President since 2003, Secretary since 2007 | Managing Director since 2007, Mutual Fund Support Service Department Manager since 2002, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 49 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 to 2002. | Not applicable |
Certified Annual Report 25
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2007 (Unaudited) |
Name, Age, Position Held With Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Vinson Walden, 37 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. | Not applicable | ||
Van Billops, 41 Vice President since 2006 | Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 36 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 36 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 to 2002. | Not applicable | ||
Connor Browne, 28 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 33 Vice President since 2007 | Co-Portfolio Manager since 2006 and Managing Director since 2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006; Associate, Fidelity Investments 2003–2004; Associate, Lehman Brothers to 2002. | Not applicable | ||
Brian Summers, 35 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager (2005–2006) of Thornburg Investment Management, Inc.; Senior Analyst, Institutional Shareholder Service 2003–2004. | Not applicable | ||
Lewis Kaufman, 31 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc.; Associate, Citigroup 2003–2004. | Not applicable |
(1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
(2) | The Fund is one of thirteen 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 thirteen active Funds. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the thirteen Funds of the Trust. Each Trustee oversees the thirteen 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 thirteen 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.
26 Certified Annual Report
OTHER INFORMATION | ||
Thornburg International Growth Fund | September 30, 2007 (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.
Information regarding how proxies were voted is available on or before August 31 for the five months from the Fund’s inception of February 1, 2007 to June 30, 2007. 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 period ended September 30, 2007, foreign taxes paid and foreign source income is $35,185 and $2,377,248, 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, 2007. Complete information will be computed and reported in conjunction with your 2007 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 2007 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 web site 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 web site at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg International Growth 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 December 3-4, 2006. The Trustees reviewed and approved the continuance of the agreement again on September 11, 2007.
In anticipation of their initial consideration of the advisory agreement for the Fund, the independent Trustees met in independent session on December 3, 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. Following this session, the Trustees met on December 4, 2006 to consider the 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, and in accordance with their established practice, the independent Trustees met in July 2007 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 Advisor’s chief investment officer reviewed the specified information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 11, 2007 the Trustees met to consider a renewal of the advisory agreement, and determined at that meeting to renew the agreement for an additional term of one year.
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. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports from the Advisor throughout the year. In addition, the Trustees considered the information provided to them in anticipation of their evaluation of the Advisor’s services, including (i) the Advisor’s commentary on the Fund’s performance, in the context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) a measure of the Fund’s investment performance since inception, relative to a broad-based securities index, and (iv) a comparative measure of earnings growth.
Certified Annual Report 27
OTHER INFORMATION, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2007 (Unaudited) |
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, trade execution, the Advisor’s performance of 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 strategies, as described in its prospectuses, are unique or may vary from the methods for selecting the investments for other funds.
The matters considered demonstrated to the Trustees that the Advisor had continued to pursue the Fund’s stated objective. Respecting the Fund’s investment performance, the Trustees considered (among other matters) the superior total returns of the Fund since its inception as compared to a broad-based securities index and a foreign small/mid cap growth category of equity mutual funds selected by an independent mutual fund analyst firm, and a comparative measure of projected earnings growth.
The Trustees concluded, based upon these and other observations, that the Advisor had satisfactorily pursued the Fund’s stated investment objective. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objective and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees 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 management fee, comparisons of the Advisor’s fee and other Fund expenses to median and average fees and expenses charged to a group of international multi-capitalization growth equity mutual funds assembled by an independent mutual fund analyst firm. The Trustees also considered that the overall expense ratio of the Fund (net of fee waivers by the Advisor) fell between the median and average expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, and that the management fee (net of fee waivers by the Advisor) was higher than the average and comparable to the median fee rates for the same group of funds. The Trustees reviewed information about the fees charged by the Advisor to other investment management clients, but noted in their review that the fee rates charged by the Advisor to other types of clients were not directly comparable to rates charged to the Fund because of significant differences in services provided.
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual. The Trustees also noted in this regard, however, that the Advisor’s profitability from its services for the Fund was likely to be reduced in the initial period of the Fund’s operations. 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 information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as the Fund increases in size due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
28 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 18, 2007
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. 29
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.
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 International Growth Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
30 This page is not part of the Annual Report.
The Firm
Thornburg Investment Management® is a privately held investment management company based in Santa Fe, New Mexico with assets under management of over $50 billion. Founded in 1982, the firm manages six 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 managing 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 $193 million in Thornburg products.
Investment Manager: | Distributor: | |
![]() | ![]() | |
119 East Marcy Street | 119 East Marcy Street |
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, 2006 and September 30, 2007 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, 2006 | Year Ended September 30, 2007 | |||||
Thornburg Investment Trust | $ | 313,000 | $ | 543,500 |
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, 2006 | Year Ended September 30, 2007 | |||||
Thornburg Investment Trust | $ | -0- | $ | 18,883 |
The audit-related fees billed to the Trust in the year ended September 30, 2007 related to preparation for and attendance at audit committee meetings as well as travel and out of pocket expenses.
Tax Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years ended September 30, 2006 and September 30, 2007 for professional services rendered by PWC for tax compliance, tax advice or tax planning are set out below.
Year Ended September 30, 2006 | Year Ended September 30, 2007 | |||||
Thornburg Investment Trust | $ | 89,800 | $ | 121,260 |
All Other Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years ended September 30, 2006 and September 30, 2007 for all other services rendered by PWC to the Trust are set out below.
Year Ended September 30, 2006 | Year Ended September 30, 2007 | |||||
Thornburg Investment Trust | $ | 2,443 | $ | -0- |
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. (i) attestation of its investment performance presentations, and (ii) PWC performed an audit of Thornburg International Equity Fund (QP), LLC, a private equity fund as to which the advisor is the manager. Neither the attestation of the advisor’s presentations nor the audit of the private equity fund related directly to the Trust’s operations or financial reporting. The fees billed by PWC for these services were $-0- and $76,504 for the fiscal years ended September 30, 2006 and September 30, 2007, respectively. The Audit Committee has considered whether PWC’s performance of the described services for the investment advisor is compatible with maintaining PWC’s independence.
Audit Committee Pre-Approval Policies and Procedures
As of September 30, 2007, the Trust’s Audit Committee has not adopted pre-approval policies and procedures.
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, Thornburg Global Opportunities Fund, and Thornburg International Growth Fund. (herein referred to as the “Funds”).
By: | /s/ Brian J. McMahon | |
Brian J. McMahon | ||
President and principal executive officer | ||
Date: | November 28, 2007 |
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 28, 2007 | |
By: | /s/ George T. Strickland | |
George T. Strickland | ||
Treasurer and principal financial officer | ||
Date: | November 28, 2007 |