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, 2008
Date of reporting period: September 30, 2008
Item 1. Reports to Stockholders
The following annual reports are attached hereto, in order:
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 Income 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 Strategic Income Fund
Important Information
The information presented in this report is current as of September 30, 2008. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; they 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. 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 bonds 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.
Performance data given at net asset value (NAV) does not take into account applicable sales charges. If the sales charges had been included, the performance would have been lower. Minimum investments for Class I shares are higher than those for other classes. Class I shares may not be available to all investors.
Ranked #1 by Morningstar
Thornburg Limited Term Municipal Fund, I shares
Class I shares ranked #1 out of 61 funds in Morningstar’s Muni National Short category for the 10-year period ended 12/31/07 and has retained that rank as of 9/30/08 out of 68 funds. Class I shares ranked #1 out of 68 funds for ten years, #16 out of 120 funds for five years and #64 out of 138 for one year. Class A shares ranked #13 out of 68 for the ten-year period ended 9/30/08; #38 out of 120 for five years; and #73 out of 138 for one year. Ranks are based on total returns without sales charge. Past performance does not guarantee future results.
© 2008 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
Barclays Capital Five-Year Municipal Bond Index – A rules-based, market-value-weighted index of the 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.
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
S&P 500 Index – An unmanaged broad measure 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.
Alternative Minimum Tax (AMT) – A federal tax aimed at ensuring that high-income individuals, estates, trusts, and corporations pay a minimal level income tax. For individuals, the AMT is calculated by adding tax preference items to regular taxable income.
Distribution Rate – 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 a 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.
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.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
SEC Yield – 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.
Tender Option Bond Programs (TOB) – Programs that allow investors to leverage their assets by borrowing at short-term rates and investing in higher yielding longer-term bonds.
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 income taxes.
CUSIPS | NASDAQ | |||
CLASS A | 885-215-459 | LTMFX | ||
CLASS C | 885-215-442 | LTMCX | ||
CLASS I | 885-215-434 | LTMIX |
This page is not part of the Annual Report. 3
Thornburg Limited Term Municipal Fund
At Thornburg, our approach to fixed-income management is based on the premise that investors in our bond funds seek preservation of capital along with an attractive, relatively stable yield. While aggressive bond strategies may generate stronger returns when the market is turning a blind eye towards risk, they usually fail to stack up over longer periods of time. Our patience and diligence was recognized by Lipper, which named Thornburg Investment Management its 2008 Best Fixed-Income Fund Family.
We apply time-tested techniques to manage risk and provide attractive returns. These include:
| • | Building a laddered portfolio. Laddering has been shown over time to mitigate price and interest rate risk. |
| • | Investing on a cash-only basis without using leverage. While leveraged strategies may enhance returns when market conditions are favorable, they can quickly compound losses when sentiment shifts. |
| • | Conducting in-depth fundamental research on each issue and actively monitoring positions for subsequent credit events. |
| • | Diversifying among a large number of generally high-quality bonds. |
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 the Fund’s Class A shares is 1.50%. The total annual fund operating expense of Class A shares is 0.90%, as disclosed in the most recent Prospectus.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 9/28/84) | |||||||||||||||
Without Sales Charge | 1.54 | % | 2.53 | % | 2.10 | % | 3.32 | % | 5.48 | % | |||||
With Sales Charge | (0.02 | )% | 2.01 | % | 1.79 | % | 3.17 | % | 5.41 | % |
30-DAY YIELDS
As of September 30, 2008
| Annualized Distribution Rate | SEC Yield | SEC Taxable Equivalent Yield | |||||||
A Shares | 3.75 | % | 3.48 | % | 5.35 | % | |||
C Shares | 3.48 | % | 3.24 | % | 4.99 | % | |||
I Shares | 4.10 | % | 3.88 | % | 5.97 | % |
See page 37 for all share class total returns.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2008
Number of Bonds | 507 | ||
| Duration | 3.9 Yrs | ||
A Shares: | |||
| Net Asset Value | $ | 13.22 | |
| Maximum Offering Price | $ | 13.42 | |
SEC Taxable Equivalent Yields assume a 35.0% marginal federal tax rate. Portions of the income of the Fund may be subject to the alternative minimum tax.
4 This page is not part of the Annual Report.
THORNBURG LIMITED TERM MUNICIPAL FUND VERSUS
LIPPER TAX-EXEMPT MONEY MARKET FUNDS AVERAGE
Class A shares as of September 30, 2008
We are often asked to compare Thornburg Limited Term Municipal Fund to money market fund returns. Municipal bond funds are not an exact substitute for money market funds. These investments have certain differences, which are discussed below. Investors in the Thornburg Limited Term Municipal Fund took more risk than tax-exempt money market fund investors to earn their higher returns.
Past performance does not guarantee future results. Performance data above does not include the 1.50% sales charge for Class A shares. If the sales charge had been included, returns would have been lower. Returns shown are minus the initial investment.
Investors in municipal bond funds may experience more volatility than those in comparable money market funds. There are also differences in fees and expenses.
Investors in the Thornburg Limited Term Municipal Fund took more risk than money market investors to earn their higher returns including reinvestment risk, credit risk, and inflation risk. Unlike money market funds, the prices of bonds fluctuate relative to changes in interest rates, with principal values decreasing when interest rates rise and increasing when interest rates fall. Generally, money market funds seek to maintain an investment portfolio with an average maturity of 90 days or less. Thornburg Limited Term Municipal Fund has an average maturity of normally less than five years. Interest dividends paid by the Fund or by tax-exempt money market funds are generally exempt from federal income tax (interest dividends may be subject to AMT). Income sourced from state of residency is generally exempt from state income tax.
Money market funds seek to preserve the value per share at $1.00, whereas, the Thornburg Limited Term Municipal Fund’s net asset value changes daily. It is possible to lose money when investing in either the Thornburg Limited Term Municipal Fund or a tax-exempt money market fund. Neither are insured by the FDIC or any other government agency.
Lipper Tax-Exempt Money Market Funds Average is an arithmetic average of the total return of all tax-exempt money market mutual funds. You cannot invest in a category average.
This page is not part of the Annual Report. 5
Thornburg Limited Term Municipal Fund
September 30, 2008
Table of Contents | ||
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| 20 | ||
| 35 | ||
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| 37 | ||
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| 41 | ||
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.
George Strickland Co-Portfolio Manager | October 17, 2008 | |
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 A shares decreased by 27 cents per share to $13.22 during the twelve months ended September 30, 2008. If you were with us for the entire period, you received dividends of 48.0 cents per share, if you reinvested your dividends, you received 48.8 cents per share. Dividends per share were lower for Class C and higher for Class I. | ||
Josh Gonze Co-Portfolio Manager |
In last year’s annual report letter, we wrote about higher yields and lower prices for municipal bonds. We also wrote about attractive valuations relative to Treasury bonds and the larger spreads between yields on high and low quality bonds. At the time, we thought that these relationships would eventually revert back to their long-term averages. We still believe that will happen, but in the meantime, the extreme has become the norm. Tax-free bonds from issuers like Harvard University and the state of Texas are selling for yields 20% higher than Treasury bond yields! Tax adjusted, those are typically junk bond spreads. Meanwhile, anything with a hint of credit risk is suffering from reduced liquidity and enlarged spreads.
Are investors really worried about the solvency of Harvard University? For that matter, are investors really worried about major problems infecting investment-grade municipal bonds, with long-term average default rates of approximately 0.1%? The economy is almost surely suffering through a prolonged recession and it is indeed a time for careful diligence, but the current sell-off is not primarily credit related. We believe that what we are currently witnessing is primarily a result of massive de-leveraging. | |
Christopher Ihlefeld Co-Portfolio Manager |
Over most of this decade, it has been relatively easy to buy long-term municipal bonds on a leveraged basis with borrowed money, typically through something called a Tender Option Bond (TOB) program. This structure was quite profitable and predictable as long as cheap and easy financing was available via money market funds. Thus the TOB trade became very popular among hedge funds, proprietary trading desks, and some mutual funds (not ours). The size of bond positions in TOB programs is not reliably tracked, but reasonable estimates placed it at about $300 billion at the peak, almost 12% of the municipal bond market. Starting last year, and accelerating this year, money market fund appetite for exotic derivatives such as TOB floating rate securities went south. As more and more funds got rid of them or demanded higher yields, financing costs spiked. That squeeze, plus margin calls due to lower bond prices, meant that many players had to unwind their programs by selling bonds into a saturated market.
Large scale selling from leveraged investors wouldn’t be a problem if it was met with large scale buying, but insurance companies and mutual funds, two traditional pillars of the municipal bond market, are not currently aggressive buyers. Individual investors are buying lots of bonds, a healthy sign, but their demand will take time to absorb the waves of selling from leveraged investors. In the meantime, bond prices have been getting pushed lower as yields go higher. | |
Certified Annual Report. 7
Letter to Shareholders | ||
Continued |
When will it stop? We don’t exactly know, but we believe that the de-leveraging process in the municipal market is more than half over. After the smoke clears, we expect investors to focus on the safety and security, relative value, and tax-exempt nature of investment-grade municipal bonds. In a world where marginal tax rates are likely to be rising for wealthy Americans, this should lead to significant outperformance of municipal bonds going forward.
The Class A shares of your Fund produced a total return of 1.54% over the twelve-month period ended September 30, 2008 at NAV, compared to a 3.72% return for the Barclays Capital Five-Year Municipal Bond Index. Over the last year, short-term municipal bonds have performed better than intermediate and long 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 whose maturities are longer than five years. Since those bonds generally under-performed, the Fund underperformed the Index.
% of Portfolio Maturing | Cumulative % Maturing | |||||||||
1 year = | 9.9 | % | Year 1 = | 9.9 | % | |||||
1 to 2 years = | 9.1 | % | Year 2 = | 19.0 | % | |||||
2 to 3 years = | 11.4 | % | Year 3 = | 30.4 | % | |||||
3 to 4 years = | 8.0 | % | Year 4 = | 38.4 | % | |||||
4 to 5 years = | 10.4 | % | Year 5 = | 48.8 | % | |||||
5 to 6 years = | 10.8 | % | Year 6 = | 59.6 | % | |||||
6 to 7 years = | 9.4 | % | Year 7 = | 69.0 | % | |||||
7 to 8 years = | 10.6 | % | Year 8 = | 79.6 | % | |||||
8 to 9 years = | 10.6 | % | Year 9 = | 90.2 | % | |||||
Over 9 years = | 9.8 | % | Over 9 Years = | 100.0 | % | |||||
| Percentages can and do vary. Data as of 9/30/08. | ||||||||||
Your Thornburg Limited Term Municipal Fund is a laddered portfolio of over 500 municipal obligations from 48 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 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 above describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
The U.S. economy is almost certainly in the midst of a significant recession at the moment. Frozen credit markets, mounting job losses, an enormous erosion of wealth in real estate and equity markets have finally brought the American consumer to his knees. Meanwhile, many foreign economies are reeling, leading to reduced demand for U.S. exports. Luckily, most non-financial corporate balance sheets were quite strong coming into the current environment and some industries are experiencing healthy growth. However, this must be tempered by reduced government spending at the state and local level. Meanwhile, the federal government is priming the pumps of our financial system as fast as it can. We believe that the massive life lines given to our nation’s banks, insurance companies, and money market funds will eventually lead to more stability in the financial markets, easier financing terms for companies and individuals, and should ultimately get the housing market back on its feet. However, there are long-term implications. Tighter regulation of derivative markets, mortgage origination and securitization, and the use of financial leverage are all necessary in order to preserve our country’s reputation as a fair place to invest. Furthermore, most or all of the money flooding the capital markets from the U.S. Treasury needs to be returned to taxpayers, and our current ballooning budget deficits need to be reigned in and reduced. If not, we face the longer term risks of higher inflation, a declining currency, and reduced growth prospects.
Surprisingly, state tax revenues rose 3.6% in the second quarter of 2008 from a year ago, but the gains were boosted by income tax payments on last year’s earnings. Looking forward, we believe that tax revenues will erode appreciably during the balance of 2008 and 2009. Sales tax, corporate income tax, and motor fuel tax collections are already dropping at single digit rates. Given rising unemployment and investment losses, income tax receipts should soon
8 Certified Annual Report
follow suit as they did in 2002. We are also seeing some areas of credit stress in local markets where weak real estate prices and poorly managed balance sheets are causing problems. It is indeed an important time for careful diligence and diversification of investment portfolios. Your Fund is broadly diversified and 86% 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 | ||||||
| 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 Limited Term Municipal Fund | September 30, 2008 | |
ASSETS | ||||
Investments at value (cost $1,229,953,273) (Note 2) | $ | 1,220,724,507 | ||
Cash | 236,707 | |||
Receivable for investments sold | 8,144,653 | |||
Receivable for fund shares sold | 7,727,556 | |||
Interest receivable | 15,511,936 | |||
Prepaid expenses and other assets | 34,383 | |||
Total Assets | 1,252,379,742 | |||
LIABILITIES | ||||
Payable for securities purchased | 5,110,060 | |||
Payable for fund shares redeemed | 2,889,948 | |||
Payable to investment advisor and other affiliates (Note 3) | 714,723 | |||
Accounts payable and accrued expenses | 149,820 | |||
Dividends payable | 911,787 | |||
Total Liabilities | 9,776,338 | |||
NET ASSETS | $ | 1,242,603,404 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (3,894 | ) | |
Net unrealized depreciation on investments | (9,228,766 | ) | ||
Accumulated net realized gain (loss) | (5,310,214 | ) | ||
Net capital paid in on shares of beneficial interest | 1,257,146,278 | |||
| $ | 1,242,603,404 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 13.22 | ||
Maximum sales charge, 1.50% of offering price | 0.20 | |||
Maximum offering price per share | $ | 13.42 | ||
Class C Shares: | ||||
Net asset value and offering price per share * | $ | 13.24 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 13.22 | ||
| * | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
10 Certified Annual Report
| ||
| Thornburg Limited Term Municipal Fund | Year Ended September 30, 2008 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $6,426,711) | $ | 50,212,114 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 4,904,782 | |||
Administration fees (Note 3) | ||||
Class A Shares | 868,656 | |||
Class C Shares | 111,375 | |||
Class I Shares | 175,451 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,737,313 | |||
Class C Shares | 892,643 | |||
Transfer agent fees | ||||
Class A Shares | 265,465 | |||
Class C Shares | 43,880 | |||
Class I Shares | 88,550 | |||
Registration and filing fees | ||||
Class A Shares | 43,217 | |||
Class C Shares | 21,758 | |||
Class I Shares | 43,728 | |||
Custodian fees (Note 3) | 184,267 | |||
Professional fees | 60,749 | |||
Accounting fees | 25,998 | |||
Trustee fees | 16,422 | |||
Other expenses | 104,173 | |||
Total Expenses | 9,588,427 | |||
Less: | ||||
Distribution fees waived (Note 3) | (446,321 | ) | ||
Fees paid indirectly (Note 3) | (75,112 | ) | ||
Net Expenses | 9,066,994 | |||
Net Investment Income | 41,145,120 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 762,038 | |||
Net change in unrealized appreciation (depreciation) of investments | (26,391,583 | ) | ||
Net Realized and Unrealized Loss | (25,629,545 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 15,515,575 | ||
See notes to financial statements.
Certified Annual Report 11
STATEMENTS OF CHANGES IN NET ASSETS
| ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 | |
| Year ended September 30, 2008 | Year ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 41,145,120 | $ | 40,159,219 | ||||
Net realized gain (loss) on investments | 762,038 | (1,146,124 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (26,391,583 | ) | (3,013,630 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 15,515,575 | 35,999,465 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (24,624,429 | ) | (26,069,081 | ) | ||||
Class C Shares | (2,909,085 | ) | (2,952,660 | ) | ||||
Class I Shares | (13,611,606 | ) | (11,137,478 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 22,835,685 | (133,561,208 | ) | |||||
Class C Shares | 15,492,880 | (18,529,049 | ) | |||||
Class I Shares | 142,907,714 | 18,744,294 | ||||||
Net Increase (Decrease) in Net Assets | 155,606,734 | (137,505,717 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 1,086,996,670 | 1,224,502,387 | ||||||
End of year | $ | 1,242,603,404 | $ | 1,086,996,670 | ||||
See notes to financial statements.
12 Certified Annual Report
| ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 |
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 thirteen 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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 objective 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 allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and administrative and legal expenses. Currently, class specific expenses of the Fund are limited to service and distribution fees, administration fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: Debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt obligations of comparable quality, type of issue, coupon, maturity, and rating; 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
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.
Certified Annual Report 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 | |
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid monthly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized to call dates or maturity dates of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of 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, 2008, 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, 2008, the Distributor has advised the Fund that it earned commissions aggregating $6,743 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $5,272 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, 2008, are set forth in the Statement of Operations. Distribution fees in the amount of $446,321 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, 2008, fees paid indirectly were $75,112.
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.
14 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 | |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 10,565,297 | $ | 142,941,921 | 4,907,768 | $ | 66,014,807 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,285,615 | 17,344,279 | 1,327,844 | 17,870,751 | ||||||||||
Shares repurchased | (10,153,413 | ) | (137,450,515 | ) | (16,162,702 | ) | (217,446,766 | ) | ||||||
Net Increase (Decrease) | 1,697,499 | $ | 22,835,685 | (9,927,090 | ) | $ | (133,561,208 | ) | ||||||
Class C Shares | ||||||||||||||
Shares sold | 2,274,026 | $ | 30,831,860 | 638,787 | $ | 8,601,275 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 143,526 | 1,939,419 | 146,274 | 1,972,339 | ||||||||||
Shares repurchased | (1,274,574 | ) | (17,278,399 | ) | (2,157,502 | ) | (29,102,663 | ) | ||||||
Net Increase (Decrease) | 1,142,978 | $ | 15,492,880 | (1,372,441 | ) | $ | (18,529,049 | ) | ||||||
Class I Shares | ||||||||||||||
Shares sold | 16,181,603 | $ | 218,944,840 | 7,495,756 | $ | 100,902,857 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 797,599 | 10,754,694 | 632,992 | 8,518,497 | ||||||||||
Shares repurchased | (6,409,073 | ) | (86,791,820 | ) | (6,741,062 | ) | (90,677,060 | ) | ||||||
Net Increase (Decrease) | 10,570,129 | $ | 142,907,714 | 1,387,686 | $ | 18,744,294 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $344,920,096 and $194,928,584, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 1,229,953,273 | ||
Gross unrealized appreciation on a tax basis | $ | 9,382,224 | ||
Gross unrealized depreciation on a tax basis | (18,610,990 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (9,228,766 | ) | |
At September 30, 2008, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2008, the Fund had tax basis capital losses, which may be carried forward 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 carry forwards expire as follows:
2013 | $ | 30,614 | |
2014 | 2,276,013 | ||
2015 | 2,811,143 | ||
2016 | 192,444 | ||
| $ | 5,310,214 | ||
During the year ending September 30, 2008, $3,565,103 of capital loss carry forwards from prior years expired.
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized investment loss by $3,565,103 and decreased net capital paid in on shares of beneficial interest by $3,565,103. This reclassification has no impact on the net asset value of the Fund. Reclassification resulted from the expiration of capital loss carry forwards.
All dividends paid by the Fund for the year ended September 30, 2008 and September 30, 2007, represent exempt interest dividends, which are excludable by shareholders from gross income for federal income tax purposes.
Certified Annual Report 15
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 | |
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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
16 Certified Annual Report
Thornburg Limited Term Municipal Fund
| Year Ended September 30, | Three Months Ended Sept. 30, 2004(a) | Year Ended June 30, 2004 | ||||||||||||||||||||||
Class A Shares: | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.49 | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.48 | 0.46 | 0.44 | 0.40 | 0.09 | 0.40 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.27 | ) | (0.04 | ) | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | |||||||||||||
Total from investment operations | 0.21 | 0.42 | 0.38 | 0.16 | 0.24 | 0.07 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.48 | ) | (0.46 | ) | (0.44 | ) | (0.40 | ) | (0.09 | ) | (0.40 | ) | ||||||||||||
Change in net asset value | (0.27 | ) | (0.04 | ) | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | |||||||||||||
NET ASSET VALUE, end of period | $ | 13.22 | $ | 13.49 | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return (%)(b) | 1.54 | 3.18 | 2.87 | 1.16 | 1.78 | 0.47 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income (loss) (%) | 3.54 | 3.43 | 3.28 | 2.91 | 2.69 | (c) | 2.85 | |||||||||||||||||
Expenses, after expense reductions (%) | 0.89 | 0.90 | 0.91 | 0.90 | 0.89 | (c) | 0.91 | |||||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.88 | 0.90 | 0.90 | 0.90 | 0.89 | (c) | 0.91 | |||||||||||||||||
Expenses, before expense reductions (%) | 0.89 | 0.90 | 0.91 | 0.90 | 0.89 | (c) | 0.91 | |||||||||||||||||
Portfolio turnover rate (%) | 17.78 | 21.35 | 23.02 | 27.80 | 4.57 | 21.37 | ||||||||||||||||||
Net assets at end of period (thousands) | $ | 705,238 | $ | 696,717 | $ | 833,189 | $ | 967,650 | $ | 1,039,050 | $ | 1,047,482 | ||||||||||||
| (a) | The Fund’s fiscal year-end changed to September 30. |
| (b) | Sales loads are not reflected in computing total return, which is not annualized for periods less than one year. |
| (c) | Annualized. |
See notes to financial statements.
Certified Annual Report 17
| FINANCIAL HIGHLIGHTS, CONTINUED |
| Thornburg Limited Term Municipal Fund |
| Year Ended September 30, | Three Months Ended Sept. 30, 2004(a) | Year Ended June 30, 2004 | ||||||||||||||||||||||
Class C Shares: | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.51 | $ | 13.55 | $ | 13.62 | $ | 13.86 | $ | 13.70 | $ | 14.04 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.44 | 0.43 | 0.41 | 0.36 | 0.08 | 0.36 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.27 | ) | (0.04 | ) | (0.07 | ) | (0.24 | ) | 0.16 | (0.34 | ) | |||||||||||||
Total from investment operations | 0.17 | 0.39 | 0.34 | 0.12 | 0.24 | 0.02 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.44 | ) | (0.43 | ) | (0.41 | ) | (0.36 | ) | (0.08 | ) | (0.36 | ) | ||||||||||||
Change in net asset value | (0.27 | ) | (0.04 | ) | (0.07 | ) | (0.24 | ) | 0.16 | (0.34 | ) | |||||||||||||
NET ASSET VALUE, end of period | $ | 13.24 | $ | 13.51 | $ | 13.55 | $ | 13.62 | $ | 13.86 | $ | 13.70 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return (%)(b) | 1.26 | 2.90 | 2.52 | 0.89 | 1.79 | 0.12 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income (loss) (%) | 3.26 | 3.15 | 3.00 | 2.63 | 2.43 | (c) | 2.56 | |||||||||||||||||
Expenses, after expense reductions (%) | 1.17 | 1.19 | 1.18 | 1.18 | 1.15 | (c) | 1.19 | |||||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.16 | 1.18 | 1.18 | 1.18 | 1.15 | (c) | 1.19 | |||||||||||||||||
Expenses, before expense reductions (%) | 1.67 | 1.68 | 1.68 | 1.68 | 1.65 | (c) | 1.69 | |||||||||||||||||
Portfolio turnover rate (%) | 17.78 | 21.35 | 23.02 | 27.80 | 4.57 | 21.37 | ||||||||||||||||||
Net assets at end of period (thousands) | $ | 99,972 | $ | 86,564 | $ | 105,436 | $ | 140,606 | $ | 156,870 | $ | 155,458 | ||||||||||||
| (a) | The Fund’s fiscal year-end changed to September 30. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
See notes to financial statements.
18 Certified Annual Report
| FINANCIAL HIGHLIGHTS, CONTINUED |
| Thornburg Limited Term Municipal Fund |
| Year Ended September 30, | Three Months Ended Sept. 30, 2004(a) | Year Ended June 30, 2004 | ||||||||||||||||||||||
Class I Shares: | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.49 | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | $ | 14.01 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.52 | 0.51 | 0.49 | 0.44 | 0.11 | 0.44 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.27 | ) | (0.04 | ) | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | |||||||||||||
Total from investment operations | 0.25 | 0.47 | 0.43 | 0.20 | 0.26 | 0.11 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.52 | ) | (0.51 | ) | (0.49 | ) | (0.44 | ) | (0.11 | ) | (0.44 | ) | ||||||||||||
Change in net asset value | (0.27 | ) | (0.04 | ) | (0.06 | ) | (0.24 | ) | 0.15 | (0.33 | ) | |||||||||||||
NET ASSET VALUE, end of period | $ | 13.22 | $ | 13.49 | $ | 13.53 | $ | 13.59 | $ | 13.83 | $ | 13.68 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return (%)(b) | 1.88 | 3.53 | 3.22 | 1.50 | 1.87 | 0.80 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income (loss) (%) | 3.88 | 3.78 | 3.62 | 3.25 | 3.02 | (c) | 3.18 | |||||||||||||||||
Expenses, after expense reductions (%) | 0.55 | 0.57 | 0.57 | 0.57 | 0.55 | (c) | 0.57 | |||||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.55 | 0.57 | 0.57 | 0.57 | 0.55 | (c) | 0.57 | |||||||||||||||||
Expenses, before expense reductions (%) | 0.55 | 0.57 | 0.57 | 0.57 | 0.55 | (c) | 0.57 | |||||||||||||||||
Portfolio turnover rate (%) | 17.78 | 21.35 | 23.02 | 27.80 | 4.57 | 21.37 | ||||||||||||||||||
Net assets at end of period (thousands) | $ | 437,393 | $ | 303,716 | $ | 285,878 | $ | 290,369 | $ | 238,589 | $ | 222,760 | ||||||||||||
| (a) | The Fund’s fiscal year-end changed to September 30. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
See notes to financial statements.
Certified Annual Report 19
| SCHEDULE OF INVESTMENTS | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 | |
 | We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings. The category of investments identified as “AAA” in this graph includes investments which are pre-refunded or escrowed to maturity. Such investments are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities to satisfy the timely payment of principal and interest and, therefore, are normally deemed to be equivalent to AAA-rated securities. |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
ALABAMA — 1.02% | ||||||||
Mobile GO Warrants, 4.50% due 8/15/2016 | NR/NR | $ | 2,610,000 | $ | 2,619,709 | |||
Mobile Industrial Development PCR, 5.00% due 6/1/2034 put 3/19/2015 (Alabama Power Co.) | A2/A | 6,000,000 | 6,032,820 | |||||
University of Alabama at Birmingham Hospital Revenue, 5.25% due 9/1/2017 | A1/A+ | 2,500,000 | 2,494,075 | |||||
University of Alabama at Birmingham Hospital Revenue, 5.00% due 9/1/2018 | A1/A+ | 1,500,000 | 1,468,620 | |||||
ALASKA — 0.71% | ||||||||
Alaska Energy Power Authority, 6.00% due 7/1/2011 (Bradley Lake Hydroelectric; Insured: FSA) | Aaa/AAA | 955,000 | 1,023,569 | |||||
Alaska Municipal Bond Bank, 5.00% due 6/1/2014 (Insured: MBIA) | A1/AA | 1,175,000 | 1,232,610 | |||||
Alaska Student Loan Corp., 5.25% due 1/1/2012 (Insured: FSA) | NR/AAA | 3,000,000 | 3,165,600 | |||||
North Slope Boro GO, 5.00% due 6/30/2015 (Insured: MBIA) | A2/AA | 3,250,000 | 3,417,830 | |||||
ARIZONA — 1.06% | ||||||||
Glendale IDA, 5.00% due 5/15/2015 (Midwestern University) | NR/A- | 1,000,000 | 1,007,510 | |||||
Glendale IDA, 5.00% due 5/15/2016 (Midwestern University) | NR/A- | 1,325,000 | 1,319,528 | |||||
Glendale IDA, 5.00% due 5/15/2017 (Midwestern University) | NR/A- | 1,440,000 | 1,413,734 | |||||
Mohave County IDA, 5.00% due 4/1/2014 (Mohave Prison LLC; Insured: XLCA) | NR/BBB+ | 3,135,000 | 3,229,144 | |||||
Mohave County IDA, 5.00% due 4/1/2009 (Mohave Prison LLC; Insured: XLCA) | NR/BBB+ | 2,780,000 | 2,804,826 | |||||
Pima County IDA, 6.40% due 7/1/2013 (Arizona Charter Schools) | Baa3/NR | 920,000 | 931,656 | |||||
Pima County IDA Lease Obligation, 7.25% due 7/15/2010 (Insured: FSA) | Aaa/AAA | 290,000 | 291,520 | |||||
Salt River Agricultural Improvement & Power District, 5.00% due 1/1/2020 | Aa1/AA | 1,205,000 | 1,206,940 | |||||
Show Low IDA Hospital, 5.25% due 12/1/2010 (Navapache Regional Medical Center; Insured: ACA) | NR/BBB | 1,000,000 | 1,008,990 | |||||
ARKANSAS — 0.25% | ||||||||
Jefferson County Hospital Improvement, 5.50% due 6/1/2010 (Jefferson Hospital Association) | NR/A | 1,000,000 | 1,032,650 | |||||
Jefferson County Hospital Improvement, 5.50% due 6/1/2011 (Jefferson Hospital Association) | NR/A | 1,075,000 | 1,119,612 | |||||
Little Rock Hotel & Restaurant GRT, 7.125% due 8/1/2009 | A3/NR | 940,000 | 969,253 | |||||
CALIFORNIA — 3.11% | ||||||||
California HFA, 5.25% due 10/1/2013 (Kaiser Permanente) (ETM) | A3/AAA | 2,620,000 | 2,650,628 | |||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: MBIA) | A2/AA | 1,000,000 | 1,007,420 | |||||
California State Department of Water Resources Power Supply, 5.50% due 5/1/2012 | Aa3/A | 2,600,000 | 2,792,790 | |||||
California State Department of Water Resources Power Supply, 6.00% due 5/1/2013 | Aa3/A | 2,550,000 | 2,783,452 | |||||
California State GO, 3.75% due 5/1/2034 put 10/1/2008 (Daily Kindergarten University; LOC: Citibank/California State Teachers) (daily demand notes) | VMIG1/A-1+ | 400,000 | 400,000 | |||||
California State Public Works Board, 5.00% due 9/1/2016 (Regents University of California; Insured: FGIC) | Aa2/AA- | 3,000,000 | 3,132,840 | |||||
20 Certified Annual Report.
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
California State Public Works Board, 5.00% due 9/1/2017 (Regents of University of California; Insured: FGIC) | Aa2/AA- | $ | 3,000,000 | $ | 3,106,860 | |||
Escondido USD GO, 5.60% due 11/1/2009 (Insured: MBIA) (ETM) | A2/AA | 1,250,000 | 1,253,338 | |||||
Golden State Tobacco Securitization Corp. Settlement Revenue, 7.875% due 6/1/2042 pre-refunded 6/1/2013 | Aaa/AAA | 2,000,000 | 2,327,420 | |||||
Irvine Improvement Bond Act 1915 Limited Obligation Assessment District, 5.05% due 9/2/2025 put 10/1/2008 (LOC: Bank of America) (daily demand notes) | VMIG1/A-1+ | 800,000 | 800,000 | |||||
Los Angeles Convention & Exhibition Center Authority Lease Revenue, 5.00% due 8/15/2018 (1) | A1/AA- | 2,000,000 | 2,015,860 | |||||
Los Angeles USD GO, 5.00% due 7/1/2018 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,076,680 | |||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: FSA) | Aaa/AAA | 7,600,000 | 4,268,160 | |||||
Sunnyvale COP, 8.00% due 4/1/2031 put 10/7/2008 (Insured: AMBAC) (weekly demand notes) | Aa3/A-1+ | 10,000,000 | 10,000,000 | |||||
COLORADO — 3.21% | ||||||||
Adams County Platte Valley Medical Center, 5.00% due 2/1/2015 (Brighton Community Hospital Association; Insured: FHA/MBIA) | NR/AA | 1,530,000 | 1,586,273 | |||||
Adams County Platte Valley Medical Center, 5.00% due 8/1/2015 (Brighton Community Hospital Association; Insured: FHA/MBIA) | NR/AA | 1,565,000 | 1,622,170 | |||||
Central Platte Valley Metropolitan District GO, 5.00% due 12/1/2031 put 12/1/2009 (LOC: US Bank) | NR/AA+ | 12,350,000 | 12,559,456 | |||||
Denver City and County Airport System, 5.00% due 11/15/2016 (Insured: MBIA) | A1/AA | 1,515,000 | 1,573,206 | |||||
Denver City and County Airport System, 5.00% due 11/15/2017 (Insured: MBIA) | A1/AA | 1,000,000 | 1,028,660 | |||||
Denver Convention Center Hotel, 5.25% due 12/1/2014 (Insured: XLCA) | Baa3/BBB- | 3,000,000 | 2,975,940 | |||||
E-470 Public Highway Authority Capital Appreciation, 0% due 9/1/2014 (Insured: MBIA) | A2/AA | 1,910,000 | 1,436,855 | |||||
Colorado Educational & Cultural Facilities Revenue, 4.25% due 9/1/2033 put 10/1/2008 (National Jewish Federal Building Program; LOC: Bank of America) (daily demand notes) | VMIG1/NR | 2,000,000 | 2,000,000 | |||||
Highlands Ranch Metropolitan District GO, 5.25% due 12/1/2008 (Insured: ACA) | NR/AA+ | 780,000 | 783,479 | |||||
Highlands Ranch Metropolitan District GO, 5.25% due 12/1/2008 (Insured: ACA) | NR/AA+ | 905,000 | 909,036 | |||||
Plaza Metropolitan District, 7.125% due 12/1/2010 (Public Improvement Fee/Tax Increment) | NR/NR | 6,025,000 | 6,160,261 | |||||
Plaza Metropolitan District, 7.60% due 12/1/2016 (Public Improvement Fee/Tax Increment) | NR/NR | 6,000,000 | 6,140,340 | |||||
Southlands Metropolitan District GO, 6.75% due 12/1/2016 pre-refunded 12/1/2014 | NR/AAA | 1,000,000 | 1,117,940 | |||||
DELAWARE — 0.51% | ||||||||
Delaware EDA, 5.50% due 7/1/2025 put 7/1/2010 (Delmarva Power & Light) | Baa2/BBB | 2,045,000 | 2,124,796 | |||||
Delaware HFA, 5.25% due 6/1/2011 (Beebe Medical Center) | Baa1/BBB+ | 1,275,000 | 1,307,844 | |||||
Delaware HFA, 5.25% due 5/1/2012 (Nanticoke Memorial Hospital; Insured: Radian) | NR/BBB+ | 1,370,000 | 1,392,865 | |||||
Delaware HFA, 5.25% due 5/1/2013 (Nanticoke Memorial Hospital; Insured: Radian) | NR/BBB+ | 1,445,000 | 1,458,077 | |||||
DISTRICT OF COLUMBIA — 2.18% | ||||||||
District of Columbia, 6.00% due 6/1/2018 (Insured: MBIA) | A1/AA | 5,000,000 | 5,526,650 | |||||
District of Columbia Convention Center Authority, 5.00% due 10/1/2013 (Insured: AMBAC) | Aa3/AA | 3,000,000 | 3,129,270 | |||||
District of Columbia COP, 5.25% due 1/1/2013 (Insured: AMBAC) | Aa3/AA | 5,950,000 | 6,157,774 | |||||
District of Columbia COP, 5.25% due 1/1/2015 (Insured: FGIC) | A2/A | 2,875,000 | 2,994,370 | |||||
District of Columbia COP, 5.25% due 1/1/2016 (Insured: FGIC) | A2/A | 4,125,000 | 4,278,161 | |||||
District of Columbia Tax Increment, 0% due 7/1/2009 (Mandarin Oriental; Insured: FSA) | Aaa/AAA | 2,000,000 | 1,955,520 | |||||
District of Columbia Tax Increment, 0% due 7/1/2011 (Mandarin Oriental; Insured: FSA) | Aaa/AAA | 1,990,000 | 1,800,432 | |||||
District of Columbia Tax Increment, 0% due 7/1/2012 (Mandarin Oriental; Insured: FSA) | Aaa/AAA | 1,480,000 | 1,276,530 | |||||
FLORIDA — 9.12% | ||||||||
Broward County Airport Systems, 5.00% due 10/1/2014 (Insured: AMBAC) | Aa3/AA | 4,000,000 | 4,183,360 | |||||
Broward County Resource Recovery, 5.375% due 12/1/2009 (Wheelabrator South) | A3/AA | 5,000,000 | 5,071,650 | |||||
Broward County School Board COP, 5.25% due 7/1/2016 (Insured: FSA) | Aaa/AAA | 7,630,000 | 7,937,184 | |||||
Broward County School Board COP, 5.00% due 7/1/2017 (Insured: FGIC) | A1/A+ | 1,000,000 | 1,020,170 | |||||
Capital Projects Finance Authority, 5.50% due 10/1/2012 (Insured: MBIA) | A2/AA | 1,820,000 | 1,903,265 | |||||
Certified Annual Report 21
| SCHEDULE OF INVESTMENTS, CONTINUED | September 30, 2008 | |
Thornburg Limited Term Municipal Fund |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Capital Projects Finance Authority, 5.50% due 10/1/2015 (Insured: MBIA) | A2/AA | $ | 3,260,000 | $ | 3,351,541 | |||
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 | 2,273,527 | |||||
Crossings at Fleming Island Community Development, 5.45% due 5/1/2010 (Insured: MBIA) | A2/AA | 1,600,000 | 1,625,904 | |||||
Escambia County HFA, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB- | 2,755,000 | 2,751,474 | |||||
Escambia County HFA, 5.00% due 11/1/2028 pre-refunded 11/1/2010 (Charity Obligated Group) | Aaa/NR | 2,540,000 | 2,570,328 | |||||
Flagler County School Board COP, 5.00% due 8/1/2014 (Insured: FSA) | Aaa/AAA | 1,605,000 | 1,671,848 | |||||
Flagler County School Board COP, 5.00% due 8/1/2015 (Insured: FSA) | Aaa/AAA | 1,500,000 | 1,553,895 | |||||
Florida Hurricane Catastrophe Series A, 5.00% due 7/1/2014 | Aa3/AA- | 11,000,000 | 11,042,790 | |||||
Florida State Correctional Privatization Commission COP, 5.00% due 8/1/2015 (Insured: AMBAC) | Aa2/AA+ | 2,000,000 | 2,083,940 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2012 | NR/AA+ | 770,000 | 803,865 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2014 | NR/AA+ | 905,000 | 942,820 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2015 | NR/AA+ | 925,000 | 955,044 | |||||
Florida State Department of Transportation, 5.00% due 7/1/2018 | Aa1/AAA | 3,000,000 | 3,082,560 | |||||
Hillsborough County Assessment, 5.00% due 3/1/2015 (Insured: FGIC) | A3/A+ | 5,000,000 | 5,188,400 | |||||
Hillsborough County IDA PCR, 5.10% due 10/1/2013 (Tampa Electric Co.) | Baa2/BBB- | 6,410,000 | 6,286,543 | |||||
Hillsborough County IDA PCR, 5.00% due 12/1/2034 put 3/15/2012 (Tampa Electric Co.; Insured: AMBAC) | Aa3/AA | 3,250,000 | 3,283,605 | |||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2016 (Insured: XLCA) | Baa1/BBB- | 2,000,000 | 2,026,880 | |||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2017 (Insured: XLCA) | Baa1/BBB- | 2,000,000 | 2,005,240 | |||||
Jacksonville Electric Authority, 5.25% due 10/1/2012 (St. John’s River Park Systems) | Aa2/AA- | 5,000,000 | 5,232,100 | |||||
Marion County Hospital District, 5.00% due 10/1/2015 (Munroe Regional Health Systems) | A2/NR | 1,000,000 | 988,670 | |||||
Miami Dade County Educational Facilities Authority, 5.00% due 4/1/2016 (University of Miami; Insured: AMBAC) | Aa3/AA | 3,000,000 | 3,066,420 | |||||
Miami Dade County School Board COP, 5.00% due 5/1/2014 (Insured: MBIA-IBC/FGIC) | A2/AA | 1,000,000 | 1,040,640 | |||||
Miami Dade County School Board COP, 5.00% due 10/1/2015 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,038,750 | |||||
Miami Dade County School Board COP, 5.00% due 10/1/2016 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,032,410 | |||||
Miami Dade County School Board COP, 5.50% due 5/1/2030 put 5/1/2011 (Insured: MBIA) | A2/AA | 1,010,000 | 1,066,257 | |||||
Miami Dade County Special Housing, 5.80% due 10/1/2012 (HUD Section 8) | Baa3/NR | 1,970,000 | 2,043,087 | |||||
Miami Street Sidewalk Improvement, 5.00% due 1/1/2018 (Insured: MBIA) | A2/AA | 1,970,000 | 1,993,147 | |||||
Orange County HFA, 5.80% due 11/15/2009 (Adventist Health) (ETM) | A1/NR | 1,395,000 | 1,447,131 | |||||
Palm Beach County Public Improvement, 5.00% due 11/1/2030 put 11/1/2011 (Convention Center; Insured: FGIC) | Aa1/AA+ | 3,000,000 | 3,138,150 | |||||
Palm Beach County School Board COP, 5.00% due 8/1/2025 (Insured: FGIC) | A1/AA- | 1,500,000 | 1,530,525 | |||||
Pelican Marsh Community Development District, 5.00% due 5/1/2011 (Insured: Radian) | NR/AA | 1,625,000 | 1,541,897 | |||||
Putnam County Development Authority PCR, 5.35% due 3/15/2042 put 5/1/2018 (Seminole; Insured: AMBAC) | Aa3/AA | 10,000,000 | 9,577,800 | |||||
South Miami HFA, 5.00% due 8/15/2016 (Baptist Health) | Aa3/AA- | 1,560,000 | 1,545,913 | |||||
St. John’s County IDA, 5.50% due 8/1/2014 (Presbyterian Retirement) | NR/NR | 1,755,000 | 1,777,815 | |||||
University of Central Florida Athletics Association Inc. COP, 5.00% due 10/1/2016 (Insured: FGIC) | NR/NR | 1,640,000 | 1,591,292 | |||||
GEORGIA — 3.42% | ||||||||
Atlanta Tax Allocation, 5.25% due 12/1/2016 (Atlantic Station; Insured: Assured Guaranty) | Aaa/AAA | 3,850,000 | 3,996,531 | |||||
Burke County PCR, 4.375% due 10/1/2032 put 4/1/2010 (Georgia Power Co.) | A2/A | 5,000,000 | 5,038,700 | |||||
Burke County PCR, 4.75% due 1/1/2039 put 4/1/2011 (Oglethorpe Power; Insured: MBIA) | A2/AA | 10,000,000 | 10,165,000 | |||||
Fulton County Development Authority, 7.25% due 4/1/2034 put 10/1/2008 (LOC: Bank of America) (daily demand notes) | NR/NR | 5,000,000 | 5,000,000 | |||||
Lagrange Troup County Hospital Authority Series A, 5.00% due 7/1/2018 | A1/A+ | 2,500,000 | 2,490,850 | |||||
Main Street Natural Gas Inc., 5.00% due 3/15/2013 | A2/A | 1,500,000 | 1,400,655 | |||||
Main Street Natural Gas Inc., 5.00% due 3/15/2014 | Aa2/AA- | 3,000,000 | 2,915,430 | |||||
Main Street Natural Gas Inc., 5.00% due 3/15/2014 | A2/A | 3,590,000 | 3,313,750 | |||||
Monroe County Development Authority PCR, 6.75% due 1/1/2010 (Oglethorpe Power; Insured: MBIA) | A2/AA | 2,000,000 | 2,098,500 | |||||
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Monroe County Development Authority PCR, 6.80% due 1/1/2012 (Oglethorpe Power; Insured: MBIA) | A2/AA | $ | 1,000,000 | $ | 1,103,080 | |||
Monroe County Development Authority PCR, 4.50% due 7/1/2025 put 4/1/2011 (Georgia Power Co.) | A2/A | 5,000,000 | 4,972,000 | |||||
GUAM — 0.08% | ||||||||
Guam Educational Financing Foundation COP, 5.00% due 10/1/2010 (Guam Public Schools) | NR/A- | 1,000,000 | 1,021,380 | |||||
HAWAII — 0.16% | ||||||||
Hawaii State Department of Budget & Finance, 4.95% due 4/1/2012 (Hawaiian Electric Company; Insured: MBIA) | A2/AA | 2,000,000 | 2,044,000 | |||||
IDAHO — 0.23% | ||||||||
Twin Falls Urban Renewal Agency, 4.95% due 8/1/2014 | NR/NR | 1,640,000 | 1,556,737 | |||||
Twin Falls Urban Renewal Agency, 5.15% due 8/1/2017 | NR/NR | 1,455,000 | 1,325,854 | |||||
ILLINOIS — 9.46% | ||||||||
Bolingbrook, 0% due 1/1/2016 (Insured: MBIA) | A2/NR | 1,500,000 | 1,064,880 | |||||
Bolingbrook, 0% due 1/1/2017 (Insured: MBIA) | A2/NR | 2,000,000 | 1,327,320 | |||||
Broadview Tax Increment Revenue, 5.375% due 7/1/2015 | NR/NR | 3,400,000 | 3,323,568 | |||||
Champaign County Community School District GO, 0% due 1/1/2009 (ETM) | NR/AA- | 1,205,000 | 1,196,625 | |||||
Champaign County Community School District GO, 0% due 1/1/2009 (Insured: FGIC) | NR/AA- | 2,140,000 | 2,123,458 | |||||
Chicago Board of Education GO, 6.00% due 12/1/2009 (Insured: FGIC) | A1/AA- | 2,000,000 | 2,080,880 | |||||
Chicago Capital Appreciation, 0% due 1/1/2016 (City Colleges; Insured: FGIC) | Aa3/AA- | 2,670,000 | 1,886,115 | |||||
Chicago Gas Supply, 4.75% due 3/1/2030 put 6/30/2014 (Peoples Gas Light & Coke) | NR/A- | 1,500,000 | 1,525,830 | |||||
Chicago GO, 6.125% due 1/1/2012 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,084,460 | |||||
Chicago GO, 5.375% due 1/1/2013 (Insured: MBIA) | Aa3/AA | 3,000,000 | 3,156,840 | |||||
Chicago GO, 5.40% due 1/1/2018 (Insured: FSA) | Aaa/AAA | 3,000,000 | 3,025,380 | |||||
Chicago Housing Authority Capital Program, 5.25% due 7/1/2010 (ETM) | Aaa/NR | 2,300,000 | 2,405,294 | |||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2015 (Insured: FSA) | Aaa/AAA | 8,460,000 | 8,899,497 | |||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2016 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,088,660 | |||||
Chicago Metropolitan Water Reclamation District, 7.00% due 1/1/2011 (ETM) | Aaa/NR | 1,070,000 | 1,122,120 | |||||
Chicago Midway Airport, 5.40% due 1/1/2009 (Insured: MBIA) | A2/AA | 1,340,000 | 1,348,000 | |||||
Chicago Midway Airport, 5.50% due 1/1/2013 (Insured: MBIA) | A2/AA | 1,180,000 | 1,252,782 | |||||
Chicago Park District Parking Facility, 5.75% due 1/1/2010 (ETM) | Baa1/NR | 1,000,000 | 1,039,920 | |||||
Cook County, 6.25% due 11/15/2013 (Insured: MBIA) | Aa2/AA | 3,995,000 | 4,475,319 | |||||
Cook County Community Consolidated School District GO, 0% due 12/1/2010 (Insured: FSA) | Aaa/NR | 2,000,000 | 1,867,960 | |||||
Cook County Community Consolidated School District GO, 9.00% due 12/1/2016 (Tinley Park; Insured: FGIC) | A1/NR | 2,500,000 | 3,221,925 | |||||
Cook County Community School District GO, 9.00% due 12/1/2013 (Oak Park; Insured: FGIC) | Aa3/NR | 2,250,000 | 2,777,580 | |||||
Du Page County Forest Preservation District, 0% due 11/1/2009 (Partial ETM) | Aaa/AAA | 5,000,000 | 4,851,550 | |||||
Illinois DFA, 6.00% due 11/15/2009 (Adventist Health; Insured: MBIA) | A1/AA | 3,635,000 | 3,739,615 | |||||
Illinois DFA, 6.00% due 11/15/2010 (Adventist Health; Insured: MBIA) | A1/AA | 3,860,000 | 4,039,413 | |||||
Illinois DFA Community Rehab Providers, 6.00% due 7/1/2015 | NR/BBB | 1,160,000 | 1,165,545 | |||||
Illinois DFA PCR, 5.70% due 1/15/2009 (Commonwealth Edison Co.; Insured: MBIA) | NR/AA | 3,000,000 | 3,021,750 | |||||
Illinois Educational Facilities, 4.75% due 3/1/2030 put 3/1/2017 (Art Institute of Chicago) | A1/A+ | 2,625,000 | 2,541,709 | |||||
Illinois Finance Authority, 5.00% due 11/1/2017 (Rush University Medical Center; Insured: MBIA) | A2/AA | 1,000,000 | 994,330 | |||||
Illinois Finance Authority Student Housing, 5.00% due 5/1/2014 | Baa3/NR | 3,895,000 | 3,774,956 | |||||
Illinois HFA, 5.375% due 7/1/2017 (Loyola University; Insured: MBIA) | A2/AA | 7,085,000 | 7,129,706 | |||||
Illinois HFA, 6.50% due 2/15/2009 (Iowa Health System) | Aa3/NR | 1,375,000 | 1,390,771 | |||||
Illinois HFA, 6.50% due 2/15/2010 (Iowa Health System) (ETM) | Aa3/NR | 1,465,000 | 1,521,520 | |||||
Illinois HFA, 6.00% due 2/15/2011 (Iowa Health System; Insured: AMBAC) (ETM) | Aa3/AA | 1,560,000 | 1,639,981 | |||||
Illinois HFA, 5.50% due 11/15/2011 (Methodist Medical Center; Insured: MBIA) | A2/AA | 3,000,000 | 3,037,560 | |||||
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED | September 30, 2008 | |
Thornburg Limited Term Municipal Fund |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Illinois HFA, 6.00% due 7/1/2017 (Lake Forest Hospital) | A3/A- | $ | 1,500,000 | $ | 1,521,420 | |||
Illinois Hospital District GO, 5.50% due 1/1/2010 (Insured: FGIC) | NR/NR | 1,040,000 | 1,061,497 | |||||
Kane County Forest Preservation District GO, 5.00% due 12/15/2015 (Insured: FGIC) | NR/AA | 2,780,000 | 2,933,372 | |||||
Kane County Waubonsee Community College District GO, 0% due 12/15/2013 (Insured: FGIC) | Aa3/AA- | 3,000,000 | 2,362,050 | |||||
Lake County Community High School District GO, 0% due 12/1/2011 (Insured: FGIC) | NR/NR | 3,235,000 | 2,848,935 | |||||
McHenry & Kane Counties Community Consolidated School District GO, 0% due 1/1/2010 (Insured: FGIC) | NR/NR | 1,000,000 | 956,400 | |||||
McHenry & Kane Counties Community Consolidated School District GO, 0% due 1/1/2012 (Insured: FGIC) | NR/NR | 2,200,000 | 1,919,346 | |||||
Metropolitan Pier & Exposition Authority Dedicated State Tax, 0% due 6/15/2013 (McCormick Place; Insured: MBIA) | A1/AAA | 1,045,000 | 864,988 | |||||
Metropolitan Pier & Exposition Authority Dedicated State Tax, 0% due 6/15/2016 (McCormick Place; Insured: FGIC) | A1/NR | 11,295,000 | 7,867,306 | |||||
Quincy Illinois, 5.00% due 11/15/2014 (Blessing Hospital) | A3/A- | 1,000,000 | 998,900 | |||||
Quincy Illinois, 5.00% due 11/15/2016 (Blessing Hospital) | A3/A- | 1,000,000 | 973,590 | |||||
Southwestern Illinois Development Authority, 5.125% due 8/15/2016 (Anderson Hospital) | Baa2/BBB | 2,160,000 | 2,064,118 | |||||
INDIANA — 4.79% | ||||||||
Allen County Economic Development, 5.60% due 12/30/2009 (Indiana Institute of Technology) | NR/NR | 760,000 | 771,134 | |||||
Allen County Economic Development, 5.00% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 1,370,000 | 1,365,753 | |||||
Allen County Jail Building Corp. First Mortgage, 5.75% due 10/1/2010 (ETM) | Aa3/NR | 1,115,000 | 1,182,212 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2014 (Insured: XLCA) | Aa3/NR | 1,000,000 | 1,049,090 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2015 (Insured: XLCA) | Aa3/NR | 1,480,000 | 1,550,004 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2016 (Insured: XLCA) | Aa3/NR | 1,520,000 | 1,579,417 | |||||
Allen County Redevelopment District, 5.00% due 11/15/2016 | A3/NR | 1,000,000 | 996,840 | |||||
Ball State University Student Fee, 5.75% due 7/1/2012 (Insured: FGIC) | A1/A+ | 1,000,000 | 1,060,960 | |||||
Boonville Junior High School Building Corp., 0% due 7/1/2010 (State Aid Withholding) | NR/A | 850,000 | 796,000 | |||||
Boonville Junior High School Building Corp., 0% due 1/1/2011 (State Aid Withholding) | NR/A | 850,000 | 776,246 | |||||
Boonville Junior High School Building Corp., 0% due 7/1/2011 (State Aid Withholding) | NR/A | 950,000 | 849,120 | |||||
Carmel Redevelopment Authority, 0% due 2/1/2015 (Performing Arts Center) | Aa2/AA | 1,575,000 | 1,186,117 | |||||
Center Grove Building Corp., 5.00% due 7/15/2010 (Insured: AMBAC) (ETM) | Aa3/AA+ | 1,135,000 | 1,182,295 | |||||
Dekalb County Redevelopment Authority Lease Rental, 5.25% due 1/15/2014 (Mini Mill Local Public Improvement; Insured: XLCA) | NR/BBB- | 1,000,000 | 1,061,070 | |||||
Eagle Union Middle School Building Corp., 5.50% due 7/15/2009 (ETM) | Aa3/AA | 910,000 | 932,841 | |||||
Evansville Vanderburgh, 5.00% due 7/15/2014 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,052,610 | |||||
Evansville Vanderburgh, 5.00% due 7/15/2015 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,051,790 | |||||
Huntington Economic Development, 6.15% due 11/1/2008 (United Methodist Memorial) | NR/NR | 190,000 | 189,998 | |||||
Huntington Economic Development, 6.20% due 11/1/2010 (United Methodist Memorial) | NR/NR | 790,000 | 791,469 | |||||
Indiana Bond Bank, 5.25% due 10/15/2016 (Special Gas Program) | Aa2/NR | 1,500,000 | 1,436,850 | |||||
Indiana Multi School Building Corp. First Mortgage, 5.00% due 7/15/2016 (Insured: MBIA) | A2/AA | 5,000,000 | 5,131,700 | |||||
Indiana State Educational Facilities Authority, 5.75% due 10/1/2009 (University of Indianapolis) | NR/A- | 670,000 | 686,596 | |||||
Indiana State Finance Authority Revenue, 5.00% due 11/1/2018 | Aa3/AA+ | 2,000,000 | 2,026,800 | |||||
Indiana State Finance Authority Revenue, 5.25% due 7/1/2018 (Rockville Correctional Facilities) | Aa2/AA+ | 2,150,000 | 2,227,873 | |||||
Indiana State Finance Authority Revenue, 5.25% due 7/1/2018 (Wabash Correctional Facilities) | Aa2/AA+ | 1,000,000 | 1,037,800 | |||||
Indiana State Finance Authority, 5.00% due 7/1/2016 (Forensic & Health Science, Insured: MBIA) | Aa2/AA+ | 1,030,000 | 1,078,420 | |||||
Indianapolis Local Public Improvement Bond, 5.00% due 1/1/2015 (Waterworks; Insured: MBIA) | A1/AA | 1,000,000 | 1,050,260 | |||||
Indianapolis Local Public Improvement Bond, 5.00% due 7/1/2015 (Waterworks; Insured: MBIA) | A1/AA | 1,000,000 | 1,051,350 | |||||
Indianapolis Local Public Improvement Bond, 5.00% due 7/1/2016 (Insured: FGIC) | Aa2/AA | 1,030,000 | 1,069,964 | |||||
Knox Middle School Building Corp. First Mortgage, 6.00% due 7/15/2009 (Insured: FGIC) | NR/AA | 455,000 | 464,482 | |||||
Knox Middle School Building Corp. First Mortgage, 0% due 1/15/2020 (Insured: FGIC) | NR/AA | 1,295,000 | 655,620 | |||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2014 (Insured: FGIC) | NR/AA+ | 1,200,000 | 1,270,128 | |||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2015 (Insured: FGIC) | NR/AA+ | 1,250,000 | 1,317,313 | |||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2013 (Insured: MBIA) | A2/AA | 1,055,000 | 1,104,553 | |||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2014 (Insured: MBIA) | A2/AA | 1,135,000 | 1,189,923 | |||||
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2015 (Insured: MBIA) | A2/AA | $ | 1,140,000 | $ | 1,193,466 | |||
Noblesville Redevelopment Authority, 5.00% due 8/1/2016 (146th Street Extension A) | NR/AA- | 1,660,000 | 1,672,948 | |||||
Perry Township Multi School Building, 5.00% due 7/10/2014 (Insured: FSA) | Aaa/NR | 2,130,000 | 2,249,813 | |||||
Peru Community School Corp. First Mortgage, 0% due 7/1/2010 (State Aid Withholding) | NR/A | 835,000 | 781,952 | |||||
Plainfield Community High School Building Corp. First Mortgage, 5.00% due 1/15/2015 (Insured: FGIC) | NR/A | 1,445,000 | 1,503,942 | |||||
South Bend Community School Building Corp., 5.00% due 7/15/2016 (Insured: FGIC/State Aid Withholding) | NR/AA+ | 1,785,000 | 1,861,112 | |||||
Warren Township Vision 2005, 5.00% due 7/10/2015 (Insured: FGIC) | NR/AA+ | 2,095,000 | 2,200,441 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2010 (State Aid Withholding) (ETM) | NR/AA+ | 995,000 | 1,045,655 | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2011 (State Aid Withholding) (ETM) | NR/AA+ | 1,095,000 | 1,168,398 | |||||
West Clark School Building Corp., 5.25% due 1/15/2014 (Insured: MBIA) | A2/AA+ | 1,335,000 | 1,426,060 | |||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2011 (State Aid Withholding) | NR/AA+ | 2,080,000 | 2,223,270 | |||||
IOWA — 1.66% | ||||||||
Ankeny Community School District Sales & Services Tax, 5.00% due 7/1/2010 | NR/AA- | 2,900,000 | 2,999,702 | |||||
Des Moines Limited Obligation, 4.40% due 12/1/2015 put 12/1/2011 (Des Moines Parking Associates; LOC: Wells Fargo Bank) | NR/NR | 2,770,000 | 2,770,831 | |||||
Dubuque Community School District, 5.00% due 1/1/2013 | NR/NR | 1,600,000 | 1,603,872 | |||||
Dubuque Community School District, 5.00% due 7/1/2013 | NR/NR | 1,640,000 | 1,643,149 | |||||
Iowa Finance Authority, 6.50% due 2/15/2009 (Iowa Health Services) | Aa3/NR | 1,825,000 | 1,847,320 | |||||
Iowa Finance Authority, 6.50% due 2/15/2010 (Iowa Health Services) | Aa3/NR | 2,955,000 | 3,078,312 | |||||
Iowa Finance Authority, 5.75% due 12/1/2010 (Trinity Health) | Aa2/AA | 3,295,000 | 3,400,934 | |||||
Iowa Finance Authority, 6.00% due 2/15/2011 pre-refunded 2/15/2010 (Iowa Health Services; Insured: AMBAC) | Aa3/AA | 3,145,000 | 3,315,459 | |||||
KANSAS — 0.79% | ||||||||
Burlington Environmental Improvement, 5.374% due 9/1/2035 put 4/1/2013 (Kansas City Power & Light; Insured: FGIC) | A3/A | 10,000,000 | 9,851,100 | |||||
KENTUCKY — 1.27% | ||||||||
Kentucky Economic DFA, 5.35% due 10/1/2009 (Norton Healthcare; Insured: MBIA) (ETM) | A2/AA | 2,835,000 | 2,918,803 | |||||
Kentucky Economic DFA, 5.35% due 10/1/2009 (Norton Healthcare; Insured: MBIA) | A2/AA | 4,565,000 | 4,683,416 | |||||
Kentucky Economic DFA, 5.40% due 10/1/2010 (Norton Healthcare; Insured: MBIA) (ETM) | A2/AA | 3,775,000 | 3,974,697 | |||||
Kentucky Economic DFA, 5.40% due 10/1/2010 (Norton Healthcare; Insured MBIA) | A2/AA | 4,055,000 | 4,227,540 | |||||
LOUISIANA — 2.88% | ||||||||
East Baton Rouge Sewer, 5.00% due 2/1/2018 (Insured: FSA) | Aaa/AAA | 3,000,000 | 3,048,600 | |||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 9/1/2012 (Bellemont Apartments) | Baa3/NR | 820,000 | 797,811 | |||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2015 (Independence Stadium) | NR/A | 1,000,000 | 1,012,160 | |||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2016 (Independence Stadium) | NR/A | 1,000,000 | 1,001,370 | |||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2017 (Independence Stadium) | NR/A | 1,265,000 | 1,249,908 | |||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2018 (Independence Stadium) | NR/A | 1,000,000 | 977,570 | |||||
Louisiana Public Facilities Authority, 5.75% due 10/1/2008 (Loyola University) | A1/A+ | 1,000,000 | 1,000,070 | |||||
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | September 30, 2008 | |
Thornburg Limited Term Municipal Fund |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Louisiana Public Facilities Authority, 5.375% due 12/1/2008 (Wynhoven Health Care Center; Guaranty: Archdiocese of New Orleans) | NR/NR | $ | 500,000 | $ | 499,320 | |||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2014 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 999,210 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2015 (Ochsner Clinic Foundation) | A3/NR | 1,825,000 | 1,804,158 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2016 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 974,600 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2017 (Ochsner Clinic Foundation) | A3/NR | 1,035,000 | 994,480 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2018 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 948,130 | |||||
Louisiana State Citizens Property Insurance Corp., 5.00% due 6/1/2015 (Insured: AMBAC) | Aa3/AA | 5,000,000 | 5,025,250 | |||||
Louisiana State GO, 5.50% due 11/15/2008 (Insured: FGIC) | A1/A+ | 1,980,000 | 1,986,871 | |||||
Louisiana State GO, 5.00% due 8/1/2017 (Insured: MBIA) | A1/AA | 4,000,000 | 4,069,440 | |||||
Louisiana State Offshore Terminal Authority, 4.25% due 10/1/2037 put 10/1/2010 (Deepwater Port Loop LLC) | A3/A | 4,200,000 | 4,296,390 | |||||
Monroe Sales Tax Increment Garrett Road Economic Development Area, 5.00% due 3/1/2017 (Insured: Radian) | A3/BBB+ | 1,505,000 | 1,410,742 | |||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | Baa3/BBB | 2,400,000 | 2,317,320 | |||||
Regional Transportation Authority, 8.00% due 12/1/2011 (Insured: FGIC) | NR/NR | 1,250,000 | 1,391,675 | |||||
MARYLAND — 0.32% | ||||||||
Maryland Health & Higher Educational Facilities, 5.00% due 1/1/2017 (Washington County Hospital) | NR/BBB- | 1,000,000 | 934,940 | |||||
Maryland Health & Higher Educational Facilities, 5.00% due 1/1/2018 (Washington County Hospital) | NR/BBB- | 1,000,000 | 921,000 | |||||
Maryland Health & Higher Educational Facilities, 5.00% due 5/15/2046 put 5/15/2013 (Johns Hopkins Health Systems) | A1/A+ | 2,000,000 | 2,080,000 | |||||
MASSACHUSETTS — 2.18% | ||||||||
Massachusetts DFA Resource Recovery, 5.50% due 1/1/2011 (Seamass Partnership; Insured: MBIA) | A2/AA | 3,470,000 | 3,613,519 | |||||
Massachusetts GO, 6.00% due 11/1/2008 | Aa2/AA | 1,000,000 | 1,003,130 | |||||
Massachusetts GO Construction Loan, 5.00% due 9/1/2015 | Aa2/AA | 10,000,000 | 10,664,900 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2011 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 2,345,000 | 2,430,898 | |||||
Massachusetts Health & Educational Facilities Authority, 5.375% due 5/15/2012 (New England Medical Center Hospital; Insured: FGIC) (ETM) | NR/NR | 3,415,000 | 3,635,268 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2012 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 2,330,000 | 2,416,699 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2013 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 3,215,000 | 3,331,447 | |||||
MICHIGAN — 3.52% | ||||||||
Detroit Sewage Disposal Revenue, 5.50% due 7/1/2032 (Insured: MBIA) | A2/AA | 3,500,000 | 3,621,695 | |||||
Dickinson County Economic Development Corp. Environmental Impact, 5.75% due 6/1/2016 (International Paper Co.) | Baa3/BBB | 3,715,000 | 3,522,675 | |||||
Dickinson County Healthcare Systems, 5.50% due 11/1/2013 (Insured: ACA) | Baa3/NR | 3,605,000 | 3,598,006 | |||||
Gull Lake Community School District GO, 0% due 5/1/2013 (Insured: FGIC) | NR/NR | 2,485,000 | 1,974,183 | |||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 5.00% due 5/15/2018 (Bronson Hospital; Insured: FSA) | Aaa/AAA | 1,520,000 | 1,511,321 | |||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 5.00% due 5/15/2018 (Bronson Hospital; Insured: FSA) | Aaa/AAA | 2,500,000 | 2,485,725 | |||||
Kent Hospital Finance Authority, 5.25% due 1/15/2047 put 1/15/2014 (Spectrum Health) | Aa3/AA | 2,000,000 | 2,025,260 | |||||
Michigan HFA, 5.375% due 7/1/2012 (Port Huron Hospital; Insured: FSA) | Aaa/AAA | 1,405,000 | 1,407,234 | |||||
Michigan Housing Development Authority Rental Housing Revenue, 5.00% due 4/1/2016 | NR/AA | 6,000,000 | 5,877,960 | |||||
Michigan State Building Authority, 5.00% due 10/15/2015 (Insured: AMBAC) | Aa3/AA | 6,000,000 | 6,291,720 | |||||
Michigan State COP, 5.00% due 9/1/2031 put 9/1/2011 (Insured: MBIA) | A2/AA | 6,000,000 | 6,278,460 | |||||
Michigan State HFA, 5.00% due 11/15/2017 (Sparrow Memorial Hospital) | A1/A+ | 1,000,000 | 977,250 | |||||
Michigan State Strategic Fund, 5.00% due 10/15/2017 (Insured: Assured Guaranty) | Aaa/AAA | �� | 2,000,000 | 2,047,140 | ||||
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Michigan State Strategic Fund, 4.85% due 9/1/2030 put 9/1/2011 (Detroit Edison Co.; Insured: AMBAC) | Aa3/NR | $ | 2,075,000 | $ | 2,093,011 | |||
MINNESOTA — 0.95% | ||||||||
Dakota County Community Development Agency Multi Family Housing, 5.00% due 11/1/2017 (Commons on Marice) | NR/NR | 1,150,000 | 1,032,965 | |||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2012 (Healthpartners Obligated Group) | Baa1/BBB | 1,000,000 | 1,012,680 | |||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2013 (Healthpartners Obligated Group) | Baa1/BBB | 1,500,000 | 1,507,500 | |||||
Minneapolis St. Paul Metropolitan Airports, 5.00% due 1/1/2017 (Insured: AMBAC) | Aa3/AA | 8,005,000 | 8,249,953 | |||||
MISSISSIPPI — 0.20% | ||||||||
Gautier Utility District Systems, 5.50% due 3/1/2012 (Insured: FGIC) | NR/NR | 1,020,000 | 1,065,329 | |||||
Mississippi Development Bank Public Improvement GO, 4.75% due 7/1/2017 | NR/NR | 1,565,000 | 1,443,196 | |||||
MISSOURI — 0.36% | ||||||||
Missouri Development Finance Board Healthcare Facilities, 4.80% due 11/1/2012 (Lutheran Home Aged; LOC: Commerce Bank) | Aa2/NR | 1,275,000 | 1,287,062 | |||||
Missouri State Health & Educational Facilities Authority, 5.00% due 6/1/2011 (SSM Healthcare Corp.) | NR/AA- | 1,000,000 | 1,026,050 | |||||
Springfield Public Utilities COP, 5.00% due 12/1/2013 (Insured: MBIA) | A1/AA | 2,000,000 | 2,120,240 | |||||
MONTANA — 1.44% | ||||||||
Forsyth PCR, 5.00% due 10/1/2032 put 12/30/2008 (Avista Corp.; Insured: AMBAC) | Aa3/AA | 11,440,000 | 11,396,643 | |||||
Forsyth PCR, 5.20% due 5/1/2033 put 5/1/2009 (Portland General) | Baa1/A | 4,385,000 | 4,401,882 | |||||
Montana Facilities Finance Authority, 5.00% due 1/1/2015 (Benefis Health Systems; Insured: Assured Guaranty) | NR/AAA | 1,000,000 | 1,026,920 | |||||
Montana Facilities Finance Authority, 5.00% due 1/1/2016 (Benefis Health Systems; Insured: Assured Guaranty) | NR/AAA | 1,000,000 | 1,017,570 | |||||
NEBRASKA — 0.68% | ||||||||
Madison County Hospital Authority, 5.25% due 7/1/2010 (Faith Regional Health Services; Insured: Radian) | NR/BBB+ | 1,455,000 | 1,484,915 | |||||
Madison County Hospital Authority, 5.50% due 7/1/2012 (Faith Regional Health Services; Insured: Radian) | NR/BBB+ | 1,625,000 | 1,724,515 | |||||
Omaha Public Power District Electric Systems, 5.00% due 2/1/2013 | Aa1/AA | 5,000,000 | 5,269,650 | |||||
NEVADA — 1.78% | ||||||||
Clark County Improvement District, 5.00% due 12/1/2015 (Insured: AMBAC) | Aa3/AA | 1,915,000 | 1,979,650 | |||||
Clark County School District GO, 5.00% due 6/15/2015 (Insured: MBIA) | Aa2/AA | 1,000,000 | 1,043,860 | |||||
Department of Business & Industry, 7.25% due 12/1/2033 put 10/1/2008 (Nevada Cancer Institute; LOC: Bank of America) (daily demand notes) | NR/NR | 12,000,000 | 12,000,000 | |||||
Las Vegas Special Local Improvement District, 5.125% due 6/1/2011 (Insured: FSA) | Aaa/AAA | 1,615,000 | 1,652,064 | |||||
Reno Hospital Revenue, 5.25% due 6/1/2014 (Washoe Medical Center; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,036,440 | |||||
Reno Hospital Revenue, 5.25% due 6/1/2016 (Washoe Medical Center; Insured: FSA) | Aaa/AAA | 1,100,000 | 1,130,734 | |||||
Reno Hospital Revenue, 5.25% due 6/1/2018 (Washoe Medical Center; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,006,330 | |||||
Sparks Redevelopment Agency Tax Allocation, 5.75% due 1/15/2010 (Insured: Radian) | NR/BBB+ | 1,000,000 | 1,018,450 | |||||
Sparks Redevelopment Agency Tax Allocation, 5.75% due 1/15/2011 (Insured: Radian) | NR/BBB+ | 1,285,000 | 1,311,317 | |||||
NEW HAMPSHIRE — 0.81% | ||||||||
Manchester Housing & Redevelopment Authority, 6.05% due 1/1/2012 (Insured: ACA) | Baa3/NR | 1,500,000 | 1,505,145 | |||||
New Hampshire Health & Educational Facilities, 5.00% due 10/1/2016 (Southern NH Health Systems) | NR/A- | 1,260,000 | 1,230,793 | |||||
New Hampshire Health & Educational Facilities, 5.00% due 10/1/2017 (Southern NH Health Systems) | NR/A- | 1,000,000 | 963,840 | |||||
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2016 (Insured: MBIA) | Aa3/AA | $ | 2,985,000 | $ | 3,127,265 | |||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2017 (Insured: MBIA) | Aa3/AA | 3,130,000 | 3,246,342 | |||||
NEW JERSEY — 2.11% | ||||||||
Hudson County COP, 7.00% due 12/1/2012 (Insured: MBIA) | A2/AA | 1,000,000 | 1,117,420 | |||||
Hudson County COP, 6.25% due 12/1/2014 (Insured: MBIA) | A2/AA | 1,500,000 | 1,662,660 | |||||
New Jersey EDA, 5.00% due 11/15/2011 (Seabrook Village) | NR/NR | 1,000,000 | 972,920 | |||||
New Jersey EDA, 5.00% due 11/15/2014 (Seabrook Village) | NR/NR | 1,000,000 | 942,450 | |||||
New Jersey EDA Cigarette Tax Revenue, 5.00% due 6/15/2012 (Insured: FGIC) | Baa2/BBB | 7,375,000 | 7,584,376 | |||||
New Jersey State Transit Corp. COP, 5.25% due 9/15/2013 (Insured: AMBAC) | Aa3/AA | 5,000,000 | 5,261,250 | |||||
New Jersey State Transit Corp. COP, 5.50% due 9/15/2013 (Insured: AMBAC) | Aa3/AA | 7,650,000 | 8,134,781 | |||||
Tobacco Settlement Financing Corp., 6.125% due 6/1/2024 refunded to various dates | Aaa/AAA | 475,000 | 495,202 | |||||
NEW MEXICO — 1.27% | ||||||||
Farmington PCR, 5.25% due 5/1/2024 put 10/1/2008 (LOC: Barclays Bank) (daily demand notes) | VMIG1/A-1+ | 9,300,000 | 9,300,000 | |||||
New Mexico Finance Authority State Office Building Tax, 5.00% due 6/1/2013 pre-refunded 6/1/2011 | Aa1/AAA | 1,325,000 | 1,394,284 | |||||
New Mexico Highway Commission Tax, 5.00% due 6/15/2011 (Insured: AMBAC) (ETM) | Aa2/AAA | 4,865,000 | 5,112,434 | |||||
NEW YORK — 4.32% | ||||||||
Hempstead Town IDA Resource Recovery, 5.00% due 12/1/2008 (American Ref-Fuel; Insured: MBIA) | A2/AA | 1,000,000 | 1,004,300 | |||||
Monroe County IDA, 5.375% due 6/1/2017 (St. John Fisher College; Insured: Radian) | NR/BBB+ | 3,910,000 | 3,775,222 | |||||
New York City GO, 5.20% due 8/1/2017 put 10/1/2008 (LOC: JPM) (daily demand notes) | VMIG1/A-1+ | 400,000 | 400,000 | |||||
New York City IDA, 5.00% due 6/1/2010 (Lycee Francais de New York; Insured: ACA) | Baa1/BBB | 1,175,000 | 1,179,829 | |||||
New York City IDA, 5.25% due 6/1/2011 (Lycee Francais de New York; Insured: ACA) | Baa1/NR | 2,215,000 | 2,221,778 | |||||
New York City IDA, 5.25% due 6/1/2012 (Lycee Francais de New York; Insured: ACA) | Baa1/NR | 2,330,000 | 2,316,253 | |||||
New York City Transitional Finance Authority, 5.00% due 11/1/2012 | Aa1/AAA | 5,000,000 | 5,303,850 | |||||
New York City Transitional Finance Authority, 5.00% due 11/1/2014 | Aa1/AAA | 2,000,000 | 2,125,120 | |||||
New York City Transitional Finance Authority, 5.00% due 11/1/2015 | Aa1/AAA | 1,500,000 | 1,587,255 | |||||
New York State Dormitory Authority Mental Health Services Facilities Improvement, 5.00% due 8/15/2010 (Insured: MBIA) | A1/AA | 1,600,000 | 1,657,568 | |||||
New York State Dormitory Authority, 5.50% due 7/1/2012 (South Nassau Community Hospital) | Baa1/NR | 1,820,000 | 1,873,836 | |||||
New York State Dormitory Authority, 5.50% due 7/1/2013 (South Nassau Community Hospital) | Baa1/NR | 1,500,000 | 1,541,460 | |||||
New York State Dormitory Authority, 5.25% due 11/15/2026 put 5/15/2012 (Insured: AMBAC) | Aa3/AA | 4,000,000 | 4,143,480 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2012 (Insured: SONYMA) | Aa1/NR | 2,000,000 | 2,050,380 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2013 (Insured: SONYMA) | Aa1/NR | 4,600,000 | 4,715,874 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2014 (Insured: SONYMA) | Aa1/NR | 1,500,000 | 1,537,785 | |||||
New York State Dormitory Authority, 5.25% due 8/15/2013 (Presbyterian Hospital; Insured: FHA & FSA) | Aaa/AAA | 3,650,000 | 3,874,658 | |||||
New York State Thruway Authority Service Contract, 5.50% due 4/1/2013 (Local Highway & Bridge; Insured: XLCA) | A1/AA- | 1,000,000 | 1,055,770 | |||||
New York City GO, 7.00% due 11/1/2026 put 10/1/2008 (Insured: FSA) (daily demand notes) | VMIG1/A-1+ | 500,000 | 500,000 | |||||
Oneida County IDA, 6.00% due 1/1/2009 (Faxton Hospital; Insured: Radian) | NR/BBB+ | 710,000 | 713,628 | |||||
Port Authority 148th, 5.00% due 8/15/2017 (Insured: FSA) | Aaa/AAA | 4,725,000 | 4,937,200 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2013 | A1/AA- | 3,160,000 | 3,162,749 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2013 (Insured: XLCA) | A1/AA- | 2,000,000 | 2,001,740 | |||||
NORTH CAROLINA — 3.47% | ||||||||
Charlotte Mecklenberg Hospital Authority Health Care Systems, 5.00% due 1/15/2016 (Carolinas Health Network) | Aa3/AA- | 3,420,000 | 3,509,672 | |||||
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Charlotte Mecklenberg Hospital Authority Health Care Systems, 5.00% due 1/15/2017 (Carolinas Health Network) | Aa3/AA- | $ | 2,000,000 | $ | 2,033,520 | |||
North Carolina Eastern Municipal Power Agency, 5.375% due 1/1/2011 | Baa1/BBB+ | 3,000,000 | 3,067,680 | |||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2012 | Baa1/BBB+ | 650,000 | 661,993 | |||||
North Carolina Eastern Municipal Power Agency, 5.50% due 1/1/2012 | Baa1/BBB+ | 1,100,000 | 1,128,501 | |||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2013 | Baa1/BBB+ | 1,055,000 | 1,072,988 | |||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2016 (Insured: AMBAC) | Aa3/AA | 1,700,000 | 1,712,206 | |||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: AMBAC) | Aa3/AA | 7,500,000 | 7,913,025 | |||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2019 (Insured: Assured Guaranty) | Aaa/AAA | 3,000,000 | 3,041,460 | |||||
North Carolina Infrastructure Finance Corp. COP, 5.00% due 2/1/2017 (Correctional Facilities) | Aa1/AA+ | 2,400,000 | 2,445,384 | |||||
North Carolina Medical Care Commission, 5.00% due 9/1/2013 (Rowan Regional Medical Center; Insured: FSA/FHA 242) | Aaa/AAA | 1,000,000 | 1,046,950 | |||||
North Carolina Municipal Power Agency, 6.00% due 1/1/2010 (Catawba Electric; Insured: MBIA) | A2/AA | 2,400,000 | 2,477,256 | |||||
North Carolina Municipal Power Agency, 5.50% due 1/1/2013 (Catawba Electric) | A2/A- | 2,505,000 | 2,638,416 | |||||
North Carolina Municipal Power Agency, 6.375% due 1/1/2013 (Catawba Electric) | A2/A- | 1,000,000 | 1,042,940 | |||||
North Carolina Municipal Power Agency, 5.25% due 1/1/2017 (Catawba Electric) | A2/A- | 3,000,000 | 3,099,120 | |||||
North Carolina State Infrastructure Finance Corp. COP, 5.00% due 2/1/2016 (Correctional Facilities) | Aa1/AA+ | 5,000,000 | 5,147,000 | |||||
University of North Carolina Systems Pool Revenue, 5.00% due 4/1/2012 (Insured: AMBAC) | Aa3/AA | 1,030,000 | 1,093,077 | |||||
NORTH DAKOTA — 0.13% | ||||||||
Ward County Health Care Facilities, 5.00% due 7/1/2013 (Trinity Obligated Group) | NR/BBB+ | 1,560,000 | 1,559,220 | |||||
OHIO — 2.15% | ||||||||
Akron COP, 5.00% due 12/1/2013 (Insured: Assured Guaranty) | NR/AAA | 3,000,000 | 3,167,370 | |||||
Akron COP, 5.00% due 12/1/2014 (Insured: Assured Guaranty) | NR/AAA | 2,000,000 | 2,107,940 | |||||
Cleveland Cuyahoga County Port Authority, 6.00% due 11/15/2010 | NR/NR | 1,730,000 | 1,766,693 | |||||
Greater Cleveland Regional Transportation Authority GO, 5.00% due 12/1/2015 (Insured: MBIA) | Aa3/NR | 1,000,000 | 1,066,040 | |||||
Hudson City GO, 6.35% due 12/1/2011 (Library Improvement) | Aa1/NR | 1,400,000 | 1,531,950 | |||||
Mahoning Valley Sanitary District, 5.85% due 11/15/2008 (Insured: FSA) | Aaa/AAA | 1,300,000 | 1,305,759 | |||||
Mahoning Valley Sanitary District, 5.90% due 11/15/2009 (Insured: FSA) | Aaa/AAA | 770,000 | 800,969 | |||||
Montgomery County, 6.00% due 12/1/2008 (Catholic Health Initiatives) | Aa2/AA | 2,250,000 | 2,262,488 | |||||
Montgomery County, 6.00% due 12/1/2009 (Catholic Health Initiatives) | Aa2/AA | 2,385,000 | 2,471,695 | |||||
Montgomery County, 6.00% due 12/1/2010 (Catholic Health Initiatives) | Aa2/AA | 1,530,000 | 1,611,564 | |||||
Montgomery County, 4.10% due 10/1/2041 put 11/10/2011 (Catholic Health Initiatives) | Aa2/AA | 2,500,000 | 2,550,225 | |||||
Ohio State Unlimited Tax GO, 5.75% due 6/15/2010 pre-refunded 6/15/2009 | Aa1/AA+ | 5,000,000 | 5,121,400 | |||||
Reading Development, 6.00% due 2/1/2009 (St. Mary’s Educational Institute; Insured: Radian) | NR/BBB+ | 975,000 | 982,186 | |||||
OKLAHOMA — 1.27% | ||||||||
Comanche County Hospital Authority, 5.00% due 7/1/2011 (Insured: Radian) | A3/BBB+ | 1,000,000 | 1,015,070 | |||||
Comanche County Hospital Authority, 5.25% due 7/1/2015 (Insured: Radian) | A3/BBB+ | 1,340,000 | 1,331,625 | |||||
Jenks Aquarium Authority First Mortgage, 5.50% due 7/1/2010 (ETM) | A2/NR | 225,000 | 231,543 | |||||
Oklahoma DFA Health, 5.00% due 8/15/2017 (Integris Baptist Medical Center) | Aa3/AA- | 2,400,000 | 2,362,560 | |||||
Oklahoma DFA Hospital, 5.25% due 12/1/2011 (Duncan Regional Hospital) | NR/A | 1,215,000 | 1,256,067 | |||||
Oklahoma DFA Hospital, 5.25% due 12/1/2012 (Duncan Regional Hospital) | NR/A | 1,330,000 | 1,370,618 | |||||
Oklahoma DFA Hospital, 5.25% due 12/1/2013 (Duncan Regional Hospital) | NR/A | 1,350,000 | 1,387,557 | |||||
Oklahoma DFA, 5.75% due 6/1/2011 (Oklahoma Hospital Association; Insured: AMBAC) | Aa3/AA | 740,000 | 794,131 | |||||
Oklahoma State Industrial Authority, 5.00% due 7/1/2016 (Medical Research Foundation) | A1/NR | 1,165,000 | 1,153,851 | |||||
Oklahoma State Industrial Authority, 5.25% due 7/1/2017 (Medical Research Foundation) | A1/NR | 1,075,000 | 1,068,958 | |||||
Oklahoma State Industrial Authority, 6.00% due 8/15/2010 pre-refunded 8/15/2009 (Integris Health Systems; Insured: MBIA) | Aa3/AAA | 190,000 | 197,872 | |||||
Oklahoma State Industrial Authority, 6.00% due 8/15/2010 pre-refunded 8/15/2009 (Integris Health Systems; Insured: MBIA) | Aa3/AA | 2,150,000 | 2,237,526 | |||||
Certified Annual Report 29
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Oklahoma State Municipal Power Authority, 3.875% due 1/1/2025 put 7/1/2012 (Insured: FSA) | Aaa/AAA | $ | 1,355,000 | $ | 1,366,965 | |||
OREGON — 0.17% | ||||||||
Oregon State Department Administrative Services COP, 5.00% due 11/1/2014 (Insured: FGIC) | Aa3/AA- | 1,000,000 | 1,051,470 | |||||
Oregon State Department Administrative Services COP, 5.00% due 11/1/2015 (Insured: FGIC) | Aa3/AA- | 1,000,000 | 1,049,930 | |||||
PENNSYLVANIA — 2.42% | ||||||||
Allegheny County Hospital Development Authority, 6.30% due 5/1/2009 (South Hills Health System) (ETM) | Baa2/NR | 410,000 | 419,385 | |||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2018 (University of Pittsburgh Medical Center) | Aa3/AA- | 3,000,000 | 2,914,860 | |||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2018 (University of Pittsburgh Medical Center) | Aa3/AA- | 1,000,000 | 971,620 | |||||
Chester County School Authority, 5.00% due 4/1/2016 (Intermediate School; Insured: AMBAC) | NR/AA | 1,915,000 | 1,992,136 | |||||
Geisinger Authority Health Systems, 5.50% due 8/15/2009 (Penn State Geisinger Health) | Aa2/AA | 1,000,000 | 1,011,890 | |||||
Northampton County IDA, 5.35% due 7/1/2010 (Moravian Hall Square; Insured: Radian) | NR/BBB+ | 1,200,000 | 1,201,008 | |||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 6/1/2015 | Baa2/BBB | 1,200,000 | 1,171,488 | |||||
Philadelphia Gas Works, 5.00% due 9/1/2014 (Insured: FSA) | Aaa/AAA | 3,000,000 | 3,152,760 | |||||
Philadelphia Gas Works, 5.00% due 9/1/2015 (Insured: FSA) | Aaa/AAA | 3,315,000 | 3,443,091 | |||||
Philadelphia Parking Authority Revenue, 5.00% due 9/1/2016 | A2/A- | 1,500,000 | 1,519,815 | |||||
Philadelphia Parking Authority Revenue, 5.00% due 9/1/2017 | A2/A- | 1,020,000 | 1,021,632 | |||||
Pittsburgh GO, 5.00% due 9/1/2012 (Insured: MBIA) | A2/AA | 3,415,000 | 3,514,650 | |||||
Pittsburgh GO, 5.50% due 9/1/2014 (Insured: AMBAC) | Aa3/AA | 2,000,000 | 2,075,860 | |||||
Pittsburgh GO, 5.25% due 9/1/2016 (Insured: FSA) | Aaa/AAA | 3,000,000 | 3,130,710 | |||||
Sayre HFA, 5.25% due 7/1/2011 (Latrobe Area Hospital; Insured: AMBAC) (ETM) | Aa3/AA | 1,400,000 | 1,449,196 | |||||
Sayre HFA, 5.25% due 7/1/2012 (Latrobe Area Hospital; Insured: AMBAC) (ETM) | Aa3/AA | 1,000,000 | 1,038,500 | |||||
RHODE ISLAND — 0.63% | ||||||||
Providence GO, 5.50% due 1/15/2012 (Insured: FGIC) | A3/A | 1,880,000 | 1,981,764 | |||||
Rhode Island COP, 5.00% due 10/1/2014 (Providence Plantations; Insured MBIA) | A1/AA | 1,000,000 | 1,048,550 | |||||
Rhode Island State Economic Development Corp., 5.75% due 7/1/2010 (Providence Place Mall; Insured: Radian) | NR/BBB+ | 1,115,000 | 1,145,752 | |||||
Rhode Island State Health & Education Building Corp., 4.50% due 9/1/2009 (Butler Hospital; LOC: Bank of America) | NR/AA+ | 1,960,000 | 1,998,357 | |||||
Rhode Island State Health & Education Building Corp., 5.25% due 7/1/2014 (Memorial Hospital; LOC: Fleet Bank) | NR/AA+ | 1,565,000 | 1,606,520 | |||||
SOUTH CAROLINA — 1.61% | ||||||||
Georgetown County Environmental Improvement, 5.70% due 4/1/2014 (International Paper Co.) | Baa3/BBB | 7,975,000 | 7,721,555 | |||||
Greenville County School District, 5.25% due 12/1/2015 (Building Equity Sooner Tomorrow) | Aa3/AA | 1,000,000 | 1,035,820 | |||||
Greenwood County Hospital Facilities, 5.00% due 10/1/2013 (Self Regional Healthcare; Insured: FSA) (2) | Aaa/AAA | 2,000,000 | 2,096,340 | |||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2015 (Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,041,300 | |||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2016 (Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,032,220 | |||||
South Carolina Jobs Economic Carealliance, 5.00% due 8/15/2014 | Aaa/AAA | 4,000,000 | 4,045,000 | |||||
South Carolina Jobs Economic Carealliance, 5.00% due 8/15/2015 | Aaa/AAA | 3,000,000 | 2,993,430 | |||||
SOUTH DAKOTA — 0.09% | ||||||||
South Dakota State Health & Educational Facilities Authority, 5.50% due 9/1/2011 (Rapid City Regional Hospital; Insured: MBIA) | A1/AA | 1,100,000 | 1,157,145 | |||||
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
TENNESSEE — 1.42% | ||||||||
Knox County Health, Educational, & Housing Facilities, 5.00% due 4/1/2017 (University Health Systems) | NR/BBB+ | $ | 3,130,000 | $ | 3,003,298 | |||
Metro Government Nashville Water & Sewer, 6.50% due 12/1/2014 (ETM) | Aaa/AAA | 1,240,000 | 1,436,763 | |||||
Tennessee Energy Acquisition Corp., 5.00% due 9/1/2014 | Aa3/AA- | 975,000 | 882,940 | |||||
Tennessee Energy Acquisition Corp., 5.00% due 9/1/2015 | Aa3/AA- | 3,000,000 | 2,649,990 | |||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2017 | A2/AA- | 5,000,000 | 4,242,200 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2018 | Aa3/AA- | 5,000,000 | 4,200,600 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2020 | Aa3/AA- | 1,450,000 | 1,179,923 | |||||
TEXAS — 13.04% | ||||||||
Amarillo Health Facilities Corp., 5.50% due 1/1/2011 (St. Anthony’s Hospital Corp.; Insured: FSA) | Aaa/NR | 1,350,000 | 1,411,803 | |||||
Austin Community College Public Facilities Corp., 5.25% due 8/1/2017 (Round Rock Campus) | Aa3/AA+ | 1,500,000 | 1,546,410 | |||||
Austin Water & Wastewater, 5.00% due 5/15/2014 (Insured: AMBAC) | Aa3/AA | 2,890,000 | 3,035,800 | |||||
Austin Water & Wastewater, 5.00% due 5/15/2015 (Insured: AMBAC) | Aa3/AA | 1,520,000 | 1,595,362 | |||||
Bexar County Housing Finance Corp. Multi Family Housing, 5.00% due 1/1/2011 (American Opportunity Housing; Insured: MBIA) | A2/NR | 1,800,000 | 1,848,078 | |||||
Brazos River Authority, 4.90% due 10/1/2015 (Center Point Energy; Insured: MBIA) | A2/AA | 2,415,000 | 2,385,320 | |||||
Cedar Hill ISD GO, 0% due 8/15/2010 (Guaranty: PSF) | NR/AAA | 440,000 | 404,202 | |||||
Clint ISD GO, 5.50% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 1,700,000 | 1,795,064 | |||||
Clint ISD GO, 5.50% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,155,000 | 1,208,881 | |||||
Collin County Limited Tax Improvement GO, 5.00% due 2/15/2016 | Aaa/AAA | 1,465,000 | 1,555,112 | |||||
Corpus Christi Business & Job Development Corp., 5.00% due 9/1/2012 (Arena Project; Insured: AMBAC) | Aa3/AA | 1,025,000 | 1,054,909 | |||||
Corpus Christi Utility Systems, 5.50% due 7/15/2009 (Insured: FSA) | Aaa/AAA | 4,780,000 | 4,895,150 | |||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2017 (Insured: AMBAC) | Aa3/AA | 1,160,000 | 1,151,404 | |||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2017 (Insured: AMBAC) | Aa3/AA | 1,260,000 | 1,250,663 | |||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2018 (Insured: AMBAC) | Aa3/AA | 1,935,000 | 1,894,249 | |||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2018 (Insured: AMBAC) | Aa3/AA | 2,035,000 | 1,992,143 | |||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2019 (Insured: AMBAC) | Aa3/AA | 2,175,000 | 2,095,243 | |||||
Duncanville ISD GO, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 4,945,000 | 4,568,240 | |||||
Duncanville ISD GO, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,245,000 | 1,102,833 | |||||
Fort Worth Water & Sewer, 5.25% due 2/15/2011 (Tarrant & Denton County) | Aa2/AA | 1,390,000 | 1,459,820 | |||||
Grapevine Colleyville ISD GO, 0% due 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 7,350,000 | 6,668,214 | |||||
Grapevine GO, 5.25% due 2/15/2012 (Insured: FGIC) | NR/AA- | 2,005,000 | 2,007,747 | |||||
Harris County Health Facilities Development Corp. Thermal Utility, 5.45% due 2/15/2011 (Teco; Insured: AMBAC) | Aa3/AA | 3,000,000 | 3,064,890 | |||||
Harris County Health Facilities Development Corp. Thermal Utility, 5.00% due 11/15/2015 (Teco; Insured: MBIA) | Aa3/AA | 1,500,000 | 1,531,710 | |||||
Harris County Hospital District, 5.75% due 2/15/2011 pre-refunded 8/15/2010 (Insured: MBIA) | A1/AA | 10,000,000 | 10,473,300 | |||||
Harris County Hospital District, 5.75% due 2/15/2012 pre-refunded 8/15/2010 (Insured: MBIA) | A1/AA | 3,000,000 | 3,141,990 | |||||
Harris County Hospital District Senior Lien, 5.00% due 2/15/2014 (Insured: MBIA) | A1/AA | 1,275,000 | 1,309,973 | |||||
Harris County Hospital District Senior Lien, 5.00% due 2/15/2017 (Insured: MBIA) | A1/AA | 1,500,000 | 1,509,195 | |||||
Harris County Sports Authority Senior Lien, 0% due 11/15/2010 (Insured: MBIA) | A2/AA | 3,260,000 | 3,013,153 | |||||
Houston ISD Public West Side, 0% due 9/15/2014 (Insured: AMBAC) | Aa3/AA | 6,190,000 | 4,773,790 | |||||
Hutto ISD GO, 0% due 8/1/2017 (Guaranty: PSF) | NR/AAA | 2,170,000 | 1,427,903 | |||||
Irving ISD GO, 0% due 2/15/2017 (Guaranty: PSF) | Aaa/AAA | 1,000,000 | 672,780 | |||||
Keller ISD GO, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,250,000 | 1,085,075 | |||||
Laredo GO, 5.00% due 2/15/2018 (Insured: MBIA) | A1/AA | 2,000,000 | 2,052,600 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2012 (Insured: AMBAC) | Aa3/AA | 1,660,000 | 1,726,251 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2013 (Insured: AMBAC) | Aa3/AA | 1,745,000 | 1,817,452 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2014 (Insured: AMBAC) | Aa3/AA | 1,835,000 | 1,912,639 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2015 (Insured: AMBAC) | Aa3/AA | 1,930,000 | 2,009,419 | |||||
Certified Annual Report 31
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 |
Issuer-Description | Credit Rating† | Principal Amount | Value | ||||
Mesquite ISD GO, 0% due 8/15/2011 pre-refunded 8/15/2010 (Guaranty: PSF) | NR/AAA $ | 1,865,000 | $ | 1,669,828 | |||
Mesquite ISD GO, 0% due 8/15/2011 (Guaranty: PSF) | NR/AAA | 1,200,000 | 1,069,752 | ||||
Midlothian ISD GO, 0% due 2/15/2009 (Guaranty: PSF) (ETM) | Aaa/NR | 570,000 | 564,152 | ||||
Midlothian ISD GO, 0% due 2/15/2009 (Guaranty: PSF) | Aaa/NR | 630,000 | 623,486 | ||||
Midtown Redevelopment Authority, 6.00% due 1/1/2010 (Insured: Radian) | A3/A- | 700,000 | 717,927 | ||||
Midtown Redevelopment Authority, 6.00% due 1/1/2011 (Insured: Radian) | A3/A- | 740,000 | 769,260 | ||||
North Central Health Facility Development, 5.00% due 5/15/2017 (Baylor Health Care System) | Aa2/AA- | 5,000,000 | 4,937,050 | ||||
North East ISD GO, 5.00% due 8/1/2016 | Aaa/AAA | 2,000,000 | 2,106,060 | ||||
Red River Authority PCR, 5.20% due 7/1/2011 (Southwestern Public Service; Insured: AMBAC) | Aa3/AA | 1,050,000 | 1,049,118 | ||||
Richardson Refunding & Improvement GO, 5.00% due 2/15/2014 (Insured: MBIA) | Aa1/AAA | 3,000,000 | 3,168,930 | ||||
Sam Rayburn Municipal Power Agency, 5.50% due 10/1/2012 | Baa2/BBB- | 6,000,000 | 6,047,040 | ||||
Spring Branch ISD GO, 7.50% due 2/1/2011 (Guaranty: PSF) | Aaa/AAA | 500,000 | 550,215 | ||||
Spring Texas ISD GO, 5.00% due 8/15/2028 (Insured: FSA) | Aaa/AAA | 10,000,000 | 10,112,700 | ||||
Tarrant County Cultural Educational Facilities, 5.00% due 8/15/2014 | Aa3/AA- | 1,180,000 | 1,190,266 | ||||
Tarrant County Cultural Educational Facilities, 5.00% due 8/15/2016 | Aa3/AA- | 2,280,000 | 2,249,266 | ||||
Tarrant County Cultural Educational Facilities, 5.00% due 8/15/2017 | Aa3/AA- | 2,000,000 | 1,952,160 | ||||
Tarrant County Health Facilities Development Corp., 6.00% due 11/15/2009 (Adventist/Sunbelt Health System) (ETM) | A1/NR | 650,000 | 675,727 | ||||
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 | 787,239 | ||||
Texarkana Health Facilities Development Corp., 5.75% due 10/1/2008 (Wadley Regional Medical Center; Insured: MBIA) | A2/AA | 1,500,000 | 1,500,105 | ||||
Texas Municipal Power Agency, 0% due 9/1/2013 (Insured: MBIA) | A2/AA | 1,000,000 | 821,620 | ||||
Texas Municipal Power Agency, 5.00% due 9/1/2017 (Insured: Assured Guaranty) | Aaa/AAA | 10,000,000 | 10,223,500 | ||||
Texas State Affordable Housing Corp., 4.85% due 9/1/2012 (Insured: MBIA) | A2/AA | 1,595,000 | 1,527,404 | ||||
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 | 1,030,540 | ||||
Texas State Public Finance Authority, 5.00% due 10/15/2014 (Stephen F. Austin University Financing; Insured: MBIA) | A2/NR | 1,305,000 | 1,362,081 | ||||
Texas State Public Finance Authority, 5.00% due 10/15/2015 (Stephen F. Austin University Financing; Insured: MBIA) | A2/NR | 1,450,000 | 1,510,624 | ||||
Tomball Hospital Authority, 5.00% due 7/1/2013 | Baa3/NR | 1,460,000 | 1,435,078 | ||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2008 (Ascension Health; Insured: MBIA) | Aa1/AA | 2,300,000 | 2,308,717 | ||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2010 (Ascension Health; Insured: MBIA) | Aa1/AA | 2,000,000 | 2,074,460 | ||||
Washington County Health Facilities Development Corp., 5.35% due 6/1/2009 (Trinity Medical Center; Insured: ACA) | NR/NR | 445,000 | 441,640 | ||||
Washington County Health Facilities Development Corp., 5.75% due 6/1/2019 (Trinity Medical Center; Insured: ACA) | NR/NR | 3,840,000 | 3,568,781 | ||||
Weslaco GO Waterworks & Sewer System, 5.25% due 2/15/2019 (Insured: MBIA) | A2/AA | 2,835,000 | 2,916,648 | ||||
West Harris County Regional Water, 5.25% due 12/15/2012 (Insured: FSA) | Aaa/AAA | 2,435,000 | 2,599,874 | ||||
UTAH — 0.52% | |||||||
Intermountain Power Agency Supply, 5.00% due 7/1/2012 (ETM) | A2/AA | 4,355,000 | 4,359,878 | ||||
Salt Lake County Municipal Building Authority, 5.50% due 10/1/2009 | Aa1/AA+ | 1,500,000 | 1,547,010 | ||||
Utah State Board of Regents Auxiliary Systems & Student Fee, 5.00% due 5/1/2010 | NR/AA | 510,000 | 526,906 | ||||
VIRGINIA — 0.77% | |||||||
Alexandria IDA, 5.75% due 10/1/2008 (Institute for Defense; Insured: AMBAC) (ETM) | Aa3/AA | 1,070,000 | 1,070,075 | ||||
Alexandria IDA, 5.75% due 10/1/2009 (Institute for Defense; Insured: AMBAC) (ETM) | Aa3/AA | 1,130,000 | 1,168,431 | ||||
Alexandria IDA, 5.75% due 10/1/2010 (Institute for Defense; Insured: AMBAC) (ETM) | Aa3/AA | 1,195,000 | 1,267,513 | ||||
32 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund |
September 30, 2008 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Chesterfield County IDA PCR, 5.50% due 10/1/2009 (VEPCO) | Baa1/A- | $ | 1,500,000 | $ | 1,504,065 | |||
Norton IDA Hospital Improvement, 5.75% due 12/1/2012 (Norton Community Hospital; Insured: ACA) | NR/NR | 1,460,000 | 1,486,630 | |||||
Suffolk Redevelopment Housing Authority, 4.85% due 7/1/2031 put 7/1/2011 (Windsor at Potomac; Collateralized: FNMA) | Aaa/NR | 3,000,000 | 3,083,400 | |||||
WASHINGTON — 2.78% | ||||||||
Chelan County Public Utilities, 0% due 6/1/2014 (Insured: MBIA) | Aa2/AA | 2,000,000 | 1,552,040 | |||||
Energy Northwest Washington Electric, 5.375% due 7/1/2013 (Number 1; Insured: FSA) | Aaa/AAA | 2,000,000 | 2,100,040 | |||||
Energy Northwest Washington Electric, 5.00% due 7/1/2017 (Number 3) | Aaa/AA- | 5,470,000 | 5,625,785 | |||||
Snohomish County Public Utilities District, 5.00% due 12/1/2015 (Insured: FSA) | Aaa/AAA | 5,015,000 | 5,227,335 | |||||
Washington State GO, 0% due 1/1/2018 (Insured: FGIC) | Aa1/AA+ | 4,000,000 | 2,526,000 | |||||
Washington State GO, 0% due 1/1/2019 (Insured: FGIC) | Aa1/AA+ | 3,000,000 | 1,772,310 | |||||
Washington State HFA, 5.25% due 8/1/2018 (Insured: FSA 242) | NR/AA | 8,095,000 | 8,140,737 | |||||
Washington State HFA, 5.50% due 12/1/2009 (Providence Services; Insured: MBIA) (ETM) | A2/AA | 1,500,000 | 1,553,655 | |||||
Washington State HFA, 5.00% due 7/1/2013 (Overlake Hospital; Credit Support: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,034,950 | |||||
Washington State Public Power Supply Systems, 5.40% due 7/1/2012 (Nuclear Number 2; Insured: FSA) | Aaa/AAA | 1,300,000 | 1,390,805 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2013 (Nuclear Number 3; Insured: MBIA-IBC) | Aaa/AA | 1,760,000 | 1,453,954 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2015 (Nuclear Number 3; Insured: MBIA-IBC) | Aaa/AA | 3,000,000 | 2,216,190 | |||||
WEST VIRGINIA — 0.30% | ||||||||
Harrison County Nursing Facility, 5.625% due 9/1/2010 (Salem Health Care Corp.; LOC: Fleet Bank) | NR/NR | 170,000 | 170,202 | |||||
Kanawha, Mercer, Nicholas, Counties Single Family Mortgage, 0% due 2/1/2015 pre-refunded 2/1/2014 | Aaa/NR | 2,260,000 | 1,616,669 | |||||
West Virginia EDA PCR, 4.85% due 5/1/2019 (Appalachian Power Company) | Baa2/BBB | 1,000,000 | 972,480 | |||||
West Virginia EDA PCR, 4.85% due 5/1/2019 (Pollution Control) | Baa2/BBB | 1,000,000 | 972,480 | |||||
WISCONSIN — 1.33% | ||||||||
Bradley PCR, 6.75% due 7/1/2009 (Owens Illinois Solid Waste) (ETM) | NR/B | 1,500,000 | 1,549,005 | |||||
Wisconsin State Health & Educational Facilities Authority, 5.40% due 8/15/2013 (Sorrowful Mother Corp.; Insured: MBIA) | A2/AA | 4,000,000 | 4,003,160 | |||||
Wisconsin State Health & Educational Facilities Authority, 5.50% due 8/15/2019 (Sorrowful Mother Corp.; Insured: MBIA) | A2/AA | 11,000,000 | 11,000,440 | |||||
WYOMING — 0.29% | ||||||||
West Park Hospital District, 5.90% due 7/1/2010 (Insured: ACA) | NR/NR | 1,200,000 | 1,200,036 | |||||
Wyoming Farm Loan Board, 0% due 4/1/2009 | NR/AA+ | 2,500,000 | 2,463,101 | |||||
TOTAL INVESTMENTS — 98.24% (Cost $1,229,953,273) | $ | 1,220,724,507 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.76% | 21,878,897 | |||||||
NET ASSETS — 100.00% | $ | 1,242,603,404 | ||||||
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. |
Certified Annual Report 33
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund |
September 30, 2008 |
| 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. | |
| GO | General Obligation | |
| GRT | Gross Receipts Tax | |
| HFA | Health Facilities Authority | |
| HUD | Department of Housing & Urban Development | |
| IDA | Industrial Development Authority | |
| ISD | Independent School District | |
| LOC | Letter 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.
34 Certified Annual Report
| 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, 2008, 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, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
Certified Annual Report 35
| EXPENSE EXAMPLE | ||
Thornburg Limited Term Municipal Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
| Beginning Account Value 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 993.20 | $ | 4.32 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.67 | $ | 4.38 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 991.10 | $ | 5.72 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,019.26 | $ | 5.80 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 994.80 | $ | 2.67 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,022.33 | $ | 2.70 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.87%; C: 1.15%; and I: 0.53%) multiplied by the average account value over the period, multiplied by 183/366 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.
36 Certified Annual Report
| INDEX COMPARISON | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 (Unaudited) | |
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. There is no sales charge for Class I shares.
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 9/28/84) | (0.02 | )% | 1.79 | % | 3.17 | % | 5.41 | % | ||||
C Shares (Incep: 9/1/94) | 0.77 | % | 1.80 | % | 2.98 | % | 3.54 | % | ||||
I Shares (Incep: 7/5/96) | 1.88 | % | 2.44 | % | 3.68 | % | 4.16 | % | ||||
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 Barclays Capital Five-Year Municipal Bond Index is a rules-based, market-value-weighted index of the 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.
Certified Annual Report 37
| Thornburg Limited Term Municipal Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) None | ||
Susan H. Dubin, 59 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, 54 Trustee since 2004, Member of Governance & Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | |||
James W. Weyhrauch, 49 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 | ||
38 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2008 | |
Name, Age, Position held with Fund Year elected | Principal occupation(s) During Past Five Years | Other Directorships | ||
| OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
| George T. Strickland, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
| Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Certified Annual Report 39
| TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund |
September 30, 2008 (Unaudited) |
Name, Age, Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
40 Certified Annual Report
| OTHER INFORMATION | ||
Thornburg Limited Term Municipal Fund |
September 30, 2008 (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, 2008, 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, 2008.
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 15, 2008.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by 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 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 considered effects of recent market and economic events on the Fund and the Advisor’s responses to these events in view of the Fund’s investment objectives and policies.
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.
Certified Annual Report 41
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund |
September 30, 2008 (Unaudited) |
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations over various periods. The Trustees noted in this regard that the Fund’s investment returns had exceeded the returns of one of the categories of municipal debt mutual funds selected by an independent mutual fund analyst firm in each of the last 11 calendar years, that the Fund’s investment returns fell within the top quartile of performance of the same category for the one, three, five and ten year periods ended in the second quarter of the current year, and that the Fund’s investment returns fell within the top half of performance of a second category for the one year period and the top quartile for the three, five, and ten year periods. Measures of portfolio volatility and risk considered by the Trustees demonstrated that the Fund’s portfolio volatility relative to those measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient, and 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 average and median 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 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, and that the overall expense ratio fell between and was generally comparable to the average and median expense ratios for the same fund group. The Trustees noted their previous observations respecting fee rates charged by the Advisor to other types of investment management clients, and their conclusion that the fee rates charged to other types of clients were not directly comparable to rates charged to the Fund because of the significant differences in services required.
In reviewing the profitability of the Advisor, the Trustees considered 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses charged to the Fund to fees and expenses charged to other mutual funds.
42 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 ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
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Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to ..19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
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Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
Sincerely,
 |
| Brian McMahon |
| CEO and Chief Investment Officer |
This page is not part of the Annual Report. 47
Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
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| Waste not, |
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Wait not | ||||||
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This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: Thornburg Investment Management® 800.847.0200
Distributor: Thornburg Securities Corporation® 800.847.0200
TH858 |
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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, 2008. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders, they 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. 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 bonds 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.
Performance data given at net asset value (NAV) does not take into account applicable sales charges. If the sales charges had been included, the performance would have been lower. Minimum investments for Class I shares are higher than those for other classes. Class I shares may not be available to all investors.
Glossary
Barclays Capital Five-Year Municipal Bond Index – A rules-based, market-value-weighted index of the 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.
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
S&P 500 Index – An unmanaged broad measure 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.
Alternative Minimum Tax (AMT) – A federal tax aimed at ensuring that high-income individuals, estates, trusts, and corporations pay a minimal level income tax. For individuals, the AMT is calculated by adding tax preference items to regular taxable income.
Distribution Rate – 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 a 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.
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.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
SEC Yield – 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.
Tender Option Bond Programs (TOB) – Programs that allow investors to leverage their assets by borrowing at short-term rates and investing in higher yielding longer-term bonds.
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 income taxes.
| CUSIPS | NASDAQ SYMBOLS | |||
CLASS A | 885-215-426 | LTCAX | ||
CLASS C | 885-215-418 | LTCCX | ||
CLASS I | 885-215-392 | LTCIX |
| This page is not part of the Annual Report. 3 |
Thornburg California Limited Term Municipal Fund
At Thornburg, our approach to fixed-income management is based on the premise that investors in our bond funds seek preservation of capital along with an attractive, relatively stable yield. While aggressive bond strategies may generate stronger returns when the market is turning a blind eye towards risk, they usually fail to stack up over longer periods of time. Our patience and diligence was recognized by Lipper, which named Thornburg Investment Management its 2008 Best Fixed-Income Fund Family.
We apply time-tested techniques to manage risk and provide attractive returns. These include
| • | Building a laddered portfolio. Laddering has been shown over time to mitigate price and interest rate risk. |
| • | Investing on a cash-only basis without using leverage. While leveraged strategies may enhance returns when market conditions are favorable, they can quickly compound losses when sentiment shifts. |
| • | Conducting in-depth fundamental research on each issue and actively monitoring positions for subsequent credit events. |
| • | Diversifying among a large number of generally high-quality bonds. |
CO-PORTFOLIO MANAGERS
Josh Gonze, George Strickland, and Chris Ihlefeld
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 the Fund’s Class A shares is 1.50%. The total annual fund operating expense of Class A shares is 1.01%, as disclosed in the most recent Prospectus. Thornburg Investment Management intends to waive fees and reimburse expenses so that actual expenses for Class A shares do not exceed 0.99%. The fee waivers and expense reimbursements are voluntary and may be terminated at any time.
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history of A shares from February 19, 1987 through September 30, 2008
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 2/19/87) | |||||||||||||||
Without Sales Charge | 1.42 | % | 2.52 | % | 2.01 | % | 2.99 | % | 4.66 | % | |||||
With Sales Charge | (0.07 | )% | 2.02 | % | 1.70 | % | 2.84 | % | 4.59 | % |
30-DAY YIELDS
As of September 30, 2008
| Annualized Distribution Rate | SEC Yield | SEC Taxable Equivalent Yield | |||||||
A Shares | 3.52 | % | 3.30 | % | 5.60 | % | |||
C Shares | 3.24 | % | 3.06 | % | 5.19 | % | |||
I Shares | 3.88 | % | 3.71 | % | 6.29 | % |
See page 25 for all share class total returns.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2008
Number of Bonds | 93 | ||
Duration | 4.1 Yrs | ||
A Shares: | |||
Net Asset Value | $ | 12.49 | |
Maximum Offering Price | $ | 12.68 | |
SEC Taxable equivalent yields assume a 35% marginal federal tax rate and a 9.3% state of California marginal tax rate. Portions of the income of the Fund may be subject to the alternative minimum tax.
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THORNBURG CALIFORNIA LIMITED TERM MUNICIPAL FUND VERSUS
LIPPER CALIFORNIA TAX-EXEMPT MONEY MARKET FUNDS AVERAGE
Class A shares as of September 30, 2008
We are often asked to compare Thornburg California Limited Term Municipal Fund to money market fund returns. Municipal bond funds are not an exact substitute for money market funds. These investments have certain differences, which are discussed below. Investors in the Thornburg California Limited Term Municipal Fund took more risk than tax-exempt money market fund investors to earn their higher returns.
Past performance does not guarantee future results. Performance data above does not include the 1.50% sales charge for Class A shares. If the sales charge had been included, returns would have been lower. Returns shown are minus the initial investment.
Investors in municipal bond funds may experience more volatility than those in comparable money market funds. There are also differences in fees and expenses.
Investors in the Thornburg California Limited Term Municipal Fund took more risk than money market investors to earn their higher returns including reinvestment risk, credit risk, and inflation risk. Unlike money market funds, the prices of bonds fluctuate relative to changes in interest rates, with principal values decreasing when interest rates rise and increasing when interest rates fall. Generally, money market funds seek to maintain an investment portfolio with an average maturity of 90 days or less. Thornburg California Limited Term Municipal Fund has an average maturity of normally less than five years. Interest dividends paid by the Fund or by California tax-exempt money market funds are generally exempt from federal income tax and (for residents of California) state income tax (may be subject to AMT).
Money market funds seek to preserve the value per share at $1.00, whereas, the Thornburg California Limited Term Municipal Fund’s net asset value changes daily. It is possible to lose money when investing in either the Thornburg California Limited Term Municipal Fund or a tax-exempt money market fund. Neither are insured by the FDIC or any other government agency.
Lipper California Tax-Exempt Money Market Funds Average is an arithmetic average of the total return of all tax-exempt California money market mutual funds. You cannot invest in a category average.
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Thornburg California Limited Term Municipal Fund
September 30, 2008
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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 |
George Strickland Co-Portfolio Manager
| October 14, 2008
Dear 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 24 cents per share to $12.49 during the twelve months ended September 30, 2008. If you were with us for the entire period, you received dividends of 42.3 cents per share. If you reinvested your dividends, you received 43.0 cents per share. Dividends per share were lower for Class C and higher for Class I. | ||
Josh Gonze Co-Portfolio Manager
|
In last year’s annual report letter, we wrote about higher yields and lower prices for municipal bonds. We also wrote about attractive valuations relative to Treasury bonds and the larger spreads between yields on high and low quality bonds. At the time, we thought that these relationships would eventually revert back to their long-term averages. We still believe that will happen, but in the meantime, the extreme has become the norm. Tax-free bonds from issuers like Harvard University and the state of Texas are selling for yields 20% higher than Treasury bond yields! Tax adjusted, those are typically junk bond spreads. Meanwhile, anything with a hint of credit risk is suffering from reduced liquidity and enlarged spreads. | |
Are investors really worried about the solvency of Harvard University? For that matter, are investors really worried about major problems infecting investment-grade municipal bonds, with long-term average default rates of approximately 0.1%? The economy is almost surely suffering through a prolonged recession and it is indeed a time for careful diligence, but the current sell-off is not primarily credit related. We believe that what we are currently witnessing is primarily a result of massive de-leveraging. | ||
Christopher Ihlefeld Co-Portfolio Manager |
Over most of this decade, it has been relatively easy to buy long-term municipal bonds on a leveraged basis with borrowed money, typically through something called a Tender Option Bond (TOB) program. This structure was quite profitable and predictable as long as cheap and easy financing was available via money market funds. Thus the TOB trade became very popular among hedge funds, proprietary trading desks, and some mutual funds (not ours). The size of bond positions in TOB programs is not reliably tracked, but reasonable estimates placed it at about $300 billion at the peak, almost 12% of the municipal bond market. Starting last year, and accelerating this year, money market fund appetite for exotic derivatives such as TOB floating rate securities went south. As more and more funds got rid of them or demanded higher yields, financing costs spiked. That squeeze, plus margin calls due to lower bond prices, meant that many players had to unwind their programs by selling bonds into a saturated market. | |
Large scale selling from leveraged investors wouldn’t be a problem if it was met with large scale buying, but insurance companies and mutual funds, two traditional pillars of the municipal bond market, are not currently aggressive buyers. Individual investors are buying lots of bonds, a healthy sign, but their demand will take time to absorb the waves of selling from leveraged investors. In the meantime, bond prices have been getting pushed lower as yields go higher. |
| Certified Annual Report 7 |
Letter to Shareholders
Continued
When will it stop? We don’t exactly know, but we believe that the de-leveraging process in the municipal market is more than half over. After the smoke clears, we expect investors to focus on the safety and security, relative value, and tax-exempt nature of investment-grade municipal bonds. In a world where marginal tax rates are likely to be rising for wealthy Americans, this should lead to significant out-performance of municipal bonds going forward.
The Class A shares of your Fund produced a total return of 1.42% at NAV over the twelve month period ended September 30, 2008, compared to a 3.72% return for the Barclays Capital Five-Year Municipal Bond Index. Over the last year, short-term municipal bonds have performed better than intermediate and long maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next 10 years, so it has significant exposure to bonds whose maturities are longer than five years. Since those bonds generally underperformed, the Fund underperformed the Index.
| % of Portfolio Maturing | Cumulative % | |||||
| 1 year = | 10.6% | Year 1 = | 10.6% | |||
| 1 to 2 years = | 7.5% | Year 2 = | 18.1% | |||
| 2 to 3 years = | 5.2% | Year 3 = | 23.3% | |||
| 3 to 4 years = | 13.6% | Year 4 = | 36.9% | |||
| 4 to 5 years = | 8.2% | Year 5 = | 45.1% | |||
| 5 to 6 years = | 9.2% | Year 6 = | 54.3% | |||
| 6 to 7 years = | 7.8% | Year 7 = | 62.1% | |||
| 7 to 8 years = | 10.4% | Year 8 = | 72.5% | |||
| 8 to 9 years = | 13.5% | Year 9 = | 86.0% | |||
| Over 9 years = | 14.0% | Over 9 Years = | 100.0% | |||
Percentages can and do vary. Data as of 9/30/08.
Your Thornburg California Limited Term Municipal Fund is a laddered portfolio of over 90 municipal obligations from all over the state. We ladder the maturity dates of the bonds in your portfolio so that some of the bonds are scheduled to mature during each of the coming years. Laddering intermediate bonds accomplishes two goals. First, the staggered bond maturities contained in a ladder defuse interest-rate risk and dampen the Fund’s price volatility. Second, laddering gives the Fund a steady cash flow stream from maturing bonds to reinvest toward the top of the ladder where yields are typically higher. The chart above describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
The U.S. economy is almost certainly in the midst of a significant recession at the moment. Frozen credit markets, mounting job losses, an enormous erosion of wealth in real estate and equity markets have finally brought the American consumer to his knees. Meanwhile, many foreign economies are reeling, leading to reduced demand for U.S. exports. Luckily, most non-financial corporate balance sheets were quite strong coming into the current environment and some industries are experiencing healthy growth. However, this must be tempered by reduced government spending at the state and local level. Meanwhile, the federal government is priming the pumps of our financial system as fast as it can. We believe that the massive life lines given to our nation’s banks, insurance companies, and money market funds will eventually lead to more stability in the financial markets, easier financing terms for companies and individuals, and should ultimately get the housing market back on its feet. However, there are long-term implications. Tighter regulation of derivative markets, mortgage origination and securitization, and the use of financial leverage are all necessary in order to preserve our country’s reputation as a fair place to invest. Furthermore, most or all of the money flooding the capital markets from the U.S. Treasury needs to be returned to taxpayers, and our current ballooning budget deficits need to be reigned in and reduced. If not, we face the longer term risks of higher inflation, a declining currency, and reduced growth prospects.
The state of California is facing large revenue shortfalls in the current fiscal year due to reduced sales taxes, motor fuel taxes, and corporate income taxes. Income and capital gains taxes will also be lower due to real estate and stock market losses, as well as rising unemployment. After a record 85 day stand-off, the governor and state
8 Certified Annual Report |
legislature managed to patch together a nominally balanced budget that features a number of accounting gimmicks and projected revenues from securitization of the state lottery, among other solutions. Some of the changes will probably make next year’s budget harder to balance. Many local governments and other issuers of municipal bonds entered the current downturn with solid balance sheets and significant financial reserves. We expect those issuers to outperform other issuers in a very discriminating bond market, and have tried to target them for your portfolio. It is indeed an important time for careful diligence and diversification of investment portfolios. 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 California Limited Term Municipal Fund.
| Sincerely, | ||||
 |  |  | ||
| George Strickland | Josh Gonze | Christopher Ihlefeld | ||
| 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 California Limited Term Municipal Fund | September 30, 2008 | |
ASSETS | ||||
Investments at value (cost $125,207,591) (Note 2) | $ | 124,286,542 | ||
Cash | 170,956 | |||
Receivable for investments sold | 580,000 | |||
Receivable for fund shares sold | 197,204 | |||
Interest receivable | 1,554,808 | |||
Prepaid expenses and other assets | 127 | |||
Total Assets | 126,789,637 | |||
LIABILITIES | ||||
Payable for securities purchased | 2,084,040 | |||
Payable for fund shares redeemed | 672,052 | |||
Payable to investment advisor and other affiliates (Note 3) | 80,495 | |||
Accounts payable and accrued expenses | 45,718 | |||
Dividends payable | 108,260 | |||
Total Liabilities | 2,990,565 | |||
NET ASSETS | $ | 123,799,072 | ||
NET ASSETS CONSIST OF: | ||||
Net unrealized depreciation on investments | $ | (921,049 | ) | |
Accumulated net realized gain (loss) | (653,516 | ) | ||
Net capital paid in on shares of beneficial interest | 125,373,637 | |||
| $ | 123,799,072 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($66,022,686 applicable to 5,287,706 shares of beneficial interest outstanding - Note 4) | $ | 12.49 | ||
Maximum sales charge, 1.50% of offering price | 0.19 | |||
Maximum offering price per share | $ | 12.68 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($15,962,875 applicable to 1,277,410 shares of beneficial interest outstanding - Note 4) | $ | 12.50 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($41,813,511 applicable to 3,345,576 shares of beneficial interest outstanding - Note 4) | $ | 12.50 | ||
| * | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
10 Certified Annual Report |
| STATEMENT OF OPERATIONS | ||
Thornburg California Limited Term Municipal Fund | Year Ended September 30, 2008 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $708,271) | $ | 4,933,076 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 574,423 | |||
Administration fees (Note 3) | ||||
Class A Shares | 83,713 | |||
Class C Shares | 17,902 | |||
Class I Shares | 16,796 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 167,425 | |||
Class C Shares | 143,214 | |||
Transfer agent fees | ||||
Class A Shares | 25,142 | |||
Class C Shares | 9,834 | |||
Class I Shares | 6,181 | |||
Registration and filing fees | ||||
Class A Shares | 56 | |||
Class C Shares | 56 | |||
Class I Shares | 56 | |||
Custodian fees (Note 3) | 51,959 | |||
Professional fees | 25,968 | |||
Accounting fees | 2,411 | |||
Trustee fees | 1,401 | |||
Other expenses | 16,282 | |||
Total Expenses | 1,142,819 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (4,498 | ) | ||
Distribution fees waived (Note 3) | (71,608 | ) | ||
Fees paid indirectly (Note 3) | (22,359 | ) | ||
Net Expenses | 1,044,354 | |||
Net Investment Income | 3,888,722 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 186,069 | |||
Net change in unrealized appreciation (depreciation) of investments | (2,621,401 | ) | ||
Net Realized and Unrealized Loss | (2,435,332 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 1,453,390 | ||
See notes to financial statements.
| Certified Annual Report 11 |
| STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg California Limited Term Municipal Fund | ||
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 3,888,722 | $ | 3,986,590 | ||||
Net realized gain (loss) on investments | 186,069 | (164,310 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (2,621,401 | ) | (238,410 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,453,390 | 3,583,870 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,220,961 | ) | (2,494,459 | ) | ||||
Class C Shares | (437,867 | ) | (471,252 | ) | ||||
Class I Shares | (1,229,894 | ) | (1,020,879 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 137,530 | (13,105,346 | ) | |||||
Class C Shares | 1,822,538 | (2,300,630 | ) | |||||
Class I Shares | 10,723,886 | 3,635,455 | ||||||
Net Increase (Decrease) in Net Assets | 10,248,622 | (12,173,241 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 113,550,450 | 125,723,691 | ||||||
End of year | $ | 123,799,072 | $ | 113,550,450 | ||||
See notes to financial statements.
12 Certified Annual Report |
| NOTES TO FINANCIAL STATEMENTS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 | |
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 thirteen 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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 objective is to reduce expected changes in its share price compared to longer intermediate and long-term bond portfolios. The Fund will invest primarily in municipal obligations within the state of California. Because the Fund invests primarily in municipal obligations originating in California, the Fund’s share value may be more sensitive to adverse economic or political developments in that state.
The Fund currently offers three classes of shares of beneficial interest, Class A, Class C, and Institutional Class (Class I) shares. Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year, and bear both a service fee and a distribution fee, (iii) Class I shares are sold at net asset value without a sales charge at the time of purchase, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and administrative and legal expenses. Currently, class specific expenses of the Fund are limited to service and distribution fees, administration fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: Debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt obligations of comparable quality, type of issue, coupon, maturity, and rating; 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
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
| Certified Annual Report 13 |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 | |
to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid monthly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized to call dates or maturity dates of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of 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, 2008, 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, 2008, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $1,282 for Class A shares, $3,197 for Class C shares, and $19 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, 2008, the Distributor has advised the Fund that it earned commissions aggregating $324 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $221 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, 2008, are set forth in the Statement of Operations. Distribution fees in the amount of $71,608 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, 2008, fees paid indirectly were $22,359.
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.
14 Certified Annual Report |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 | |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 1,256,600 | $ | 16,038,976 | 414,862 | $ | 5,274,076 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 114,676 | 1,458,516 | 131,772 | 1,673,749 | ||||||||||
Shares repurchased | (1,362,378 | ) | (17,359,962 | ) | (1,579,257 | ) | (20,053,171 | ) | ||||||
Net Increase (Decrease) | 8,898 | $ | 137,530 | (1,032,623 | ) | $ | (13,105,346 | ) | ||||||
Class C Shares | ||||||||||||||
Shares sold | 349,863 | $ | 4,463,176 | 86,180 | $ | 1,093,229 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 26,389 | 335,881 | 28,501 | 362,296 | ||||||||||
Shares repurchased | (233,249 | ) | (2,976,519 | ) | (295,057 | ) | (3,756,155 | ) | ||||||
Net Increase (Decrease) | 143,003 | $ | 1,822,538 | (180,376 | ) | $ | (2,300,630 | ) | ||||||
Class I Shares | ||||||||||||||
Shares sold | 1,606,761 | $ | 20,521,258 | 1,133,498 | $ | 14,373,498 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 73,325 | 933,060 | 66,177 | 841,375 | ||||||||||
Shares repurchased | (840,081 | ) | (10,730,432 | ) | (910,981 | ) | (11,579,418 | ) | ||||||
Net Increase (Decrease) | 840,005 | $ | 10,723,886 | 288,694 | $ | 3,635,455 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $45,210,306 and $37,891,647, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 125,207,591 | ||
Gross unrealized appreciation on a tax basis | $ | 1,069,444 | ||
Gross unrealized depreciation on a tax basis | (1,990,493 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (921,049 | ) | |
At September 30, 2008, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2008, the Fund had tax basis capital losses, which may be carried forward 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 carry forwards expire as follows:
2012 | $ | 33,844 | |
2014 | 148,124 | ||
2015 | 471,548 | ||
| $ | 653,516 | ||
The Fund utilized $21,759 of capital loss carry forwards during the year ended September 30, 2008.
During the year ending September 30, 2008, $192,812 of capital loss carry forwards from prior years expired.
All dividends paid by the Fund for the years ended September 30, 2008 and September 30, 2007, represent exempt interest dividends, which are excludable by shareholders from gross income for federal income tax purposes.
| Certified Annual Report 15 |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 | |
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized loss by $192,812 and decreased net capital paid in on shares of beneficial interest by $192,812. 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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
16 Certified Annual Report |
Thornburg California Limited Term Municipal Fund
| Year Ended September 30, | Three Months Ended Sept. 30, 2004(a) | Year Ended June 30, 2004 | ||||||||||||||||||||||
Class A Shares: | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.73 | $ | 12.77 | $ | 12.79 | $ | 13.02 | $ | 12.87 | $ | 13.20 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.42 | 0.43 | 0.40 | 0.36 | 0.08 | 0.35 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | |||||||||||||
Total from investment operations | 0.18 | 0.39 | 0.38 | 0.13 | 0.23 | 0.02 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.42 | ) | (0.43 | ) | (0.40 | ) | (0.36 | ) | (0.08 | ) | (0.35 | ) | ||||||||||||
Change in net asset value | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | |||||||||||||
NET ASSET VALUE, end of period | $ | 12.49 | $ | 12.73 | $ | 12.77 | $ | 12.79 | $ | 13.02 | $ | 12.87 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return (%)(b) | 1.42 | 3.10 | 3.06 | 0.98 | 1.81 | 0.13 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income (loss) (%) | 3.32 | 3.37 | 3.17 | 2.75 | 2.53 | (c) | 2.66 | |||||||||||||||||
Expenses, after expense reductions (%) | 1.00 | 0.99 | 0.92 | 1.00 | 0.99 | (c) | 0.99 | |||||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.98 | 0.99 | 0.87 | 0.99 | 0.99 | (c) | 0.99 | |||||||||||||||||
Expenses, before expense reductions (%) | 1.00 | 1.01 | 1.01 | 1.02 | 1.05 | (c) | 1.04 | |||||||||||||||||
Portfolio turnover rate (%) | 34.88 | 22.71 | 25.77 | 26.33 | 4.18 | 23.80 | ||||||||||||||||||
Net assets at end of period (thousands) | $ | 66,023 | $ | 67,183 | $ | 80,589 | $ | 111,102 | $ | 134,588 | $ | 131,158 | ||||||||||||
| (a) | The Fund’s fiscal year-end changed to September 30. |
| (b) | Sales loads are not reflected in computing total return, which is not annualized for periods less than one year. |
| (c) | Annualized. |
See notes to financial statements.
Certified Annual Report 17 |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg California Limited Term Municipal Fund
| Year ended September 30, | Three Months Ended Sept. 30, 2004(a) | Year Ended June 30, 2004 | ||||||||||||||||||||||
Class C Shares: | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.74 | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.88 | $ | 13.21 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.39 | 0.40 | 0.37 | 0.32 | 0.07 | 0.32 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | |||||||||||||
Total from investment operations | 0.15 | 0.36 | 0.35 | 0.09 | 0.22 | (0.01 | ) | |||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.39 | ) | (0.40 | ) | (0.37 | ) | (0.32 | ) | (0.07 | ) | (0.32 | ) | ||||||||||||
Change in net asset value | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.15 | (0.33 | ) | |||||||||||||
NET ASSET VALUE, end of period | $ | 12.50 | $ | 12.74 | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.88 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return (%)(b) | 1.16 | 2.85 | 2.80 | 0.73 | 1.75 | (0.12 | ) | |||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income (loss) (%) | 3.06 | 3.13 | 2.92 | 2.50 | 2.28 | (c) | 2.41 | |||||||||||||||||
Expenses, after expense reductions (%) | 1.26 | 1.24 | 1.18 | 1.25 | 1.24 | (c) | 1.24 | |||||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.24 | 1.23 | 1.13 | 1.24 | 1.24 | (c) | 1.24 | |||||||||||||||||
Expenses, before expense reductions (%) | 1.78 | 1.79 | 1.83 | 1.82 | 1.87 | (c) | 1.86 | |||||||||||||||||
Portfolio turnover rate (%) | 34.88 | 22.71 | 25.77 | 26.33 | 4.18 | 23.80 | ||||||||||||||||||
Net assets at end of period (thousands) | $ | 15,963 | $ | 14,449 | $ | 16,801 | $ | 20,021 | $ | 21,941 | $ | 22,363 | ||||||||||||
| (a) | The Fund’s fiscal year-end changed to September 30. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
See notes to financial statements.
18 Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg California Limited Term Municipal Fund
| Year Ended September 30, | Three Months Ended Sept. 30, 2004(a) | Year Ended June 30, 2004 | ||||||||||||||||||||||
Class I Shares: | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.74 | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.89 | $ | 13.22 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.47 | 0.47 | 0.44 | 0.40 | 0.09 | 0.39 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.14 | (0.33 | ) | |||||||||||||
Total from investment operations | 0.23 | 0.43 | 0.42 | 0.17 | 0.23 | 0.06 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.47 | ) | (0.47 | ) | (0.44 | ) | (0.40 | ) | (0.09 | ) | (0.39 | ) | ||||||||||||
Change in net asset value | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | 0.14 | (0.33 | ) | |||||||||||||
NET ASSET VALUE, end of period | $ | 12.50 | $ | 12.74 | $ | 12.78 | $ | 12.80 | $ | 13.03 | $ | 12.89 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return (%)(b) | 1.77 | 3.44 | 3.39 | 1.31 | 1.81 | 0.46 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income (loss) (%) | 3.66 | 3.71 | 3.50 | 3.09 | 2.85 | (c) | 2.99 | |||||||||||||||||
Expenses, after expense reductions (%) | 0.65 | 0.66 | 0.66 | 0.68 | 0.67 | (c) | 0.67 | |||||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.63 | 0.65 | 0.55 | 0.67 | 0.67 | (c) | 0.67 | |||||||||||||||||
Expenses, before expense reductions (%) | 0.65 | 0.68 | 0.71 | 0.73 | 0.77 | (c) | 0.78 | |||||||||||||||||
Portfolio turnover rate (%) | 34.88 | 22.71 | 25.77 | 26.33 | 4.18 | 23.80 | ||||||||||||||||||
Net assets at end of period (thousands) | $ | 41,814 | $ | 31,918 | $ | 28,334 | $ | 30,843 | $ | 25,728 | $ | 22,929 | ||||||||||||
| (a) | The Fund’s fiscal year-end changed to September 30. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
See notes to financial statements.
| Certified Annual Report 19 |
| SCHEDULE OF INVESTMENTS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 | |
We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings. The category of investments identified as “AAA” in this graph includes investments which are pre-refunded or escrowed to maturity. Such investments are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities to satisfy the timely payment of principal and interest and, therefore, are normally deemed to be equivalent to AAA-rated securities.
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 | $ | 444,513 | |||
ABAG Finance Authority, 4.75% due 10/1/2012 (California School of Mechanical Arts) | A3/NR | 455,000 | 462,708 | |||||
Alameda County COP, 5.625% due 12/1/2016 (Santa Rita Jail; Insured: AMBAC) | Aa3/AA | 1,830,000 | 1,999,915 | |||||
Alvord USD GO, 5.25% due 2/1/2014 (Insured: MBIA) | A2/AA | 1,150,000 | 1,207,293 | |||||
Bay Area Toll Bridge Revenue, 5.00% due 4/1/2016 (1) | NR/AA | 2,075,000 | 2,187,444 | |||||
California HFA, 5.00% due 11/15/2011 (Cedars Sinai Medical Center) | A2/NR | 1,000,000 | 1,036,050 | |||||
California HFA, 5.25% due 10/1/2013 (Kaiser Permanente) (ETM) | NR/AAA | 2,000,000 | 2,023,380 | |||||
California HFA, 5.125% due 7/1/2022 (Catholic Healthcare West) | A2/A | 2,500,000 | 2,312,325 | |||||
California Housing Finance Agency, 4.85% due 8/1/2016 (Insured: FSA) (AMT) | Aaa/AAA | 1,000,000 | 965,230 | |||||
California Housing Finance Agency, 9.875% due 2/1/2017 | Aa2/AA- | 1,345,000 | 1,379,983 | |||||
California Housing Finance Agency, 5.00% due 8/1/2017 (Insured: FSA) (AMT) | Aaa/AAA | 980,000 | 939,448 | |||||
California Housing Finance Agency, 5.125% due 8/1/2018 (Insured: FSA) (AMT) | Aaa/AAA | 1,000,000 | 957,150 | |||||
California Mobile Home Park Financing Authority, 4.75% due 11/15/2010 (Rancho Vallecitos; Insured: ACA) | NR/NR | 500,000 | 501,175 | |||||
California Mobile Home Park Financing Authority, 5.00% due 11/15/2013 (Rancho Vallecitos; Insured: ACA) | NR/NR | 570,000 | 562,379 | |||||
California PCR Authority Solid Waste Disposal, 6.75% due 7/1/2011 (ETM) | Aaa/NR | 1,470,000 | 1,558,891 | |||||
California PCR Authority Solid Waste Disposal, 5.25% due 6/1/2023 (AMT) | Baa1/BBB+ | 2,000,000 | 1,783,300 | |||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: MBIA) | A2/AA | 2,000,000 | 2,014,840 | |||||
California State GO, 6.60% due 2/1/2010 (Insured: MBIA) | A2/AA | 560,000 | 588,174 | |||||
California State GO, 5.75% due 10/1/2010 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,056,070 | |||||
California State GO, 5.50% due 3/1/2012 (School Improvements; Insured: FGIC-TCRs) | A1/A+ | 230,000 | 231,741 | |||||
California State GO, 6.25% due 9/1/2012 | A1/A+ | 3,000,000 | 3,234,030 | |||||
California State GO, 5.00% due 3/1/2018 | A1/A+ | 1,000,000 | 1,020,450 | |||||
California State GO, 3.75% due 5/1/2034 put 10/1/2008 (Daily Kindergarten Univ.; LOC: Citibank/ StateStreet Bank & Trust/National Australia Bank) (daily demand notes) | VMIG1/A-1+ | 1,100,000 | 1,100,000 | |||||
California State GO, 3.75% due 5/1/2034 put 10/1/2008 (Daily Kindergarten Univ.; LOC: Citibank/California State Teachers) (daily demand notes) | VMIG1/A-1+ | 3,800,000 | 3,800,000 | |||||
California State GO Veterans Bonds, 9.50% due 2/1/2010 (Insured: MBIA) | A2/AA | 1,000,000 | 1,087,860 | |||||
California State Public Works Board Lease, 5.50% due 6/1/2010 (Various Universities) | Aa2/AA- | 780,000 | 802,542 | |||||
California State Public Works Board Lease, 5.00% due 1/1/2015 (Department of Corrections; Insured: AMBAC) | Aa3/AA | 2,000,000 | 2,091,540 | |||||
California State Public Works Board Lease, 5.00% due 11/1/2015 (Various Universities) | Aa2/AA- | 1,000,000 | 1,052,410 | |||||
California Statewide Community Development Authority, 5.25% due 8/1/2014 (EAH-East Campus Apartments; Insured: ACA) | Baa1/NR | 1,215,000 | 1,208,706 | |||||
California Statewide Community Development Authority, 5.50% due 8/15/2014 (Enloe Medical Center; Insured: CA Mtg Insurance) | NR/A+ | 750,000 | 783,967 | |||||
California Statewide Community Development Authority, 4.70% due 11/1/2036 put 6/1/2009 (Kaiser Permanente) | NR/A+ | 2,000,000 | 2,027,540 | |||||
California Statewide Community Development Authority COP, 6.50% due 8/1/2012 (Cedars Sinai Center Hospital; Insured: MBIA) | A2/AA | 550,000 | 583,561 | |||||
20 Certified Annual Report |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
California Statewide Community Development Authority COP, 5.30% due 12/1/2015 (Kaiser Permanente) (ETM) | Aaa/AAA | $ | 2,785,000 | $ | 2,902,248 | |||
Central Union High School District Imperial County, 5.00% due 8/1/2012 (Insured: FGIC) | NR/A- | 830,000 | 867,549 | |||||
Cerritos California Public Financing Authority, 5.00% due 11/1/2014 (Tax Allocation Redevelopment; Insured: AMBAC) | Aa3/AA | 1,260,000 | 1,312,429 | |||||
Corona Norco USD GO, 0% due 9/1/2017 (Insured: FSA) | Aaa/AAA | 1,595,000 | 1,045,953 | |||||
Daly City Housing Development Financing Agency, 5.00% due 12/15/2019 (Franciscan Mobile Home Park) | NR/A- | 1,815,000 | 1,702,089 | |||||
El Monte COP Department of Public Services, 5.00% due 1/1/2009 (Insured: AMBAC) | Aa3/AA | 955,000 | 958,801 | |||||
Escondido USD GO, 6.10% due 11/1/2011 (Insured: MBIA) | A2/AA | 500,000 | 501,210 | |||||
Fillmore Public Financing Authority, 5.00% due 5/1/2016 (Water Recycling; Insured: CIFG) | Baa2/BBB | 735,000 | 755,845 | |||||
Fresno USD GO, 5.00% due 8/1/2009 (Insured: FSA) (ETM) | Aaa/AAA | 545,000 | 549,780 | |||||
Golden State Tobacco Sec. Corp., 5.50% due 6/1/2043 pre-refunded 6/1/2013 | Aaa/AAA | 4,000,000 | 4,263,560 | |||||
Hawaiian Gardens Redevelopment Agency, 5.50% due 12/1/2008 | NR/BBB+ | 575,000 | 576,667 | |||||
High Desert California Memorial Health Care, 5.40% due 10/1/2011 | NR/NR | 1,920,000 | 1,915,584 | |||||
Kern High School District GO, 7.00% due 8/1/2010 (ETM) | Aaa/NR | 165,000 | 178,152 | |||||
Los Angeles Community Redevelopment Agency, 5.00% due 7/1/2009 (Cinerama Dome Public Parking; Insured: ACA) | NR/NR | 835,000 | 824,663 | |||||
Los Angeles Community Redevelopment Agency, 5.75% due 7/1/2010 (Cinerama Dome Public Parking; Insured: ACA) | NR/NR | 435,000 | 427,588 | |||||
Los Angeles Convention & Exhibition Center Authority, 5.00% due 8/15/2016 (2) | A1/AA- | 2,000,000 | 2,066,400 | |||||
Los Angeles COP, 5.00% due 2/1/2012 (Insured: MBIA) | A1/AA | 1,400,000 | 1,465,422 | |||||
Los Angeles County Schools, 5.00% due 6/1/2016 (Pooled Financing; Insured: MBIA) | A2/AA | 1,000,000 | 1,026,260 | |||||
Los Angeles County Schools, 5.00% due 6/1/2017 (Pooled Financing; Insured: MBIA) | A2/AA | 1,010,000 | 1,026,342 | |||||
Los Angeles Department of Airports, 5.50% due 5/15/2018 (Los Angeles Intl.) | Aa3/AA | 2,000,000 | 1,972,420 | |||||
Los Angeles Department of Water & Power Series A, 5.25% due 7/1/2011 (Insured: MBIA) | Aa3/AA | 3,000,000 | 3,165,540 | |||||
Los Angeles USD GO, 5.50% due 7/1/2012 (Insured: MBIA) | Aa3/AA | 2,500,000 | 2,684,275 | |||||
Los Angeles USD GO, 5.00% due 7/1/2018 (Insured: FSA) | Aaa/AAA | 2,000,000 | 2,076,680 | |||||
Los Angeles Wastewater System, 5.00% due 6/1/2018 (Insured: FGIC) | Aa3/AA | 1,000,000 | 1,006,130 | |||||
Milpitas California Redevelopment Agency Tax Allocation Area No. 1, 5.00% due 9/1/2015 (Insured: MBIA) | A2/AA | 2,000,000 | 2,079,660 | |||||
Mojave USD COP, 0% due 9/1/2017 (Insured: FSA) | NR/AAA | 1,045,000 | 657,253 | |||||
Mojave USD COP, 0% due 9/1/2018 (Insured: FSA) | NR/AAA | 1,095,000 | 641,550 | |||||
Moorpark Mobile Home Park, 5.80% due 5/15/2010 (Villa Del Arroyo; Insured: ACA) | NR/NR | 525,000 | 533,983 | |||||
Norwalk California Redevelopment Agency Tax Allocation, 5.00% due 10/1/2014 (Insured: MBIA) | A2/AA | 625,000 | 647,594 | |||||
Oxnard Financing Authority Solid Waste, 5.00% due 5/1/2013 (Insured: AMBAC) (AMT) | Aa3/AA | 2,115,000 | 2,104,636 | |||||
Pomona USD GO, 6.10% due 2/1/2010 (Insured: MBIA) | A2/AA | 320,000 | 331,523 | |||||
Port Oakland, 5.75% due 11/1/2012 (Airport & Marina Improvements; Insured: FGIC) | A1/A+ | 2,500,000 | 2,519,900 | |||||
Richmond Joint Powers Financing Authority Lease & Gas Tax, 5.25% due 5/15/2013 partially pre-refunded 11/15/2007 | NR/A | 475,000 | 475,389 | |||||
Roseville Natural Gas Financing Authority, 5.00% due 2/15/2017 | A2/A | 1,000,000 | 883,550 | |||||
Sacramento City Financing Authority, 0% due 11/1/2014 (Insured: MBIA) | A2/AA | 3,310,000 | 2,513,713 | |||||
Sacramento County Sanitation District Financing Authority, 5.75% due 12/1/2009 | Aa3/AA | 560,000 | 581,504 | |||||
San Bernardino County Community Facilities District, 5.10% due 9/1/2011 | NR/NR | 190,000 | 191,260 | |||||
San Bernardino County Community Facilities District, 5.20% due 9/1/2012 | NR/NR | 205,000 | 205,726 | |||||
San Bernardino County Community Facilities District, 5.30% due 9/1/2013 | NR/NR | 300,000 | 300,888 | |||||
San Bernardino County Multi Family Housing, 4.75% due 12/15/2031 put 12/15/2011 (Rolling Ridge LLC; Collateralized: FNMA) | Aaa/NR | 3,100,000 | 3,217,614 | |||||
San Bernardino County Transportation Authority Sales Tax, 6.00% due 3/1/2010 (Insured: FGIC) (ETM) | NR/NR | 380,000 | 391,662 | |||||
San Diego County COP, 5.625% due 9/1/2012 (Insured: AMBAC) | Aa3/AA | 550,000 | 556,699 | |||||
San Diego County COP Developmental Services Foundation, 5.50% due 9/1/2017 | Baa1/BB | 2,000,000 | 1,962,240 | |||||
San Francisco, 5.00% due 6/15/2014 (Laguna Honda Hospital; Insured: FSA) | Aaa/AAA | 2,320,000 | 2,468,503 | |||||
| Certified Annual Report 21 |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | ||||||
San Francisco City & County Redevelopment Agency, 0% due 7/1/2010 (George R Moscone Convention Center) | A1/AA- | $ | 1,380,000 | $ | 1,302,154 | ||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: FSA) | Aaa/AAA | 5,000,000 | 2,808,000 | ||||||
San Jose Evergreen Community College District GO, 0% due 9/1/2011 crossover refunded 9/1/2010 (Insured: AMBAC) | Aa2/AA | 2,200,000 | 1,956,988 | ||||||
San Mateo Flood Control District COP, 5.25% due 8/1/2017 (Colma Creek; Insured: MBIA) | A2/AA | 1,000,000 | 1,011,340 | ||||||
San Mateo USD GO, 0% due 9/1/2019 (Insured: FGIC) | Aa3/AA- | 2,000,000 | 1,125,260 | ||||||
Santa Clara County Financing Authority, 5.00% due 5/15/2017 (Multiple Facilities; Insured: AMBAC) | Aa3/AA | 5,000,000 | 5,172,000 | ||||||
Seal Beach Redevelopment Agency Mobile Home Park, 5.20% due 12/15/2013 (Insured: ACA) | NR/NR | 575,000 | 568,715 | ||||||
Southeast Resource Recovery Facilities Authority, 5.375% due 12/1/2013 (Insured: AMBAC) (AMT) | Aa3/AA | 1,060,000 | 1,084,126 | ||||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Insured: AMBAC) | Aa3/AA | 350,000 | 373,804 | ||||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Insured: AMBAC) | Aa3/AA | 250,000 | 267,003 | ||||||
Sunnyvale COP, 8.00% due 4/1/2031 put 10/7/2008 (Insured: AMBAC) (weekly demand notes) | Aa3/AA | 2,935,000 | 2,935,000 | ||||||
Val Verde USD COP, 5.00% due 1/1/2014 (Insured: FGIC) (ETM) | NR/NR | 445,000 | 480,075 | ||||||
Victorville Redevelopment Agency, 5.00% due 12/1/2014 (Bear Valley Road Special Escrow Fund; Insured: FSA) | Aaa/AAA | 340,000 | 352,804 | ||||||
Walnut Valley USD GO, 8.75% due 8/1/2010 (Insured: MBIA) (ETM) | A2/AA | 1,000,000 | 1,110,280 | ||||||
Washington Township Health Care District, 5.00% due 7/1/2009 | A3/NR | 450,000 | 455,485 | ||||||
Washington USD COP, 5.00% due 8/1/2017 (New High School; Insured: AMBAC) | Aa3/AA | 725,000 | 741,008 | ||||||
Whittier Solid Waste, 5.375% due 8/1/2014 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,001,451 | ||||||
TOTAL INVESTMENTS —100.39% (Cost $125,207,591) | $ | 124,286,542 | |||||||
LIABILITIES NET OF OTHER ASSETS — (0.39)% | (487,470 | ) | |||||||
NET ASSETS — 100.00% | $ | 123,799,072 | |||||||
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. | |
| 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 | |
| LOC | Letter of Credit | |
| MBIA | Insured by Municipal Bond Investors Assurance | |
| Mtg | Mortgage | |
| PCR | Pollution Control Revenue Bond | |
| TCRs | Transferable Custodial Receipts | |
| USD | Unified School District |
See notes to financial statements.
22 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, 2008, 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, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
| Certified Annual Report 23 |
| EXPENSE EXAMPLE | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
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 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 995.20 | $ | 4.83 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.16 | $ | 4.89 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 993.90 | $ | 6.16 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.82 | $ | 6.24 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 997.00 | $ | 3.09 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.90 | $ | 3.13 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.97%; C: 1.24%; and I: 0.62%) multiplied by the average account value over the period, multiplied by 183/366 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.
24 Certified Annual Report |
| INDEX COMPARISON | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg California Limited Term Municipal Fund versus Barclays Capital Five-Year Municipal Bond Index
and Consumer Price Index (February 19, 1987 to September 30, 2008)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 2/19/87) | (0.07 | )% | 1.70 | % | 2.84 | % | 4.59 | % | ||||
C Shares (Incep: 9/1/94) | 0.67 | % | 1.76 | % | 2.67 | % | 3.38 | % | ||||
I Shares (Incep: 4/1/97) | 1.77 | % | 2.35 | % | 3.35 | % | 3.82 | % |
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 for the first year only. There is no sales charge for Class I 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 Barclays Capital Five-Year Municipal Bond Index is a rules-based, market-value-weighted index of the 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.
| Certified Annual Report 25 |
| TRUSTEES AND OFFICERS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 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, 49 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 California Limited Term Municipal Fund | September 30, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Certified Annual Report 27 |
| TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
28 Certified Annual Report |
| OTHER INFORMATION | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 (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 I NFORMATION
For the fiscal year ended September 30, 2008, 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, 2008.
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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the speci-fied information with the Trustees and addressed questions presented by 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 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 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 considered and discussed the effects of recent market and economic events on the Fund and the Advisor’s responses to these events in view of the Fund’s investment objectives and policies.
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.
| Certified Annual Report 29 |
| OTHER INFORMATION, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2008 (Unaudited) | |
In considering the quantitative and comparative performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations. The Trustees further noted in this regard that the Fund’s investment returns for the ten most recent calendar years were somewhat lower in the majority of years than the returns for a category of municipal bond mutual funds assembled by an independent mutual fund analyst firm, but that the Fund’s investment returns for the one and three year periods fell within the top quartile of the same category and within the top half of the category for the five year period, and further, that the Fund’s investment returns fell within the top quartile for the one, three and five year periods for a second category. Measures of portfolio volatility and risk considered by the Trustees demonstrated that the Fund’s portfolio volatility relative to those measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 other factors considered. The Trustees noted their previous observations respecting fee rates charged by the Advisor to other types of investment management clients, and their conclusion that the fee rates charged 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 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses 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 ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
| This page is not part of the Annual Report. 33 |
Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to .19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
34 This page is not part of the Annual Report. |
Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
| Sincerely, |
 |
| Brian McMahon |
| CEO and Chief Investment Officer |
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Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
| This page is not part of the Annual Report. 39 |
| This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. | ||
 | Investment Advisor: Thornburg Investment Management® 800.847.0200
Distributor: Thornburg Securities Corporation® 800.847.0200
TH859 | |
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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, 2008. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; they 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. 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 bonds 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.
Performance data given at net asset value (NAV) does not take into account applicable sales charges. If the sales charges had been included, the performance would have been lower. Minimum investments for Class I shares are higher than those for other classes. Class I shares may not be available to all investors.
Glossary
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.
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
S&P 500 Index – An unmanaged broad measure 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.
Alternative Minimum Tax (AMT) – A federal tax aimed at ensuring that high-income individuals, estates, trusts, and corporations pay a minimal level income tax. For individuals, the AMT is calculated by adding tax preference items to regular taxable income.
Distribution Rate – 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 a 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.
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.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
SEC Yield – 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.
Tender Option Bond Programs (TOB) – Programs that allow investors to leverage their assets by borrowing at short-term rates and investing in higher yielding longer-term bonds.
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 income taxes.
| CUSIPS | NASDAQ SYMBOLS | |||
CLASS A | 885-215-202 | THIMX | ||
CLASS C | 885-215-780 | THMCX | ||
CLASS I | 885-215-673 | THMIX |
| This page is not part of the Annual Report. 3 |
Thornburg Intermediate Municipal Fund
At Thornburg, our approach to fixed-income management is based on the premise that investors in our bond funds seek preservation of capital along with an attractive, relatively stable yield. While aggressive bond strategies may generate stronger returns when the market is turning a blind eye towards risk, they usually fail to stack up over longer periods of time. Our patience and diligence was recognized by Lipper, which named Thornburg Investment Management its 2008 Best Fixed-Income Fund Family.
We apply time-tested techniques to manage risk and provide attractive returns. These include:
| • | Building a laddered portfolio. Laddering has been shown over time to mitigate price and interest rate risk. |
| • | Investing on a cash-only basis without using leverage. While leveraged strategies may enhance returns when market conditions are favorable, they can quickly compound losses when sentiment shifts. |
| • | Conducting in-depth fundamental research on each issue and actively monitoring positions for subsequent credit events. |
| • | Diversifying among a large number of generally high-quality bonds. |
CO-PORTFOLIO MANAGERS
Josh Gonze, George Strickland, and Chris Ihlefeld
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 the Fund’s Class A shares is 2.00%. The total annual fund operating expense of Class A shares is 0.99%, as disclosed in the most recent Prospectus.
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history of A shares from July 22, 1991 through September 30, 2008
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
| A Shares (Incep: 7/22/91) | |||||||||||||||
Without Sales Charge | (1.33 | )% | 1.64 | % | 2.15 | % | 3.20 | % | 4.95 | % | |||||
With Sales Charge | (3.32 | )% | 0.96 | % | 1.74 | % | 2.99 | % | 4.83 | % |
30-DAY YIELDS
As of September 30, 2008
| Annualized Distribution Rate | SEC Yield | SEC Taxable Equivalent Yield | |||||||
A Shares | 4.27 | % | 3.79 | % | 5.83 | % | |||
C Shares | 3.96 | % | 3.55 | % | 5.45 | % | |||
I Shares | 4.61 | % | 4.22 | % | 6.49 | % |
See page 33 for all share class total returns.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2008
Number of Bonds | 337 | ||
Duration | 5.65 Yrs | ||
A Shares: | |||
Net Asset Value | $ | 12.47 | |
Maximum Offering Price | $ | 12.72 | |
SEC Taxable Equivalent Yields assume a 35% marginal federal tax rate. Portions of the income of the Fund may be subject to the alternative minimum tax.
4 This page is not part of the Annual Report. |
THORNBURG INTERMEDIATE MUNICIPAL FUND VERSUS
LIPPER TAX-EXEMPT MONEY MARKET FUNDS AVERAGE
Class A shares as of September 30, 2008
We are often asked to compare Thornburg Intermediate Municipal Fund to money market fund returns. Municipal bond funds are not an exact substitute for money market funds. These investments have certain differences, which are discussed below. Investors in the Thornburg Intermediate Municipal Fund took more risk than tax-exempt money market fund investors to earn their higher returns.
Past performance does not guarantee future results. Performance data above does not include the 2.00% sales charge for Class A shares. If the sales charge had been included, returns would have been lower. Returns shown are minus the initial investment.
Investors in municipal bond funds may experience more volatility than those in comparable money market funds. There are also differences in fees and expenses.
Investors in the Thornburg Intermediate Municipal Fund took more risk than money market investors to earn their higher returns including reinvestment risk, credit risk, and inflation risk. Unlike money market funds, the prices of bonds fluctuate relative to changes in interest rates, with principal values decreasing when interest rates rise and increasing when interest rates fall. Generally, money market funds seek to maintain an investment portfolio with an average maturity of 90 days or less. Thornburg Intermediate Municipal Fund has an average maturity of normally between three and ten years. Interest dividends paid by the Fund or by tax-exempt money market funds are generally exempt from federal income tax and state income tax (may be subject to AMT).
Money market funds seek to preserve the value per share at $1.00, whereas, the Thornburg Intermediate Municipal Fund’s net asset value changes daily. It is possible to lose money when investing in either the Thornburg Intermediate Municipal Fund or a tax-exempt money market fund. Neither are insured by the FDIC or any other government agency.
Lipper Tax-Exempt Money Market Funds Average is an arithmetic average of the total return of all tax-exempt money market mutual funds. You cannot invest in a category average.
| This page is not part of the Annual Report. 5 |
Thornburg Intermediate Municipal Fund
September 30, 2008
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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 |
George Strickland Co-Portfolio Manager | October 14, 2008
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 68 cents per share to $12.47 during the twelve months ended September 30, 2008. If you were with us for the entire period, you received dividends of 51.6 cents per share. If you reinvested your dividends, you received 52.5 cents per share. Dividends per share were lower for Class C shares and higher for Class I shares. | |
Josh Gonze Co-Portfolio Manager | In last year’s annual report letter, we wrote about higher yields and lower prices for municipal bonds. We also wrote about attractive valuations relative to Treasury bonds and the larger spreads between yields on high and low quality bonds. At the time, we thought that these relationships would eventually revert back to their long-term averages. We still believe that will happen, but in the meantime, the extreme has become the norm. Tax-free bonds from issuers like Harvard University and the state of Texas are selling for yields 20% higher than Treasury bond yields! Tax adjusted, those are typically junk bond spreads. Meanwhile, anything with a hint of credit risk is suffering from reduced liquidity and enlarged spreads.
Are investors really worried about the solvency of Harvard University? For that matter, are investors really worried about major problems infecting investment-grade municipal bonds, with long-term average default rates of approximately 0.1%? The economy is almost surely suffering through a prolonged recession and it is indeed a time for careful diligence, but the current sell-off is not primarily credit related. We believe that what we are currently witnessing is primarily a result of massive de-leveraging. | |
Christopher Ihlefeld Co-Portfolio Manager | Over most of this decade, it has been relatively easy to buy long-term municipal bonds on a leveraged basis with borrowed money, typically through something called a Tender Option Bond (TOB) program. This structure was quite profitable and predictable as long as cheap and easy financing was available via money market funds. Thus the TOB trade became very popular among hedge funds, proprietary trading desks, and some mutual funds (not ours). The size of bond positions in TOB programs is not reliably tracked, but reasonable estimates placed it at about $300 billion at the peak, almost 12% of the municipal bond market. Starting last year, and accelerating this year, money market fund appetite for exotic derivatives such as TOB floating rate securities went south. As more and more funds got rid of them or demanded higher yields, financing costs spiked. That squeeze, plus margin calls due to lower bond prices, meant that many players had to unwind their programs by selling bonds into a saturated market.
Large scale selling from leveraged investors wouldn’t be a problem if it was met with large scale buying, but insurance companies and mutual funds, two traditional pillars of the mu- nicipal bond market – are not currently aggressive buyers. Individual investors are buying lots of bonds, a healthy sign, but their demand will take time to absorb the waves of selling from leveraged investors. In the meantime, bond prices have been getting pushed lower as yields go higher. | |
| Certified Annual Report 7 |
Letter to Shareholders
Continued
When will it stop? We don’t exactly know, but we believe that the de-leveraging process in the municipal market is more than half over. After the smoke clears, we expect investors to focus on the safety and security, relative value, and tax-exempt nature of investment-grade municipal bonds. In a world where marginal tax rates are likely to be rising for wealthy Americans, this should lead to significant out-performance of municipal bonds going forward.
The Class A shares of your Fund produced a total return of negative 1.33% at NAV over the twelve month period ended September 30, 2008, compared to a positive 0.35% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Over the last year, short-term municipal bonds have performed better than intermediate and long maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next 20 years, so it has significant exposure to bonds whose maturities are longer than the 7-12 year bonds in the Index. Since those bonds generally underperformed, the Fund under-performed the Index.
| % of Portfolio Maturing | Cumulative % Maturing | |||||
| 2 years = | 11.2% | Year 2 = | 11.2% | |||
| 2 to 4 years = | 10.5% | Year 4 = | 21.7% | |||
| 4 to 6 years = | 11.9% | Year 6 = | 33.6% | |||
| 6 to 8 years = | 10.9% | Year 8 = | 44.5% | |||
| 8 to 10 years = | 12.4% | Year 10 = | 56.9% | |||
| 10 to 12 years = | 13.1% | Year 12 = | 70.0% | |||
| 12 to 14 years = | 14.3% | Year 14 = | 84.3% | |||
| 14 to 16 years = | 7.5% | Year 16 = | 91.8% | |||
| 16 to 18 years = | 2.7% | Year 18 = | 94.5% | |||
| Over 18 years = | 5.5% | Over 18 years = | 100.0% | |||
Percentages can and do vary. Data as of 9/30/08.
Your Thornburg Intermediate Municipal Fund is a laddered portfolio of over 330 municipal obligations from over 40 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 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 above describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
The U.S. economy is almost certainly in the midst of a significant recession at the moment. Frozen credit markets, mounting job losses, an enormous erosion of wealth in real estate and equity markets have finally brought the American consumer to his knees. Meanwhile, many foreign economies are reeling, leading to reduced demand for U.S. exports. Luckily, most non-financial corporate balance sheets were quite strong coming into the current environment and some industries are experiencing healthy growth. However, this must be tempered by reduced government spending at the state and local level. Meanwhile, the federal government is priming the pumps of our financial system as fast as it can. We believe that the massive life lines given to our nation’s banks, insurance companies, and money market funds will eventually lead to more stability in the financial markets, easier financing terms for companies and individuals, and should ultimately get the housing market back on its feet. However, there are long-term implications. Tighter regulation of derivative markets, mortgage origination and securitization, and the use of financial leverage are all necessary in order to preserve our country’s reputation as a fair place to invest. Furthermore, most or all of the money flooding the capital markets from the U.S. Treasury needs to be returned to taxpayers, and our current ballooning budget deficits need to be reigned in and reduced. If not, we face the longer term risks of higher inflation, a declining currency, and reduced growth prospects.
8 Certified Annual Report |
Surprisingly, state tax revenues rose 3.6% in the second quarter of 2008 from a year ago, but the gains were boosted by income tax payments on last years’ earnings. Looking forward, we believe that tax revenues will erode appreciably during the balance of 2008 and 2009. Sales tax, corporate income tax, and motor fuel tax collections are already dropping at single digit rates. Given rising unemployment and investment losses, income tax receipts should soon follow suit as they did in 2002. We are also seeing some areas of credit stress in local markets where weak real estate prices and poorly managed balance sheets are causing problems. It is indeed an important time for careful diligence and diversification of investment portfolios. Your Fund is broadly diversified and 82% 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 Co-Portfolio Manager Managing Director | Josh Gonze Co-Portfolio Manager Managing Director | Christopher Ihlefeld 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 Intermediate Municipal Fund | September 30, 2008 | |
ASSETS | ||||
Investments at value (cost $546,151,221) (Note 2) | $ | 528,446,567 | ||
Cash | 244,116 | |||
Receivable for investments sold | 6,852,688 | |||
Receivable for fund shares sold | 1,538,878 | |||
Interest receivable | 7,890,111 | |||
Prepaid expenses and other assets | 29,302 | |||
Total Assets | 545,001,662 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 1,363,552 | |||
Payable to investment advisor and other affiliates (Note 3) | 366,194 | |||
Accounts payable and accrued expenses | 93,745 | |||
Dividends payable | 652,275 | |||
Total Liabilities | 2,475,766 | |||
NET ASSETS | $ | 542,525,896 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (4,864 | ) | |
Net unrealized depreciation on investments | (17,704,655 | ) | ||
Accumulated net realized gain (loss) | (6,723,663 | ) | ||
Net capital paid in on shares of beneficial interest | 566,959,078 | |||
| $ | 542,525,896 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($311,435,091 applicable to 24,984,491 shares of beneficial interest outstanding - Note 4) | $ | 12.47 | ||
Maximum sales charge, 2.00% of offering price | 0.25 | |||
Maximum offering price per share | $ | 12.72 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($59,242,926 applicable to 4,746,730 shares of beneficial interest outstanding - Note 4) | $ | 12.48 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($171,847,879 applicable to 13,804,770 shares of beneficial interest outstanding - Note 4) | $ | 12.45 | ||
| * | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
10 Certified Annual Report |
| STATEMENT OF OPERATIONS | ||
| Thornburg Intermediate Municipal Fund | Year Ended September 30, 2008 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $1,635,241) | $ | 26,699,208 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 2,699,084 | |||
Administration fees (Note 3) | ||||
Class A Shares | 412,392 | |||
Class C Shares | 70,404 | |||
Class I Shares | 79,002 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 824,784 | |||
Class C Shares | 564,615 | |||
Transfer agent fees | ||||
Class A Shares | 120,650 | |||
Class C Shares | 23,828 | |||
Class I Shares | 57,905 | |||
Registration and filing fees | ||||
Class A Shares | 29,026 | |||
Class C Shares | 22,560 | |||
Class I Shares | 19,375 | |||
Custodian fees (Note 3) | 118,258 | |||
Professional fees | 45,308 | |||
Accounting fees | 11,334 | |||
Trustee fees | 8,545 | |||
Other expenses | 54,942 | |||
Total Expenses | 5,162,012 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (56,539 | ) | ||
Distribution fees waived (Note 3) | (225,846 | ) | ||
Fees paid indirectly (Note 3) | (43,741 | ) | ||
Net Expenses | 4,835,886 | |||
Net Investment Income | 21,863,322 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 1,598,830 | |||
Net change in unrealized appreciation (depreciation) of investments | (31,001,380 | ) | ||
Net Realized and Unrealized Loss | (29,402,550 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (7,539,228 | ) | |
See notes to financial statements.
| Certified Annual Report 11 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Intermediate Municipal Fund
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 21,863,322 | $ | 19,690,998 | ||||
Net realized gain on investments | 1,598,830 | 563,541 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (31,001,380 | ) | (6,072,467 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (7,539,228 | ) | 14,182,072 | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (13,036,059 | ) | (13,591,786 | ) | ||||
Class C Shares | (2,065,179 | ) | (1,928,153 | ) | ||||
Class I Shares | (6,762,084 | ) | (4,171,059 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (5,176,838 | ) | (28,841,157 | ) | ||||
Class C Shares | 8,496,598 | (1,015,192 | ) | |||||
Class I Shares | 55,028,894 | 37,157,553 | ||||||
Net Increase in Net Assets | 28,946,104 | 1,792,278 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 513,579,792 | 511,787,514 | ||||||
End of year | $ | 542,525,896 | $ | 513,579,792 | ||||
See notes to financial statements.
12 Certified Annual Report |
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
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 thirteen 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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 objective 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, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year, and bear both a service fee and a distribution fee, (iii) Class I shares are sold at net asset value without a sales charge at the time of purchase, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and administrative and legal expenses. Currently, class specific expenses of the Fund are limited to service and distribution fees, administration fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: Debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt obligations of comparable quality, type of issue, coupon, maturity, and rating; 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
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.
| Certified Annual Report 13 |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid monthly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized to call dates or maturity dates of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of 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, 2008, 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, 2008, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $56,539 for Class C 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, 2008, the Distributor has advised the Fund that it earned net commissions aggregating $3,322 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $5,599 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, 2008, are set forth in the Statement of Operations. Distribution fees in the amount of $225,846 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, 2008, fees paid indirectly were $43,741.
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.
14 Certified Annual Report |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 4,450,931 | $ | 58,138,441 | 2,977,070 | $ | 39,306,041 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 626,634 | 8,132,456 | 616,657 | 8,138,336 | ||||||||||
Shares repurchased | (5,480,272 | ) | (71,447,735 | ) | (5,785,000 | ) | (76,285,534 | ) | ||||||
Net Increase (Decrease) | (402,707 | ) | $ | (5,176,838 | ) | (2,191,273 | ) | $ | (28,841,157 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 1,148,857 | $ | 14,986,114 | 698,647 | $ | 9,209,025 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 104,215 | 1,353,476 | 96,425 | 1,274,036 | ||||||||||
Shares repurchased | (599,797 | ) | (7,842,992 | ) | (870,144 | ) | (11,498,253 | ) | ||||||
Net Increase (Decrease) | 653,275 | $ | 8,496,598 | (75,072 | ) | $ | (1,015,192 | ) | ||||||
Class I Shares | ||||||||||||||
Shares sold | 8,563,318 | $ | 111,626,302 | 4,284,001 | $ | 56,206,181 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 339,488 | 4,395,192 | 217,243 | 2,861,145 | ||||||||||
Shares repurchased | (4,686,010 | ) | (60,992,600 | ) | (1,660,657 | ) | (21,909,773 | ) | ||||||
Net Increase (Decrease) | 4,216,796 | $ | 55,028,894 | 2,840,587 | $ | 37,157,553 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $157,886,120 and $114,764,108, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 546,151,221 | ||
Gross unrealized appreciation on a tax basis | $ | 6,634,271 | ||
Gross unrealized depreciation on a tax basis | (24,338,926 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (17,704,655 | ) | |
At September 30, 2008, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2008 the Fund had tax basis capital losses, which may be carried forward to offset future capital gains. Such losses include losses from the merger of the Thornburg Florida Intermediate Municipal Fund that took place on September 15, 2006. Utilization of these losses may be subject to limitations from the IRS regulations. To the extent such carry forwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carry forwards expire as follows:
2009 | $ | 2,374,508 | |
2011 | 11,597 | ||
2012 | 4,297,982 | ||
2013 | 39,577 | ||
| $ | 6,723,664 | ||
The Fund utilized $1,601,301 capital loss carry forwards during the year ended September 30, 2008.
| Certified Annual Report 15 |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
During the year ending September 30, 2008 $643,244 capital loss carry forwards from prior years expired.
In order to account for book/tax differences, the Fund decreased accumulated net realized investment loss by $643,244 and decreased net capital paid in on shares of beneficial interest by $643,244. This reclassification has no impact on the net asset value of the Fund. Reclassification resulted from the expiration of a capital loss carry forward.
All dividends paid by the Fund for the year ended September 30, 2008 and September 30, 2007 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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
16 Certified Annual Report |
Thornburg Intermediate Municipal Fund
| Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.15 | $ | 13.30 | $ | 13.33 | $ | 13.48 | $ | 13.56 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.52 | 0.51 | 0.49 | 0.49 | 0.52 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.15 | ) | (0.08 | ) | ||||||||||
Total from investment operations | (0.16 | ) | 0.36 | 0.46 | 0.34 | 0.44 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.52 | ) | (0.51 | ) | (0.49 | ) | (0.49 | ) | (0.52 | ) | ||||||||||
Change in net asset value | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.15 | ) | (0.08 | ) | ||||||||||
NET ASSET VALUE, end of year | $ | 12.47 | $ | 13.15 | $ | 13.30 | $ | 13.33 | $ | 13.48 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | (1.33 | ) | 2.74 | 3.57 | 2.57 | 3.29 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.95 | 3.84 | 3.74 | 3.66 | 3.83 | |||||||||||||||
Expenses, after expense reductions (%) | 0.96 | 0.99 | 0.99 | 0.99 | 0.98 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.95 | 0.98 | 0.99 | 0.99 | 0.98 | |||||||||||||||
Expenses, before expense reductions (%) | 0.96 | 0.99 | 1.00 | 1.01 | 0.98 | |||||||||||||||
Portfolio turnover rate (%) | 22.00 | 22.55 | 18.95 | 20.06 | 11.81 | |||||||||||||||
Net assets at end of year (thousands) | $ | 311,435 | $ | 333,800 | $ | 366,702 | $ | 362,783 | $ | 370,227 | ||||||||||
| (a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
| Certified Annual Report 17 |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Intermediate Municipal Fund
| Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.16 | $ | 13.31 | $ | 13.34 | $ | 13.50 | $ | 13.58 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.48 | 0.47 | 0.46 | 0.46 | 0.48 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.16 | ) | (0.08 | ) | ||||||||||
Total from investment operations | (0.20 | ) | 0.32 | 0.43 | 0.30 | 0.40 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.48 | ) | (0.47 | ) | (0.46 | ) | (0.46 | ) | (0.48 | ) | ||||||||||
Change in net asset value | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.16 | ) | (0.08 | ) | ||||||||||
NET ASSET VALUE, end of year | $ | 12.48 | $ | 13.16 | $ | 13.31 | $ | 13.34 | $ | 13.50 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (1.61 | ) | 2.48 | 3.31 | 2.24 | 3.02 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.67 | 3.59 | 3.49 | 3.41 | 3.57 | |||||||||||||||
Expenses, after expense reductions (%) | 1.25 | 1.24 | 1.24 | 1.25 | 1.24 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.24 | 1.24 | 1.24 | 1.24 | 1.24 | |||||||||||||||
Expenses, before expense reductions (%) | 1.75 | 1.78 | 1.78 | 1.80 | 1.78 | |||||||||||||||
Portfolio turnover rate (%) | 22.00 | 22.55 | 18.95 | 20.06 | 11.81 | |||||||||||||||
Net assets at end of year (thousands) | $ | 59,243 | $ | 53,890 | $ | 55,497 | $ | 55,382 | $ | 57,979 | ||||||||||
See notes to financial statements.
18 Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Intermediate Municipal Fund
| Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.13 | $ | 13.28 | $ | 13.31 | $ | 13.46 | $ | 13.54 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.56 | 0.55 | 0.54 | 0.53 | 0.56 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.15 | ) | (0.08 | ) | ||||||||||
Total from investment operations | (0.12 | ) | 0.40 | 0.51 | 0.38 | 0.48 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.56 | ) | (0.55 | ) | (0.54 | ) | (0.53 | ) | (0.56 | ) | ||||||||||
Change in net asset value | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.15 | ) | (0.08 | ) | ||||||||||
NET ASSET VALUE, end of year | $ | 12.45 | $ | 13.13 | $ | 13.28 | $ | 13.31 | $ | 13.46 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (1.02 | ) | 3.06 | 3.90 | 2.90 | 3.61 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 4.28 | 4.16 | 4.07 | 3.98 | 4.12 | |||||||||||||||
Expenses, after expense reductions (%) | 0.64 | 0.67 | 0.67 | 0.67 | 0.67 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.63 | 0.67 | 0.67 | 0.67 | 0.67 | |||||||||||||||
Expenses, before expense reductions (%) | 0.64 | 0.73 | 0.75 | 0.77 | 0.75 | |||||||||||||||
Portfolio turnover rate (%) | 22.00 | 22.55 | 18.95 | 20.06 | 11.81 | |||||||||||||||
Net assets at end of year (thousands) | $ | 171,848 | $ | 125,890 | $ | 89,589 | $ | 52,037 | $ | 33,079 | ||||||||||
See notes to financial statements.
| Certified Annual Report 19 |
| SCHEDULE OF INVESTMENTS | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings. The category of investments identified as “AAA” in this graph includes investments which are pre-refunded or escrowed to maturity. Such investments are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities to satisfy the timely payment of principal and interest and, therefore, are normally deemed to be equivalent to AAA-rated securities.
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
ALABAMA — 0.64% | ||||||||
Lauderdale County & Florence City Health Care Authority, 5.75% due 7/1/2013 (Coffee Health; Insured: MBIA) | A2/AA | $ | 1,600,000 | $ | 1,643,936 | |||
University of Alabama at Birmingham Hospital Revenue Series A, 5.25% due 9/1/2025 | A1/A+ | 2,000,000 | 1,851,860 | |||||
ALASKA — 0.56% | ||||||||
Alaska Municipal Bond Bank, 5.00% due 10/1/2017 (Insured: FGIC) | A1/A+ | 2,470,000 | 2,524,711 | |||||
Anchorage GO, 6.00% due 10/1/2012 (Insured: FGIC) | NR/AA | 500,000 | 531,680 | |||||
ARIZONA — 1.23% | ||||||||
Phoenix Civic Improvement Corp., 5.00% due 7/1/2017 (Insured: MBIA) | Aa3/AA | 1,000,000 | 1,038,710 | |||||
Pima County IDA, 6.70% due 7/1/2021 (Arizona Charter Schools) | Baa3/NR | 2,655,000 | 2,582,492 | |||||
Salt Verde Financial Corp. Gas Revenue, 5.25% due 12/1/2022 | Aa3/AA- | 2,000,000 | 1,558,700 | |||||
Salt Verde Financial Corp. Gas Revenue, 5.25% due 12/1/2028 | Aa3/AA- | 500,000 | 381,370 | |||||
Tucson GO, 9.75% due 7/1/2012 (ETM) | NR/AA | 400,000 | 490,088 | |||||
Tucson GO, 9.75% due 7/1/2013 (ETM) | NR/AA | 500,000 | 634,805 | |||||
ARKANSAS — 0.23% | ||||||||
Jefferson County Hospital Improvement, 5.75% due 6/1/2013 (Jefferson Hospital Association) | NR/A | 1,200,000 | 1,238,832 | |||||
CALIFORNIA — 3.73% | ||||||||
California HFA, 5.125% due 7/1/2022 (Catholic Healthcare West) | A2/A | 1,000,000 | 984,660 | |||||
California State Department of Water Resources, 5.05% due 5/1/2022 put 10/1/2008 (LOC: Bayerische Landesbank/West Deutsche Landesbank) (daily demand notes) | VMIG1/A-1+ | 2,700,000 | 2,700,000 | |||||
California State GO, 3.75% due 5/1/2034 put 10/1/2008 (Daily Kindergarten Univ.; LOC: Citibank/ California State Teachers) (daily demand notes) | VMIG1/A-1+ | 400,000 | 400,000 | |||||
California State Public Works Board Lease, 5.00% due 6/1/2017 (Regents of University of California; Insured: FGIC) | Aa2/AA- | 2,000,000 | 2,071,740 | |||||
California Statewide Community Development Authority, 6.25% due 8/15/2028 (Enloe Medical Center; Insured: CA Mtg. Insurance) | NR/A+ | 1,050,000 | 1,062,243 | |||||
El Camino Hospital District, 6.25% due 8/15/2017 (ETM) | Aa3/AA | 1,000,000 | 1,106,480 | |||||
Golden West Schools Financing Authority, 0% due 8/1/2018 (Insured: MBIA) | A2/AA | 2,140,000 | 1,223,695 | |||||
Irvine Improvement District, 5.05% due 9/2/2025 put 10/1/2008 (LOC: Bank of America) (daily demand notes) | VMIG1/A-1+ | 2,200,000 | 2,200,000 | |||||
Los Angeles Regional Airport Improvement Corp., 5.00% due 1/1/2017 (LAX Fuel Corp.; Insured: FSA) (AMT) | Aaa/AAA | 1,120,000 | 1,070,272 | |||||
Mojave USD COP, 0% due 9/1/2021 (Insured: FSA) | NR/AAA | 1,095,000 | 509,525 | |||||
Mojave USD COP, 0% due 9/1/2023 (Insured: FSA) | NR/AAA | 1,100,000 | 439,164 | |||||
Redwood City Redevelopment Project, 0% due 7/15/2023 (Insured: AMBAC) | Aa3/AA | 2,060,000 | 832,508 | |||||
20 Certified Annual Report |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
San Jose USD COP, 5.00% due 6/1/2021 (Insured: FGIC) | NR/AA- | $ | 1,580,000 | $ | 1,510,274 | |||
San Mateo USD GO, 0% due 9/1/2019 (Insured: FGIC) | Aa3/AA- | 3,000,000 | 1,687,890 | |||||
Victor Elementary School District GO, 0% due 8/1/2025 (Insured: FGIC) | A2/A | 1,535,000 | 544,649 | |||||
Washington USD, 5.00% due 8/1/2022 (New High School; Insured: AMBAC) | Aa3/AA | 2,010,000 | 1,898,485 | |||||
COLORADO — 5.24% | ||||||||
Adams County, 5.00% due 8/1/2014 (Platte Valley Medical Center; Insured: FHA 242/MBIA) | NR/AA | 1,000,000 | 1,044,920 | |||||
Adams County Communication Center COP, 5.75% due 12/1/2016 | Baa1/NR | 1,265,000 | 1,278,599 | |||||
Arvada IDRB, 5.60% due 12/1/2012 (Wanco Inc.; LOC: US Bank N.A.) (AMT) | NR/NR | 450,000 | 449,973 | |||||
Central Platte Valley Metropolitan District, 5.15% due 12/1/2013 pre-refunded 12/1/2009 | NR/AAA | 1,000,000 | 1,042,200 | |||||
Central Platte Valley Metropolitan District, 5.00% due 12/1/2031 put 12/1/2009 (LOC: BNP Paribas) | NR/AA+ | 3,995,000 | 4,062,755 | |||||
Colorado Educational & Cultural Facilities, 5.25% due 8/15/2019 (Peak to Peak Charter School; Insured: XLCA) | NR/A | 1,475,000 | 1,478,820 | |||||
Denver City & County Airport, 5.50% due 11/15/2015 (Insured: FGIC) | A1/A+ | 5,000,000 | 4,990,600 | |||||
Denver City & County Housing Authority, 5.20% due 11/1/2027 (Three Towers Rehabilitation; Insured: FSA) (AMT) | Aaa/NR | 2,555,000 | 2,271,242 | |||||
El Paso County School District GO, 7.10% due 12/1/2013 (State Aid Withholding) | Aa3/AA- | 500,000 | 576,490 | |||||
Madre Metropolitan District GO, 5.375% due 12/1/2026 | NR/NR | 2,220,000 | 1,599,532 | |||||
Murphy Creek Metropolitan District GO, 6.00% due 12/1/2026 | NR/NR | 2,000,000 | 1,556,420 | |||||
North Range Metropolitan District GO, 5.00% due 12/15/2021 (Insured: ACA | NR/NR | 1,500,000 | 1,258,860 | |||||
Northwest Parkway Public Highway Authority Senior Convertible C, 0% due 6/15/2014 (Insured: FSA) (ETM) | Aaa/AAA | 1,005,000 | 935,153 | |||||
Plaza Metropolitan District Public Improvement Fee/Tax Increment, 7.70% due 12/1/2017 | NR/NR | 2,500,000 | 2,564,900 | |||||
Public Authority For Colorado Energy Gas Revenue, 6.125% due 11/15/2023 (Guaranty: Merrill Lynch) | A2/A | 2,000,000 | 1,729,180 | |||||
Southlands Metropolitan District GO, 7.00% due 12/1/2024 pre-refunded 12/1/2014 | NR/AAA | 1,370,000 | 1,604,311 | |||||
DELAWARE — 0.27% | ||||||||
Delaware State HFA, 5.25% due 5/1/2016 (Nanticoke Memorial Hospital; Insured: Radian) | NR/BBB+ | 1,500,000 | 1,472,100 | |||||
DISTRICT OF COLUMBIA — 2.06% | ||||||||
District of Columbia Association of American Medical Colleges, 5.00% due 2/15/2017 (Insured: AMBAC) | Aa2/AA | 1,000,000 | 1,038,830 | |||||
District of Columbia COP, 5.25% due 1/1/2014 (Insured: FGIC) | A2/A | 2,000,000 | 2,084,540 | |||||
District of Columbia COP, 5.00% due 1/1/2020 (Insured: FGIC) | A2/A | 3,900,000 | 3,788,616 | |||||
District of Columbia COP, 5.00% due 1/1/2023 (Insured: FGIC) | A2/A | 1,000,000 | 939,660 | |||||
District of Columbia GO, 6.00% due 6/1/2015 (Insured: MBIA) | A1/AA | 3,000,000 | 3,325,980 | |||||
FLORIDA — 11.48% | ||||||||
Broward County Housing Finance Authority Multi Family Housing, 5.40% due 10/1/2011 (Pembroke Park Apartments; Guaranty: Florida Housing Finance Corp.) (AMT) | NR/NR | 325,000 | 328,559 | |||||
Broward County Resource Recovery, 5.50% due 12/1/2008 (Wheelabrator South) | A3/AA | 500,000 | 502,425 | |||||
Broward County School Board COP, 5.00% due 7/1/2020 (Insured: FSA) | Aaa/AAA | 1,000,000 | 976,060 | |||||
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 | 1,038,140 | |||||
Collier County Housing Finance Authority Multi Family A-1, 4.90% due 2/15/2032 put 2/15/2012 (Goodlette Arms; Collateralized: FNMA) | Aaa/NR | 1,000,000 | 1,034,620 | |||||
Crossings at Fleming Island Community Development, 5.60% due 5/1/2012 (Insured: MBIA) | A2/AA | 1,405,000 | 1,419,514 | |||||
Enterprise Community Development District Assessment Bonds, 6.00% due 5/1/2010 (Insured: MBIA) | A2/AA | 595,000 | 596,446 | |||||
Escambia County HFA, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB- | 1,000,000 | 998,720 | |||||
Escambia County HFA, 5.95% due 7/1/2020 (Florida Health Care Facility Loan; Insured: AMBAC) | Aa3/NR | 2,860,000 | 2,896,065 | |||||
Flagler County School Board COP, 5.00% due 8/1/2020 (Insured: FSA) | Aaa/AAA | 2,560,000 | 2,497,766 | |||||
Florida Board of Education GO Capital Outlay, 9.125% due 6/1/2014 | Aa1/AAA | 905,000 | 1,034,442 | |||||
21 Certified Annual Report | Certified Annual Report 21 |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Florida Board of Education GO Capital Outlay, 5.75% due 6/1/2018 | Aa1/AAA | $ | 1,460,000 | $ | 1,524,342 | |||
Florida Housing Finance Corp., 5.40% due 4/1/2014 pre-refunded 10/1/2010 (Augustine Club Apartments; Insured: MBIA) | Aaa/NR | 415,000 | 444,822 | |||||
Florida Housing Finance Corp. Homeowner Mtg., 4.80% due 1/1/2016 | Aa1/AA+ | 270,000 | 272,714 | |||||
Florida Municipal Loan Council, 5.00% due 10/1/2024 (Insured: MBIA) | A2/AA | 2,235,000 | 2,087,758 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2018 (South Florida Evaluation Treatment) | NR/AA+ | 2,090,000 | 2,093,657 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2019 (South Florida Evaluation Treatment) | NR/AA+ | 2,255,000 | 2,234,682 | |||||
Florida State Department of Environmental Protection, 5.00% due 7/1/2017 (Florida Forever; Insured: FGIC) | A1/AA- | 1,000,000 | 1,017,120 | |||||
Greater Orlando Aviation Authority, 5.25% due 10/1/2017 (Insured: FSA) (AMT) | Aaa/AAA | 5,000,000 | 4,832,000 | |||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | A1/A+ | 1,100,000 | 1,043,647 | |||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | A1/A+ | 1,000,000 | 948,770 | |||||
Hillsborough County Assessment Capacity, 5.00% due 3/1/2017 (Insured: FGIC) | A3/A+ | 1,000,000 | 1,020,390 | |||||
Hillsborough County IDA PCR, 5.10% due 10/1/2013 (Tampa Electric Co.) | Baa2/BBB- | 1,000,000 | 980,740 | |||||
Hillsborough County IDA PCR, 5.65% due 5/15/2018 (Tampa Electric Co.) | Baa2/BBB- | 2,000,000 | 1,925,480 | |||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2021 (Insured: XLCA) | Baa1/BBB- | 3,000,000 | 2,813,220 | |||||
Jacksonville HFA Hospital, 5.75% due 8/15/2014 pre-refunded 8/15/2011 | NR/NR | 1,000,000 | 1,032,670 | |||||
Manatee County Florida, 5.00% due 10/1/2016 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,033,320 | |||||
Marion County Hospital District, 5.00% due 10/1/2022 (Munroe Regional Health) | A2/NR | 1,000,000 | 895,670 | |||||
Miami Dade County School Board COP, 5.00% due 10/1/2021 (Insured: AMBAC) | Aa3/AA | 3,035,000 | 2,913,054 | |||||
Miami Dade County School Board COP, 5.25% due 5/1/2022 (Insured: Assured Guaranty) | Aaa/AAA | 2,600,000 | 2,562,664 | |||||
Miami Dade County Special Housing, 5.80% due 10/1/2012 (HUD Section 8) | Baa3/NR | 510,000 | 528,921 | |||||
Miami GO, 5.375% due 9/1/2015 (Insured: MBIA) | A2/AA | 1,000,000 | 1,045,950 | |||||
Orange County HFA, 6.25% due 10/1/2013 (Orlando Regional Hospital; Insured: MBIA) | A2/AA | 440,000 | 477,017 | |||||
Orange County HFA, 5.125% due 6/1/2014 (Mayflower Retirement; Insured: Radian) | NR/BBB+ | 1,000,000 | 993,530 | |||||
Orange County HFA, 6.25% due 10/1/2016 (Orlando Regional Hospital; Insured: MBIA) | A2/AA | 280,000 | 300,818 | |||||
Orange County HFA, 6.375% due 11/15/2020 pre-refunded 11/15/2010 (Adventist Health Systems) | A1/NR | 1,000,000 | 1,081,450 | |||||
Port Everglades Authority, 5.00% due 9/1/2016 (Insured: FSA) | Aaa/AAA | 5,635,000 | 5,496,210 | |||||
South Miami HFA, 5.00% due 8/15/2022 (Baptist Health Group) | Aa3/AA- | 1,500,000 | 1,373,205 | |||||
St. John’s County IDA, 5.50% due 8/1/2014 (Presbyterian Retirement) | NR/NR | 1,000,000 | 1,013,000 | |||||
Tampa Bay Water Utilities System Revenue, 5.50% due 10/1/2022 (Insured: FGIC) | Aa3/AA+ | 2,750,000 | 2,750,797 | |||||
Tampa Health Systems, 5.50% due 11/15/2013 (Baycare Health Group; Insured: MBIA) | Aa3/AA | 1,050,000 | 1,115,531 | |||||
University of Central Florida COP Convocation Corp., 5.00% due 10/1/2019 (Insured: FGIC) | NR/NR | 1,135,000 | 1,090,883 | |||||
GEORGIA — 1.16% | ||||||||
Atlanta Airport Revenue Series B, 6.00% due 1/1/2018 (Insured: FGIC) (AMT) | A1/A+ | 1,000,000 | 993,590 | |||||
Atlanta Tax Allocation, 5.00% due 12/1/2015 (Atlantic Station; Insured: Assured Guaranty) | Aaa/AAA | 4,120,000 | 4,249,121 | |||||
Georgia Municipal Electric Power Authority, 10.00% due 1/1/2010 | A1/A+ | 230,000 | 249,570 | |||||
Main Street Natural Gas Inc., 5.50% due 9/15/2022 | A2/A | 1,000,000 | 824,940 | |||||
HAWAII — 0.39% | ||||||||
Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Kapiolani Health Care; Insured: MBIA) | A2/AA | 2,000,000 | 2,120,100 | |||||
IDAHO — 0.38% | ||||||||
Boise City IDRB Corp., 5.00% due 5/15/2020 (Western Trailer Co.; LOC: Wells Fargo) | Aaa/NR | 2,000,000 | 2,034,860 | |||||
ILLINOIS — 7.77% | ||||||||
Chicago Midway Airport Second Lien, 5.00% due 1/1/2019 (Insured: AMBAC) | Aa3/AA | 1,210,000 | 1,107,803 | |||||
Chicago O’Hare International Airport Revenue Second Lien, 5.75% due 1/1/2018 (Insured: AMBAC) | Aa3/AA | 3,000,000 | 2,944,920 | |||||
Chicago Tax Increment, 6.25% due 11/15/2013 (Near South Redevelopment; Insured: ACA) | NR/NR | 1,500,000 | 1,509,990 | |||||
22 Certified Annual Report |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Chicago Tax Increment, 0% due 11/15/2014 (Near South Redevelopment; Insured: ACA) | NR/NR | $ | 1,340,000 | $ | 902,946 | |||
Chicago Tax Increment Allocation, 6.50% due 12/1/2008 (Sub Central Loop Redevelopment; Insured: ACA) | NR/NR | 1,500,000 | 1,504,725 | |||||
Chicago Tax Increment Allocation, 5.30% due 1/1/2014 (Lincoln Belmont; Insured: ACA) | NR/NR | 2,285,000 | 2,214,622 | |||||
Cook County School District GO, 0% due 12/1/2022 (ETM) | NR/NR | 2,000,000 | 937,420 | |||||
Illinois DFA, 6.00% due 11/15/2012 (Adventist Health Group; Insured: MBIA) | A1/AA | 2,860,000 | 3,024,622 | |||||
Illinois DFA Community Rehab Providers, 5.90% due 7/1/2009 | NR/BBB | 290,000 | 292,929 | |||||
Illinois Educational Facilities Authority, 5.00% due 11/1/2016 (Rush University Medical Center) | A2/AA | 1,000,000 | 1,006,700 | |||||
Illinois Educational Facilities Authority, 5.625% due 10/1/2022 (Augustana College) | Baa1/NR | 1,625,000 | 1,531,140 | |||||
Illinois Educational Facilities Authority, 5.75% due 11/1/2028 (Rush University Medical Center) | A2/AA | 1,000,000 | 943,180 | |||||
Illinois Educational Facilities Authority, 4.75% due 11/1/2036 put 11/1/2016 (Field Museum) | A2/A | 1,160,000 | 1,156,102 | |||||
Illinois Finance Authority, 5.00% due 8/1/2022 (Bradley University; Insured: XLCA) | NR/A | 1,000,000 | 937,190 | |||||
Illinois Finance Authority, 5.00% due 2/1/2027 (Newman Foundation; Insured: Radian) | NR/BBB+ | 1,220,000 | 1,014,052 | |||||
Illinois HFA, 6.00% due 7/1/2011 (Loyola University Health Systems; Insured: MBIA) | A2/AA | 1,370,000 | 1,453,871 | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola University Health Systems; Insured: MBIA) (ETM) | A2/AA | 230,000 | 252,163 | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola University Health Systems; Insured: MBIA) | A2/AA | 1,080,000 | 1,148,688 | |||||
Illinois HFA, 6.25% due 11/15/2019 pre-refunded 11/15/2009 (OSF Healthcare) | A2/A | 1,250,000 | 1,313,362 | |||||
Illinois HFA, 5.70% due 2/20/2021 (Midwest Care Center; Collateralized: GNMA) | Aaa/NR | 905,000 | 909,815 | |||||
Illinois HFA Series A, 5.75% due 8/15/2013 pre-refunded 8/15/2009 (Children’s Memorial Hospital; Insured: AMBAC) | Aa3/AA | 1,900,000 | 1,974,613 | |||||
Melrose Park Tax Increment, 6.50% due 12/15/2015 (Insured: FSA) | Aaa/AAA | 1,015,000 | 1,079,879 | |||||
Sangamon County School District COP, 5.875% due 8/15/2018 (Hay Edwards; Insured: ACA) | NR/NR | 2,400,000 | 2,320,512 | |||||
Sherman Mortgage, 6.10% due 10/1/2014 (Villa Vianney Health Care; Collateralized: FHA/GNMA) | NR/AAA | 1,170,000 | 1,209,066 | |||||
Sherman Mortgage, 6.20% due 10/1/2019 (Villa Vianney Health Care; Collateralized: FHA/GNMA) | NR/AAA | 1,600,000 | 1,631,712 | |||||
Southern Illinois University, 0% due 4/1/2014 (Insured: MBIA) | A1/AA | 1,425,000 | 1,128,173 | |||||
Southwestern Illinois Development Authority, 0% due 12/1/2024 (Insured: FSA) | NR/AAA | 2,975,000 | 1,155,520 | |||||
Tazewell County School District GO, 9.00% due 12/1/2024 (Insured: FGIC) | A3/NR | 1,205,000 | 1,624,412 | |||||
University of Illinois, 0% due 4/1/2014 (Insured: MBIA) | Aa3/AA | 1,590,000 | 1,260,154 | |||||
Will County Community School District GO, 0% due 11/1/2011 (Insured: FSA) | Aaa/AAA | 2,965,000 | 2,663,904 | |||||
INDIANA — 6.04% | ||||||||
Allen County Economic Development, 5.80% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 895,000 | 910,806 | |||||
Allen County Economic Development, 5.75% due 12/30/2015 (Indiana Institute of Technology) | NR/NR | 1,355,000 | 1,367,683 | |||||
Allen County Jail Building Corp., 5.00% due 4/1/2018 (Insured: XLCA) | Aa3/NR | 2,495,000 | 2,541,083 | |||||
Allen County Redevelopment District, 5.00% due 11/15/2018 | A3/NR | 1,560,000 | 1,539,689 | |||||
Boone County Hospital Association, 5.625% due 1/15/2015 pre-refunded 7/15/2011 (Insured: FGIC) | NR/A+ | 1,000,000 | 1,069,520 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2016 (Performing Arts Center) | Aa2/AA | 1,730,000 | 1,226,414 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2021 (Performing Arts Center) | Aa2/AA | 2,000,000 | 1,008,260 | |||||
Dyer Redevelopment Authority, 6.40% due 7/15/2015 pre-refunded 7/15/2009 | NR/A- | 1,515,000 | 1,578,160 | |||||
Dyer Redevelopment Authority, 6.50% due 7/15/2016 pre-refunded 7/15/2009 | NR/A- | 1,910,000 | 1,991,118 | |||||
Fishers Redevelopment Authority, 5.25% due 2/1/2020 (Insured: XLCA) | NR/AA | 1,025,000 | 1,039,688 | |||||
Fort Wayne Redevelopment Authority, 5.00% due 8/1/2023 (Harrison Square; Insured: Assured Guaranty) | Aaa/NR | 2,290,000 | 2,217,590 | |||||
Goshen Chandler School Building, 0% due 1/15/2011 (Insured: MBIA) | A2/AA | 1,020,000 | 939,807 | |||||
Huntington Economic Development, 6.40% due 5/1/2015 (United Methodist Memorial) | NR/NR | 1,000,000 | 1,000,260 | |||||
Indiana Bond Bank, 5.25% due 4/1/2023 (Hendricks Regional; Insured: AMBAC) | Aa3/AA | 2,000,000 | 1,887,480 | |||||
Indiana Bond Bank Gas Revenue Series A, 5.25% due 10/15/2020 | Aa2/NR | 5,000,000 | 4,464,550 | |||||
Indiana HFA, 5.75% due 9/1/2015 (Methodist Hospital) (ETM) | NR/AAA | 575,000 | 583,556 | |||||
Lawrence Multifamily Redevelopment Authority, 5.40% due 6/1/2024 put 1/1/2018 (Pinnacle Apartments; Collateralized: FNMA) | NR/AAA | 1,500,000 | 1,469,955 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2017 (146th Street Extension) | NR/AA- | 1,000,000 | 994,780 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2020 (146th Street Extension) | NR/AA- | 1,000,000 | 962,230 | |||||
Vanderburgh County Redevelopment District Tax Increment, 5.00% due 2/1/2020 | NR/A | 1,000,000 | 910,080 | |||||
| Certified Annual Report 23 |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2012 pre-refunded 1/15/2012 | NR/AA+ | $ | 1,200,000 | $ | 1,297,704 | |||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2017 (Insured: FGIC) | NR/AA+ | 1,685,000 | 1,760,606 | |||||
IOWA — 1.66% | ||||||||
Coralville COP, 5.25% due 6/1/2022 | A2/NR | 2,980,000 | 2,736,772 | |||||
Iowa Finance Authority, 6.00% due 7/1/2012 (Trinity Regional Hospital; Insured: FSA) | Aaa/AAA | 820,000 | 869,364 | |||||
Iowa Finance Authority, 6.00% due 7/1/2013 (Genesis Medical Center) | A1/NR | 1,000,000 | 1,022,730 | |||||
Iowa Finance Authority, 5.75% due 12/1/2015 (Trinity Health) | Aa2/AA | 1,250,000 | 1,279,350 | |||||
Iowa Finance Authority, 6.75% due 2/15/2016 pre-refunded 2/15/2010 (Iowa Health Services) | Aa3/NR | 1,000,000 | 1,064,250 | |||||
Iowa Finance Authority, 6.00% due 12/1/2018 (Catholic Health Initiatives) | Aa2/AA | 2,000,000 | 2,045,640 | |||||
KANSAS — 1.62% | ||||||||
Burlington Environmental Improvement, 5.374% due 9/1/2035 put 4/1/2013 (Kansas City Power & Light; Insured: FGIC) | A3/A | 2,400,000 | 2,364,264 | |||||
Olathe Tax Increment Special Obligation, 5.45% due 9/1/2022 (West Village Center) | NR/NR | 1,155,000 | 1,030,352 | |||||
Wichita Hospital Revenue, 6.75% due 11/15/2019 (Via Christi Health System) | NR/A+ | 4,200,000 | 4,313,274 | |||||
Wyandotte County School District GO, 5.00% due 9/1/2014 (Insured: FGIC) | A3/NR | 1,030,000 | 1,072,591 | |||||
KENTUCKY — 1.26% | ||||||||
Kentucky EDA, 5.85% due 10/1/2015 pre-refunded 10/1/2013 (Norton Healthcare; Insured: MBIA) | A2/AA | 1,335,000 | 1,485,801 | |||||
Kentucky EDA, 5.85% due 10/1/2015 (Norton Healthcare; Insured: MBIA) | A2/AA | 2,665,000 | 2,842,809 | |||||
Kentucky EDA, 5.75% due 12/1/2028 (Louisville Arena; Insured: Assured Guaranty) | Aaa/AAA | 1,500,000 | 1,414,530 | |||||
Kentucky EDA, 0% due 10/1/2024 (Norton Healthcare; Insured: MBIA) | A2/AA | 3,000,000 | 1,069,530 | |||||
LOUISIANA — 2.56% | ||||||||
Jefferson Sales Tax District, 5.50% due 12/1/2008 (Insured: AMBAC) | Aa3/AA | 1,595,000 | 1,601,938 | |||||
Louisiana Local Government Environment Facilities Authority, 5.00% due 3/1/2014 (Independence Stadium) | NR/A | 1,000,000 | 1,021,020 | |||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2021 (Archdiocese of New Orleans; Insured: CIFG) | Baa2/NR | 980,000 | 888,547 | |||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2022 (Black & Gold Facilities; Insured: CIFG) | Baa3/BBB- | 1,500,000 | 1,351,620 | |||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2023 (Archdiocese of New Orleans; Insured: CIFG) | Baa2/NR | 1,000,000 | 879,700 | |||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | Baa3/BBB | 3,000,000 | 2,896,650 | |||||
New Orleans Aviation Board, 5.25% due 1/1/2018 (Insured: FSA) | Aaa/AAA | 1,000,000 | 958,880 | |||||
New Orleans Aviation Board, 5.25% due 1/1/2020 (Insured: FSA) | Aaa/AAA | 2,000,000 | 1,999,820 | |||||
St. Tammany Parish Sales Tax Revenue, 5.00% due 6/1/2019 (Insured: CIFG) | NR/A+ | 1,300,000 | 1,295,125 | |||||
St. Tammany Parish Sales Tax Revenue, 5.00% due 6/1/2020 (Insured: CIFG) | NR/A+ | 1,000,000 | 978,230 | |||||
MASSACHUSETTS — 0.23% | ||||||||
Massachusetts Housing Finance Agency, 5.05% due 6/1/2010 (Insured: MBIA) (AMT) | A2/AA | 290,000 | 293,167 | |||||
Massachusetts Housing Finance Agency, 6.125% due 12/1/2011 (Insured: MBIA) (AMT) | Aa2/AA | 950,000 | 962,758 | |||||
MICHIGAN — 2.84% | ||||||||
Kalamazoo Hospital Finance Authority, 6.25% due 6/1/2014 (Borgess Medical Center) (ETM) | Aaa/AAA | 650,000 | 734,812 | |||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2019 (Bronson Hospital; Insured: FSA) | Aaa/AAA | 1,500,000 | 1,473,495 | |||||
Kent Hospital Finance Authority, 7.25% due 1/15/2013 (Butterworth Hospital; Insured: MBIA) | A2/AA | 840,000 | 908,384 | |||||
Michigan Public Educational Facilities Authority, 5.50% due 9/1/2022 (Black River School) | NR/NR | 1,110,000 | 983,216 | |||||
Michigan State Building Authority, 5.25% due 10/15/2017 (Insured: FSA) | Aaa/AAA | 2,450,000 | 2,513,578 | |||||
Michigan State Building Authority, 0% due 10/15/2025 (Insured: FGIC) | A1/A+ | 6,000,000 | 2,036,160 | |||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2024 (Sparrow Obligated Group) | A1/A+ | 2,140,000 | 1,918,638 | |||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Obligated Group) | A2/A | 3,650,000 | 3,162,287 | |||||
Michigan Strategic Fund, 5.25% due 10/15/2023 (Michigan House of Representatives Facilities; Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 971,630 | |||||
24 Certified Annual Report |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Southfield Economic Development Corp., 7.25% due 12/1/2010 (N.W. 12 LP Transcon Builders) | NR/NR | $ | 750,000 | $ | 728,670 | |||
MINNESOTA — 0.66% | ||||||||
Minneapolis St. Paul Health, 6.00% due 12/1/2018 (Healthpartners Obligated Group) | Baa1/BBB | 1,000,000 | 1,000,430 | |||||
Southern Minnesota Municipal Power Agency, 5.75% due 1/1/2018 pre-refunded to various dates (Insured: MBIA) | A2/AA | 700,000 | 732,816 | |||||
St. Paul Housing & Redevelopment Authority, 5.25% due 5/15/2020 (Healthpartners Obligated Group) | Baa1/BBB | 1,965,000 | 1,827,057 | |||||
MISSISSIPPI — 1.71% | ||||||||
Mississippi Development Bank Special Obligation, 5.00% due 7/1/2022 (Canton Public Improvement) | NR/NR | 1,935,000 | 1,687,900 | |||||
Mississippi Development Bank Special Obligation, 5.00% due 7/1/2027 (Lowndes County Industrial Development; Insured: FSA) | Aaa/AAA | 2,500,000 | 2,365,875 | |||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply, 5.00% due 3/1/2018 (Insured: XLCA) | Baa2/BBB- | 920,000 | 887,800 | |||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply, 5.00% due 3/1/2020 (Insured: XLCA) | Baa2/BBB- | 1,000,000 | 931,600 | |||||
Mississippi Higher Educational Authority, 7.50% due 9/1/2009 (Guaranty: Student Loans) (AMT) | A2/NR | 1,500,000 | 1,503,780 | |||||
Mississippi Hospital Equipment & Facilities, 5.25% due 8/1/2026 (Delta Regional Medical Center; Insured: MBIA/FHA) | A2/AA | 2,000,000 | 1,889,200 | |||||
MISSOURI — 1.41% | ||||||||
Kansas City Tax Increment Financing Commission, 5.00% due 3/1/2012 (Maincor) | NR/NR | 1,100,000 | 1,082,015 | |||||
Missouri Development Finance Board, 5.40% due 11/1/2018 (Lutheran Home for the Aged; LOC: Commerce Bank) | Aa2/NR | 2,025,000 | 1,996,002 | |||||
Missouri Development Finance Board, 5.00% due 4/1/2019 (Eastland Center) | NR/A+ | 1,000,000 | 963,980 | |||||
Missouri Development Finance Board, 5.00% due 4/1/2021 (Eastland Center) | NR/A+ | 2,000,000 | 1,864,160 | |||||
Missouri Development Finance Board, 5.125% due 4/1/2022 (Eastland Center) | NR/A+ | 2,000,000 | 1,760,200 | |||||
MONTANA — 0.28% | ||||||||
Montana Facilities Financing Authority, 5.00% due 1/1/2022 (St. Luke Community Healthcare) | Aa3/NR | 1,595,000 | 1,501,900 | |||||
NEBRASKA — 0.55% | ||||||||
Adams County Hospital Authority, 5.00% due 12/15/2023 (Mary Lanning Memorial Hospital; Insured: Radian) | NR/A- | 2,000,000 | 1,817,000 | |||||
University of Nebraska, 5.00% due 5/15/2022 (Omaha Health) | Aa2/AA- | 1,200,000 | 1,170,192 | |||||
NEVADA — 0.80% | ||||||||
Las Vegas Special Improvement District, 5.375% due 6/1/2013 (Insured: FSA) | Aaa/AAA | 1,110,000 | 1,135,674 | |||||
Reno Sparks Indian Colony, 5.00% due 6/1/2021 (LOC: U.S. Bank NA) | NR/NR | 1,000,000 | 844,130 | |||||
Washoe County GO, 0% due 7/1/2011 (Reno Sparks Convention Center; Insured: FSA) | Aaa/AAA | 2,600,000 | 2,367,638 | |||||
NEW HAMPSHIRE — 1.60% | ||||||||
Manchester Housing & Redevelopment Authority, 0% due 1/1/2016 (Insured: Radian ACA) | Baa3/A | 4,990,000 | 3,266,105 | |||||
New Hampshire Health & Education Facilities, 5.25% due 10/1/2023 (Southern New Hampshire Medical Center) | NR/A- | 1,000,000 | 913,550 | |||||
New Hampshire IDA PCR, 5.90% due 8/1/2018 (CT Light & Power) (AMT) | Baa1/BBB- | 1,000,000 | 968,840 | |||||
New Hampshire PCR, 5.375% due 5/1/2014 (Central Maine Power Co.) | A3/BBB+ | 3,500,000 | 3,530,380 | |||||
NEW JERSEY — 0.03% | ||||||||
New Jersey EDA, 7.50% due 12/1/2019 (Spectrum for Living Development) | NR/NR | 180,000 | 180,535 | |||||
| Certified Annual Report 25 |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
NEW MEXICO — 1.79% | ||||||||
Farmington PCR, 5.25% due 5/1/2024 put 10/1/2008 (LOC: Barclays Bank) (daily demand notes) | VMIG1/A-1+ | $ | 8,400,000 | $ | 8,400,000 | |||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation) | NR/NR | 1,515,000 | 1,330,821 | |||||
NEW YORK — 0.54% | ||||||||
Nassau Health Care Corp., 6.00% due 8/1/2011 pre-refunded 8/1/2009 | Aaa/AAA | 1,130,000 | 1,180,262 | |||||
New York City Trust Cultural Resources, 5.75% due 7/1/2015 (Museum of American Folk Art; Insured: ACA) | NR/NR | 875,000 | 851,568 | |||||
New York State Dormitory Authority, 5.00% due 7/1/2017 (Bishop Henry B. Hucles Nursing; Insured: SONYMA) | Aa1/NR | 850,000 | 872,176 | |||||
NORTH CAROLINA — 0.76% | ||||||||
Charlotte-Mecklenberg Hospital Authority, 5.00% due 1/15/2022 (Carolinas Health) | Aa3/AA- | 2,000,000 | 1,910,040 | |||||
Franklin County COP, 5.00% due 9/1/2022 (Insured: MBIA) | A2/AA | 1,500,000 | 1,444,590 | |||||
North Carolina Housing Finance Agency SFMR, 6.50% due 9/1/2026 | Aa2/AA | 760,000 | 772,988 | |||||
NORTH DAKOTA — 0.17% | ||||||||
Ward County Health Care Facilities, 5.125% due 7/1/2021 (Trinity Obligated Group) | NR/BBB+ | 1,000,000 | 903,650 | |||||
OHIO — 3.18% | ||||||||
Central Ohio Solid Waste Authority GO, 5.00% due 12/1/2008 | Aa2/AA+ | 2,530,000 | 2,540,702 | |||||
Cleveland Cuyahoga County Port Authority, 6.25% due 5/15/2016 (LOC: Fifth Third Bank) | NR/NR | 1,140,000 | 1,151,719 | |||||
Deerfield Township Tax Increment, 5.00% due 12/1/2025 | A3/NR | 1,000,000 | 875,170 | |||||
Franklin County Health Care, 6.00% due 11/1/2010 (Heinzerling Foundation; LOC: Banc One) | Aaa/NR | 605,000 | 606,107 | |||||
Hamilton Wastewater Systems, 5.25% due 10/1/2017 (Insured: FSA) | Aaa/NR | 1,500,000 | 1,560,990 | |||||
Lorain County Hospital Revenue, 5.625% due 10/1/2016 (Catholic Healthcare) | A1/AA- | 1,435,000 | 1,464,719 | |||||
Marysville School District COP, 5.25% due 12/1/2017 pre-refunded 6/1/2015 (School Facilities; Insured: MBIA) | A2/AA | 2,000,000 | 2,176,460 | |||||
North Ridgeville Economic Development, 0% due 2/1/2015 (Lake Ridge Nursing Home; Collateralized: FHA) | NR/AAA | 230,000 | 138,373 | |||||
Ohio State Air Quality Development Authority, 4.85% due 8/1/2040 (Columbus Southern Power; Insured: MBIA) | A2/AA | 1,500,000 | 1,484,400 | |||||
Ohio State Air Quality Development Authority, 5.10% due 11/1/2042 (Columbus Southern Power; Insured: MBIA) | A2/AA | 3,000,000 | 3,008,370 | |||||
Ohio State Higher Educational Facilities, 5.05% due 7/1/2037 put 7/1/2016 (Kenyon College) | A1/A+ | 2,200,000 | 2,243,648 | |||||
OKLAHOMA — 1.99% | ||||||||
Comanche County Hospital Authority, 5.25% due 7/1/2019 (Insured: Radian) | A3/BBB+ | 3,345,000 | 3,145,471 | |||||
Oklahoma City Municipal Water & Sewer, 0% due 7/1/2011 (Insured: AMBAC) | Aa3/AA | 1,125,000 | 1,018,654 | |||||
Oklahoma City Municipal Water & Sewer, 0% due 7/1/2013 (Insured: AMBAC) | Aa3/AA | 1,485,000 | 1,220,506 | |||||
Oklahoma State DFA, 5.40% due 6/1/2013 (Oklahoma Hospital Association; Insured: AMBAC) | Aa3/NR | 825,000 | 879,310 | |||||
Oklahoma State Industries Authority, 5.50% due 7/1/2023 (OK Medical Research Foundation) | A1/NR | 3,730,000 | 3,517,390 | |||||
Tulsa IDA, 5.00% due 12/15/2024 (St. Francis Health Systems) | Aa2/AA | 1,130,000 | 1,023,599 | |||||
OREGON — 0.41% | ||||||||
Forest Grove Campus Improvement, 6.00% due 5/1/2015 pre-refunded 5/1/2010 (Pacific University; Insured: Radian) | NR/BBB+ | 800,000 | 843,304 | |||||
Oregon State Housing & Community Services Department Single Family Mtg. Program, 5.35% due 7/1/2018 (AMT) | Aa2/NR | 520,000 | 523,385 | |||||
Portland Housing Authority, 4.75% due 5/1/2022 (Yards Union Station) (AMT) | Aa2/NR | 1,000,000 | 872,270 | |||||
26 Certified Annual Report |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
PENNSYLVANIA — 1.45% | ||||||||
Allegheny County Hospital Development, 6.50% due 5/1/2012 pre-refunded 5/1/2010 (South Hills Health Systems) | Baa2/NR | $ | 1,400,000 | $ | 1,485,932 | |||
Carbon County IDA, 6.65% due 5/1/2010 (Panther Creek Partners) | NR/BBB- | 3,050,000 | 3,084,678 | |||||
Chartiers Valley Industrial & Community Development Authority, 5.75% due 12/1/2022 (Asbury Health Center) | NR/NR | 900,000 | 784,089 | |||||
Lancaster County, 0% due 5/1/2014 (Insured: FGIC) | Aa3/NR | 795,000 | 611,379 | |||||
Lancaster County, 0% due 5/1/2015 (Insured: FGIC) | Aa3/NR | 800,000 | 576,088 | |||||
Pennsylvania Higher Education Facilities Authority, 5.60% due 11/15/2009 (Allegheny United Hospitals; Insured: MBIA) | A2/AA | 500,000 | 479,390 | |||||
Pennsylvania Higher Education Facilities Authority, 0% due 7/1/2020 (Insured: AMBAC) | Aa3/AA | 2,032,839 | 855,927 | |||||
RHODE ISLAND — 0.64% | ||||||||
Rhode Island Health & Education Building Corp., 5.00% due 3/15/2014 (Salve Regina University; Insured: Radian) | NR/BBB+ | 1,065,000 | 1,098,026 | |||||
Rhode Island Health & Education Building Corp., 6.00% due 8/1/2014 (Roger Williams Realty; Credit Support: FHA) | NR/A- | 1,000,000 | 1,038,190 | |||||
Rhode Island Health & Education Building Corp. Hospital Financing, 5.25% due 7/1/2015 (Memorial Hospital; LOC: Fleet Bank) | NR/AA+ | 1,325,000 | 1,347,710 | |||||
SOUTH CAROLINA — 3.54% | ||||||||
Berkeley County School District Installment Lease, 5.00% due 12/1/2019 | A3/A- | 2,000,000 | 1,896,740 | |||||
Charleston Educational Excellence Financing Corp., 5.25% due 12/1/2020 (Charleston County School District) | A1/AA- | 1,855,000 | 1,833,853 | |||||
Greenwood School Facilities, Inc., 5.00% due 12/1/2025 (Greenwood School District 50; Insured: Assured Guaranty) | Aaa/AAA | 2,400,000 | 2,254,896 | |||||
Lexington One School Facilities Corp. School District 1, 5.00% due 12/1/2019 | A1/NR | 1,000,000 | 971,930 | |||||
Lexington One School Facilities Corp. School District 1, 5.25% due 12/1/2021 | A1/NR | 1,700,000 | 1,655,902 | |||||
Scago Educational Facilities Corp., 5.00% due 12/1/2017 (Colleton School District; Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 1,002,920 | |||||
Scago Educational Facilities Corp. Spartanburg County, 5.00% due 4/1/2019 (Insured: FSA) | Aaa/AAA | 2,740,000 | 2,764,962 | |||||
Scago Educational Facilities Corp. Spartanburg County, 5.00% due 4/1/2021 (Insured: FSA) | Aaa/AAA | 1,000,000 | 989,290 | |||||
South Carolina Housing Finance & Development Authority, 5.875% due 7/1/2022 | Aa1/NR | 2,265,000 | 2,141,240 | |||||
South Carolina Housing Finance & Development Authority, 5.30% due 7/1/2023 | Aa1/NR | 1,000,000 | 911,910 | |||||
Sumter School Facilities Inc. School District 2, 5.00% due 12/1/2021 (Insured: Assured Guaranty) | Aaa/AAA | 2,855,000 | 2,768,008 | |||||
TENNESSEE — 1.73% | ||||||||
Knox County Health, 4.90% due 6/1/2031 put 6/1/2011 (Eastowne Partners II Ltd.; Collateralized: FNMA) | NR/AAA | 1,955,000 | 2,023,523 | |||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2023 | A2/AA- | 2,500,000 | 1,912,675 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2023 | Aa3/AA- | 7,000,000 | 5,472,880 | |||||
TEXAS — 14.10% | ||||||||
Austin Community College District, 5.50% due 8/1/2023 (Round Rock Campus) | Aa3/AA+ | 2,180,000 | 2,158,047 | |||||
Bexar County Health Facilities Development Corp., 6.125% due 7/1/2022 pre-refunded 7/1/2012 (Army Retirement Residence) | NR/NR | 1,250,000 | 1,385,138 | |||||
Bexar County Health Facilities Development Corp., 5.00% due 7/1/2027 (Army Retirement Residence) | NR/BBB | 1,000,000 | 826,400 | |||||
Bexar County Housing Finance Corp., 5.40% due 8/1/2012 (Dymaxion & Marrach Park Apartments; Insured: MBIA) | A2/NR | 620,000 | 604,475 | |||||
Bexar County Housing Finance Corp., 5.875% due 4/1/2014 (Honey Creek Apartments; Insured: MBIA) | A2/NR | 975,000 | 955,539 | |||||
| Certified Annual Report 27 |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Bexar County Housing Finance Corp., 5.50% due 1/1/2016 (American Opportunity Housing & Colinas; Insured: MBIA) | A2/NR | $ | 600,000 | $ | 607,650 | |||
Bexar County Housing Finance Corp., 6.125% due 4/1/2020 (Honey Creek Apartments; Insured: MBIA) | A2/NR | 1,000,000 | 946,730 | |||||
Bexar County Housing Finance Corp., 5.95% due 8/1/2020 (Dymaxion & Marrach Park Apartments; Insured: MBIA) | A2/NR | 1,270,000 | 1,181,100 | |||||
Bexar County Housing Finance Corp., 5.70% due 1/1/2021 (American Opportunity Housing & Colinas; Insured: MBIA) | A2/NR | 1,035,000 | 1,018,782 | |||||
Bexar County Housing Finance Corp., 6.50% due 12/1/2021 (American Opportunity Housing-Waterford) | Baa2/NR | 2,000,000 | 1,958,280 | |||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2021 (Insured: XLCA) | A3/A | 1,300,000 | 1,247,961 | |||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2022 (Insured: XLCA) | A3/A | 2,300,000 | 2,182,401 | |||||
Birdville ISD GO, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 2,800,000 | 2,480,268 | |||||
Carroll ISD GO, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 345,000 | 309,444 | |||||
Cedar Park Improvement District GO, 5.00% due 2/15/2016 (Insured: MBIA) | A1/AA | 1,000,000 | 1,035,220 | |||||
Coppell ISD GO, 0% due 8/15/2013 (Guaranty: PSF) | NR/AAA | 1,495,000 | 1,163,962 | |||||
Coppell ISD GO, 0% due 8/15/2013 pre-refunded 8/15/2009 (Guaranty: PSF) | NR/AAA | 3,505,000 | 2,738,316 | |||||
Dallas County Utilities & Reclamation District, 5.15% due 2/15/2022 (Insured: AMBAC) | Aa3/AA | 3,000,000 | 2,767,020 | |||||
Duncanville ISD GO, 0% due 2/15/2016 pre-refunded 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 2,985,000 | 2,106,276 | |||||
Duncanville ISD GO, 0% due 2/15/2016 (Guaranty: PSF) | Aaa/AAA | 15,000 | 10,324 | |||||
Ennis ISD GO, 0% due 8/15/2012 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,625,000 | 1,389,375 | |||||
Ennis ISD GO, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/NR | 835,000 | 708,431 | |||||
Ennis ISD GO, 0% due 8/15/2013 (Guaranty: PSF) | Aaa/NR | 845,000 | 672,823 | |||||
Ennis ISD GO, 0% due 8/15/2014 (Guaranty: PSF) | Aaa/NR | 855,000 | 638,283 | |||||
Gulf Coast Center, 6.75% due 9/1/2020 (Mental Health Retardation Center) | NR/BBB | 1,320,000 | 1,355,389 | |||||
Hays Consolidated ISD GO, 0% due 8/15/2013 pre-refunded 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 6,245,000 | 5,092,298 | |||||
Laredo Sports Venue Sales Tax, 5.00% due 3/15/2018 (Insured: AMBAC) | Aa3/AA | 2,040,000 | 2,063,276 | |||||
Lewisville Combination Contract Special Assessment District, 4.75% due 9/1/2012 (Insured: ACA) | NR/NR | 2,055,000 | 2,001,221 | |||||
Midlothian ISD GO, 0% due 2/15/2012 (ETM) | Aaa/NR | 500,000 | 443,640 | |||||
Midlothian ISD GO, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/NR | 500,000 | 442,905 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2012 (Insured: Radian) | A3/A- | 735,000 | 758,469 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2013 (Insured: Radian) | A3/A- | 500,000 | 513,485 | |||||
Mission EDA, 6.00% due 8/1/2020 (Solid Waste Management, Inc.) | NR/A-2 | 3,000,000 | 2,957,520 | |||||
Richardson Improvement GO, 5.00% due 2/15/2019 (Insured: MBIA) | Aa1/AAA | 2,145,000 | 2,171,662 | |||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2016 | Baa2/BBB- | 3,000,000 | 3,015,840 | |||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2021 | Baa2/BBB- | 675,000 | 658,955 | |||||
Spring ISD GO, 5.00% due 8/15/2029 (Insured: FSA) | Aaa/AAA | 4,000,000 | 4,045,080 | |||||
Stafford Economic Development, 6.00% due 9/1/2017 (Insured: FGIC) | A2/A | 1,775,000 | 1,905,338 | |||||
Tarrant County Health Facilities, 6.625% due 11/15/2020 pre-refunded 11/15/2010 (Adventist/Sunbelt) | A1/NR | 3,500,000 | 3,812,095 | |||||
Tarrant County Limited Tax GO, 5.00% due 7/15/2023 | Aaa/AAA | 1,000,000 | 978,450 | |||||
Texarkana Health Facilities, 5.75% due 10/1/2011 (Wadely Regional Medical Center; Insured: MBIA) | A2/AA | 2,500,000 | 2,626,975 | |||||
Texas City Industrial Development Corp., 7.375% due 10/1/2020 (Arco Pipe Line Company) | Aa1/AA | 2,450,000 | 2,878,603 | |||||
Texas State Public Finance Authority, 5.00% due 8/15/2023 (Idea Charter School; Insured: ACA) | NR/BBB- | 3,100,000 | 2,572,473 | |||||
Travis County GO, 5.25% due 3/1/2021 | Aaa/AAA | 1,000,000 | 1,026,440 | |||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2010 (Ascension Health; Insured: MBIA) | Aa1/AA | 2,000,000 | 2,074,460 | |||||
Waco Health Facilities Development Corp., 6.00% due 11/15/2015 pre-refunded 11/15/2009 (Ascension Health) | Aa1/AAA | 870,000 | 913,596 | |||||
Waco Health Facilities Development Corp., 6.00% due 11/15/2016 pre-refunded 11/15/2009 (Ascension Health) | Aa1/AAA | 1,050,000 | 1,102,616 | |||||
UTAH — 0.62% | ||||||||
Salt Lake Valley Fire Services, 5.25% due 4/1/2020 | Aa3/NR | 1,250,000 | 1,242,325 | |||||
28 Certified Annual Report |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Utah County Municipal Building Authority, 5.50% due 11/1/2016 pre-refunded 11/1/2011 (Insured: AMBAC) | Aa3/NR | $ | 1,000,000 | $ | 1,071,400 | |||
Utah Housing Finance Authority, 6.05% due 7/1/2016 (Credit Support: FHA) | NR/AAA | 370,000 | 371,262 | |||||
Utah Housing Finance Authority SFMR, 5.85% due 7/1/2015 (Credit Support: FHA) | Aaa/AA | 30,000 | 30,347 | |||||
Utah State Board of Regents Auxiliary, 5.25% due 5/1/2013 | NR/AA | 595,000 | 625,422 | |||||
VIRGINIA — 1.01% | ||||||||
Amelia County IDA, 4.80% due 4/1/2027 put 4/1/2010 (Waste Management) (AMT) | NR/A-2 | 2,000,000 | 1,976,960 | |||||
Fauquier County IDRB, 5.50% due 10/1/2016 (Insured: Radian) | NR/BBB+ | 1,000,000 | 1,005,320 | |||||
Hanover County IDRB Medical Facilities, 6.00% due 10/1/2021 (ETM) | A2/AA | 795,000 | 796,312 | |||||
Norton IDA, 6.00% due 12/1/2014 (Norton Community Hospital; Insured: ACA) | NR/NR | 1,635,000 | 1,672,687 | |||||
WASHINGTON — 5.34% | ||||||||
King County Housing Authority, 5.20% due 5/1/2028 (Birch Creek Apts.) | NR/AAA | 2,400,000 | 2,259,360 | |||||
Port Longview Industrial Development Corp. Solid Waste Disposal, 6.875% due 10/1/2008 (Weyerhaeuser Co.) (AMT) | NR/BBB | 1,500,000 | 1,500,090 | |||||
Skagit County Public Hospital District GO, 5.125% due 12/1/2015 (Insured: MBIA) | A2/NR | 1,900,000 | 1,985,690 | |||||
Vancouver Downtown Redevelopment Authority, 5.50% due 1/1/2018 (Conference Center; Insured: ACA) | NR/NR | 3,500,000 | 3,245,305 | |||||
Washington Health Care Facilities, 4.50% due 12/1/2008 (Kadlec Medical Center; Insured: Assured Guaranty) | Aaa/AAA | 1,200,000 | 1,203,648 | |||||
Washington Health Care Facilities, 5.50% due 12/1/2010 pre-refunded 12/1/2009 (Providence Services; Insured: MBIA) | A2/AA | 2,690,000 | 2,811,131 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2014 (Catholic Health Services; Insured: MBIA) | Aa2/AA | 1,735,000 | 1,819,113 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2015 (Catholic Health Services; Insured: MBIA) | Aa2/AA | 1,945,000 | 2,036,707 | |||||
Washington Health Care Facilities, 6.25% due 12/1/2021 (Group Health Co-op Puget Sound; Insured: MBIA) | A2/NR | 3,775,000 | 3,678,888 | |||||
Washington Health Care Facilities, 5.25% due 8/15/2024 (Multi Health Services; Insured: FSA) | Aaa/AAA | 1,000,000 | 956,350 | |||||
Washington Health Care Facilities, 6.25% due 8/1/2028 (Insured: FHA 242) | NR/AA | 4,000,000 | 4,022,920 | |||||
Washington Housing Finance Commission, 5.60% due 7/1/2011 (Kline Galland Center; Insured: Radian) | NR/BBB+ | 500,000 | 508,710 | |||||
Washington Housing Finance Commission, 6.10% due 1/1/2016 (Seattle Academy; Insured: ACA) | NR/NR | 1,040,000 | 1,038,201 | |||||
Washington Housing Finance Commission, 5.875% due 7/1/2019 (Kline Galland Center; Insured: Radian) | NR/BBB+ | 1,000,000 | 980,020 | |||||
Washington Public Power Supply, 0% due 7/1/2011 | Aaa/AA- | 1,000,000 | 908,910 | |||||
WEST VIRGINIA — 0.27% | ||||||||
West Virginia Hospital Finance Authority, 5.00% due 6/1/2020 (United Hospital Center; Insured: AMBAC) | Aa3/AA | 1,530,000 | 1,465,786 | |||||
WISCONSIN — 1.47% | ||||||||
Wisconsin Health & Educational Facilities, 5.40% due 8/15/2013 (Sorrowful Mother; Insured: MBIA) | A2/AA | 5,000,000 | 5,003,950 | |||||
Wisconsin Health & Educational Facilities, 5.75% due 8/15/2020 (Eagle River Memorial Hospital Inc.; Insured: Radian) | NR/BBB+ | 1,000,000 | 957,950 | |||||
Wisconsin Housing & Economic Development, 5.875% due 11/1/2016 (Insured: AMBAC) | Aa3/AA | 1,980,000 | 2,021,027 | |||||
TOTAL INVESTMENTS — 97.40% (Cost $546,151,221) | $ | 528,446,567 | ||||||
OTHER ASSETS LESS LIABILITIES — 2.60% | 14,079,329 | |||||||
NET ASSETS — 100.00% | $ | 542,525,896 | ||||||
| Certified Annual Report 29 |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 | |
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 | |
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 | |
HUD | Department of Housing & Urban Development | |
IDA | Industrial Development Authority | |
IDRB | Industrial Development Revenue Bond | |
ISD | Independent School District | |
LOC | Letter 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.
30 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, 2008, 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, 2008 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
| Certified Annual Report 31 |
| EXPENSE EXAMPLE | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
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 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 978.00 | $ | 4.65 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.29 | $ | 4.75 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 979.50 | $ | 6.14 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.26 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 976.50 | $ | 3.03 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.93 | $ | 3.10 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.94%; C: 1.24%; and I: 0.61%) multiplied by the average account value over the period, multiplied by 183/366 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.
32 Certified Annual Report |
| INDEX COMPARISON | ||
Thornburg Intermediate Municipal Fund | September 30, 2008 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Intermediate Municipal Fund versus Merrill Lynch 7-12 Year Municipal Bond Index and
Consumer Price Index (July 22, 1991 to September 30, 2008)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 7/22/91) | (3.32 | )% | 1.74 | % | 2.99 | % | 4.83 | % | ||||
C Shares (Incep: 9/1/94) | (2.18 | )% | 1.87 | % | 2.86 | % | 3.85 | % | ||||
I Shares (Incep: 7/5/96) | (1.02 | )% | 2.47 | % | 3.51 | % | 4.30 | % |
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. There is no sales charge for Class I 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.
| Certified Annual Report 33 |
| TRUSTEES AND OFFICERS | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 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, 49 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None | ||
34 Certified Annual Report |
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Certified Annual Report 35 |
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
36 Certified Annual Report |
| OTHER INFORMATION | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 (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, 2008, 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, 2008.
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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the information with the Trustees and addressed questions presented by 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 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 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 considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events in view of the Fund’s investment objectives and policies.
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.
| Certified Annual Report 37 |
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2008 (Unaudited) | |
In considering the quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations over various periods. The Trustees further noted in this regard that the Fund’s investment returns exceeded the returns in most of the last 11 calendar years for a category of intermediate-term municipal bond funds selected by an independent mutual fund analyst firm, that the Fund’s returns fell within the top quartile of performance for the three and five year periods ended with the second quarter of the year for the same fund category and fell at the midpoint of performance for the one and ten year periods for the category, and that the Fund’s returns similarly fell within the top quartile of performance for the three and five year periods for a second fund category. Measures of portfolio volatility and risk considered by the Trustees demonstrated that the Fund’s portfolio volatility relative to those measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 differences were not significant in view of their degree and the other factors considered. The Trustees noted their previous observations respecting fees charged by the Advisor to other investment management clients, and their conclusion 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 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses charged to the Fund to fees and expenses charged to other mutual funds.
38 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 ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
| This page is not part of the Annual Report. 39 |
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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. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
| This page is not part of the Annual Report. 41 |
Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to .19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
Exhibit 1: KOSPI Stock Index/Korea, 10/31/88 – 9/30/08 (in USD)
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
42 This page is not part of the Annual Report. |
Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
| Sincerely, |
 |
| Brian McMahon |
| CEO and Chief Investment Officer |
| This page is not part of the Annual Report. 43 |
44 This page is not part of the Annual Report. |
Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
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46 This page is not part of the Annual Report. |
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| This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. | ||
| Investment Advisor: Thornburg Investment Management® 800.847.0200
Distributor: Thornburg Securities Corporation® 800.847.0200
TH079 | |
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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, 2008. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; they 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. 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 bonds 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.
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. Minimum investments for Class I shares are higher than those for other classes. Class I shares may not be available to all investors.
Glossary
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.
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
S&P 500 Index – An unmanaged broad measure 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.
Alternative Minimum Tax (AMT) – A federal tax aimed at ensuring that high-income individuals, estates, trusts, and corporations pay a minimal level income tax. For individuals, the AMT is calculated by adding tax preference items to regular taxable income.
Distribution Rate – 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 a 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.
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.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
SEC Yield – 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.
Tender Option Bond Programs (TOB) – Programs that allow investors to leverage their assets by borrowing at short-term rates and investing in higher yielding longer-term bonds.
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 income taxes.
| CUSIPS | NASDAQ SYMBOLS | |||
CLASS A | 885-215-301 | THNMX | ||
CLASS D | 885-215-624 | THNDX | ||
CLASS I | 885-215-285 | THNIX |
| This page is not part of the Annual Report. 3 |
Thornburg New Mexico Intermediate Municipal Fund
At Thornburg, our approach to fixed-income management is based on the premise that investors in our bond funds seek preservation of capital along with an attractive, relatively stable yield. While aggressive bond strategies may generate stronger returns when the market is turning a blind eye towards risk, they usually fail to stack up over longer periods of time. Our patience and diligence was recognized by Lipper, which named Thornburg Investment Management its 2008 Best Fixed-Income Fund Family.
We apply time-tested techniques to manage risk and provide attractive returns. These include:
| • | Building a laddered portfolio. Laddering has been shown over time to mitigate price and interest rate risk. |
| • | Investing on a cash-only basis without using leverage. While leveraged strategies may enhance returns when market conditions are favorable, they can quickly compound losses when sentiment shifts. |
| • | Conducting in-depth fundamental research on each issue and actively monitoring positions for subsequent credit events. |
| • | Diversifying among a large number of generally high-quality bonds. |
CO-PORTFOLIO MANAGERS
Josh Gonze, George Strickland, and Chris Ihlefeld
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 the Fund’s Class A shares is 2.00%. The total annual fund operating expense of Class A shares is 0.98%, as disclosed in the most recent Prospectus.
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history of A shares from June 18, 1991 through September 30, 2008
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 6/18/91) | |||||||||||||||
Without Sales Charge | 0.00 | % | 2.03 | % | 2.20 | % | 3.29 | % | 4.70 | % | |||||
With Sales Charge | (2.02 | )% | 1.35 | % | 1.79 | % | 3.09 | % | 4.58 | % |
30-DAY YIELDS
As of September 30, 2008
| Annualized Distribution Rate | SEC Yield | SEC Taxable Equivalent Yield | |||||||
A Shares | 3.82 | % | 3.48 | % | 5.65 | % | |||
D Shares | 3.52 | % | 3.23 | % | 5.25 | % | |||
I Shares | 4.17 | % | 3.90 | % | 6.33 | % |
See page 26 for all share class total returns.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2008
Number of Bonds | 133 | ||
Duration | 5.44 Yrs | ||
A Shares: | |||
Net Asset Value | $ | 12.64 | |
Maximum Offering Price | $ | 12.90 | |
SEC Taxable Equivalent Yields assume a 35% marginal federal tax rate and a 5.3% state of New Mexico marginal tax rate. Portions of the income of the Fund may be subject to the alternative minimum tax.
4 This page is not part of the Annual Report. |
THORNBURG NEW MEXICO INTERMEDIATE MUNICIPAL FUND VERSUS
LIPPER OTHER STATES TAX-EXEMPT MONEY MARKET FUNDS AVERAGE
Class A shares as of September 30, 2008
We are often asked to compare Thornburg New Mexico Intermediate Municipal Fund to money market fund returns. These investments have certain differences, which are discussed below. Investors in the Thornburg New Mexico Intermediate Municipal Fund took more risk than tax-exempt money market fund investors to earn their higher returns.
Past performance does not guarantee future results. Performance data above does not include the 2.00% sales charge for Class A shares. If the sales charge had been included, returns would have been lower. Returns shown are minus the initial investment.
Municipal bond funds are not an exact substitute for money market funds. Investors in municipal bond funds may experience more volatility than those in comparable money market funds. There are also differences in fees and expenses.
Investors in the Thornburg New Mexico Intermediate Municipal Fund took more risk than money market investors to earn their higher returns including reinvestment risk, credit risk, and inflation risk. Unlike money market funds, the prices of bonds fluctuate relative to changes in interest rates, with principal values decreasing when interest rates rise and increasing when interest rates fall. Generally, money market funds seek to maintain an investment portfolio with an average maturity of 90 days or less. Thornburg New Mexico Intermediate Municipal Fund has an average maturity of normally between three and ten years. Interest dividends paid by the Fund or by tax-exempt money market funds are generally exempt from federal income tax and (for residents of New Mexico) state income tax (may be subject to AMT).
Money market funds seek to preserve the value per share at $1.00, whereas, the Thornburg New Mexico Intermediate Municipal Fund’s net asset value changes daily. It is possible to lose money when investing in either the Thornburg New Mexico Intermediate Municipal Fund or a tax-exempt money market fund. Neither are insured by the FDIC or any other government agency.
Lipper Other States Tax-Exempt Money Market Funds Average is an arithmetic average of the total return of all other states tax-exempt money market mutual funds. You cannot invest in a category average.
| This page is not part of the Annual Report. 5 |
Thornburg New Mexico Intermediate Municipal Fund
September 30, 2008
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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 |
George Strickland Co-Portfolio Manager | October 16, 2008
Dear Fellow Shareholder:
We are pleased to present the Annual Report for the Thornburg New Mexico Intermediate Municipal Fund. | |
Josh Gonze Co-Portfolio Manager |
In last year’s annual report letter, we wrote about higher yields and lower prices for municipal bonds. We also wrote about attractive valuations relative to Treasury bonds and the larger spreads between yields on high and low quality bonds. At the time, we thought that these relationships would eventually revert back to their long-term averages. We still believe that will happen, but in the meantime, the extreme has become the norm. Tax-free bonds from issuers like Harvard University and the state of Texas are selling for yields 20% higher than Treasury bond yields! Tax adjusted, those are typically junk bond spreads. Meanwhile, anything with a hint of credit risk is suffering from reduced liquidity and enlarged spreads. | |
Are investors really worried about the solvency of Harvard University? For that matter, are investors really worried about major problems infecting investment-grade municipal bonds, with long-term average default rates of approximately 0.1%? The economy is almost surely suffering through a prolonged recession and it is indeed a time for careful diligence, but the current sell-off is not primarily credit related. We believe that what we are currently witnessing is primarily a result of massive de-leveraging. | ||
Christopher Ihlefeld Co-Portfolio Manager |
Over most of this decade, it has been relatively easy for institutional investors to buy long-term municipal bonds on a leveraged basis with borrowed money, typically through something called a Tender Option Bond (TOB) program. This structure was quite profitable and predictable as long as cheap and easy financing was available via money market funds. Thus the TOB trade became very popular among hedge funds, proprietary trading desks, and some mutual funds (not ours). The size of bond positions in TOB programs is not reliably tracked, but reasonable estimates placed it at about $300 billion at the peak, almost 12% of the municipal bond market. Starting last year, and accelerating this year, money market fund appetite for derivatives such as TOB floating rate securities went south. As more and more funds got rid of them or demanded higher yields, financing costs spiked. That squeeze, plus margin calls due to lower bond prices, meant that many players had to unwind their programs by selling bonds into a saturated market. | |
Large scale selling from leveraged investors wouldn’t be a problem if it was met with large scale buying, but insurance companies and mutual funds, two traditional pillars of the municipal bond market, are not currently aggressive buyers. Individual investors are buying lots of bonds, a healthy sign, but their demand will take time to absorb the waves of selling from leveraged investors. In the meantime, bond prices have been getting pushed lower as yields go higher. | ||
| Certified Annual Report 7 |
Letter to Shareholders
Continued
When will it stop? We don’t exactly know, but we believe that the de-leveraging process in the municipal market is more than half over. After the smoke clears, we expect investors to focus on the safety and security, relative value, and tax-exempt nature of investment-grade municipal bonds. In a world where marginal tax rates are likely to be rising for wealthy Americans, this should lead to significant out-performance of municipal bonds going forward.
The Class A shares of your Fund produced a total return of virtually 0.00% at NAV, over the twelve-month period ended September 30, 2008, compared to a 0.35% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Over the last year, short-term municipal bonds have performed better than intermediate and long maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next 20 years, so it has significant exposure to bonds whose maturities are longer than the 7-12 year bonds in the Index. Since those bonds generally underperformed, the Fund under-performed the Index.
| % of Portfolio Maturing | Cumulative % | |||||
| 2 years = | 12.5% | Year 2 = | 12.5% | |||
| 2 to 4 years = | 15.8% | Year 4 = | 28.3% | |||
| 4 to 6 years = | 10.3% | Year 6 = | 38.6% | |||
| 6 to 8 years = | 7.9% | Year 8 = | 46.5% | |||
| 8 to 10 years = | 13.8% | Year 10 = | 60.3% | |||
| 10 to 12 years = | 12.0% | Year 12 = | 72.3% | |||
| 12 to 14 years = | 7.9% | Year 14 = | 80.2% | |||
| 14 to 16 years = | 8.8% | Year 16 = | 89.0% | |||
| 16 to 18 years = | 1.2% | Year 18 = | 90.2% | |||
| Over 18 years = | 9.8% | Over 18 years = | 100.0% | |||
Percentages can and do vary. Data as of 9/30/08.
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 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 above describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
The U.S. economy is almost certainly in the midst of a significant recession at the moment. Frozen credit markets, mounting job losses, an enormous erosion of wealth in real estate and equity markets have finally brought the American consumer to his knees. Meanwhile, many foreign economies are reeling, leading to reduced demand for U.S. exports. Luckily, most non-financial corporate balance sheets were quite strong coming into the current environment and some industries are experiencing healthy growth. However, this must be tempered by reduced government spending at the state and local level. Meanwhile, the federal government is priming the pumps of our financial system as fast as it can. We believe that the massive life lines given to our nation’s banks, insurance companies, and money market funds will eventually lead to more stability in the financial markets, easier financing terms for companies and individuals, and should ultimately get the housing market back on its feet. However, there are long-term implications. Tighter regulation of derivative markets, mortgage origination and securitization, and the use of financial leverage are all necessary in order to preserve our country’s reputation as a fair place to invest. Furthermore, most or all of the money flooding the capital markets from the U.S. Treasury needs to be returned to taxpayers, and our current ballooning budget deficits need to be reigned in and reduced. If not, we face the longer term risks of higher inflation, a declining currency, and reduced growth prospects.
Up until recently, the state of New Mexico had been able to avoid most of the fallout from the housing market and economic downturn. Declining income tax revenues were overshadowed by 2.9% growth in sales tax revenues, high oil and gas prices, and rising investment income. However, oil and gas prices have been plummeting, sales tax
8 Certified Annual Report |
receipts are slowing, and investment income can’t be counted upon. However, the state has a healthy $612 million reserve balance and the means to weather current problems. It is indeed an important time for careful diligence and diversification of investment portfolios. Your Fund is broadly diversified within the state 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 | ||
| 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 New Mexico Intermediate Municipal Fund | September 30, 2008 | |
ASSETS | ||||
Investments at value (cost $203,651,117) (Note 2) | $ | 199,979,994 | ||
Cash | 199,629 | |||
Receivable for fund shares sold | 687,022 | |||
Interest receivable | 2,887,207 | |||
Prepaid expenses and other assets | 845 | |||
Total Assets | 203,754,697 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 176,006 | |||
Payable to investment advisor and other affiliates (Note 3) | 145,185 | |||
Accounts payable and accrued expenses | 45,615 | |||
Dividends payable | 206,571 | |||
Total Liabilities | 573,377 | |||
NET ASSETS | $ | 203,181,320 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (24,691 | ) | |
Net unrealized depreciation on investments | (3,671,123 | ) | ||
Accumulated net realized gain (loss) | (627,830 | ) | ||
Net capital paid in on shares of beneficial interest | 207,504,964 | |||
| $ | 203,181,320 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($163,928,000 applicable to 12,971,741 shares of beneficial interest outstanding - Note 4) | $ | 12.64 | ||
Maximum sales charge, 2.00% of offering price | 0.26 | |||
Maximum offering price per share | $ | 12.90 | ||
Class D Shares: | ||||
Net asset value, offering and redemption price per share ($15,525,149 applicable to 1,227,962 shares of beneficial interest outstanding - Note 4) | $ | 12.64 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($23,728,171 applicable to 1,878,457 shares of beneficial interest outstanding - Note 4) | $ | 12.63 | ||
See notes to financial statements.
10 Certified Annual Report |
| STATEMENT OF OPERATIONS | ||
Thornburg New Mexico Intermediate Municipal Fund | Year Ended September 30, 2008 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $784,367) | $ | 9,215,987 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,021,128 | |||
Administration fees (Note 3) | ||||
Class A Shares | 210,131 | |||
Class D Shares | 18,810 | |||
Class I Shares | 10,537 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 420,261 | |||
Class D Shares | 150,921 | |||
Transfer agent fees | ||||
Class A Shares | 52,150 | |||
Class D Shares | 7,250 | |||
Class I Shares | 2,959 | |||
Registration and filing fees | ||||
Class A Shares | 525 | |||
Class D Shares | 526 | |||
Class I Shares | 525 | |||
Custodian fees (Note 3) | 61,038 | |||
Professional fees | 25,779 | |||
Accounting fees | 4,091 | |||
Trustee fees | 2,682 | |||
Other expenses | 32,104 | |||
Total Expenses | 2,021,417 | |||
Less: | ||||
Distribution fees waived (Note 3) | (75,461 | ) | ||
Fees paid indirectly (Note 3) | (34,566 | ) | ||
Net Expenses | 1,911,390 | |||
Net Investment Income | 7,304,597 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments sold | 306,833 | |||
Net change in unrealized appreciation (depreciation) of investments | (7,873,236 | ) | ||
Net Realized and Unrealized Loss | (7,566,403 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (261,806 | ) | |
See notes to financial statements.
| Certified Annual Report 11 |
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg New Mexico Intermediate Municipal Fund | ||
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 7,304,597 | $ | 7,262,837 | ||||
Net realized gain on investments | 306,833 | 54,061 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (7,873,236 | ) | (1,563,489 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (261,806 | ) | 5,753,409 | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (5,987,083 | ) | (6,302,393 | ) | ||||
Class D Shares | (495,075 | ) | (480,929 | ) | ||||
Class I Shares | (822,439 | ) | (479,515 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 863,745 | (25,600,468 | ) | |||||
Class D Shares | 2,599,577 | (500,141 | ) | |||||
Class I Shares | 5,203,704 | 19,414,839 | ||||||
Net Increase (Decrease) in Net Assets | 1,100,623 | (8,195,198 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 202,080,697 | 210,275,895 | ||||||
End of year | $ | 203,181,320 | $ | 202,080,697 | ||||
See notes to financial statements.
12 Certified Annual Report |
| NOTES TO FINANCIAL STATEMENTS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 | |
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 thirteen 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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 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 Mexico. Because the Fund invests primarily in municipal obligations originating in New Mexico, the Fund’s share value may be more sensitive to adverse economic or political developments in that state.
The Fund currently offers three classes of shares of beneficial interest, Class A, Class D, 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 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 allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and administrative and legal expenses. Currently, class specific expenses of the Fund are limited to service and distribution fees, administration fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: Debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt obligations of comparable quality, type of issue, coupon, maturity, and rating; 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
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
| Certified Annual Report 13 |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 | |
record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid monthly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized to call dates or maturity dates of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of 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, 2008, 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.
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, 2008, the Distributor has advised the Fund that it earned net commissions aggregating $4,902 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, 2008, are set forth in the Statement of Operations. Distribution fees in the amount of $75,461 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, 2008, fees paid indirectly were $34,566.
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.
14 Certified Annual Report |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 | |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 1,962,932 | $ | 25,829,862 | 1,480,808 | $ | 19,422,034 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 281,958 | 3,685,132 | 285,590 | 3,745,888 | ||||||||||
Shares repurchased | (2,179,867 | ) | (28,651,249 | ) | (3,721,960 | ) | (48,768,390 | ) | ||||||
Net Increase (Decrease) | 65,023 | $ | 863,745 | (1,955,562 | ) | $ | (25,600,468 | ) | ||||||
Class D Shares | ||||||||||||||
Shares sold | 334,108 | $ | 4,407,249 | 421,403 | $ | 5,522,652 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 29,797 | 389,455 | 27,641 | 362,701 | ||||||||||
Shares repurchased | (167,471 | ) | (2,197,127 | ) | (486,230 | ) | (6,385,494 | ) | ||||||
Net Increase (Decrease) | 196,434 | $ | 2,599,577 | (37,186 | ) | $ | (500,141 | ) | ||||||
Class I Shares* | ||||||||||||||
Shares sold | 730,390 | $ | 9,604,681 | 1,771,412 | $ | 23,191,290 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 49,543 | 647,263 | 35,158 | 459,669 | ||||||||||
Shares repurchased | (384,441 | ) | (5,048,240 | ) | (323,605 | ) | (4,236,120 | ) | ||||||
Net Increase (Decrease) | 395,492 | $ | 5,203,704 | 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, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $31,956,518 and $26,575,349, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 203,651,117 | ||
Gross unrealized appreciation on a tax basis | $ | 2,174,430 | ||
Gross unrealized depreciation on a tax basis | (5,845,553 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (3,671,123 | ) | |
At September 30, 2008, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2008, the Fund had tax basis capital losses, which may be carried forward 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 carry forwards expire as follows:
2009 | $ | 320,666 | |
2011 | 145,437 | ||
2013 | 255 | ||
2014 | 49,136 | ||
2015 | 112,336 | ||
| $ | 627,830 | ||
The Fund utilized $307,278 capital loss carry forwards during the year ended September 30, 2008.
During the year ended September 30, 2008, $288,360 of capital loss carry forwards from prior years expired.
| Certified Annual Report 15 |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 | |
In order to account for book/tax differences, the Fund decreased accumulated net realized loss by $288,360, increased over-distributed net investment income by $5,412 and decreased net capital paid in on shares of beneficial interest by $282,948. Reclassifications result primarily from an expired capital loss carry forward and taxable market discount.
All dividends paid by the Fund for the years ended September 30, 2008 and September 30, 2007, 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 became effective for the Fund for the financial statement reporting period ended 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. The Fund's federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
16 Certified Annual Report |
Thornburg New Mexico Intermediate Municipal Fund
| Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.10 | $ | 13.20 | $ | 13.22 | $ | 13.40 | $ | 13.46 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.47 | 0.47 | 0.45 | 0.43 | 0.45 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.46 | ) | (0.10 | ) | (0.02 | ) | (0.18 | ) | (0.06 | ) | ||||||||||
Total from investment operations | 0.01 | 0.37 | 0.43 | 0.25 | 0.39 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.47 | ) | (0.47 | ) | (0.45 | ) | (0.43 | ) | (0.45 | ) | ||||||||||
Change in net asset value | (0.46 | ) | (0.10 | ) | (0.02 | ) | (0.18 | ) | (0.06 | ) | ||||||||||
NET ASSET VALUE, end of year | $ | 12.64 | $ | 13.10 | $ | 13.20 | $ | 13.22 | $ | 13.40 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 0.00 | (b) | 2.82 | 3.31 | 1.88 | 3.00 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.56 | 3.55 | 3.41 | 3.22 | 3.40 | |||||||||||||||
Expenses, after expense reductions (%) | 0.97 | 0.98 | 0.99 | 0.99 | 0.96 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.95 | 0.97 | 0.98 | 0.98 | 0.96 | |||||||||||||||
Expenses, before expense reductions (%) | 0.97 | 0.98 | 0.99 | 0.99 | 0.96 | |||||||||||||||
Portfolio turnover rate (%) | 13.48 | 17.38 | 11.59 | 16.63 | 14.66 | |||||||||||||||
Net assets at end of year (thousands) | $ | 163,928 | $ | 169,130 | $ | 196,163 | $ | 212,335 | $ | 208,435 | ||||||||||
| (a) | Sales loads are not reflected in computing total return. |
| (b) | Total return figure was less than 0.01%. |
See notes to financial statements.
| Certified Annual Report 17 |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund
| Year Ended September 30, | ||||||||||||||||||||
Class D Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.11 | $ | 13.21 | $ | 13.23 | $ | 13.41 | $ | 13.47 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.43 | 0.43 | 0.41 | 0.39 | 0.42 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.47 | ) | (0.10 | ) | (0.02 | ) | (0.18 | ) | (0.06 | ) | ||||||||||
Total from investment operations | (0.04 | ) | 0.33 | 0.39 | 0.21 | 0.36 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.43 | ) | (0.43 | ) | (0.41 | ) | (0.39 | ) | (0.42 | ) | ||||||||||
Change in net asset value | (0.47 | ) | (0.10 | ) | (0.02 | ) | (0.18 | ) | (0.06 | ) | ||||||||||
NET ASSET VALUE, end of year | $ | 12.64 | $ | 13.11 | $ | 13.21 | $ | 13.23 | $ | 13.41 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (0.35 | ) | 2.57 | 3.04 | 1.62 | 2.70 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.29 | 3.30 | 3.15 | 2.96 | 3.11 | |||||||||||||||
Expenses, after expense reductions (%) | 1.24 | 1.23 | 1.24 | 1.25 | 1.25 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.22 | 1.23 | 1.24 | 1.24 | 1.24 | |||||||||||||||
Expenses, before expense reductions (%) | 1.74 | 1.77 | 1.82 | 1.83 | 1.83 | |||||||||||||||
Portfolio turnover rate (%) | 13.48 | 17.38 | 11.59 | 16.63 | 14.66 | |||||||||||||||
Net assets at end of year (thousands) | $ | 15,525 | $ | 13,524 | $ | 14,113 | $ | 18,577 | $ | 14,051 | ||||||||||
See notes to financial statements.
18 Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund
Class I Shares: | Year Ended Sept. 30, 2008 | Period Ended Sept. 30, 2007 (a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period) | ||||||||
Net asset value, beginning of period | $ | 13.10 | $ | 13.10 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.51 | 0.34 | ||||||
Net realized and unrealized gain (loss) on investments | (0.47 | ) | — | |||||
Total from investment operations | 0.04 | 0.34 | ||||||
Less dividends from: | ||||||||
Net investment income | (0.51 | ) | (0.34 | ) | ||||
Change in net asset value | (0.47 | ) | — | |||||
NET ASSET VALUE, end of period | $ | 12.63 | $ | 13.10 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 0.26 | 2.64 | ||||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 3.90 | 3.95 | (c) | |||||
Expenses, after expense reductions (%) | 0.63 | 0.63 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 0.61 | 0.62 | (c) | |||||
Expenses, before expense reductions (%) | 0.63 | 0.63 | (c) | |||||
Portfolio turnover rate (%) | 13.48 | 17.38 | ||||||
Net assets at end of period (thousands) | $ | 23,728 | $ | 19,427 | ||||
| (a) | Effective date of this class of shares was February 1, 2007. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
See notes to financial statements.
| Certified Annual Report 19 |
| SCHEDULE OF INVESTMENTS | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 | |
We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings. The category of investments identified as “AAA” in this graph includes investments which are pre-refunded or escrowed to maturity. Such investments are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities to satisfy the timely payment of principal and interest and, therefore, are normally deemed to be equivalent to AAA-rated securities.
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Albuquerque GRT, 0% due 7/1/2012 pre-refunded 7/1/2011 | Aaa/AAA | $ | 1,775,000 | $ | 1,557,119 | |||
Albuquerque GRT, 0% due 7/1/2012 (Insured: FSA) | Aaa/AAA | 225,000 | 195,412 | |||||
Albuquerque Industrial, 5.15% due 4/1/2016 (MCT Industries Inc.; LOC: Bank of the West) (AMT) | Aa3/NR | 1,170,000 | 1,144,822 | |||||
Albuquerque Industrial, 5.25% due 4/1/2017 (MCT Industries Inc.; LOC: Bank of the West) (AMT) | Aa3/NR | 2,140,000 | 2,081,150 | |||||
Albuquerque Municipal School District 12, 5.00% due 8/1/2015 | Aa2/AA | 1,175,000 | 1,208,053 | |||||
Albuquerque Refuse Removal & Disposal, 5.00% due 7/1/2010 (Insured: FSA) | Aaa/AAA | 415,000 | 430,421 | |||||
Belen Gasoline Tax Improvement, 5.40% due 1/1/2011 | NR/NR | 425,000 | 425,140 | |||||
Bernalillo County GRT, 5.50% due 10/1/2011 pre-refunded 10/01/2009 | Aa3/AAA | 495,000 | 510,513 | |||||
Bernalillo County GRT, 5.25% due 10/1/2012 | Aa3/AAA | 1,000,000 | 1,068,110 | |||||
Bernalillo County GRT, 5.75% due 10/1/2015 pre-refunded 10/01/2009 | Aa3/AAA | 2,000,000 | 2,067,600 | |||||
Bernalillo County GRT, 5.00% due 4/1/2021 (Insured: MBIA) | Aa3/AAA | 3,000,000 | 2,933,220 | |||||
Bernalillo County GRT, 5.25% due 10/1/2022 (Insured: AMBAC) | Aa3/AAA | 3,170,000 | 3,199,132 | |||||
Bernalillo County GRT, 5.25% due 10/1/2023 (Insured: AMBAC) | Aa3/AAA | 1,275,000 | 1,280,266 | |||||
Bernalillo County GRT, 5.25% due 10/1/2025 (Insured: AMBAC) | Aa3/AAA | 3,850,000 | 3,815,850 | |||||
Bernalillo County Water Utility Authority, 5.00% due 7/1/2026 | Aa2/AAA | 1,420,000 | 1,358,670 | |||||
Chaves County GRT, 5.00% due 7/1/2017 pre-refunded 7/1/2010 (Insured: FGIC) | A3/NR | 1,000,000 | 1,041,520 | |||||
Chaves County GRT, 5.05% due 7/1/2019 pre-refunded 7/1/2010 (Insured: FGIC) | A3/NR | 735,000 | 766,142 | |||||
Cibola County GRT, 5.875% due 11/1/2008 (Insured: AMBAC) (ETM) | Aa3/AA | 495,000 | 496,173 | |||||
Cibola County GRT, 6.00% due 11/1/2010 (Insured: AMBAC) (ETM) | Aa3/AA | 555,000 | 592,396 | |||||
Farmington Hospital, 5.00% due 6/1/2017 (San Juan Regional Medical Center) | A3/NR | 1,035,000 | 988,073 | |||||
Farmington Hospital, 5.125% due 6/1/2018 (San Juan Regional Medical Center) | A3/NR | 570,000 | 543,888 | |||||
Farmington Hospital, 5.125% due 6/1/2019 (San Juan Regional Medical Center) | A3/NR | 645,000 | 604,952 | |||||
Farmington Hospital, 5.00% due 6/1/2022 (San Juan Regional Medical Center) | A3/NR | 2,325,000 | 2,060,299 | |||||
Farmington PCR, 5.25% due 5/1/2024 put 10/1/2008 (LOC: Barclays Bank) (daily demand notes) | VMIG1/A-1+ | 2,100,000 | 2,100,000 | |||||
Farmington PCR, 4.53% due 9/1/2024 put 10/1/2008 (LOC: Barclays Bank) (daily demand notes) | P1/A-1+ | 2,000,000 | 2,000,000 | |||||
Farmington Utility Systems, 5.00% due 5/15/2012 (Insured: FSA) | Aaa/AAA | 6,095,000 | 6,336,606 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2012 (Insured: AMBAC) | Aa3/AA | 3,345,000 | 3,486,159 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2013 (Insured: AMBAC) | Aa3/AA | 2,110,000 | 2,200,139 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2017 (Insured: AMBAC) | Aa3/AA | 3,540,000 | 3,636,536 | |||||
Grant County Department of Health, 5.50% due 7/1/2020 (Ft. Bayard Project) | Aa2/AA | 1,565,000 | 1,598,616 | |||||
Grant County Department of Health, 5.50% due 7/1/2021 (Ft. Bayard Project) | Aa2/AA | 1,655,000 | 1,669,763 | |||||
Grant County Department of Health, 5.50% due 7/1/2022 (Ft. Bayard Project) | Aa2/AA | 1,745,000 | 1,743,168 | |||||
Grant County Hospital Facility, 5.50% due 8/1/2009 (Gila Regional Medical Center; Insured: Radian) | NR/BBB+ | 1,310,000 | 1,322,720 | |||||
Grant County Hospital Facility, 5.50% due 8/1/2010 (Gila Regional Medical Center; Insured: Radian) | NR/BBB+ | 1,385,000 | 1,417,326 | |||||
Las Cruces School District GO, 5.50% due 8/1/2010 | Aa3/NR | 1,000,000 | 1,025,840 | |||||
Los Alamos County Utility Systems, 5.00% due 7/1/2013 (Insured: FSA) | Aaa/AAA | 1,265,000 | 1,338,256 | |||||
New Mexico Finance Authority, 5.15% due 6/1/2012 pre-refunded 6/1/2009 (Insured: MBIA) | Aa2/AA+ | 255,000 | 259,791 | |||||
New Mexico Finance Authority, 5.25% due 6/1/2013 pre-refunded 6/1/2009 (Insured: MBIA) | Aa2/AA+ | 130,000 | 132,529 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2013 (Insured: AMBAC) | Aa3/NR | 2,280,000 | 2,411,328 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2014 (Insured: MBIA) | Aa2/AA+ | 2,660,000 | 2,791,431 | |||||
New Mexico Finance Authority, 5.35% due 6/1/2014 pre-refunded 6/1/2009 (Insured: MBIA) | Aa2/AA+ | 130,000 | 132,614 | |||||
New Mexico Finance Authority, 5.25% due 6/1/2015 (Insured: AMBAC) | Aa2/AA+ | 1,000,000 | 1,057,440 | |||||
20 Certified Annual Report |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
New Mexico Finance Authority, 5.45% due 6/1/2015 pre-refunded 6/1/2009 (Insured: MBIA) | Aa2/AA+ | $ | 145,000 | $ | 148,012 | |||
New Mexico Finance Authority, 5.00% due 6/15/2015 (Insured: AMBAC) | Aa3/NR | 2,360,000 | 2,482,484 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2018 (Insured: AMBAC) | Aa3/NR | 2,915,000 | 2,986,534 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2019 (Insured: MBIA) | Aa3/NR | 1,215,000 | 1,234,975 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2020 (Insured: MBIA) | Aa2/AA+ | 1,625,000 | 1,626,739 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2020 (Insured: AMBAC) | Aa2/AA+ | 1,000,000 | 997,130 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2020 (Insured: MBIA) | Aa3/NR | 1,395,000 | 1,405,170 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2022 (Insured: MBIA) | Aa3/AA | 1,300,000 | 1,267,305 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2024 (Insured: MBIA) | Aa3/AA | 7,000,000 | 6,741,280 | |||||
New Mexico Finance Authority Court Facilities Fee, 5.50% due 6/15/2020 pre-refunded 6/15/2011 (Insured: MBIA) | A2/AA | 2,000,000 | 2,129,680 | |||||
New Mexico Finance Authority State Transportation, 5.00% due 6/15/2014 (Insured: MBIA) | Aa2/AA+ | 2,100,000 | 2,224,131 | |||||
New Mexico Highway Commission Senior Tax, 5.50% due 6/15/2013 pre-refunded 6/15/2011 | Aa2/AAA | 2,000,000 | 2,127,540 | |||||
New Mexico Highway Commission Senior Tax, 5.50% due 6/15/2014 | Aa2/AAA | 2,000,000 | 2,086,180 | |||||
New Mexico Highway Commission Tax, 6.00% due 6/15/2011 pre-refunded 6/15/2009 | Aa2/AAA | 5,000,000 | 5,129,050 | |||||
New Mexico Hospital Equipment Loan Council, 4.80% due 8/1/2010 (Presbyterian Healthcare) | Aa3/AA- | 500,000 | 510,455 | |||||
New Mexico Hospital Equipment Loan Council, 5.75% due 8/1/2016 pre-refunded 8/1/2011 (Presbyterian Healthcare) | Aa3/AA- | 5,205,000 | 5,612,812 | |||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2017 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | A3/NR | 1,730,000 | 1,836,637 | |||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2019 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | A3/NR | 1,000,000 | 1,061,640 | |||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2021 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | A3/NR | 1,185,000 | 1,258,043 | |||||
New Mexico Hospital Equipment Loan Council, 5.25% due 7/1/2025 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | A3/NR | 1,000,000 | 1,076,330 | |||||
New Mexico Housing Authority Multi Family Housing, 5.30% due 12/1/2022 (El Paseo Apartments; Insured: AMBAC) (AMT) | Aa3/AA | 1,055,000 | 973,712 | |||||
New Mexico MFA Forward Mortgage, 6.50% due 7/1/2025 (Collateralized: FNMA/GNMA) | NR/AAA | 140,000 | 144,095 | |||||
New Mexico MFA General, 5.80% due 9/1/2019 pre-refunded 9/1/2009 | NR/AAA | 775,000 | 799,281 | |||||
New Mexico MFA Multi Family, 5.05% due 9/1/2027 (St. Anthony; Insured: FHA) (AMT) | NR/AAA | 890,000 | 763,148 | |||||
New Mexico MFA Multi Family, 6.05% due 7/1/2028 (Sandpiper Apartments; Insured: FHA) (AMT) | NR/AAA | 2,335,000 | 2,179,466 | |||||
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 | 1,025,370 | |||||
New Mexico MFA Multi Family, 5.00% due 7/1/2031 put 7/1/2011 (Riverwalk Apartments; Collateralized: FNMA) | Aaa/NR | 1,910,000 | 1,958,457 | |||||
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 | 2,855,655 | |||||
New Mexico MFA SFMR, 5.70% due 9/1/2014 (Collateralized: FNMA/GNMA) (AMT) | NR/AAA | 70,000 | 70,321 | |||||
New Mexico MFA SFMR, 5.80% due 9/1/2016 (Collateralized: FNMA/GNMA) | NR/AAA | 130,000 | 131,616 | |||||
New Mexico MFA SFMR, 5.75% due 3/1/2017 (Collateralized: FNMA/GNMA) | NR/AAA | 185,000 | 186,780 | |||||
New Mexico MFA SFMR, 6.15% due 9/1/2017 (Collateralized: FNMA/GNMA) | NR/AAA | 60,000 | 60,688 | |||||
New Mexico MFA SFMR, 0% due 9/1/2019 (GIC: Bayerisch Landesbank) (AMT) | NR/AAA | 205,000 | 194,242 | |||||
New Mexico MFA SFMR, 5.875% due 9/1/2020 (AMT) | NR/AAA | 185,000 | 186,104 | |||||
New Mexico MFA SFMR, 5.875% due 9/1/2021 (Collateralized: FNMA/GNMA) (AMT) | NR/AAA | 350,000 | 351,876 | |||||
New Mexico MFA SFMR, 6.05% due 9/1/2021 (Collateralized: FNMA/GNMA) (AMT) | NR/AAA | 225,000 | 229,880 | |||||
New Mexico MFA SFMR, 5.25% due 7/1/2023 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | NR/AAA | 1,500,000 | 1,366,080 | |||||
New Mexico MFA SFMR, 5.375% due 7/1/2023 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | NR/AAA | 2,225,000 | 2,044,152 | |||||
New Mexico MFA SFMR, 5.50% due 7/1/2028 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | NR/AAA | 3,265,000 | 2,951,331 | |||||
New Mexico MFA SFMR, 5.60% due 7/1/2028 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | NR/AAA | 2,000,000 | 1,827,660 | |||||
New Mexico State Highway Commission Infrastructure C, 5.00% due 6/15/2012 (ETM) | Aa2/AAA | 1,000,000 | 1,060,810 | |||||
New Mexico State Highway Commission Tax, 5.00% due 6/15/2010 (ETM) | Aa2/AAA | 255,000 | 265,366 | |||||
New Mexico State Highway Commission Tax, 5.00% due 6/15/2010 | Aa2/AAA | 245,000 | 254,604 | |||||
| Certified Annual Report 21 |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
New Mexico State Highway Commission Tax, 5.125% due 6/15/2010 | Aa2/AAA | $ | 3,695,000 | $ | 3,702,131 | |||
New Mexico State University Improvement, 5.00% due 4/1/2013 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,058,360 | |||||
Rio Rancho GRT, 5.00% due 6/1/2014 (Insured: FGIC) | A1/AA- | 955,000 | 1,001,337 | |||||
Rio Rancho GRT, 5.00% due 6/1/2016 (Insured: FGIC) | A1/AA- | 555,000 | 575,690 | |||||
Rio Rancho GRT, 5.00% due 6/1/2022 (Insured: FGIC) | A1/AA- | 1,000,000 | 961,610 | |||||
San Juan County Gasoline Tax/Motor Vehicle Improvement, 5.25% due 5/15/2014 | A1/NR | 400,000 | 418,272 | |||||
San Juan County Gasoline Tax/Motor Vehicle Improvement, 5.25% due 5/15/2022 | A1/NR | 1,725,000 | 1,692,001 | |||||
San Juan County GRT, 5.30% due 9/15/2009 | A1/NR | 110,000 | 112,226 | |||||
San Juan County GRT, 5.00% due 6/15/2014 (Insured: MBIA) | A1/AA | 1,225,000 | 1,285,233 | |||||
San Juan County GRT, 5.75% due 9/15/2021 pre-refunded 9/15/2011 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,086,110 | |||||
Sandoval County Incentive Payment, 5.75% due 2/1/2010 (Intel Corp.) | NR/A+ | 370,000 | 372,749 | |||||
Sandoval County Incentive Payment, 5.00% due 6/1/2020 (Intel Corp.) | NR/A+ | 6,390,000 | 6,296,323 | |||||
Sandoval County Landfill Improvement, 5.50% due 8/15/2015 | Baa2/NR | 1,420,000 | 1,417,898 | |||||
Sandoval County Landfill Improvement, 5.75% due 8/15/2018 | Baa2/NR | 1,335,000 | 1,307,379 | |||||
Santa Fe County, 5.50% due 5/15/2015 (El Castillo Retirement Project) | NR/BBB- | 1,250,000 | 1,237,975 | |||||
Santa Fe County, 5.80% due 5/15/2018 (El Castillo Retirement Project) | NR/BBB- | 1,835,000 | 1,783,914 | |||||
Santa Fe County, 7.25% due 7/1/2029 (Rancho Viejo Improvement District) | NR/NR | 1,745,000 | 1,781,872 | |||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation) | NR/NR | 1,000,000 | 878,430 | |||||
Santa Fe County Charter School Foundation, 6.625% due 1/15/2036 (ATC Foundation) | NR/NR | 1,030,000 | 878,817 | |||||
Santa Fe County Correctional Systems, 5.00% due 2/1/2018 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,022,780 | |||||
Santa Fe County Correctional Systems, 6.00% due 2/1/2027 (Insured: FSA) | Aaa/AAA | 1,520,000 | 1,614,848 | |||||
Santa Fe County NM Gross Receipts Tax, 5.00% due 6/1/2025 | Aa2/AA+ | 1,400,000 | 1,346,296 | |||||
Santa Fe County NM Gross Receipts Tax, 5.00% due 6/1/2026 | Aa2/AA+ | 1,535,000 | 1,468,903 | |||||
Santa Fe Educational Facilities, 5.40% due 3/1/2017 (St. John's College) | NR/BBB+ | 1,215,000 | 1,189,011 | |||||
Santa Fe SFMR, 6.00% due 11/1/2010 (Collateralized: FNMA/GNMA) (AMT) | Aaa/NR | 55,000 | 55,348 | |||||
Santa Fe SFMR, 6.10% due 11/1/2011 (Collateralized: FNMA/GNMA) (AMT) | Aaa/NR | 80,000 | 80,089 | |||||
Santa Fe SFMR, 6.20% due 11/1/2016 (Collateralized: FNMA/GNMA) (AMT) | Aaa/NR | 90,000 | 90,644 | |||||
Taos County GRT, 4.25% due 10/1/2010 (Insured: Radian) | A3/NR | 1,000,000 | 1,000,190 | |||||
Taos County GRT, 4.75% due 10/1/2012 (ETM) | Baa1/NR | 1,500,000 | 1,577,475 | |||||
University of New Mexico, 5.25% due 6/1/2013 | Aa3/AA | 665,000 | 697,977 | |||||
University of New Mexico, 5.25% due 6/1/2014 | Aa3/AA | 335,000 | 348,655 | |||||
University of New Mexico, 5.00% due 6/1/2015 (Insured: AMBAC) | Aa3/AA | 1,590,000 | 1,672,394 | |||||
University of New Mexico, 5.25% due 6/1/2015 | Aa3/AA | 1,195,000 | 1,250,627 | |||||
University of New Mexico, 5.25% due 6/1/2016 | Aa3/AA | 645,000 | 667,749 | |||||
University of New Mexico, 5.25% due 6/1/2017 | Aa3/AA | 1,730,000 | 1,768,060 | |||||
University of New Mexico, 5.25% due 6/1/2018 | Aa3/AA | 1,825,000 | 1,844,308 | |||||
University of New Mexico, 5.25% due 6/1/2018 | Aa3/AA | 1,200,000 | 1,215,804 | |||||
University of New Mexico, 5.25% due 6/1/2021 | Aa3/AA | 1,000,000 | 1,003,560 | |||||
University of New Mexico, 6.00% due 6/1/2021 | Aa3/AA | 610,000 | 667,932 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2016 (Insured: FSA/FHA) | Aaa/AAA | 2,920,000 | 2,982,692 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2017 (Insured: FSA/FHA) | Aaa/AAA | 2,000,000 | 2,021,760 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2018 (Insured: FSA/FHA) | Aaa/AAA | 2,000,000 | 2,002,820 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2019 (Insured: FSA/FHA) | Aaa/AAA | 3,000,000 | 2,976,030 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 7/1/2019 (Insured: FSA/FHA) | Aaa/AAA | 3,000,000 | 2,967,840 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 1/1/2020 (Insured: FSA/FHA) | Aaa/AAA | 2,310,000 | 2,253,544 | |||||
University of New Mexico Hospital Mortgage Bonds, 5.00% due 7/1/2020 (Insured FSA/FHA) | Aaa/AAA | 500,000 | 486,750 | |||||
22 Certified Annual Report |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Ventana West Public Improvement District Special Tax, 6.625% due 8/1/2023 | NR/NR | $ | 2,000,000 | $ | 1,889,340 | |||
Villa Hermosa Multi Family Housing, 5.85% due 11/20/2016 (Villa Hermosa Apartments; Collateralized: GNMA) (AMT) | NR/AAA | 1,105,000 | 1,116,237 | |||||
TOTAL INVESTMENTS — 98.42% (Cost $203,651,117) | $ | 199,979,994 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.58% | 3,201,326 | |||||||
NET ASSETS — 100.00% | $ | 203,181,320 | ||||||
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 | |
| FHLMC | Insured by Federal Home Loan Mortgage Corp. | |
| 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 | Letter 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 |
See notes to financial statements.
| Certified Annual Report 23 |
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, 2008, 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, 2008 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
24 Certified Annual Report |
| EXPENSE EXAMPLE | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
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 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 980.80 | $ | 4.65 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.30 | $ | 4.75 | |||
Class D Shares | |||||||||
Actual | $ | 1,000.00 | $ | 979.40 | $ | 4.28 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.68 | $ | 4.37 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 982.40 | $ | 4.20 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.77 | $ | 4.28 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.94%; D: 0.86%; and I: 0.85%) multiplied by the average account value over the period, multiplied by 183/366 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 25 |
| INDEX COMPARISON | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg New Mexico Intermediate Municipal Fund, versus Merrill Lynch 7-12 Year
Municipal Bond Index and Consumer Price Index (June 18, 1991 to September 30, 2008)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 6/18/91) | (2.02 | )% | 1.79 | % | 3.09 | % | 4.58 | % | ||||
D Shares (Incep: 6/1/99) | (0.35 | )% | 1.91 | % | N/A | 3.13 | % | |||||
I Shares (Incep: 2/1/07) | 0.26 | % | N/A | N/A | 1.74 | % |
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 2.00%. For Class D shares and Class I shares there is no sales charge 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.
26 Certified Annual Report |
| TRUSTEES AND OFFICERS | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 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, 49 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 New Mexico Intermediate Municipal Fund | September 30, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
28 Certified Annual Report |
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
| Certified Annual Report 29 |
| OTHER INFORMATION | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 (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, 2008, 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, 2008.
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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the specified information with the Trustees and addressed questions by 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 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 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 considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events in view of the Fund’s investment objectives and policies.
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.
30 Certified Annual Report |
| OTHER INFORMATION, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2008 (Unaudited) | |
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations over various periods. The Trustees further noted in this regard that the Fund’s performance in a majority of the previous eleven calendar years had been lower than the performance for a category of single-state municipal bond funds assembled by an independent mutual fund analyst firm, but that the Fund’s performance for the one, three and five year periods fell within the top quartile of the same category and similarly fell within the top quartile of a second category for the same periods. Measures of portfolio volatility and risk considered by the Trustees demonstrated that the Fund’s portfolio volatility relative to those measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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, and that the management fee was equal to the median and slightly higher than the average fee rates for the same group of funds. The Trustees noted their previous observations respecting fee rates charged by the Advisor to other types of investment management clients, and their conclusion 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 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses 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 ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
| This page is not part of the Annual Report. 35 |
Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to .19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
36 This page is not part of the Annual Report. |
Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
| Sincerely, |
 |
| Brian McMahon |
| CEO and Chief Investment Officer |
| This page is not part of the Annual Report. 37 |
38 This page is not part of the Annual Report. |
Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
| This page is not part of the Annual Report. 39 |
| ||
| This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. | ||
| Investment Advisor: | ||
Thornburg Investment Management® 800.847.0200 | ||
| Distributor: Thornburg Securities Corporation® 800.847.0200 | |
TH080 | ||
Waste not, Wait not |  |
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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, 2008. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; they 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. 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 bonds 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.
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
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.
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
S&P 500 Index – An unmanaged broad measure 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.
Alternative Minimum Tax (AMT) – A federal tax aimed at ensuring that high-income individuals, estates, trusts, and corporations pay a minimal level income tax. For individuals, the AMT is calculated by adding tax preference items to regular taxable income.
Distribution Rate – 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 a 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.
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.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
SEC Yield – 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.
Tender Option Bond Programs (TOB) – Programs that allow investors to leverage their assets by borrowing at short-term rates and investing in higher yielding longer-term bonds.
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 income taxes.
| CUSIP | NASDAQ SYMBOL | |||
CLASS A | 885-215-665 | THNYX |
| This page is not part of the Annual Report. 3 |
Thornburg New York Intermediate Municipal Fund
At Thornburg, our approach to fixed-income management is based on the premise that investors in our bond funds seek preservation of capital along with an attractive, relatively stable yield. While aggressive bond strategies may generate stronger returns when the market is turning a blind eye towards risk, they usually fail to stack up over longer periods of time. Our patience and diligence was recognized by Lipper, which named Thornburg Investment Management its 2008 Best Fixed-Income Fund Family.
We apply time-tested techniques to manage risk and provide attractive returns. These include:
| • | Building a laddered portfolio. Laddering has been shown over time to mitigate price and interest rate risk. |
| • | Investing on a cash-only basis without using leverage. While leveraged strategies may enhance returns when market conditions are favorable, they can quickly compound losses when sentiment shifts. |
| • | Conducting in-depth fundamental research on each issue and actively monitoring positions for subsequent credit events. |
| • | Diversifying among a large number of generally high-quality bonds. |
CO-PORTFOLIO MANAGERS
Josh Gonze, George Strickland, and Chris Ihlefeld
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 the Fund’s Class A shares is 2.00%. The total annual fund operating expense of Class A shares is 1.09%, as disclosed in the most recent Prospectus. Thornburg Investment Management intends to waive fees and reimburse expenses so that actual expenses for Class A shares do not exceed 0.99%. The fee waivers and expense reimbursements are voluntary and may be terminated at any time.
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history from September 5, 1997 through September 30, 2008
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 9/5/97) | |||||||||||||||
Without Sales Charge | 0.07 | % | 2.13 | % | 2.12 | % | 3.35 | % | 3.80 | % | |||||
With Sales Charge | (1.93 | )% | 1.46 | % | 1.71 | % | 3.15 | % | 3.61 | % |
30-DAY YIELDS
As of September 30, 2008
| Annualized Distribution Rate | SEC Yield | SEC Taxable Equivalent Yield | |||||||
A Shares | 3.84 | % | 3.45 | % | 5.98 | % |
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2008
Number of Bonds | 37 | ||
Duration | 4.9 Yrs | ||
Net Asset Value | $ | 11.87 | |
Maximum Offering Price | $ | 12.11 |
SEC Taxable Equivalent Yields assume a 35% marginal federal tax rate and a 7.70% state of New York marginal tax rate. Portions of the income of the Fund may be subject to the alternative minimum tax.
4 This page is not part of the Annual Report. |
THORNBURG NEW YORK INTERMEDIATE MUNICIPAL FUND VERSUS
LIPPER NEW YORK TAX-EXEMPT MONEY MARKET FUNDS AVERAGE
Class A shares as of September 30, 2008
We are often asked to compare Thornburg New York Intermediate Municipal Fund to money market fund returns. Municipal bond funds are not an exact substitute for money market funds. These investments have certain differences, which are discussed below. Investors in the Thornburg New York Intermediate Municipal Fund took more risk than money market fund investors to earn their higher returns.
Past performance does not guarantee future results. Performance data above does not include the 2.00% maximum sales charge for Class A shares. If the sales charge had been included, returns would have been lower. Returns shown are minus the initial investment.
Investors in municipal bond funds may experience more volatility than those in comparable money market funds. There are also differences in fees and expenses.
Investors in the Thornburg New York Intermediate Municipal Fund took more risk than money market investors to earn their higher returns including reinvestment risk, credit risk, and inflation risk. Unlike money market funds, the prices of bonds fluctuate relative to changes in interest rates, with principal values decreasing when interest rates rise and increasing when interest rates fall. Generally, money market funds seek to maintain an investment portfolio with an average maturity of 90 days or less. Thornburg New York Intermediate Municipal Fund has an average maturity of normally between three and ten years. Interest dividends paid by the Fund or by New York tax-exempt money market funds are generally exempt from federal income tax and (for residents of New York state) state income tax (may be subject to AMT).
Money market funds seek to preserve the value per share at $1.00, whereas, the Thornburg New York Intermediate Municipal Fund’s net asset value changes daily. It is possible to lose money when investing in either the Thornburg New York Intermediate Municipal Fund or a money market fund. Neither are insured by the FDIC or any other government agency.
Lipper New York Tax-Exempt Money Market Funds Average is an arithmetic average of the total return of all tax-exempt New York money market mutual funds. You cannot invest in a category average.
| This page is not part of the Annual Report. 5 |
Thornburg New York Intermediate Municipal Fund
September 30, 2008
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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 |
George Strickland Co-Portfolio Manager | October 17, 2008
Dear Shareholder:
We are pleased to present the Annual Report for the Thornburg New York Intermediate Fund. The net asset value of the Class A shares decreased by 43 cents per share to $11.87 during the twelve months ended September 30, 2008. If you were with us for the entire period, you received dividends of 44.4 cents per share. If you reinvested your dividends, you received 45.2 cents per share. | |
Josh Gonze Co-Portfolio Manager | In last year’s annual report letter, we wrote about higher yields and lower prices for municipal bonds. We also wrote about attractive valuations relative to Treasury bonds and the larger spreads between yields on high and low quality bonds. At the time, we thought that these relationships would eventually revert back to their long-term averages. We still believe that will happen, but in the meantime, the extreme has become the norm. Tax-free bonds from issuers like Harvard University and the state of Texas are selling for yields 20% higher than Treasury bond yields! Tax adjusted, those are typically junk bond spreads. Meanwhile, anything with a hint of credit risk is suffering from reduced liquidity and enlarged spreads.
Are investors really worried about the solvency of Harvard University? For that matter, are investors really worried about major problems infecting investment-grade municipal bonds, with long-term average default rates of approximately 0.1%? The economy is almost surely suffering through a prolonged recession and it is indeed a time for careful diligence, but the current sell-off is not primarily credit related. We believe that what we are currently witnessing is primarily a result of massive de-leveraging. | |
Christopher Ihlefeld Co-Portfolio Manager | Over most of this decade, it has been relatively easy for institutional investors to buy long- term municipal bonds on a leveraged basis with borrowed money, typically through some- thing called a Tender Option Bond (TOB) program. This structure was quite profitable and predictable as long as cheap and easy financing was available via money market funds. Thus the TOB trade became very popular among hedge funds, proprietary trading desks, and some mutual funds (not ours). The size of bond positions in TOB programs is not reliably tracked, but reasonable estimates placed it at about $300 billion at the peak, almost 12% of the municipal bond market. Starting last year, and accelerating this year, money market fund appetite for derivatives such as TOB floating rate securities went south. As more and more funds got rid of them or demanded higher yields, financing costs spiked. That squeeze, plus margin calls due to lower bond prices, meant that many players had to unwind their programs by selling bonds into a saturated market.
Large scale selling from leveraged investors wouldn’t be a problem if it was met with large scale buying; but insurance companies and mutual funds, two traditional pillars of the municipal bond market, are not currently aggressive buyers. Individual investors are buying lots of bonds, a healthy sign, but their demand will take time to absorb the waves of selling from leveraged investors. In the meantime, bond prices have been getting pushed lower as yields go higher. | |
| Certified Annual Report 7 |
Letter to Shareholders
Continued
When will it stop? We don’t exactly know, but we believe that the de-leveraging process in the municipal market is more than half over. After the smoke clears, we expect investors to focus on the safety and security, relative value, and tax-exempt nature of investment-grade municipal bonds. In a world where marginal tax rates are likely to be rising for wealthy Americans, this should lead to significant out-performance of municipal bonds going forward.
The Class A shares of your Fund produced a total return of 0.07% over the twelve-month period ended September 30, 2008 at NAV, compared to a 0.35% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Over the last year, short-term municipal bonds have performed better than intermediate and long maturity bonds. The Fund invests in a laddered portfolio of bonds that mature over the next 20 years, so it has significant exposure to bonds whose maturities are longer than the 7-12 year bonds in the Index. Since those bonds generally underperformed, the Fund underperformed the Index.
| % of Portfolio Maturing | Cumulative % | |||||
| 2 years = | 10.3% | Year 2 = | 10.3% | |||
| 2 to 4 years = | 11.2% | Year 4 = | 21.5% | |||
| 4 to 6 years = | 13.3% | Year 6 = | 34.8% | |||
| 6 to 8 years = | 10.6% | Year 8 = | 45.4% | |||
| 8 to 10 years = | 11.7% | Year 10 = | 57.1% | |||
| 10 to 12 years = | 8.3% | Year 12 = | 65.4% | |||
| 12 to 14 years = | 16.6% | Year 14 = | 82.0% | |||
| 14 to 16 years = | 6.3% | Year 16 = | 88.3% | |||
| 16 to 18 years = | 1.3% | Year 18 = | 89.6% | |||
| Over 18 years = | 10.4% | Over 18 years = | 100.0% | |||
Percentages can and do vary. Data as of 9/30/08.
Your Thornburg New York Intermediate Municipal Fund is a laddered portfolio of 37 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 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 above describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
The U.S. economy is almost certainly in the midst of a significant recession at the moment. Frozen credit markets, mounting job losses, an enormous erosion of wealth in real estate and equity markets have finally brought the American consumer to his knees. Meanwhile, many foreign economies are reeling, leading to reduced demand for U.S. exports. Luckily, most non-financial corporate balance sheets were quite strong coming into the current environment and some industries are experiencing healthy growth. However, this must be tempered by reduced government spending at the state and local level. Meanwhile, the federal government is priming the pumps of our financial system as fast as it can. We believe that the massive life lines given to our nation’s banks, insurance companies, and money market funds will eventually lead to more stability in the financial markets, easier financing terms for companies and individuals, and should ultimately get the housing market back on its feet. However, there are long-term implications. Tighter regulation of derivative markets, mortgage origination and securitization, and the use of financial leverage are all necessary in order to preserve our country’s reputation as a fair place to invest. Furthermore, most or all of the money flooding the capital markets from the U.S. Treasury needs to be returned to taxpayers, and our current ballooning budget deficits need to be reigned in and reduced. If not, we face the longer term risks of higher inflation, a declining currency, and reduced growth prospects.
Following several years of robust growth, New York State has had to reduce revenue projections several times in 2008. Much lower earnings in the insurance and financial sector and a weakening real estate market are adding to projected budget gaps in 2009 and 2010. New York City and State appear to be acting proactively to cut expenditures
8 Certified Annual Report |
and postpone tax cuts. Moreover, the city has large built up reserve balances that should help cushion falling tax receipts in this challenging new environment. It is indeed an important time for careful diligence and diversification of investment portfolios. Your Fund is broadly diversified within the state and 88% invested in bonds rated A or above by at least one of the major rating agencies.
Over the years, our practice of laddering a diversified portfolio of short and intermediate maturity municipal bonds has allowed your Fund to perform consistently well in varying interest rate environments. Thank you for investing in Thornburg New York Intermediate Municipal Fund.
| Sincerely, | ||||
 |  |  | ||
| George Strickland | Josh Gonze | Christopher Ihlefeld | ||
| 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 New York Intermediate Municipal Fund | September 30, 2008 | |
ASSETS | ||||
Investments at value (cost $30,597,577) (Note 2) | $ | 30,215,242 | ||
Cash | 118,169 | |||
Receivable for fund shares sold | 77,429 | |||
Interest receivable | 387,599 | |||
Prepaid expenses and other assets | 277 | |||
Total Assets | 30,798,716 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 40,756 | |||
Payable to investment advisor and other affiliates (Note 3) | 21,102 | |||
Accounts payable and accrued expenses | 26,378 | |||
Dividends payable | 25,326 | |||
Total Liabilities | 113,562 | |||
NET ASSETS | $ | 30,685,154 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (16,535 | ) | |
Net unrealized depreciation on investments | (382,335 | ) | ||
Accumulated net realized gain (loss) | (79,788 | ) | ||
Net capital paid in on shares of beneficial interest | 31,163,812 | |||
| $ | 30,685,154 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($30,685,154 applicable to 2,584,218 shares of beneficial interest outstanding - Note 4) | $ | 11.87 | ||
Maximum sales charge, 2.00% of offering price | 0.24 | |||
Maximum offering price per share | $ | 12.11 | ||
See notes to financial statements.
10 Certified Annual Report |
| STATEMENT OF OPERATIONS | ||
| Thornburg New York Intermediate Municipal Fund | Year Ended September 30, 2008 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $127,448) | $ | 1,464,298 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 159,122 | |||
Administration fees (Note 3) | 39,780 | |||
Distribution and service fees (Note 3) | 79,561 | |||
Transfer agent fees | 18,009 | |||
Registration and filing fees | 293 | |||
Custodian fees (Note 3) | 16,421 | |||
Professional fees | 23,128 | |||
Accounting fees | 521 | |||
Trustee fees | 464 | |||
Other expenses | 7,646 | |||
Total Expenses | 344,945 | |||
Less: | ||||
Management fees waived by investment advisor (Note 3) | (23,281 | ) | ||
Fees paid indirectly (Note 3) | (6,628 | ) | ||
Net Expenses | 315,036 | |||
Net Investment Income | 1,149,262 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (30,533 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | (1,056,739 | ) | ||
Net Realized and Unrealized Loss | (1,087,272 | ) | ||
Net Increase in Net Assets Resulting From Operations | $ | 61,990 | ||
See notes to financial statements.
| Certified Annual Report 11 |
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 | |
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,149,262 | $ | 1,247,732 | ||||
Net realized gain (loss) on investments | (30,533 | ) | 22,961 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (1,056,739 | ) | (275,765 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 61,990 | 994,928 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (1,149,262 | ) | (1,247,732 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (1,243,777 | ) | (1,580,052 | ) | ||||
Net Decrease in Net Assets | (2,331,049 | ) | (1,832,856 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 33,016,203 | 34,849,059 | ||||||
End of year | $ | 30,685,154 | $ | 33,016,203 | ||||
See notes to financial statements.
12 Certified Annual Report |
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 | |
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 thirteen 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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. Because the Fund invests primarily in municipal obligations originating in New York, the Fund’s share value may be more sensitive to adverse economic or political developments in that state. The Fund currently offers only one class of shares of beneficial interest, Class A shares.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: Debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt obligations of comparable quality, type of issue, coupon, maturity, and rating; 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
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.
| Certified Annual Report 13 |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 | |
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, 2008, 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, 2008, the Advisor voluntarily waived investment advisory fees of $23,281. 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, 2008, the Distributor has advised the Fund that it earned no commissions from the sale of Class A shares.
Pursuant to a service plan under Rule 12b-1 of the Investment Company Act of 1940, the 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, 2008, fees paid indirectly were $6,628.
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, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 411,254 | $ | 5,063,258 | 455,331 | $ | 5,595,138 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 65,938 | 806,929 | 70,407 | 865,914 | ||||||||||
Shares repurchased | (577,748 | ) | (7,113,964 | ) | (656,314 | ) | (8,041,104 | ) | ||||||
Net Increase (Decrease) | (100,556 | ) | $ | (1,243,777 | ) | (130,576 | ) | $ | (1,580,052 | ) | ||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $4,561,045 and $4,109,898, respectively.
14 Certified Annual Report |
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 | |
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 30,597,577 | ||
Gross unrealized appreciation on a tax basis | $ | 282,853 | ||
Gross unrealized depreciation on a tax basis | (665,188 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (382,335 | ) | |
At September 30, 2008, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2008, the Fund had tax basis capital losses of $49,255, which may be carried forward 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 carry forwards will expire September 30, 2014.
As of September 30, 2008, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2007 of $30,533. For tax purposes, such losses will be reflected in the year ending September 30, 2009. 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.
All dividends paid by the Fund for the year ended September 30, 2008 and September 30, 2007, 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 increased net capital paid in on shares of beneficial interest by $2,235, and increased distributions in excess of net investment income by $2,235. 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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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”, (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
| Certified Annual Report 15 |
Thornburg New York Intermediate Municipal Fund
| Year Ended September 30, | Three Months Ended Sept. 30, 2004(a) | Year Ended June 30, 2004 | ||||||||||||||||||||||
Class A Shares: | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.30 | $ | 12.38 | $ | 12.44 | $ | 12.64 | $ | 12.46 | $ | 12.86 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.44 | 0.46 | 0.45 | 0.42 | 0.10 | 0.45 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.43 | ) | (0.08 | ) | (0.06 | ) | (0.20 | ) | 0.18 | (0.40 | ) | |||||||||||||
Total from investment operations | 0.01 | 0.38 | 0.39 | 0.22 | 0.28 | 0.05 | ||||||||||||||||||
Less dividends from: | ||||||||||||||||||||||||
Net investment income | (0.44 | ) | (0.46 | ) | (0.45 | ) | (0.42 | ) | (0.10 | ) | (0.45 | ) | ||||||||||||
Change in net asset value | (0.43 | ) | (0.08 | ) | (0.06 | ) | (0.20 | ) | 0.18 | (0.40 | ) | |||||||||||||
NET ASSET VALUE, end of period | $ | 11.87 | $ | 12.30 | $ | 12.38 | $ | 12.44 | $ | 12.64 | $ | 12.46 | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Total return (%)(b) | 0.07 | 3.13 | 3.23 | 1.73 | 2.26 | 0.36 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Net investment income (loss) (%) | 3.61 | 3.74 | 3.66 | 3.31 | 3.19 | (c) | 3.51 | |||||||||||||||||
Expenses, after expense reductions (%) | 1.01 | 1.01 | 1.01 | 1.00 | 0.99 | (c) | 0.99 | |||||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.99 | 0.99 | 0.99 | (c) | 0.99 | |||||||||||||||||
Expenses, before expense reductions (%) | 1.08 | 1.11 | 1.11 | 1.12 | 1.18 | (c) | 1.11 | |||||||||||||||||
Portfolio turnover rate (%) | 13.42 | 14.91 | 15.38 | 28.70 | 4.27 | 13.46 | ||||||||||||||||||
Net assets at end of period (thousands) | $ | 30,685 | $ | 33,016 | $ | 34,849 | $ | 41,375 | $ | 45,543 | $ | 42,551 | ||||||||||||
| (a) | The Fund’s fiscal year-end changed to September 30. |
| (b) | Sales loads are not reflected in computing total return, which is not annualized for periods less than one year. |
| (c) | Annualized. |
See notes to financial statements.
16 Certified Annual Report |
| SCHEDULE OF INVESTMENTS | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 | |
We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings. The category of investments identified as “AAA” in this graph includes investments which are pre-refunded or escrowed to maturity. Such investments are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities to satisfy the timely payment of principal and interest and, therefore, are normally deemed to be equivalent to AAA-rated securities.
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Amherst IDA Civic Facility, 5.75% due 4/1/2015 (Insured: ACA) | NR/NR | $ | 465,000 | $ | 462,763 | |||
Dutchess County IDA, 5.00% due 8/1/2021 (Bard College) | A3/NR | 1,100,000 | 1,049,752 | |||||
Hempstead IDA Resource Recovery, 5.00% due 12/1/2010 put 6/1/2010 (American Ref-Fuel) | Baa3/BB+ | 1,000,000 | 986,990 | |||||
Monroe County IDA, 6.45% due 2/1/2014 (DePaul Community Facility; Insured: SONYMA) | Aa1/NR | 640,000 | 646,918 | |||||
Monroe County IDA, 5.375% due 6/1/2017 (St. John Fisher College; Insured: Radian) | NR/BBB+ | 495,000 | 477,937 | |||||
Nassau Health Care Corp., 6.00% due 8/1/2011 pre-refunded 8/1/2009 | Aaa/AAA | 400,000 | 417,792 | |||||
New York City GO, 6.75% due 2/1/2009 (Insured: MBIA-IBC) | Aa3/AA | 950,000 | 963,215 | |||||
New York City GO, 5.00% due 8/1/2018 | Aa3/AA | 1,000,000 | 1,003,500 | |||||
New York City GO, 5.00% due 8/1/2025 | Aa3/AA | 400,000 | 376,520 | |||||
New York City Municipal Water Finance Authority, 5.75% due 6/15/2013 (ETM) | Aa2/AAA | 1,000,000 | 1,030,830 | |||||
New York City Transitional Finance Authority, 5.25% due 8/1/2016 (Insured: AMBAC) | Aa1/AAA | 1,000,000 | 1,037,180 | |||||
New York City Transitional Finance Authority, 5.00% due 11/1/2020 | Aa1/AAA | 1,000,000 | 1,002,620 | |||||
New York City Trust Cultural Resources, 5.75% due 7/1/2014 (Museum of American Folk Art; Insured: ACA) | NR/NR | 920,000 | 906,660 | |||||
New York Convention Center Development Corp. Hotel Unit Fee, 5.00% due 11/15/2017 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,027,010 | |||||
New York Dormitory Authority, 5.25% due 7/1/2010 (D’Youville College; Insured: Radian) | NR/BBB+ | 350,000 | 355,887 | |||||
New York Dormitory Authority, 5.25% due 7/1/2011 (D’Youville College; Insured: Radian) | NR/BBB+ | 370,000 | 376,889 | |||||
New York Dormitory Authority, 5.00% due 7/1/2016 (Bishop Henry B Hucles Nursing Home; Insured: SONYMA) | Aa1/NR | 400,000 | 416,396 | |||||
New York Dormitory Authority, 6.10% due 7/1/2019 (Ryan Clinton Community Health Center; Insured: SONYMA) | Aa1/NR | 1,000,000 | 1,037,720 | |||||
New York Dormitory Authority, 5.00% due 7/1/2024 (Bishop Henry B Hucles Nursing Home; Insured: SONYMA) | Aa1/NR | 1,000,000 | 948,690 | |||||
New York Dormitory Authority Health Quest Systems, 5.25% due 7/1/2027 (Insured: Assured Guaranty) | Aaa/AAA | 500,000 | 487,730 | |||||
New York Dormitory Authority Lease, 5.25% due 8/15/2013 (Master Boces; Insured: FSA) | Aaa/AAA | 1,000,000 | 1,040,340 | |||||
New York Dormitory Authority Lease, 5.00% due 1/15/2023 | A1/AA- | 1,000,000 | 953,730 | |||||
New York Dormitory Authority Mental Health Services, 5.00% due 2/15/2015 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,051,200 | |||||
New York Dormitory Authority Mental Health Services, 5.50% due 2/15/2019 pre-refunded 8/15/2011 (Insured: MBIA) | A1/AA | 1,085,000 | 1,162,740 | |||||
New York Dormitory Authority Personal Income Tax, 5.50% due 3/15/2012 | Aa3/AAA | 1,000,000 | 1,072,680 | |||||
New York Dormitory Authority Personal Income Tax, 5.00% due 3/15/2019 (Insured: FSA) | Aaa/AAA | 1,000,000 | 1,023,230 | |||||
New York Environmental Facilities Corp. PCR Water, 6.875% due 6/15/2014 (State Revolving Fund) | Aaa/AAA | 400,000 | 401,228 | |||||
New York State Thruway Authority General, 5.00% due 1/1/2018 (Insured: AMBAC) | Aa3/AA | 1,000,000 | 1,025,280 | |||||
New York State Thruway Authority Highway & Bridge Trust Fund, 5.00% due 4/1/2022 | NR/AA | 1,000,000 | 977,730 | |||||
Newark Wayne Community Hospital, 5.875% due 1/15/2033 (Insured: AMBAC) | Aa3/AA | 1,310,000 | 1,310,131 | |||||
Oneida County IDA, 6.00% due 1/1/2010 (Faxton Hospital; Insured: Radian) | NR/BBB+ | 375,000 | 383,588 | |||||
Oneida County IDA, 6.10% due 6/1/2020 (Presbyterian Home for Central NY; LOC: HSBC Bank USA) | Aa2/NR | 450,000 | 458,343 | |||||
| Certified Annual Report 17 |
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 | |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Port Authority New York & New Jersey, 5.00% due 8/15/2022 (Insured: FSA) | Aaa/AAA | $ | 1,000,000 | $ | 988,520 | |||
Port Chester IDA, 4.75% due 7/1/2031 put 7/1/2011 (American Foundation; Collateralized: FNMA) | NR/AAA | 750,000 | 776,460 | |||||
Tobacco Settlement Funding Corp., 5.50% due 6/1/2021 | A1/AA- | 1,000,000 | 1,005,220 | |||||
Triborough Bridge & Tunnel Authority, 5.00% due 11/15/2025 | Aa2/AA- | 1,410,000 | 1,353,487 | |||||
Utica IDA Civic Facility, 5.25% due 7/15/2016 (Munson Williams Proctor Institute) | A1/NR | 210,000 | 218,336 | |||||
TOTAL INVESTMENTS — 98.47% (Cost $30,597,577) | $ | 30,215,242 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.53% | 469,912 | |||||||
NET ASSETS — 100.00% | $ | 30,685,154 | ||||||
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. | |
| GO | General Obligation | |
| IDA | Industrial Development Authority | |
| LOC | Letter 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 |
See notes to financial statements.
18 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, 2008, 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, 2008 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
| Certified Annual Report 19 |
| EXPENSE EXAMPLE | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
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 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 985.20 | $ | 4.91 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | |||
| † | 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 183/366 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.
20 Certified Annual Report |
| INDEX COMPARISON | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg New York Intermediate Municipal Fund versus Merrill Lynch 7-12 Year Municipal Bond Index
and Consumer Price Index (September 5, 1997 to September 30, 2008)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 9/5/97) | (1.93 | )% | 1.71 | % | 3.15 | % | 3.61 | % |
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.
| Certified Annual Report 21 |
| TRUSTEES AND OFFICERS | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 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, 49 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 New York Intermediate Municipal Fund | September 30, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Certified Annual Report 23 |
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
24 Certified Annual Report |
| OTHER INFORMATION | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 (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, 2008, 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, 2008.
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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the information with the Trustees and addressed questions presented by 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 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 considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events in the view of the Fund’s investment objectives and policies.
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.
| Certified Annual Report 25 |
| OTHER INFORMATION, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2008 (Unaudited) | |
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations over various periods. The Trustees further noted in this regard that the Fund’s investment performance in a majority of the previous nine calendar years had been less than the performance of one of the two mutual fund categories considered, but further noted that the Fund’s performance in one, three and five year periods relative to the two categories had continued to improve and the Fund’s relative performance fell within the top third of each category in the three year period and in the top half of each category in the one and five year periods. Measures of portfolio volatility and risk considered by the Trustees demonstrated that the Fund’s portfolio volatility relative to those measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of services were sufficient and 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 slightly lower 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 slightly lower than the average expense ratio and slightly higher than the median expense ratio for the same fund group. The Trustees noted their previous observations respecting fees charged by the Advisor to other investment management clients and their conclusion 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 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses 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 ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor��s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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28 This page is not part of the Annual Report. |
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
| This page is not part of the Annual Report. 29 |
Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to .19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
30 This page is not part of the Annual Report. |
Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
| Sincerely, |
 |
| Brian McMahon |
| CEO and Chief Investment Officer |
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32 This page is not part of the Annual Report. |
Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
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 | ||
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. | ||
 |
Investment Advisor: | |
Thornburg Investment Management® 800.847.0200 | ||
Distributor: | ||
Thornburg Securities Corporation® 800.847.0200 | ||
TH860 | ||
Waste not, Wait not |  |
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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, 2008. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Funds’ shareholders; they 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 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 bonds 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.
Performance data given at net asset value (NAV) does not take into account applicable sales charges. If the sales charges had been included, the performance would have been lower. Minimum investments for Class I shares are higher than those for other classes. Class I and R3 shares may not be available to all investors.
Glossary
Barclays Capital 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.
Barclays Capital 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.
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
S&P 500 Index – An unmanaged broad measure 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.
Alternative Minimum Tax (AMT) – A federal tax aimed at ensuring that high-income individuals, estates, trusts, and corporations pay a minimal level income tax. For individuals, the AMT is calculated by adding tax preference items to regular taxable income.
Distribution Rate – 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 a 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.
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.
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.
SEC Yield – 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.
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 income taxes.
Limited Term U.S. Government Fund | CUSIPS | NASDAQ SYMBOLS | ||
CLASS A | 885-215-103 | LTUSX | ||
CLASS B | 885-215-848 | LTUBX | ||
CLASS C | 885-215-830 | LTUCX | ||
CLASS I | 885-215-699 | LTUIX | ||
CLASS R3 | 885-215-491 | LTURX | ||
Limited Term Income Fund | ||||
CLASS A | 885-215-509 | THIFX | ||
CLASS C | 885-215-764 | THICX | ||
CLASS I | 885-215-681 | THIIX | ||
CLASS R3 | 885-215-483 | THIRX | ||
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Thornburg Limited Term U.S. Government Fund
At Thornburg, our approach to fixed-income management is based on the premise that investors in our bond funds seek preservation of capital along with an attractive, relatively stable yield. While aggressive bond strategies may generate stronger returns when the market is turning a blind eye towards risk, they usually fail to stack up over longer periods of time. Our patience and diligence was recognized by Lipper, which named Thornburg Investment Management its 2008 Best Fixed-Income Fund Family.
We apply time-tested techniques to manage risk and provide attractive returns. These include:
| • | Building a laddered portfolio. Laddering has been shown over time to mitigate price and interest rate risk. |
| • | Investing on a cash-only basis without using leverage. While leveraged strategies may enhance returns when market conditions are favorable, they can quickly compound losses when sentiment shifts. |
| • | Conducting careful research to invest where we see the best relative value among government and agency sectors. |
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 the Limited Term U.S. Government Fund’s Class A shares is 1.50%. The total annual fund operating expense of Class A shares is 0.99%, as disclosed in the most recent Prospectus.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 11/16/87) | |||||||||||||||
Without Sales Charge | 5.75 | % | 4.54 | % | 3.05 | % | 4.49 | % | 5.99 | % | |||||
With Sales Charge | 4.15 | % | 4.03 | % | 2.74 | % | 4.33 | % | 5.91 | % |
30-DAY YIELDS
As of September 30, 2008
| Annualized Distribution Rate | SEC Yield | |||||
A Shares | 3.55 | % | 3.46 | % | ||
B Shares | 2.50 | % | 2.46 | % | ||
C Shares | 3.24 | % | 3.17 | % | ||
I Shares | 3.81 | % | 3.77 | % | ||
R3 Shares | 3.46 | % | 3.41 | % |
See page 46 for all share class total returns.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2008
Number of Bonds | 113 | ||
Duration | 3.3 Yrs | ||
A Shares: | |||
Net Asset Value | $ | 13.26 | |
Maximum Offering Price | $ | 13.46 | |
4 This page is not part of the Annual Report.
THORNBURG LIMITED TERM U.S. GOVERNMENT FUND VERSUS
LIPPER U.S. GOVERNMENT MONEY MARKET FUNDS AVERAGE
Class A shares as of September 30, 2008
We often are asked to compare Thornburg Limited Term U.S. Government Fund to money market fund returns. U.S. Government bond funds are not an exact substitute for money market funds. These investments have certain differences, which are discussed below. Investors in Thornburg Limited Term U.S. Government Fund took more risk than money market fund investors to earn their higher returns.
Past performance does not guarantee future results. Performance data above does not include the 1.50% sales charge for Class A shares. If the sales charge had been included, returns would have been lower. Returns shown are minus the initial investment.
Investors in U.S. Government bond funds may experience more volatility than those in comparable money market funds. There are also differences in fees and expenses.
Investors in the Thornburg Limited Term U.S. Government Fund took more risk than money market investors to earn their higher returns including reinvestment risk, credit risk, and inflation risk. Unlike money market funds, the prices of bonds fluctuate relative to changes in interest rates, with principal values decreasing when interest rates rise and increasing when interest rates fall. Generally, money market funds seek to maintain an investment portfolio with an average maturity of 90 days or less. Thornburg Limited Term U.S. Government Fund has an average maturity of normally less than five years. Interest dividends paid by the Fund or by U.S. Government money market funds are generally exempt from federal income tax and may be exempt from some state income tax.
Money market funds seek to preserve the value per share at $1.00, whereas, the Thornburg Limited Term U.S. Government Fund’s net asset value changes daily. It is possible to lose money when investing in either the Thornburg Limited Term U.S. Government Fund or a U.S. Government money market fund. Neither are insured by the FDIC or any other government agency.
Lipper U.S. Government Money Market Funds Average is an arithmetic average of the total return of all U.S. Government money market mutual funds. You cannot invest in a category average.
This page is not part of the Annual Report. 5
Thornburg Limited Term Income Fund
The Thornburg Limited Term Income Fund takes the laddering strategy to the broader fixed-income market. Expanding beyond government and agency securities brings additional risks – as well as potentially higher returns. The team addresses these uncertainties by employing a comprehensive approach to risk management. While utilizing the ladder to balance interest rate and reinvestment risk, the team also:
| • | Invests on a cash-only basis. While leveraged strategies may enhance returns when market conditions are favorable, they can quickly compound losses when sentiment shifts. |
| • | Conducts in-depth fundamental research on each credit issue under consideration. The goal of this research is identification of bonds which provide a reasonable return for their given level of risk. |
| • | Maintains a portfolio of high-quality bonds and diversifies among a large number of bonds to minimize the potential impact of default by any single issuer. |
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 the Limited Term Income Fund’s Class A shares is 1.50%. The total annual fund operating expense of Class A shares is 1.08%, as disclosed in the most recent Prospectus. Thornburg Investment Management intends to waive fees and reimburse expenses so that actual expenses for Class A shares do not exceed 0.99%. The fee waivers and expense reimbursements are voluntary and may be terminated at any time.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 10/1/92) | |||||||||||||||
Without Sales Charge | 0.44 | % | 2.61 | % | 2.24 | % | 4.25 | % | 5.17 | % | |||||
With Sales Charge | (1.08 | )% | 2.09 | % | 1.93 | % | 4.09 | % | 5.07 | % |
30-DAY YIELDS
As of September 30, 2008
| Annualized Distribution Rate | SEC Yield | |||||
A Shares | 4.71 | % | 4.40 | % | ||
C Shares | 4.44 | % | 4.21 | % | ||
I Shares | 5.06 | % | 4.83 | % | ||
R3 Shares | 4.70 | % | 4.45 | % |
See page 47 for all share class total returns.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2008
Number of Bonds | 235 | ||
Duration | 3.3 Yrs | ||
A Shares: | |||
Net Asset Value | $ | 11.92 | |
Maximum Offering Price | $ | 12.10 | |
6 This page is not part of the Annual Report.
THORNBURG LIMITED TERM INCOME FUND VERSUS
LIPPER MONEY MARKET FUNDS (TAXABLE) AVERAGE
Class A shares as of September 30, 2008
We often are asked to compare Thornburg Limited Term Income Fund to money market fund returns. Taxable bond funds are not an exact substitute for money market funds. These investments have certain differences, which are discussed below. Investors in Thornburg Limited Term Income Fund took more risk than money market fund investors to earn their higher returns.
Past performance does not guarantee future results. Performance data above does not include the 1.50% sales charge for Class A shares. If the sales charge had been included, returns would have been lower. Returns shown are minus the initial investment.
Investors in taxable bond funds may experience more volatility than those in comparable money market funds. There are also differences in fees and expenses.
Investors in the Thornburg Limited Term Income Fund took more risk than money market investors to earn their higher returns including reinvestment risk, credit risk, and inflation risk. Unlike money market funds, the prices of bonds fluctuate relative to changes in interest rates, with principal values decreasing when interest rates rise and increasing when interest rates fall. Generally, money market funds seek to maintain an investment portfolio with an average maturity of 90 days or less. Thornburg Limited Term Income Fund has an average maturity of normally less than five years.
Interest dividends paid by the Fund or by taxable money market funds are generally subject to federal income tax and state income tax (except for income from U.S. Government Treasuries, if applicable). Both Thornburg Limited Term Income Fund and taxable money market funds may be subject to AMT.
Money market funds seek to preserve the value per share at $1.00, whereas, the Thornburg Limited Term Income Fund’s net asset value changes daily. It is possible to lose money when investing in either the Thornburg Limited Term Income Fund or a taxable money market fund. Neither are insured by the FDIC or any other government agency.
Lipper Money Market Funds (Taxable) Average is an arithmetic average of the total return of all taxable money market mutual funds. You cannot invest in a category average.
This page is not part of the Annual Report. 7
Thornburg Limited Term Income Funds
September 30, 2008
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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
Jason Brady, CFA Portfolio Manager | October 15, 2008
Dear Fellow Shareholder:
I am pleased to present the Annual Report for the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund for the period ended September 30, 2008. The net asset value of a Class A share of the Thornburg Limited Term U.S. Government Fund increased 29 cents per share in the period to $13.26. If you were invested for the entire period, you received dividends of 44.9 cents per share. If you reinvested your dividends, you received 45.6 cents per share. The net asset value of a Class A share of the Thornburg Limited Term Income Fund decreased 48 cents per share in the period to $11.92. If you were invested for the entire period, you received dividends of 54.7 cents per share. If you reinvested your dividends, you received 55.8 cents per share. For both Funds, dividends per share were lower for some classes and higher for other classes of shares. |
The yields on U.S. Treasuries were volatile over the course of the past year, with a major change in the shape of the yield curve as well as general price appreciation in U.S. Treasuries driving returns in that sector. A much larger factor in the fixed income market generally was a considerable widening in spreads (the additional yield the market requires for investing in risky securities versus credit risk-less U.S. Treasuries) on all non-Treasury bond asset classes. The two-year U.S. Treasury moved from a 3.99% yield to a 1.96% yield over the course of the past year, while the ten-year U.S. Treasury moved from a 4.59% yield to a 3.82% yield. As you can see, front-end securities moved much lower in yield than longer term securities. This “steepening” 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. Those policy actions were largely due to a significant dislocation of global credit markets. Credit spreads continued to widen dramatically, particularly in March and September of 2008. The Barclays Capital Corporate Bond Index lost 6.78% over the course of the twelve months ended on September 30, 2008. By many measures, fixed income securities have had their worst year in history. The market continues to be challenging from a price and liquidity standpoint, though yields in non-Treasury securities are extremely attractive for any long-term investor, given fundamental risks.
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 5.75% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Barclays Capital Intermediate Government Index produced a 7.52% total return over the same time period. The average return for the Lipper Short-Intermediate U.S. Government Bond category was 4.61%. The Class A shares of the Thornburg Limited Term Income Fund produced a total return of 0.44% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Barclays Capital Intermediate Government/Credit Index produced a 3.13% total return over the same time period. The average return for the Lipper Short-Intermediate Investment Grade category was negative 0.98%. Both Barclays indices reflect no deduction for fees, expenses, or taxes.
The Funds kept their durations somewhat shorter than the indices during much of 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 Thornburg Limited Term Income Fund. However, the Thornburg Limited Term Income Fund, while maintaining a very high (AA) average credit rating, holds a much smaller proportion of U.S. Treasury securities than the index. In a time of widening credit spreads, U.S. Treasuries outperformed any other security, limiting returns for the Thornburg Limited Term Income Fund relative to its index. Similarly, while the Thornburg Limited Term U.S. Government Fund continues to hold only instruments guaranteed by the U.S. Government or government sponsored enterprises, the Fund’s holdings in non-Treasury securities including Agency Debentures and Mortgages underperformed U.S. Treasuries. I remain quite comfortable with our holdings and believe that over time each investment will yield satisfactory results, and in aggregate, position the Funds well for continued positive returns. Furthermore, the medium and long-term yields available in the market today make for significant investment opportunities for an investor with a reasonable time horizon.
Certified Annual Report 9
Letter to Shareholders
Continued
The recent volatility in the marketplace continues to underline the importance of high quality bonds in your bond portfolio allocation. Both Funds continue to perform even in an environment with nearly unprecedented movements in all asset classes. These periods of volatility have been relatively short in the past, and credit spreads had remained fairly well behaved. However, the past year has shown that volatility is alive and well. Furthermore, the challenges to continued smooth economic and asset growth are significant. Problems within financial institutions caused by weakness in housing markets have spilled over into the broader economy, and it is likely, given recent GDP growth, that we are in the midst of a recession, though this has yet to be officially declared.
In this environment, high quality bond funds should 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. The broad distribution of fund returns in the past year shows that those that reached for yield by taking incremental risk, for which they were not compensated, have suffered. In some cases, years of fund returns have been wiped out in just a few months, or even weeks. We believe that the store of value in your bond portfolio should benefit you through economic cycles and we strive to invest with that in mind.
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. 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, in our opinion, 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.
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 those looking for core bond investments. While future performance cannot be guaranteed, Thornburg Investment Management will continue to strive to chart a steady course in what continues to be a volatile marketplace.
Sincerely,
 |
| Jason H. Brady,CFA |
| 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.
10 Certified Annual Report
STATEMENTS OF ASSETS AND LIABILITIES
Thornburg Limited Term Income Funds | September 30, 2008 |
| Limited Term U.S. Government Fund | Limited Term Income Fund | |||||||
ASSETS | ||||||||
Investments at value (cost $201,640,785 and $323,075,344, respectively) (Note 2) | $ | 203,340,934 | $ | 310,360,100 | ||||
Cash | 25,404,865 | 13,419,109 | ||||||
Receivable for investments sold | — | 298,750 | ||||||
Principal receivable | 743,206 | — | ||||||
Receivable for fund shares sold | 3,626,492 | 1,026,807 | ||||||
Interest receivable | 1,525,031 | 3,584,344 | ||||||
Prepaid expenses and other assets | 31,503 | 33,153 | ||||||
Total Assets | 234,672,031 | 328,722,263 | ||||||
LIABILITIES | ||||||||
Payable for securities purchased | 12,977,986 | 6,348,597 | ||||||
Payable for fund shares redeemed | 995,848 | 2,339,155 | ||||||
Payable to investment advisor and other affiliates (Note 3) | 129,088 | 207,874 | ||||||
Accounts payable and accrued expenses | 38,006 | 131,102 | ||||||
Dividends payable | 118,754 | 275,664 | ||||||
Total Liabilities | 14,259,682 | 9,302,392 | ||||||
NET ASSETS | $ | 220,412,349 | $ | 319,419,871 | ||||
NET ASSETS CONSIST OF: | ||||||||
Undistributed (over distributed) net investment income | $ | 83,044 | $ | (98,854 | ) | |||
Net unrealized appreciation (depreciation) on investments | 1,700,149 | (12,715,244 | ) | |||||
Accumulated net realized gain (loss) | (1,409,057 | ) | (6,992,713 | ) | ||||
Net capital paid in on shares of beneficial interest | 220,038,213 | 339,226,682 | ||||||
| $ | 220,412,349 | $ | 319,419,871 | |||||
NET ASSET VALUE: | ||||||||
Class A Shares: | ||||||||
Net asset value and redemption price per share ($123,625,392 and $134,371,916 applicable to 9,324,400 and 11,276,755 shares of beneficial interest outstanding—Note 4) | $ | 13.26 | $ | 11.92 | ||||
Maximum sales charge, 1.50% of offering price | 0.20 | 0.18 | ||||||
Maximum offering price per share | $ | 13.46 | $ | 12.10 | ||||
Class B Shares: | ||||||||
Net asset value and offering price per share * ($5,147,430 applicable to 389,105 shares of beneficial interest outstanding—Note 4) | $ | 13.23 | $ | — | ||||
Certified Annual Report 11
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
| Thornburg Limited Term Income Fund | September 30, 2008 |
| Limited Term U.S. Government Fund | Limited Term Income Fund | |||||
Class C Shares: | ||||||
Net asset value and offering price per share * | $ | 13.34 | $ | 11.90 | ||
Class I Shares: | ||||||
Net asset value, offering and redemption price per share | $ | 13.26 | $ | 11.92 | ||
Class R3 Shares: | ||||||
Net asset value, offering and redemption price per share | $ | 13.27 | $ | 11.92 | ||
| * | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
12 Certified Annual Report
Thornburg Limited Term Income Funds | Year Ended September 30, 2008 |
| Limited Term U.S. Government Fund | Limited Term Income Fund | |||||||
INVESTMENT INCOME: | ||||||||
Interest income (net of premium amortized of $599,193 and $400,933, respectively) | $ | 7,162,444 | $ | 16,510,351 | ||||
EXPENSES: | ||||||||
Investment advisory fees (Note 3) | 621,335 | 1,535,234 | ||||||
Administration fees (Note 3) | ||||||||
Class A Shares | 127,169 | 172,387 | ||||||
Class B Shares | 3,734 | — | ||||||
Class C Shares | 45,998 | 57,483 | ||||||
Class I Shares | 9,344 | 57,576 | ||||||
Class R3 Shares | 6,850 | 9,999 | ||||||
Distribution and service fees (Note 3) | ||||||||
Class A Shares | 254,339 | 344,775 | ||||||
Class B Shares | 29,898 | — | ||||||
Class C Shares | 368,879 | 460,559 | ||||||
Class R3 Shares | 27,469 | 40,142 | ||||||
Transfer agent fees | ||||||||
Class A Shares | 97,990 | 123,873 | ||||||
Class B Shares | 5,456 | — | ||||||
Class C Shares | 42,560 | 50,071 | ||||||
Class I Shares | 14,530 | 55,927 | ||||||
Class R3 Shares | 5,324 | 8,310 | ||||||
Registration and filing fees | ||||||||
Class A Shares | 15,606 | 21,378 | ||||||
Class B Shares | 14,785 | — | ||||||
Class C Shares | 16,629 | 17,275 | ||||||
Class I Shares | 14,958 | 18,534 | ||||||
Class R3 Shares | 15,915 | 19,249 | ||||||
Custodian fees (Note 3) | 63,081 | 74,571 | ||||||
Professional fees | 31,893 | 40,327 | ||||||
Accounting fees | 3,143 | 6,174 | ||||||
Trustee fees | 2,039 | 4,083 | ||||||
Other expenses | 39,104 | 39,268 | ||||||
Total expenses | 1,878,028 | 3,157,195 | ||||||
Less: | ||||||||
Expenses reimbursed by investment advisor (Note 3) | (30,370 | ) | (149,548 | ) | ||||
Distribution fees waived (Note 3) | (184,440 | ) | (230,279 | ) | ||||
Fees paid indirectly (Note 3) | (23,808 | ) | (8,396 | ) | ||||
Net expenses | 1,639,410 | 2,768,972 | ||||||
Net Investment Income | $ | 5,523,034 | $ | 13,741,379 | ||||
Certified Annual Report 13
STATEMENTS OF OPERATIONS, CONTINUED
| Thornburg Limited Term Income Fund | Year Ended September 30, 2008 |
| Limited Term U.S. Government Fund | Limited Term Income Fund | ||||||
REALIZED AND UNREALIZED GAIN (LOSS) | |||||||
Net realized gain (loss) on investments | $ | 591,631 | $ | (1,268,288 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 2,079,673 | (11,780,991 | ) | ||||
Net Realized and Unrealized Gain (Loss) | 2,671,304 | (13,049,279 | ) | ||||
Net Increase in Net Assets Resulting From operations | $ | 8,194,338 | $ | 692,100 | |||
See notes to financial statements.
14 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Limited Term U.S. Government Fund
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 5,523,034 | $ | 4,476,842 | ||||
Net realized gain (loss) on investments | 591,631 | (1,130,360 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 2,079,673 | 3,591,635 | ||||||
Net Increase (Decrease) in Net Assets Resulting from operations | 8,194,338 | 6,938,117 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (3,449,329 | ) | (3,111,314 | ) | ||||
Class B Shares | (62,097 | ) | (43,700 | ) | ||||
Class C Shares | (1,141,337 | ) | (730,241 | ) | ||||
Class I Shares | (687,676 | ) | (557,507 | ) | ||||
Class R3 Shares | (182,595 | ) | (134,180 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 30,152,088 | (16,914,982 | ) | |||||
Class B Shares | 2,522,111 | 69,320 | ||||||
Class C Shares | 38,094,236 | 19,577 | ||||||
Class I Shares | 5,016,787 | 797,088 | ||||||
Class R3 Shares | 1,881,814 | 730,067 | ||||||
Net Increase (Decrease) in Net Assets | 80,338,340 | (12,937,755 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 140,074,009 | 153,011,764 | ||||||
End of year | $ | 220,412,349 | $ | 140,074,009 | ||||
Undistributed net investment income | $ | 83,044 | $ | 30,440 | ||||
See notes to financial statements.
Certified Annual Report 15
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Limited Term Income Fund
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 13,741,379 | $ | 13,360,036 | ||||
Net realized gain (loss) on investments | (1,268,288 | ) | (2,488,007 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | (11,780,991 | ) | 3,252,405 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 692,100 | 14,124,434 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (6,044,314 | ) | (7,108,149 | ) | ||||
Class C Shares | (1,908,409 | ) | (1,590,499 | ) | ||||
Class I Shares | (5,435,409 | ) | (4,559,897 | ) | ||||
Class R3 Shares | (353,247 | ) | (201,476 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (15,302,054 | ) | (35,890,344 | ) | ||||
Class C Shares | 18,676,711 | (3,689,930 | ) | |||||
Class I Shares | 19,634,479 | (8,312,790 | ) | |||||
Class R3 Shares | 3,948,966 | 2,841,946 | ||||||
Net Increase in Net Assets | 13,908,823 | (44,386,705 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 305,511,048 | 349,897,753 | ||||||
End of year | $ | 319,419,871 | $ | 305,511,048 | ||||
Undistributed net investment income | $ | — | $ | 29,903 | ||||
See notes to financial statements.
16 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Income Funds | September 30, 2008 | |
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 twelve 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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 expected 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 the Funds 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 allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and administrative and legal expenses. Currently, class specific expenses of the Funds are limited to distribution and service fees, administration fees, and certain registration and transfer agent expenses. Class B shares of the Government Fund outstanding for eight years will convert to Class A shares of the Government Fund.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: Debt obligations 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 obligations at quoted bid prices. Quotations for any foreign debt obligations 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 obligations are valued at evaluated prices determined by the pricing service using methods which include consideration of yields or prices of debt obligations of comparable quality, type of issue, coupon, maturity, and rating, 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 obligation held by the Funds, the valuation and pricing committee determines a fair value for the obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Funds upon a sale of the investment, and that difference could be material to the Funds’ financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
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
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Limited Term Income Funds | September 30, 2008 |
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 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 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 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, 2008, 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, 2008, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $2,990, $1,740, and $25,640 for the Class C, I, and R3 shares, respectively, of the Government Fund and $59,774, $37,913, $9,483, and $42,378 for the Class A, C, I, and R3 shares, respectively, of the Income Fund.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Limited Term Income Funds | September 30, 2008 |
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, 2008, the Distributor has advised the Funds that they reimbursed $45 from the sale of Class A shares of the Government Fund, earned commissions aggregating $901 from the sale of Class A shares of the Income Fund, and collected contingent deferred sales charges aggregating $17,876 and $6,830 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. 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, 2008, are set forth in the Statements of Operations. Distribution fees of $184,440 and $230,279, 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, 2008, fees paid indirectly were $23,808 for the Government Fund and $8,396 for the Income Fund.
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, 2008, 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, 2008 | Year Ended September 30, 2007 | ||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 4,369,558 | $ | 58,069,047 | 1,276,492 | $ | 16,340,009 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 211,200 | 2,798,238 | 190,598 | 2,442,071 | ||||||||||
Shares repurchased | (2,318,228 | ) | (30,715,197 | ) | (2,790,433 | ) | (35,697,062 | ) | ||||||
Net Increase (Decrease) | 2,262,530 | $ | 30,152,088 | (1,323,343 | ) | $ | (16,914,982 | ) | ||||||
Class B Shares | ||||||||||||||
Shares sold | 287,259 | $ | 3,815,622 | 67,148 | $ | 859,574 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 3,540 | 46,773 | 2,341 | 29,948 | ||||||||||
Shares repurchased | (101,549 | ) | (1,340,284 | ) | (64,214 | ) | (820,202 | ) | ||||||
Net Increase (Decrease) | 189,250 | $ | 2,522,111 | 5,275 | $ | 69,320 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 4,329,138 | $ | 57,987,683 | 805,083 | $ | 10,391,015 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 65,290 | 870,692 | 44,908 | 578,910 | ||||||||||
Shares repurchased | (1,556,409 | ) | (20,764,139 | ) | (849,163 | ) | (10,950,348 | ) | ||||||
Net Increase (Decrease) | 2,838,019 | $ | 38,094,236 | 828 | $ | 19,577 | ||||||||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Limited Term Income Funds | September 30, 2008 |
GOVERNMENT FUND (cont.) | Year Ended September 30, 2008 | Year Ended September 30, 2007 | ||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 922,038 | $ | 12,250,106 | 449,065 | $ | 5,745,316 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 39,092 | 517,921 | 36,249 | 464,437 | ||||||||||
Shares repurchased | (587,596 | ) | (7,751,240 | ) | (422,642 | ) | (5,412,665 | ) | ||||||
Net Increase (Decrease) | 373,534 | $ | 5,016,787 | 62,672 | $ | 797,088 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 265,853 | $ | 3,540,253 | 202,447 | $ | 2,596,860 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 13,376 | 177,342 | 10,191 | 130,690 | ||||||||||
Shares repurchased | (138,318 | ) | (1,835,781 | ) | (155,073 | ) | (1,997,483 | ) | ||||||
Net Increase (Decrease) | 140,911 | $ | 1,881,814 | 57,565 | $ | 730,067 | ||||||||
INCOME FUND | Year Ended September 30, 2008 | Year Ended September 30, 2007 | ||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 4,077,504 | $ | 50,782,602 | 2,831,583 | $ | 34,951,535 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 382,187 | 4,756,794 | 452,077 | 5,583,769 | ||||||||||
Shares repurchased | (5,687,221 | ) | (70,841,450 | ) | (6,196,310 | ) | (76,425,648 | ) | ||||||
Net Increase (Decrease) | (1,227,530 | ) | $ | (15,302,054 | ) | (2,912,650 | ) | $ | (35,890,344 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 2,478,217 | $ | 30,760,300 | 590,334 | $ | 7,262,571 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 109,746 | 1,362,431 | 93,760 | 1,156,118 | ||||||||||
Shares repurchased | (1,080,947 | ) | (13,446,020 | ) | (982,996 | ) | (12,108,619 | ) | ||||||
Net Increase (Decrease) | 1,507,016 | $ | 18,676,711 | (298,902 | ) | $ | (3,689,930 | ) | ||||||
Class I Shares | ||||||||||||||
Shares sold | 4,178,477 | $ | 52,176,888 | 1,954,926 | $ | 24,120,287 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 358,454 | 4,462,198 | 335,119 | 4,139,507 | ||||||||||
Shares repurchased | (2,966,749 | ) | (37,004,607 | ) | (2,957,329 | ) | (36,572,584 | ) | ||||||
Net Increase (Decrease) | 1,570,182 | $ | 19,634,479 | (667,284 | ) | $ | (8,312,790 | ) | ||||||
Class R3 Shares | ||||||||||||||
Shares sold | 538,236 | $ | 6,722,392 | 320,679 | $ | 3,961,502 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 24,032 | 298,513 | 13,801 | 170,430 | ||||||||||
Shares repurchased | (246,888 | ) | (3,071,939 | ) | (104,551 | ) | (1,289,986 | ) | ||||||
Net Increase (Decrease) | 315,380 | $ | 3,948,966 | 229,929 | $ | 2,841,946 | ||||||||
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Limited Term Income Funds | September 30, 2008 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2008, the Government Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $98,869,361 and $30,866,981, respectively, while the Income Fund had purchase and sale transactions of investment securities (excluding short-term investments and U.S. Government obligations) of $143,345,889 and $104,607,458, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
| Government Fund | Income Fund | |||||||
Cost of investments for tax purposes | $ | 201,640,785 | $ | 323,106,038 | ||||
Gross unrealized appreciation on a tax basis | $ | 2,408,086 | $ | 2,224,790 | ||||
Gross unrealized depreciation on a tax basis | (707,937 | ) | (14,970,728 | ) | ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 1,700,149 | $ | (12,745,938 | ) | |||
Distributable earnings – ordinary income | $ | 83,045 | $ | — | ||||
During the fiscal year ended September 30, 2008, $497,824 of the Income Fund capital loss carry forwards from prior years expired.
As of September 30, 2008, the Income Fund had deferred tax basis capital losses occurring subsequent to October 31, 2007 of $1,238,185. For tax purposes, such losses will be reflected in the year ending September 30, 2009. Unutilized tax basis capital losses may be carried forward to offset realized gains in future years. To the extent such carry forwards are used, capital gain distributions may be reduced to the extent provided by regulations.
At September 30, 2008, the Government Fund had tax basis capital losses, which may be carried forward to offset future capital gains. Such capital loss carry forwards expire as follows:
2009 | $ | 674,873 | |
2010 | 13,611 | ||
2014 | 3,770 | ||
2015 | 108,190 | ||
2016 | 608,613 | ||
| $ | 1,409,057 | ||
At September 30, 2008, the Income Fund had tax basis capital losses, which may be carried forward to offset future capital gains. Such capital loss carry forwards expire as follows:
2009 | $ | 650,941 | |
2010 | 308,333 | ||
2013 | 1,625,980 | ||
2014 | 601,391 | ||
2015 | 178,155 | ||
2016 | 2,359,034 | ||
| $ | 5,723,834 | ||
In order to account for book/tax differences, the Government Fund increased undistributed net investment income by $52,604 and increased accumulated net realized loss by $52,604. The Income Fund decreased undistributed net investment income by $128,757, decreased accumulated net realized loss by $626,581, and decreased net capital paid in on shares of beneficial interest by $497,824. These reclassifications have no impact on the net asset value of the Funds. Reclassifications result primarily from paydown gains and losses, class actions, and consent fees, which are recorded as an adjustment to interest income in the financial statements and as realized gains in the tax returns.
For tax purposes, distributions for the year ended September 30, 2008 and September 30, 2007, 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 became effective for the Funds for the financial statement reporting period ended March 31, 2008. As of the date of this report, management of the Funds has not identified any material effect on the Funds’ financial statements resulting from the implementation of FIN 48. The Funds’ federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Limited Term Income Funds | September 30, 2008 |
FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Funds’ financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Funds, including how such activities are accounted for and any effect on the Funds’ financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Funds’ financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Funds’ financial statements and related disclosures.
22 Certified Annual Report
Thornburg Limited Term U.S. Government Fund
| Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.97 | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.23 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.45 | 0.40 | 0.37 | 0.32 | 0.35 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.29 | 0.23 | (0.01 | ) | (0.24 | ) | (0.22 | ) | ||||||||||||
Total from investment operations | 0.74 | 0.63 | 0.36 | 0.08 | 0.13 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.45 | ) | (0.41 | ) | (0.37 | ) | (0.33 | ) | (0.35 | ) | ||||||||||
Change in net asset value | 0.29 | 0.22 | (0.01 | ) | (0.25 | ) | (0.22 | ) | ||||||||||||
NET ASSET VALUE, end of year | $ | 13.26 | $ | 12.97 | $ | 12.75 | $ | 12.76 | $ | 13.01 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 5.75 | 5.03 | 2.87 | 0.66 | 1.04 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.39 | 3.13 | 2.90 | 2.50 | 2.72 | |||||||||||||||
Expenses, after expense reductions (%) | 0.95 | 0.98 | 0.99 | 0.99 | 0.92 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.93 | 0.97 | 0.96 | 0.98 | 0.91 | |||||||||||||||
Expenses, before expense reductions (%) | 0.95 | 0.99 | 0.99 | 0.99 | 0.92 | |||||||||||||||
Portfolio turnover rate (%) | 19.61 | 43.35 | 7.47 | 18.00 | 12.39 | |||||||||||||||
Net assets at end of year (thousands) | $ | 123,625 | $ | 91,561 | $ | 106,913 | $ | 138,422 | $ | 163,530 | ||||||||||
| (a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
Certified Annual Report 23
FINANCIAL HIGHLIGHTS, CONTINUED
| Thornburg Limited Term U.S. Government Fund |
| Year Ended September 30, | ||||||||||||||||||||
Class B Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.94 | $ | 12.72 | $ | 12.73 | $ | 12.98 | $ | 13.22 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.28 | 0.22 | 0.18 | 0.13 | 0.21 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.28 | 0.23 | (0.01 | ) | (0.24 | ) | (0.24 | ) | ||||||||||||
Total from investment operations | 0.56 | 0.45 | 0.17 | (0.11 | ) | (0.03 | ) | |||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.27 | ) | (0.23 | ) | (0.18 | ) | (0.14 | ) | (0.21 | ) | ||||||||||
Change in net asset value | 0.29 | 0.22 | (0.01 | ) | (0.25 | ) | (0.24 | ) | ||||||||||||
NET ASSET VALUE, end of year | $ | 13.23 | $ | 12.94 | $ | 12.72 | $ | 12.73 | $ | 12.98 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 4.37 | 3.55 | 1.32 | (0.82 | ) | (0.24 | ) | |||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 2.08 | 1.73 | 1.41 | 1.03 | 1.65 | |||||||||||||||
Expenses, after expense reductions (%) | 2.26 | 2.40 | 2.51 | 2.46 | 1.99 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.25 | 2.39 | 2.48 | 2.45 | 1.99 | |||||||||||||||
Expenses, before expense reductions (%) | 2.26 | 2.63 | 3.21 | 2.86 | 2.74 | |||||||||||||||
Portfolio turnover rate (%) | 19.61 | 43.35 | 7.47 | 18.00 | 12.39 | |||||||||||||||
Net assets at end of year (thousands) | $ | 5,147 | $ | 2,586 | $ | 2,476 | $ | 1,875 | $ | 2,396 | ||||||||||
See notes to financial statements.
24 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
| Thornburg Limited Term U.S. Government Fund |
| Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.04 | $ | 12.83 | $ | 12.84 | $ | 13.09 | $ | 13.31 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.41 | 0.37 | 0.34 | 0.29 | 0.31 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.30 | 0.22 | (0.01 | ) | (0.24 | ) | (0.22 | ) | ||||||||||||
Total from investment operations | 0.71 | 0.59 | 0.33 | 0.05 | 0.09 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.41 | ) | (0.38 | ) | (0.34 | ) | (0.30 | ) | (0.31 | ) | ||||||||||
Change in net asset value | 0.30 | 0.21 | (0.01 | ) | (0.25 | ) | (0.22 | ) | ||||||||||||
NET ASSET VALUE, end of year | $ | 13.34 | $ | 13.04 | $ | 12.83 | $ | 12.84 | $ | 13.09 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 5.51 | 4.66 | 2.60 | 0.41 | 0.73 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.10 | 2.88 | 2.63 | 2.24 | 2.40 | |||||||||||||||
Expenses, after expense reductions (%) | 1.24 | 1.25 | 1.26 | 1.25 | 1.24 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.22 | 1.24 | 1.23 | 1.24 | 1.24 | |||||||||||||||
Expenses, before expense reductions (%) | 1.75 | 1.80 | 1.79 | 1.79 | 1.76 | |||||||||||||||
Portfolio turnover rate (%) | 19.61 | 43.35 | 7.47 | 18.00 | 12.39 | |||||||||||||||
Net assets at end of year (thousands) | $ | 63,998 | $ | 25,566 | $ | 25,132 | $ | 32,821 | $ | 43,404 | ||||||||||
See notes to financial statements.
Certified Annual Report 25
FINANCIAL HIGHLIGHTS, CONTINUED
| Thornburg Limited Term U.S. Government Fund |
| Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.97 | $ | 12.75 | $ | 12.76 | $ | 13.01 | $ | 13.22 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.49 | 0.44 | 0.41 | 0.36 | 0.39 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.29 | 0.23 | (0.01 | ) | (0.24 | ) | (0.21 | ) | ||||||||||||
Total from investment operations | 0.78 | 0.67 | 0.40 | 0.12 | 0.18 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.49 | ) | (0.45 | ) | (0.41 | ) | (0.37 | ) | (0.39 | ) | ||||||||||
Change in net asset value | 0.29 | 0.22 | (0.01 | ) | (0.25 | ) | (0.21 | ) | ||||||||||||
NET ASSET VALUE, end of year | $ | 13.26 | $ | 12.97 | $ | 12.75 | $ | 12.76 | $ | 13.01 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 6.06 | 5.35 | 3.19 | 0.95 | 1.37 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.68 | 3.45 | 3.22 | 2.82 | 2.95 | |||||||||||||||
Expenses, after expense reductions (%) | 0.66 | 0.68 | 0.68 | 0.68 | 0.67 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.64 | 0.67 | 0.65 | 0.67 | 0.67 | |||||||||||||||
Expenses, before expense reductions (%) | 0.67 | 0.74 | 0.78 | 0.80 | 0.77 | |||||||||||||||
Portfolio turnover rate (%) | 19.61 | 43.35 | 7.47 | 18.00 | 12.39 | |||||||||||||||
Net assets at end of year (thousands) | $ | 21,275 | $ | 15,963 | $ | 14,900 | $ | 16,075 | $ | 12,905 | ||||||||||
See notes to financial statements.
26 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
| Thornburg Limited Term U.S. Government Fund |
| Year Ended September 30, | ||||||||||||||||||||
Class R3 Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.97 | $ | 12.76 | $ | 12.77 | $ | 13.02 | $ | 13.23 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.44 | 0.40 | 0.37 | 0.34 | 0.37 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.30 | 0.22 | (0.01 | ) | (0.25 | ) | (0.21 | ) | ||||||||||||
Total from investment operations | 0.74 | 0.62 | 0.36 | 0.09 | 0.16 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.44 | ) | (0.41 | ) | (0.37 | ) | (0.34 | ) | (0.37 | ) | ||||||||||
Change in net asset value | 0.30 | 0.21 | (0.01 | ) | (0.25 | ) | (0.21 | ) | ||||||||||||
NET ASSET VALUE, end of year | $ | 13.27 | $ | 12.97 | $ | 12.76 | $ | 12.77 | $ | 13.02 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 5.77 | 4.93 | 2.86 | 0.72 | 1.26 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.33 | 3.15 | 2.90 | 2.66 | 2.62 | |||||||||||||||
Expenses, after expense reductions (%) | 1.01 | 1.00 | 1.00 | 0.93 | 0.91 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.97 | 0.91 | 0.91 | |||||||||||||||
Expenses, before expense reductions (%) | 1.47 | 1.64 | 1.55 | 3.55 | 13.56 | |||||||||||||||
Portfolio turnover rate (%) | 19.61 | 43.35 | 7.47 | 18.00 | 12.39 | |||||||||||||||
Net assets at end of year (thousands) | $ | 6,367 | $ | 4,398 | $ | 3,591 | $ | 3,008 | $ | 422 | ||||||||||
See notes to financial statements.
Certified Annual Report 27
Thornburg Limited Term Income Fund
| Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.40 | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.55 | 0.50 | 0.50 | 0.46 | 0.43 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.48 | ) | 0.04 | (0.14 | ) | (0.28 | ) | (0.19 | ) | |||||||||||
Total from investment operations | 0.07 | 0.54 | 0.36 | 0.18 | 0.24 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.55 | ) | (0.51 | ) | (0.50 | ) | (0.47 | ) | (0.43 | ) | ||||||||||
Change in net asset value | (0.48 | ) | 0.03 | (0.14 | ) | (0.29 | ) | (0.19 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 11.92 | $ | 12.40 | $ | 12.37 | $ | 12.51 | $ | 12.80 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 0.44 | 4.43 | 2.96 | 1.44 | 1.96 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 4.38 | 4.07 | 4.05 | 3.52 | 3.33 | |||||||||||||||
Expenses, after expense reductions (%) | 0.99 | 1.00 | 1.00 | 1.00 | 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 (%) | 1.03 | 1.08 | 1.09 | 1.09 | 1.07 | |||||||||||||||
Portfolio turnover rate (%) | 42.84 | 41.55 | 6.77 | 23.16 | 22.73 | |||||||||||||||
Net assets at end of year (thousands) | $ | 134,372 | $ | 155,021 | $ | 190,670 | $ | 212,881 | $ | 230,256 | ||||||||||
| (a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
28 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
| Thornburg Limited Term Income Fund |
| Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.38 | $ | 12.35 | $ | 12.49 | $ | 12.78 | $ | 12.97 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.52 | 0.47 | 0.47 | 0.43 | 0.40 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.49 | ) | 0.03 | (0.14 | ) | (0.28 | ) | (0.19 | ) | |||||||||||
Total from investment operations | 0.03 | 0.50 | 0.33 | 0.15 | 0.21 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.51 | ) | (0.47 | ) | (0.47 | ) | (0.44 | ) | (0.40 | ) | ||||||||||
Change in net asset value | (0.48 | ) | 0.03 | (0.14 | ) | (0.29 | ) | (0.19 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 11.90 | $ | 12.38 | $ | 12.35 | $ | 12.49 | $ | 12.78 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 0.18 | 4.17 | 2.71 | 1.19 | 1.70 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 4.15 | 3.82 | 3.79 | 3.27 | 3.07 | |||||||||||||||
Expenses, after expense reductions (%) | 1.24 | 1.24 | 1.25 | 1.25 | 1.25 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.24 | 1.24 | 1.24 | 1.24 | 1.24 | |||||||||||||||
Expenses, before expense reductions (%) | 1.83 | 1.89 | 1.87 | 1.88 | 1.87 | |||||||||||||||
Portfolio turnover rate (%) | 42.84 | 41.55 | 6.77 | 23.16 | 22.73 | |||||||||||||||
Net assets at end of year (thousands) | $ | 57,114 | $ | 40,769 | $ | 44,361 | $ | 59,355 | $ | 65,398 | ||||||||||
See notes to financial statements.
Certified Annual Report 29
FINANCIAL HIGHLIGHTS, CONTINUED
| Thornburg Limited Term Income Fund |
| Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.40 | $ | 12.37 | $ | 12.51 | $ | 12.80 | $ | 12.99 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.59 | 0.54 | 0.54 | 0.51 | 0.47 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.48 | ) | 0.04 | (0.14 | ) | (0.29 | ) | (0.19 | ) | |||||||||||
Total from investment operations | 0.11 | 0.58 | 0.40 | 0.22 | 0.28 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.59 | ) | (0.55 | ) | (0.54 | ) | (0.51 | ) | (0.47 | ) | ||||||||||
Change in net asset value | (0.48 | ) | 0.03 | (0.14 | ) | (0.29 | ) | (0.19 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 11.92 | $ | 12.40 | $ | 12.37 | $ | 12.51 | $ | 12.80 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 0.77 | 4.76 | 3.30 | 1.77 | 2.29 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 4.72 | 4.39 | 4.38 | 3.85 | 3.64 | |||||||||||||||
Expenses, after expense reductions (%) | 0.66 | 0.67 | 0.68 | 0.67 | 0.67 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.66 | 0.67 | 0.67 | 0.67 | 0.67 | |||||||||||||||
Expenses, before expense reductions (%) | 0.67 | 0.72 | 0.72 | 0.72 | 0.72 | |||||||||||||||
Portfolio turnover rate (%) | 42.84 | 41.55 | 6.77 | 23.16 | 22.73 | |||||||||||||||
Net assets at end of year (thousands) | $ | 118,222 | $ | 103,530 | $ | 111,535 | $ | 99,396 | $ | 90,025 | ||||||||||
See notes to financial statements.
30 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
| Thornburg Limited Term Income Fund |
| Year Ended September 30, | ||||||||||||||||||||
Class R3 Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.40 | $ | 12.38 | $ | 12.52 | $ | 12.81 | $ | 12.99 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.55 | 0.50 | 0.50 | 0.48 | 0.45 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.48 | ) | 0.03 | (0.14 | ) | (0.30 | ) | (0.18 | ) | |||||||||||
Total from investment operations | 0.07 | 0.53 | 0.36 | 0.18 | 0.27 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.55 | ) | (0.51 | ) | (0.50 | ) | (0.47 | ) | (0.45 | ) | ||||||||||
Change in net asset value | (0.48 | ) | 0.02 | (0.14 | ) | (0.29 | ) | (0.18 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 11.92 | $ | 12.40 | $ | 12.38 | $ | 12.52 | $ | 12.81 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 0.44 | 4.34 | 2.97 | 1.43 | 2.14 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 4.42 | 4.09 | 4.07 | 3.57 | 3.41 | |||||||||||||||
Expenses, after expense reductions (%) | 0.99 | 0.99 | 1.00 | 1.00 | 0.98 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.99 | 0.99 | 0.98 | |||||||||||||||
Expenses, before expense reductions (%) | 1.52 | 1.71 | 1.79 | 3.15 | 7.63 | |||||||||||||||
Portfolio turnover rate (%) | 42.84 | 41.55 | 6.77 | 23.16 | 22.73 | |||||||||||||||
Net assets at end of year (thousands) | $ | 9,712 | $ | 6,191 | $ | 3,331 | $ | 2,162 | $ | 911 | ||||||||||
See notes to financial statements.
Certified Annual Report 31
| SCHEDULE OF INVESTMENTS | ||
| September 30, 2008 |
Issuer-Description | Principal Amount | Value | ||||
U.S. TREASURY SECURITIES — 31.38% | ||||||
United States Treasury Notes, 5.50% due 5/15/2009 | $ | 8,000,000 | $ | 8,186,406 | ||
United States Treasury Notes, 3.625% due 1/15/2010 | 16,000,000 | 16,365,938 | ||||
United States Treasury Notes, 2.125% due 4/30/2010 | 5,000,000 | 5,024,610 | ||||
United States Treasury Notes, 4.625% due 10/31/2011 | 2,000,000 | 2,134,531 | ||||
United States Treasury Notes, 3.625% due 5/15/2013 | 11,000,000 | 11,351,484 | ||||
United States Treasury Notes, 4.75% due 5/15/2014 | 3,000,000 | 3,275,391 | ||||
United States Treasury Notes, 4.875% due 8/15/2016 | 5,000,000 | 5,416,211 | ||||
United States Treasury Notes, 4.625% due 2/15/2017 | 2,000,000 | 2,128,359 | ||||
United States Treasury Notes Inflationary Index, 0.625% due 4/15/2013 | 10,406,800 | 9,821,418 | ||||
United States Treasury Notes Inflationary Index, 2.00% due 1/15/2016 | 5,541,300 | 5,469,436 | ||||
TOTAL U.S. TREASURY SECURITIES (Cost $67,878,080) | 69,173,784 | |||||
U.S. GOVERNMENT AGENCIES — 60.87% | ||||||
Federal Home Loan Mtg Corp., 4.50% due 1/15/2015 | 5,000,000 | 5,045,385 | ||||
Federal Agricultural Mtg Corp., 6.71% due 7/28/2014 | 200,000 | 224,522 | ||||
Federal Farm Credit Bank, 5.35% due 12/11/2008 | 200,000 | 201,092 | ||||
Federal Farm Credit Bank, 5.80% due 3/19/2009 | 300,000 | 304,178 | ||||
Federal Farm Credit Bank, 6.75% due 7/7/2009 | 350,000 | 359,239 | ||||
Federal Farm Credit Bank, 6.06% due 5/28/2013 | 240,000 | 260,493 | ||||
Federal Home Loan Bank, 5.48% due 1/8/2009 | 1,250,000 | 1,258,767 | ||||
Federal Home Loan Bank, 5.985% due 4/9/2009 | 1,000,000 | 1,015,042 | ||||
Federal Home Loan Bank, 5.79% due 4/27/2009 | 200,000 | 202,907 | ||||
Federal Home Loan Bank, 5.125% due 4/29/2009 | 1,750,000 | 1,768,984 | ||||
Federal Home Loan Bank, 4.125% due 8/13/2010 | 7,000,000 | 7,202,198 | ||||
Federal Home Loan Mtg Corp., 5.50% due 3/28/2016 | 1,190,000 | 1,209,869 | ||||
Federal Home Loan Mtg Corp., CMO Series 00246, 5.50% due 5/15/2034 | 2,142,778 | 2,187,897 | ||||
Federal Home Loan Mtg Corp., CMO Series 1321 Class TE, 7.00% due 8/15/2022 | 822,180 | 822,180 | ||||
Federal Home Loan Mtg Corp., CMO Series 1616 Class E, 6.50% due 11/15/2008 | 34,608 | 34,620 | ||||
Federal Home Loan Mtg Corp., CMO Series 2509 Class TV, 5.50% due 4/15/2022 | 2,500,000 | 2,510,894 | ||||
Federal Home Loan Mtg Corp., CMO Series 2592 Class PD, 5.00% due 7/15/2014 | 497,921 | 500,650 | ||||
Federal Home Loan Mtg Corp., CMO Series 2628 Class DQ, 3.00% due 11/15/2017 | 807,814 | 775,577 | ||||
Federal Home Loan Mtg Corp., CMO Series 2649 Class QH, 4.50% due 7/15/2018 | 1,000,000 | 979,111 | ||||
Federal Home Loan Mtg Corp., CMO Series 2744 Class JG, 5.00% due 8/15/2032 | 1,500,000 | 1,472,702 | ||||
Federal Home Loan Mtg Corp., CMO Series 2764 Class UE, 5.00% due 10/15/2032 | 2,000,000 | 1,974,240 | ||||
Federal Home Loan Mtg Corp., CMO Series 2770 Class UD, 4.50% due 5/15/2017 | 2,400,000 | 2,409,487 | ||||
Federal Home Loan Mtg Corp., CMO Series 2802 Class NE, 5.00% due 2/15/2033 | 1,470,000 | 1,450,105 | ||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | 1,120,880 | 1,094,844 | ||||
Federal Home Loan Mtg Corp., CMO Series 2825 Class VP, 5.50% due 6/15/2015 | 5,400,531 | 5,535,753 | ||||
32 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Limited Term U.S. Government Fund | September 30, 2008 |
Issuer-Description | Principal Amount | Value | ||||
Federal Home Loan Mtg Corp., CMO Series 2834 Class VE, 5.50% due 7/15/2015 | $ | 2,426,278 | $ | 2,474,292 | ||
Federal Home Loan Mtg Corp., CMO Series 2901 Class UB, 5.00% due 3/15/2033 | 2,400,000 | 2,355,388 | ||||
Federal Home Loan Mtg Corp., CMO Series 2943 Class HE, 5.00% due 3/15/2033 | 1,965,000 | 1,928,527 | ||||
Federal Home Loan Mtg Corp., CMO Series 3020 Class VA, 5.50% due 11/15/2014 | 1,439,642 | 1,477,466 | ||||
Federal Home Loan Mtg Corp., CMO Series 3067 Class PJ, 5.50% due 7/15/2031 | 3,000,000 | 3,019,500 | ||||
Federal Home Loan Mtg Corp., CMO Series 3068 Class VA, 5.50% due 10/15/2016 | 1,589,057 | 1,628,011 | ||||
Federal Home Loan Mtg Corp., CMO Series 3078 Class PC, 5.50% due 11/15/2030 | 2,250,000 | 2,264,183 | ||||
Federal Home Loan Mtg Corp., CMO Series 3138 Class PC, 5.50% due 6/15/2032 | 5,000,000 | 5,020,933 | ||||
Federal Home Loan Mtg Corp., CMO Series 3184 Class PC, 5.50% due 8/15/2032 | 535,000 | 534,393 | ||||
Federal Home Loan Mtg Corp., CMO Series 3187 Class LA, 5.50% due 4/15/2031 | 2,900,780 | 2,967,009 | ||||
Federal Home Loan Mtg Corp., CMO Series 3192 Class GB, 6.00% due 1/15/2031 | 1,000,000 | 1,026,531 | ||||
Federal Home Loan Mtg Corp., CMO Series 3195 Class PD, 6.50% due 7/15/2036 | 4,300,000 | 4,404,638 | ||||
Federal Home Loan Mtg Corp., CMO Series 3216 Class NA, 6.00% due 5/15/2028 | 1,687,930 | 1,722,587 | ||||
Federal Home Loan Mtg Corp., CMO Series 3319 Class PA, 5.50% due 8/15/2030 | 873,411 | 895,850 | ||||
Federal Home Loan Mtg Corp., CMO Series 3320 Class TC, 5.50% due 10/15/2032 | 2,000,000 | 2,004,119 | ||||
Federal Home Loan Mtg Corp., CMO Series 3331 Class PB, 6.00% due 1/15/2031 | 2,000,000 | 2,058,679 | ||||
Federal Home Loan Mtg Corp., CMO Series R003 Class VA, 5.50% due 8/15/2016 | 1,392,118 | 1,420,686 | ||||
Federal Home Loan Mtg Corp., CMO Series R012 Class AB, 5.50% due 12/15/2020 | 3,305,151 | 3,274,835 | ||||
Federal Home Loan Mtg Corp., CMO Series 2731 Class Vl, 5.50% due 12/15/2014 | 2,834,739 | 2,910,618 | ||||
Federal Home Loan Mtg Corp., Pool # 141412, 8.50% due 4/1/2017 | 35,501 | 38,445 | ||||
Federal Home Loan Mtg Corp., Pool # 1N1736, 5.43% due 4/1/2037 | 1,275,905 | 1,301,046 | ||||
Federal Home Loan Mtg Corp., Pool # 252986, 10.75% due 4/1/2010 | 8,205 | 8,474 | ||||
Federal Home Loan Mtg Corp., Pool # 298107, 10.25% due 8/1/2017 | 23,256 | 26,635 | ||||
Federal Home Loan Mtg Corp., Pool # C90041, 6.50% due 11/1/2013 | 21,957 | 22,562 | ||||
Federal Home Loan Mtg Corp., Pool # D37120, 7.00% due 7/1/2023 | 28,933 | 30,605 | ||||
Federal National Mtg Assoc, 5.125% due 12/8/2008 | 3,665,000 | 3,682,576 | ||||
Federal National Mtg Assoc CMO Series 1993-122 Class D, 6.50% due 6/25/2023 | 25,965 | 26,179 | ||||
Federal National Mtg Assoc CMO Series 1993-32 Class H, 6.00% due 3/25/2023 | 92,798 | 94,941 | ||||
Federal National Mtg Assoc CMO Series 2002-18 Class PC, 5.50% due 4/25/2017 | 2,050,000 | 2,083,313 | ||||
Federal National Mtg Assoc CMO Series 2003-92 Class KH, 5.00% due 3/25/2032 | 2,000,000 | 1,973,297 | ||||
Federal National Mtg Assoc CMO Series 2004-35 Class CA, 4.00% due 12/25/2017 | 1,702,251 | 1,685,695 | ||||
Federal National Mtg Assoc CMO Series 2007-42 Class YA, 5.50% due 1/25/2036 | 2,450,769 | 2,443,890 | ||||
Federal National Mtg Assoc CMO Series 2007-65 Class PB, 6.00% due 10/25/2032 | 2,916,000 | 2,965,711 | ||||
Federal National Mtg Assoc CMO Series 2007-79 Class MB, 5.50% due 12/25/2030 | 1,000,000 | 1,012,697 | ||||
Federal National Mtg Assoc CPI Floating Rate Note, 6.162% due 2/17/2009 | 3,000,000 | 3,000,000 | ||||
Federal National Mtg Assoc REMIC Series 2002-59 Class B, 5.50% due 9/25/2017 | 2,258,165 | 2,294,291 | ||||
Federal National Mtg Assoc REMIC Series 2006-B1 Class AB, 6.00% due 6/25/2016 | 2,773,597 | 2,789,001 | ||||
Federal National Mtg Assoc, Pool # 044003, 8.00% due 6/1/2017 | 25,940 | 27,690 | ||||
Federal National Mtg Assoc, Pool # 050811, 7.50% due 12/1/2012 | 21,415 | 22,177 | ||||
Federal National Mtg Assoc, Pool # 050832, 7.50% due 6/1/2013 | 27,532 | 28,459 | ||||
Federal National Mtg Assoc, Pool # 076388, 9.25% due 9/1/2018 | 62,864 | 68,748 | ||||
Federal National Mtg Assoc, Pool # 077725, 9.75% due 10/1/2018 | 490 | 491 | ||||
Federal National Mtg Assoc, Pool # 100286, 7.50% due 8/1/2009 | 6,933 | 6,958 | ||||
Federal National Mtg Assoc, Pool # 112067, 9.50% due 10/1/2016 | 20,583 | 22,913 | ||||
Federal National Mtg Assoc, Pool # 190555, 7.00% due 1/1/2014 | 20,543 | 21,308 | ||||
Federal National Mtg Assoc, Pool # 190703, 7.00% due 3/1/2009 | 1,235 | 1,245 | ||||
Federal National Mtg Assoc, Pool # 190836, 7.00% due 6/1/2009 | 3,680 | 3,675 | ||||
Federal National Mtg Assoc, Pool # 250387, 7.00% due 11/1/2010 | 16,786 | 16,974 | ||||
Federal National Mtg Assoc, Pool # 251759, 6.00% due 5/1/2013 | 41,780 | 42,635 | ||||
Federal National Mtg Assoc, Pool # 252648, 6.50% due 5/1/2022 | 128,044 | 132,620 | ||||
Federal National Mtg Assoc, Pool # 303383, 7.00% due 12/1/2009 | 1,476 | 1,485 | ||||
Federal National Mtg Assoc, Pool # 312663, 7.50% due 6/1/2010 | 10,431 | 10,545 | ||||
Federal National Mtg Assoc, Pool # 323706, 7.00% due 2/1/2009 | 866 | 866 | ||||
Certified Annual Report 33
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Limited Term U.S. Government Fund | September 30, 2008 |
Issuer-Description | Principal Amount | Value | ||||
Federal National Mtg Assoc, Pool # 334996, 7.00% due 2/1/2011 | $ | 14,449 $ | 14,638 | |||
Federal National Mtg Assoc, Pool # 342947, 7.25% due 4/1/2024 | 219,867 | 234,589 | ||||
Federal National Mtg Assoc, Pool # 373942, 6.50% due 12/1/2008 | 78 | 81 | ||||
Federal National Mtg Assoc, Pool # 384243, 6.10% due 10/1/2011 | 592,703 | 602,618 | ||||
Federal National Mtg Assoc, Pool # 384746, 5.86% due 2/1/2009 | 1,010,584 | 1,011,083 | ||||
Federal National Mtg Assoc, Pool # 385714, 4.70% due 1/1/2010 | 3,035,808 | 3,021,719 | ||||
Federal National Mtg Assoc, Pool # 406384, 8.25% due 12/1/2024 | 120,996 | 128,768 | ||||
Federal National Mtg Assoc, Pool # 443909, 6.50% due 9/1/2018 | 92,053 | 95,341 | ||||
Federal National Mtg Assoc, Pool # 516363, 5.00% due 3/1/2014 | 127,893 | 129,168 | ||||
Federal National Mtg Assoc, Pool # 555207, 7.00% due 11/1/2017 | 40,467 | 41,925 | ||||
Federal National Mtg Assoc, Pool # 895572, 5.653% due 6/1/2036 | 2,892,175 | 2,933,565 | ||||
Government National Mtg Assoc, Pool # 000623, 8.00% due 9/20/2016 | 40,124 | 42,488 | ||||
Government National Mtg Assoc, Pool # 369693, 7.00% due 1/15/2009 | 4,173 | 4,173 | ||||
Government National Mtg Assoc, Pool # 409921, 7.50% due 8/15/2010 | 11,435 | 11,578 | ||||
Government National Mtg Assoc, Pool # 410240, 7.00% due 12/15/2010 | 15,243 | 15,453 | ||||
Government National Mtg Assoc, Pool # 410271, 7.50% due 8/15/2010 | 17,243 | 17,524 | ||||
Government National Mtg Assoc, Pool # 410846, 7.00% due 12/15/2010 | 24,741 | 25,069 | ||||
Government National Mtg Assoc, Pool # 430150, 7.25% due 12/15/2026 | 29,768 | 31,496 | ||||
Government National Mtg Assoc, Pool # 453928, 7.00% due 7/15/2017 | 53,430 | 56,155 | ||||
Government National Mtg Assoc, Pool # 780448, 6.50% due 8/15/2011 | 41,160 | 42,759 | ||||
Overseas Private Investment Corp., 4.10% due 11/15/2014 (1) | 1,627,200 | 1,600,505 | ||||
Private Export Funding Corp., 5.685% due 5/15/2012 | 5,000,000 | 5,295,140 | ||||
Private Export Funding Corp., 4.974% due 8/15/2013 | 2,700,000 | 2,779,898 | ||||
Tennessee Valley Authority, 4.75% due 8/1/2013 | 3,000,000 | 3,085,586 | ||||
U.S. Department of Transportation Headquarters Series 2004 Class A-2, 5.594% due 12/7/2021 (1)(2) | 2,878,426 | 2,868,703 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $133,762,705) | 134,167,150 | |||||
TOTAL INVESTMENTS — 92.25% (Cost $201,640,785) | $ | 203,340,934 | ||||
OTHER ASSETS LESS LIABILITIES — 7.75% | 17,071,415 | |||||
NET ASSETS — 100.00% | $ | 220,412,349 | ||||
Footnote Legend
| (1) | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
| (2) | Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of September 30, 2008, the aggregate value of these securities in the Fund’s portfolio was $2,868,703, representing 1.30% of the Fund’s net assets. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| CMO | Collateralized Mortgage Obligation |
| CPI | Consumer Price Index |
| Mtg | Mortgage |
| REMIC | Real Estate Mortgage Investment Conduit |
See notes to financial statements.
34 Certified Annual Report
| Thornburg Limited Term Income Fund | September 30, 2008 |
We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings.
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
U.S. TREASURY SECURITIES — 1.02% | ||||||||
United States Treasury Notes, 5.125% due 5/15/2016 | Aaa/AAA | $ | 1,000,000 | $ | 1,100,781 | |||
United States Treasury Notes, 4.875% due 8/15/2016 | Aaa/AAA | 2,000,000 | 2,166,484 | |||||
TOTAL U.S. TREASURY SECURITIES (Cost $3,096,795) | 3,267,265 | |||||||
U.S. GOVERNMENT AGENCIES — 7.31% | ||||||||
Federal Home Loan Bank, 5.085% due 10/7/2008 | Aaa/AAA | 250,000 | 250,125 | |||||
Federal Home Loan Bank, 5.038% due 10/14/2008 | Aaa/AAA | 200,000 | 200,196 | |||||
Federal Home Loan Bank, 5.365% due 12/11/2008 | Aaa/AAA | 75,000 | 75,386 | |||||
Federal Home Loan Bank, 4.50% due 12/15/2008 | Aaa/AAA | 3,000,000 | 3,011,473 | |||||
Federal Home Loan Bank, 5.985% due 4/9/2009 | Aaa/AAA | 85,000 | 86,279 | |||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | Aaa/AAA | 1,120,880 | 1,094,844 | |||||
Federal Home Loan Mtg Corp., CMO Series 3192 Class GB, 6.00% due 1/15/2031 | Aaa/AAA | 2,000,000 | 2,053,062 | |||||
Federal Home Loan Mtg Corp., CMO Series 3195 Class PD, 6.50% due 7/15/2036 | Aaa/AAA | 1,000,000 | 1,024,335 | |||||
Federal National Mtg Assoc, 6.00% due 12/1/2008 | Aaa/AAA | 1,773 | 1,809 | |||||
Federal National Mtg Assoc, 8.00% due 12/1/2009 | Aaa/AAA | 10,398 | 10,530 | |||||
Federal National Mtg Assoc, 7.00% due 3/1/2011 | Aaa/AAA | 10,509 | 10,621 | |||||
Federal National Mtg Assoc, 6.42% due 4/1/2011 | Aaa/AAA | 2,277,228 | 2,336,413 | |||||
Federal National Mtg Assoc, 5.095% due 12/1/2011 | Aaa/AAA | 120,618 | 121,961 | |||||
Federal National Mtg Assoc, 7.491% due 8/1/2014 | Aaa/AAA | 27,507 | 27,507 | |||||
Federal National Mtg Assoc CMO Series 2003-64 Class EC, 5.50% due 5/25/2030 | Aaa/AAA | 376,251 | 381,933 | |||||
Federal National Mtg Assoc CMO Series 2007-65 Class PB, 6.00% due 10/25/2032 | Aaa/AAA | 3,000,000 | 3,051,143 | |||||
Federal National Mtg Assoc CPI Floating Rate Note, 6.162% due 2/17/2009 | Aaa/AAA | 5,000,000 | 5,000,000 | |||||
Government National Mtg Assoc, Pool # 003007, 8.50% due 11/20/2015 | Aaa/AAA | 22,074 | 23,590 | |||||
Government National Mtg Assoc, Pool # 827148, 5.375% due 2/20/2024 | Aaa/AAA | 36,443 | 36,671 | |||||
Small Business Administration, 4.638% due 2/10/2015 | Aaa/AAA | 1,980,086 | 1,922,378 | |||||
U.S. Department of Transportation Headquarters Series 2004 Class A-2, 5.594%due 12/7/2021 (1)(2) | NR/AAA | 2,638,557 | 2,629,645 | |||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $23,293,682) | 23,349,901 | |||||||
ASSET BACKED SECURITIES — 10.14% | ||||||||
BANKS — 2.28% | ||||||||
COMMERCIAL BANKS — 2.03% | ||||||||
Wachovia Bank Commercial Mtg Trust Series 2005-C21 Class A-4, 5.384% due 10/15/2044 | Aaa/AAA | 5,000,000 | 4,700,801 | |||||
Wells Fargo Asset Securities Corp. Series 2005-AR2 Class B1, 4.543% due 2/25/2035 | Aa2/AA | 999,135 | 473,281 | |||||
Wells Fargo Asset Securities Corp. Series 2005-AR2 Class B1, 4.686% due 3/25/2035 | NR/NR | 1,070,181 | 513,280 | |||||
Wells Fargo Mtg Backed Securities Series 2005-3 Class-A10, 5.50% due 5/25/2035 | Aaa/NR | 814,637 | 809,011 | |||||
Certified Annual Report 35
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Limited Term Income Fund | September 30, 2008 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
THRIFTS & MORTGAGE FINANCE — 0.25% | ||||||||
Washington Mutual Series 05-AR4, Class-A4b, 4.669% due 4/25/2035 | Aaa/AAA | $ | 830,000 | $ | 788,819 | |||
| 7,285,192 | ||||||||
CONSUMER SERVICES — 1.89% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 1.89% | ||||||||
Dunkin 2006-1 Class A2, 5.779% due 6/20/2031 (2) | Aa3/AA | 4,000,000 | 3,427,840 | |||||
IHOP Franchising LLC Series 2007-1A Class A1, 5.144% due 3/20/2037 (2) | Baa2/BBB- | 3,000,000 | 2,610,000 | |||||
| 6,037,840 | ||||||||
DIVERSIFIED FINANCIALS — 5.97% | ||||||||
CAPITAL MARKETS — 3.17% | ||||||||
Bear Stearns Mtg Series 2004-3 Class 1-A2, 4.664% due 7/25/2034 | Aaa/AAA | 522,406 | 467,394 | |||||
GS Mtg Securities Corp. 2001-Rock Class C, 6.878% due 5/3/2018 (2) | Aaa/AAA | 545,000 | 573,964 | |||||
GSR Mtg Loan Trust Series 2004-3F Class 2-A10, 9.056% due 2/25/2034 | NR/AAA | 637,090 | 598,052 | |||||
Legg Mason Mtg Capital Corp., 4.44% due 6/1/2009 (1) | NR/NR | 1,714,286 | 1,714,286 | |||||
Merrill Lynch Mtg Investors, 4.233% due 8/25/2034 | NR/AA | 992,866 | 688,476 | |||||
Merrill Lynch Mtg Investors, Series 2003 E Class B3, 4.707% due 10/25/2028 | A2/A+ | 1,518,962 | 644,368 | |||||
Morgan Stanley Dean Witter Capital Trust Series 2000 Xl-1345 Class C, 7.846% due 9/3/2015 (2) | Aaa/NR | 545,000 | 571,899 | |||||
Morgan Stanley Dean Witter Capital Trust Series 2001 Xl-280 Class C, 6.756% due 2/3/2016 (2) | Aaa/NR | 825,000 | 856,115 | |||||
Salomon Brothers Mtg Securities Series 1999-C1 Class D, 7.237% due 5/18/2032 | Aaa/NR | 4,000,000 | 4,012,301 | |||||
DIVERSIFIED FINANCIAL SERVICES — 2.80% | ||||||||
Banc America Mtg Securities, Inc. Series 2005 A Class B1 Floating Rate Note, 4.868% due 2/25/2035 NR/NR | 2,922,622 | 1,768,187 | ||||||
Citigroup Commercial Mtg Trust Series 2004-HYB2 Class B1, 5.081% due 3/25/2034 | Aa2/AA | 700,499 | 492,538 | |||||
Countrywide Home Loan Series 2004 Class 1-A, 5.661% due 7/20/2034 | Aaa/AAA | 976,887 | 749,341 | |||||
FNBC Trust Series 1993 A, 8.08% due 1/5/2018 | Aa3/AA- | 1,040,163 | 1,263,257 | |||||
JPMorgan Chase Commercial Mtg Series 2004-C3 Class A-5, 4.878% due 1/15/2042 | Aaa/NR | 5,000,000 | 4,664,599 | |||||
| 19,064,777 | ||||||||
TOTAL ASSET BACKED SECURITIES (Cost $36,881,188) | 32,387,809 | |||||||
CORPORATE BONDS — 59.22% | ||||||||
AUTOMOBILES & COMPONENTS — 0.73% | ||||||||
AUTOMOBILES — 0.73% | ||||||||
Harley Davidson Funding Corp. Series C, 6.80% due 6/15/2018 (2) | A1/A | 2,500,000 | 2,340,860 | |||||
| 2,340,860 | ||||||||
BANKS — 3.97% | ||||||||
COMMERCIAL BANKS — 3.53% | ||||||||
ANZ National International, 6.20% due 7/19/2013 (2) | Aa2/AA | 1,000,000 | 992,710 | |||||
Household Finance Corp., 6.40% due 9/15/2009 | Aa3/AA- | 400,000 | 393,470 | |||||
Household Finance Corp. CPI Floating Rate Note, 6.97% due 8/10/2009 | Aa3/AA- | 5,000,000 | 4,889,400 | |||||
National City Bank, 7.25% due 7/15/2010 | Wr/A- | 2,000,000 | 1,603,258 | |||||
National Westminster Bank, 7.375% due 10/1/2009 | Aa2/AA- | 715,000 | 722,565 | |||||
Nations Bank Corp., 7.23% due 8/15/2012 | Aa2/AA- | 250,000 | 247,517 | |||||
Sovereign Bank, 5.125% due 3/15/2013 | Baa1/BBB | 400,000 | 230,108 | |||||
Suntrust Bank, 5.20% due 1/17/2017 | A1/A+ | 400,000 | 311,976 | |||||
Whitney National Bank, 5.875% due 4/1/2017 | A3/BBB | 2,000,000 | 1,879,026 | |||||
36 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Limited Term Income Fund | September 30, 2008 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
THRIFTS & MORTGAGE FINANCE — 0.44% | ||||||||
Sovereign Bancorp, Inc., 3.44% due 3/23/2010 | Baa1/BBB | $ | 2,000,000 | $ | 1,419,532 | |||
| 12,689,562 | ||||||||
CAPITAL GOODS — 5.16% | ||||||||
ELECTRICAL EQUIPMENT — 0.59% | ||||||||
Emerson Electric Co., 5.75% due 11/1/2011 | A2/A | 800,000 | 838,957 | |||||
Hubbell Inc., 6.375% due 5/15/2012 | A3/A+ | 1,000,000 | 1,046,422 | |||||
INDUSTRIAL CONGLOMERATES — 2.97% | ||||||||
General Electric Capital Corp., 4.875% due 10/21/2010 | Aaa/AAA | 2,500,000 | 2,420,322 | |||||
General Electric Capital Corp., 7.75% due 6/9/2009 | Aaa/AAA | 200,000 | 200,649 | |||||
General Electric Capital Corp., 7.375% due 1/19/2010 | Aaa/AAA | 400,000 | 402,732 | |||||
General Electric Capital Corp. Floating Rate Note, 2.939% due 12/15/2009 | Aaa/AAA | 1,000,000 | 993,468 | |||||
General Electric Capital Corp. Floating Rate Note, 2.687% due 3/2/2009 | Aaa/AAA | 5,000,000 | 4,904,750 | |||||
Ingersoll Rand Global Holding Co., 6.875% due 8/15/2018 | Baa1/BBB+ | 570,000 | 561,737 | |||||
MACHINERY — 1.60% | ||||||||
General American Railcar Corp., 6.69% due 9/20/2016 (1)(2) | A3/AA- | 172,104 | 179,849 | |||||
Illinois Tool Works Cupids Financing Trust, 6.55% due 12/31/2011 (2) | Aa3/NR | 5,000,000 | 4,938,450 | |||||
| 16,487,336 | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 1.03% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 1.03% | ||||||||
Science Applications International Corp., 6.25% due 7/1/2012 | A3/A- | 1,000,000 | 1,028,853 | |||||
Waste Management, Inc., 6.875% due 5/15/2009 | Baa3/BBB | 725,000 | 727,067 | |||||
Waste Management, Inc., 7.375% due 8/1/2010 | Baa3/BBB | 500,000 | 517,764 | |||||
Waste Management, Inc., 6.50% due 11/15/2008 | Baa3/BBB | 1,000,000 | 1,001,916 | |||||
| 3,275,600 | ||||||||
CONSUMER DURABLES & APPAREL — 0.73% | ||||||||
TEXTILES, APPAREL & LUXURY GOODS — 0.73% | ||||||||
Nike, Inc., 5.15% due 10/15/2015 | A1/A+ | 2,315,000 | 2,345,623 | |||||
| 2,345,623 | ||||||||
DIVERSIFIED FINANCIALS — 8.52% | ||||||||
CAPITAL MARKETS — 2.72% | ||||||||
Bear Stearns Co., Inc., 4.50% due 10/28/2010 | Aa2/AA- | 3,000,000 | 2,913,429 | |||||
Lehman Brothers Holdings, Inc., 5.625% due 1/24/2013 (3) | B3/D | 1,300,000 | 162,500 | |||||
Merrill Lynch & Co., 4.125% due 9/10/2009 | A2/A | 2,000,000 | 1,919,884 | |||||
Merrill Lynch & Co, Inc., 6.875% due 4/25/2018 | A2/A | 2,000,000 | 1,769,500 | |||||
Merrill Lynch & Co. Floating Rate Note, 2.578% due 8/14/2009 | A2/A | 2,000,000 | 1,909,730 | |||||
CONSUMER FINANCE — 2.76% | ||||||||
American Express Credit Corp., 5.875% due 5/2/2013 | Aa3/A+ | 2,500,000 | 2,304,123 | |||||
American General Finance Corp., 4.625% due 9/1/2010 | A3/BBB | 200,000 | 121,053 | |||||
American Honda Finance Corp., 6.70% due 10/1/2013 (2) | Aa3/A+ | 3,000,000 | 2,982,420 | |||||
American Honda Finance Corp., 5.125% due 12/15/2010 (2) | Aa3/A+ | 1,500,000 | 1,481,307 | |||||
Capital One Bank, 6.50% due 6/13/2013 | A3/BBB+ | 300,000 | 255,502 | |||||
Capital One Financial Corp., 5.70% due 9/15/2011 | A3/BBB+ | 950,000 | 841,267 | |||||
Toyota Motor Credit Corp., 4.35% due 12/15/2010 | Aaa/AAA | 800,000 | 827,625 | |||||
DIVERSIFIED FINANCIAL SERVICES — 3.04% | ||||||||
Bank of America Institutional Series B, 7.70% due 12/31/2026 (2) | Aa3/A | 2,000,000 | 1,729,608 | |||||
Caterpillar Financial Services, 6.20% due 9/30/2013 | A2/A | 2,000,000 | 1,999,944 | |||||
Certified Annual Report 37
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Limited Term Income Fund | September 30, 2008 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Citigroup, Inc., 6.50% due 8/19/2013 | Aa3/AA- | $ | 1,000,000 | $ | 888,768 | |||
JPMorgan Chase Co. CPI Floating Rate Note, 7.33% due 6/28/2009 | Aa2/AA- | 5,000,000 | 5,106,895 | |||||
| 27,213,555 | ||||||||
ENERGY — 2.38% | ||||||||
ENERGY EQUIPMENT & SERVICES — 0.60% | ||||||||
Detroit Edison Corporate Senior Note Series D, 5.40% due 8/1/2014 | A3/A- | 2,000,000 | 1,907,050 | |||||
OIL, GAS & CONSUMABLE FUELS — 1.78% | ||||||||
Chevron Phillips Chemical, 7.00% due 3/15/2011 | Baa1/BBB+ | 500,000 | 524,002 | |||||
Enbridge, Inc., 5.80% due 6/15/2014 | Baa1/A- | 2,000,000 | 1,902,480 | |||||
Energy Transfer Partners LP, 6.00% due 7/1/2013 | Baa3/BBB- | 1,000,000 | 976,567 | |||||
Enterprise Products Participating LP, 7.50% due 2/1/2011 | Baa3/BBB- | 250,000 | 257,491 | |||||
Murphy Oil Corp., 6.375% due 5/1/2012 | Baa3/BBB | 750,000 | 783,313 | |||||
Phillips Petroleum Co., 9.375% due 2/15/2011 | A1/A | 900,000 | 983,870 | |||||
Phillips Petroleum Co., 8.75% due 5/25/2010 | A1/A | 250,000 | 268,511 | |||||
| 7,603,284 | ||||||||
FOOD & STAPLES RETAILING — 0.29% | ||||||||
FOOD & STAPLES RETAILING — 0.29% | ||||||||
Wal-Mart Stores, Inc., 6.875% due 8/10/2009 | Aa2/AA | 900,000 | 924,359 | |||||
| 924,359 | ||||||||
| �� | ||||||||
FOOD, BEVERAGE & TOBACCO — 3.55% | ||||||||
BEVERAGES — 2.20% | ||||||||
Anheuser Busch Co., Inc., 4.375% due 1/15/2013 | A2/BBB+ | 2,000,000 | 1,872,928 | |||||
Anheuser Busch Co., Inc., 4.70% due 4/15/2012 | A2/BBB+ | 1,000,000 | 922,181 | |||||
Coca Cola Co., 5.75% due 3/15/2011 | Aa3/A+ | 200,000 | 209,441 | |||||
Sabmiller PLC, 6.50% due 7/15/2018 (2) | Baa1/BBB+ | 4,250,000 | 4,025,970 | |||||
FOOD PRODUCTS — 1.05% | ||||||||
Conagra, Inc., 7.875% due 9/15/2010 | Baa2/BBB+ | 100,000 | 105,530 | |||||
General Mills, 5.50% due 1/12/2009 | Baa1/BBB+ | 300,000 | 299,652 | |||||
General Mills, 5.20% due 3/17/2015 | Baa1/BBB+ | 1,000,000 | 959,535 | |||||
Kraft Foods, Inc., 6.00% due 2/11/2013 | Baa2/BBB+ | 2,000,000 | 1,987,750 | |||||
TOBACCO — 0.30% | ||||||||
UST, Inc., 5.75% due 3/1/2018 | A3/A | 1,000,000 | 962,702 | |||||
| 11,345,689 | ||||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.90% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 0.62% | ||||||||
Covidien International Finance Senior Note, 6.00% due 10/15/2017 | Baa1/A- | 2,000,000 | 1,975,986 | |||||
HEALTH CARE PROVIDERS & SERVICES — 0.28% | ||||||||
Unitedhealth Group, Inc., 6.00% due 2/15/2018 | Baa1/A- | 1,000,000 | 904,611 | |||||
| 2,880,597 | ||||||||
INSURANCE — 8.44% | ||||||||
INSURANCE — 8.44% | ||||||||
American International Group, Inc., 5.85% due 1/16/2018 | A2/A- | 4,000,000 | 2,007,788 | |||||
Berkshire Hathaway Finance Corp., 5.00% due 8/15/2013 (2) | Aaa/AAA | 1,500,000 | 1,496,052 | |||||
Berkshire Hathaway Finance Corp. Senior Note, 4.625% due 10/15/2013 | Aaa/AAA | 1,000,000 | 974,284 | |||||
Genworth Life Institutional Fund, 5.875% due 5/3/2013 (2) | Aa3/AA- | 1,000,000 | 924,790 | |||||
Hartford Financial Services Group, Inc. Senior Note, 4.625% due 7/15/2013 | A2/A | 1,000,000 | 914,284 | |||||
38 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Limited Term Income Fund | September 30, 2008 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
International Lease Finance Corp., 5.00% due 9/15/2012 | A3/A- | $ | 2,000,000 | $ | 1,469,088 | |||
International Lease Finance Corp. Floating Rate Note, 3.191% due 1/15/2010 | A3/A- | 2,925,000 | 2,521,622 | |||||
Liberty Mutual Group, Inc., 5.75% due 3/15/2014 (2) | Baa2/BBB- | 1,000,000 | 893,286 | |||||
Lincoln National Corp., 4.75% due 2/15/2014 | A3/A+ | 1,000,000 | 944,694 | |||||
Metlife, Inc. Series A, 6.817% due 8/15/2018 | A2/A | 2,000,000 | 1,892,408 | |||||
Pacific Life Global Funding CPI Floating Rate Note, 7.20% due 2/6/2016 (2) | Aa3/AA | 8,000,000 | 7,506,880 | |||||
Principal Financial Group Australia, 8.20% due 8/15/2009 (2) | A2/A | 700,000 | 709,902 | |||||
Principal Life Global Funding, 4.40% due 10/1/2010 (2) | Aa2/AA | 4,000,000 | 3,999,228 | |||||
UnumProvident Corp., 7.625% due 3/1/2011 | Ba1/BBB- | 691,000 | 705,628 | |||||
| 26,959,934 | ||||||||
MATERIALS — 2.52% | ||||||||
CHEMICALS — 1.33% | ||||||||
Dow Chemical Co., 5.75% due 12/15/2008 | A3/A- | 350,000 | 350,326 | |||||
E.I. du Pont de Nemours & Co., 4.75% due 11/15/2012 | A2/A | 1,000,000 | 977,675 | |||||
E.I. du Pont de Nemours & Co., 4.125% due 3/6/2013 | A2/A | 325,000 | 309,977 | |||||
E.I. du Pont de Nemours & Co., 5.00% due 1/15/2013 | A2/A | 1,000,000 | 988,181 | |||||
E.I. du Pont de Nemours & Co., 6.00% due 7/15/2018 | A2/A | 1,000,000 | 976,126 | |||||
Lubrizol Corp. Senior Note, 5.875% due 12/1/2008 | Baa2/BBB | 635,000 | 635,370 | |||||
CONSTRUCTION MATERIALS — 0.61% | ||||||||
CRH America, Inc., 8.125% due 7/15/2018 | Baa1/BBB+ | 2,000,000 | 1,962,170 | |||||
METALS & MINING — 0.58% | ||||||||
BHP Billiton Finance, 5.40% due 3/29/2017 | A1/A+ | 2,000,000 | 1,847,768 | |||||
| 8,047,593 | ||||||||
MEDIA — 3.01% | ||||||||
MEDIA — 3.01% | ||||||||
AOL Time Warner, Inc., 6.75% due 4/15/2011 | Baa2/BBB+ | 750,000 | 748,324 | |||||
Comcast Corp., 6.30% due 11/15/2017 | Baa2/BBB+ | 1,000,000 | 919,502 | |||||
Thomson Corp., 4.25% due 8/15/2009 | Baa1/A- | 2,900,000 | 2,895,389 | |||||
Thomson Reuters Corp., 5.95% due 7/15/2013 | Baa1/A- | 2,000,000 | 1,997,640 | |||||
Time Warner Cable, Inc., 5.40% due 7/2/2012 | Baa2/BBB+ | 3,000,000 | 2,853,648 | |||||
Time Warner, Inc., 8.05% due 1/15/2016 | Baa2/BBB+ | 200,000 | 194,882 | |||||
| 9,609,385 | ||||||||
MISCELLANEOUS — 1.10% | ||||||||
MISCELLANEOUS — 1.10% | ||||||||
Stanford University, 5.85% due 3/15/2009 | Aaa/AAA | 3,500,000 | 3,526,239 | |||||
| 3,526,239 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.72% | ||||||||
PHARMACEUTICALS — 0.72% | ||||||||
Abbott Labs, 3.75% due 3/15/2011 | A1/AA | 500,000 | 494,858 | |||||
Tiers Inflation Linked Trust Series Wyeth 2004-21 Trust Certificate CPI Floating Rate Note, 6.872% due 2/1/2014 | Baa1/A+ | 2,000,000 | 1,810,420 | |||||
| 2,305,278 | ||||||||
Certified Annual Report 39
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Limited Term Income Fund | September 30, 2008 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
RETAILING — 0.79% | ||||||||
SPECIALTY RETAIL — 0.79% | ||||||||
Best Buy Co., Inc., 6.75% due 7/15/2013 (2) | Baa2/BBB | $ | 2,500,000 | $ | 2,526,880 | |||
| 2,526,880 | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.08% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.08% | ||||||||
KLA Tencor Corp. Senior Note, 6.90% due 5/1/2018 | Baa1/BBB | 3,000,000 | 2,789,400 | |||||
National Semiconductor Corp. Senior Note, 3.069% due 6/15/2010 | Baa1/BBB | 4,000,000 | 3,842,272 | |||||
| 6,631,672 | ||||||||
SOFTWARE & SERVICES — 0.72% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 0.72% | ||||||||
Computer Sciences Corp., 5.50% due 3/15/2013 (2) | Baa1/A- | 1,000,000 | 970,085 | |||||
Computer Sciences Corp., 6.25% due 3/15/2009 | Baa1/A- | 300,000 | 299,447 | |||||
Electronic Data Systems Corp., 6.50% due 8/1/2013 | Baa3/A | 1,000,000 | 1,019,586 | |||||
| 2,289,118 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.77% | ||||||||
COMMUNICATIONS EQUIPMENT — 0.62% | ||||||||
Cisco Systems, Inc., 5.25% due 2/22/2011 | A1/A+ | 1,000,000 | 1,020,833 | |||||
Corning, Inc., 6.05% due 6/15/2015 | Baa1/BBB+ | 1,000,000 | 955,662 | |||||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS — 0.15% | ||||||||
Jabil Circuit, Inc., 5.875% due 7/15/2010 | Ba1/BB+ | 500,000 | 480,000 | |||||
| 2,456,495 | ||||||||
TELECOMMUNICATION SERVICES — 0.73% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.73% | ||||||||
Deutsche Telekom International Finance, 6.75% due 8/20/2018 | Baa1/BBB+ | 2,000,000 | 1,853,700 | |||||
Verizon Communications, Inc., 6.10% due 4/15/2018 | A3/A | 500,000 | 461,705 | |||||
| 2,315,405 | ||||||||
TRANSPORTATION — 0.51% | ||||||||
AIRLINES — 0.04% | ||||||||
Continental Airlines Series 1997-4 Class 4-A, 6.90% due 1/2/2018 | Baa2/BBB+ | 155,698 | 137,015 | |||||
ROAD & RAIL — 0.47% | ||||||||
Ryder System, Inc., 7.20% due 9/1/2015 | Baa1/BBB+ | 1,500,000 | 1,488,972 | |||||
| 1,625,987 | ||||||||
UTILITIES — 10.57% | ||||||||
ELECTRIC UTILITIES — 7.33% | ||||||||
AEP Texas Central Transition Bond A1, 4.98% due 1/1/2010 | Aaa/AAA | 1,345,296 | 1,345,296 | |||||
Appalachian Power Co., 6.60% due 5/1/2009 (Insured: MBIA) | A2/AA | 175,000 | 176,881 | |||||
Commonwealth Edison Co., 4.74% due 8/15/2010 | Baa2/BBB+ | 975,000 | 968,185 | |||||
Commonwealth Edison Co. Series 108, 5.80% due 3/15/2018 | Baa2/BBB+ | 1,000,000 | 916,390 | |||||
Duke Energy, 5.25% due 1/15/2018 | A2/A | 1,000,000 | 945,410 | |||||
E. On, 5.80% due 4/30/2018 (2) | A2/A | 2,000,000 | 1,911,516 | |||||
Entergy Gulf States, Inc., 5.12% due 8/1/2010 | Baa3/BBB+ | 1,800,000 | 1,762,681 | |||||
Entergy Gulf States, Inc., 5.70% due 6/1/2015 | Baa3/BBB+ | 2,300,000 | 2,183,176 | |||||
40 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund |
September 30, 2008 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Florida Power & Light Co., 5.55% due 11/1/2017 | Aa3/A | $ | 1,000,000 | $ | 980,770 | |||
Great River Energy Series 2007-A, 5.829% due 7/1/2017 (Insured: MBIA) (2) | A2/AAA | 4,365,306 | 4,414,372 | |||||
Gulf Power Co., 4.35% due 7/15/2013 | A2/A | 925,000 | 892,551 | |||||
Idaho Power Corp., 6.025% due 7/15/2018 | A3/A- | 1,000,000 | 963,923 | |||||
Korea Southern Power Co. Series 144A, 5.375% due 4/18/2013 (2) | A1/A- | 1,000,000 | 972,893 | |||||
MP Environmental, 4.982% due 7/1/2014 | Aaa/AAA | 4,132,386 | 4,055,508 | |||||
PPL Energy Supply LLC, 6.50% due 5/1/2018 | Baa2/BBB | 1,000,000 | 911,769 | |||||
GAS UTILITIES — 0.20% | ||||||||
Questar Pipeline Co., 6.05% due 12/1/2008 | A3/A- | 425,000 | 424,727 | |||||
Southern California Gas Co., 4.375% due 1/15/2011 | A1/NR | 225,000 | 224,604 | |||||
MULTI-UTILITIES — 3.04% | ||||||||
Northern States Power Co., 4.75% due 8/1/2010 | A2/A | 2,825,000 | 2,852,713 | |||||
South Carolina Electric & Gas Co., 6.50% due 11/1/2018 (1) | A2/A- | 1,000,000 | 1,002,830 | |||||
Taqa Abu Dhabi National Energy Co., 7.25% due 8/1/2018 (2) | Aa2/AA- | 1,000,000 | 974,911 | |||||
Taqa Abu Dhabi National Energy Co., 6.60% due 8/1/2013 (2) | Aa2/AA- | 1,000,000 | 992,731 | |||||
Union Electric Co., 4.65% due 10/1/2013 | Baa1/BBB | 2,000,000 | 1,862,400 | |||||
Union Electric Co., 6.70% due 2/1/2019 | Baa1/BBB | 500,000 | 482,816 | |||||
Wisconsin Energy Corp., 5.50% due 12/1/2008 | A3/BBB+ | 350,000 | 350,466 | |||||
Wisconsin Public Service Corp., 6.125% due 8/1/2011 | Aa3/A+ | 1,150,000 | 1,192,032 | |||||
| 33,761,551 | ||||||||
TOTAL CORPORATE BONDS (Cost $197,596,657) | 189,162,002 | |||||||
MUNICIPAL BONDS — 19.21% | ||||||||
Amelia County IDA, 4.80% due 4/1/2027 put 4/1/2010 (Waste Management) (AMT) | NR/A-2 | 1,000,000 | 988,480 | |||||
American Campus Properties Student Housing, 7.38% due 9/1/2012 (Insured: MBIA) (2) | A2/AA | 2,460,000 | 2,604,500 | |||||
American Fork City Utah Sales, 4.89% due 3/1/2012 (Insured: FSA) | Aaa/AAA | 300,000 | 301,929 | |||||
American Fork City Utah Sales, 5.07% due 3/1/2013 (Insured: FSA) | Aaa/AAA | 120,000 | 120,736 | |||||
Austin Texas Electric Utility System Refunding, 5.218% due 11/15/2017 (Insured: Assured Guaranty) | Aaa/AAA | 1,000,000 | 988,210 | |||||
Brockton MA Taxable Economic Development Series A, 6.45% due 5/1/2017 (Insured: FGIC) | A2/A | 150,000 | 152,030 | |||||
California State, 5.168% due 10/1/2037 | A1/A+ | 2,000,000 | 2,010,300 | |||||
Cleveland Cuyahoga County Ohio, 6.10% due 5/15/2013 | NR/BBB+ | 1,215,000 | 1,211,999 | |||||
Cook County Illinois School District 083, 4.625% due 12/1/2010 (Insured: FSA) | Aaa/NR | 250,000 | 255,680 | |||||
Cook County Illinois School District 083, 4.875% due 12/1/2011 (Insured: FSA) | Aaa/NR | 150,000 | 153,957 | |||||
Elkhart Indiana Redevelopment District Revenue, 4.80% due 6/15/2011 (ETM) | NR/NR | 240,000 | 245,854 | |||||
Elkhart Indiana Redevelopment District Revenue, 4.80% due 12/15/2011 (ETM) | NR/NR | 245,000 | 250,108 | |||||
Elkhart Indiana Redevelopment District Revenue, 5.05% due 12/15/2012 (ETM) | NR/NR | 515,000 | 530,944 | |||||
Elkhart Indiana Redevelopment District Revenue, 5.25% due 12/15/2013 pre-refunded 6/15/2013 | NR/NR | 540,000 | 554,920 | |||||
Granite City Madison County, 4.875% due 5/1/2027 (Waste Management, Inc.) | NR/BBB | 1,000,000 | 981,970 | |||||
Grant County Washington Water Public Utility District 2 Series Z, 5.14% due 1/1/2014 (Insured: FGIC) | Aa2/AA- | 1,015,000 | 1,000,252 | |||||
Green Bay Wisconsin Series B, 4.875% due 4/1/2011 (Insured: MBIA) | Aa2/NR | 365,000 | 369,059 | |||||
Hancock County Mississippi, 4.80% due 8/1/2010 (Insured: MBIA) | A2/NR | 245,000 | 245,257 | |||||
Hancock County Mississippi, 4.90% due 8/1/2011 (Insured: MBIA) | A2/NR | 315,000 | 315,079 | |||||
Hanover Pennsylvania Area School District Notes Series B, 4.47% due 3/15/2013 (Insured: FSA) | Aaa/AAA | 1,385,000 | 1,386,856 | |||||
Jea Florida Electric Systems Series Three B-2, 7.95% due 10/1/2040 put 10/1/2008 (Insured: DEXIA) | VMIG1/NR | 6,570,000 | 6,567,043 | |||||
Jefferson County Texas Navigation Refunding, 5.50% due 5/1/2010 (Insured: FSA) | Aaa/NR | 500,000 | 500,750 | |||||
Jersey City New Jersey Municipal Utilities Authority, 3.72% due 5/15/2009 (Insured: MBIA) | A2/AA | 575,000 | 571,901 | |||||
Kendall Kane County Illinois School District 308, 5.50% due 10/1/2011 (Insured: FGIC) | A1/NR | 365,000 | 372,453 | |||||
Louisiana Public Facilities Authority, 5.72% due 7/1/2015 (Insured: CIFG) | Baa3/BBB- | 1,770,000 | 1,656,826 | |||||
Certified Annual Report 41
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund |
September 30, 2008 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
Mississippi Development Bank Special Obligation Refinance Harrison County B, 5.21% due 7/1/2013 (Insured: FSA) | NR/AAA | $ | 1,200,000 | $ | 1,224,528 | |||
Missouri State Development Finance Board Series A, 5.45% due 3/1/2011 (Crackerneck Creek) | NR/A+ | 1,090,000 | 1,126,035 | |||||
Missouri State Environmental Improvement Energy, 5.25% due 7/1/2017 (K.C. Power & Light) | A2/BBB | 3,500,000 | 3,438,890 | |||||
Montgomery County Maryland Revenue Authority, 5.00% due 2/15/2012 | Aa2/AA+ | 100,000 | 102,409 | |||||
New Jersey Health Care Facilities Financing, 10.75% due 7/1/2010 (ETM) | NR/NR | 205,000 | 223,628 | |||||
New Jersey Health Care Facilities Financing, 7.70% due 7/1/2011 (Insured: Connie Lee) | NR/AA | 70,000 | 74,759 | |||||
New Mexico Mtg Finance Authority Single Family Mtg I D 2, 5.77% due 1/1/2016 (GNMA/FNMA/FHLMC) | NR/AAA | 910,000 | 929,356 | |||||
New Mexico Mtg Finance Authority Taxable, 5.00% due 7/1/2025 | NR/AAA | 1,000,000 | 988,230 | |||||
New Rochelle New York Industrial Development Agency, 7.15% due 10/1/2014 (LOC: Bank of New York) | Aaa/A+ | 360,000 | 375,898 | |||||
New York Environmental Facilities, 5.85% due 3/15/2011 | NR/AA- | 3,500,000 | 3,674,195 | |||||
New York State Housing Finance, 4.46% due 8/15/2009 | Aa1/NR | 125,000 | 126,009 | |||||
New York State Urban Development Corp., 4.75% due 12/15/2011 | NR/AAA | 1,400,000 | 1,430,058 | |||||
Newark New Jersey, 4.70% due 4/1/2011 (Insured: MBIA) | A2/NR | 845,000 | 850,923 | |||||
Newark New Jersey, 4.90% due 4/1/2012 (Insured: MBIA) | A2/NR | 1,225,000 | 1,226,164 | |||||
Niagara Falls New York Public Water, 4.30% due 7/15/2010 (Insured: MBIA) | A2/AA | 360,000 | 360,403 | |||||
Northwest Open Access Network Washington Revenue, 6.18% due 12/1/2008 (Insured: AMBAC) | Aa3/AA | 1,600,000 | 1,608,704 | |||||
Ohio Housing Financing Agency Mtg, 5.20% due 9/1/2014 (GNMA/FNMA) | Aaa/NR | 2,395,000 | 2,424,075 | |||||
Ohio State Solid Waste, 4.25% due 4/1/2033 (Republic Services) | NR/BBB+ | 1,000,000 | 888,350 | |||||
Ohio State Taxable Development Assistance Series A, 4.88% due 10/1/2011 (Insured: MBIA) | Aa3/AA | 550,000 | 553,845 | |||||
Pennsylvania Economic Development Series A, 4.70% due 11/1/2021 (Waste Management) | NR/A-2 | 2,250,000 | 2,023,470 | |||||
Port Walla Walla Washington Revenue, 5.30% due 12/1/2009 | NR/NR | 235,000 | 237,049 | |||||
Redlands California Redevelopment Agency Series A, 5.818% due 8/1/2022 (Insured: AMBAC) | Aa3/AA | 2,850,000 | 2,734,262 | |||||
Santa Fe County New Mexico Charter School Taxable Series B, 7.55% due 1/15/2010 (ATC Foundation) | NR/NR | 165,000 | 161,032 | |||||
Short Pump Town Center Community Development, 6.26% due 2/1/2009 | NR/NR | 1,000,000 | 1,008,760 | |||||
Springfield Ohio City School District Tax Anticipation Notes, 6.35% due 12/1/2010 (Insured: AMBAC) | Aa2/NR | 1,400,000 | 1,446,424 | |||||
Springfield Ohio City School District Tax Anticipation Notes, 6.40% due 12/1/2011 (Insured: AMBAC) | Aa2/NR | 1,500,000 | 1,554,225 | |||||
Tazewell County Illinois Community High School, 5.20% due 12/1/2011 (Insured: FSA) | Aaa/NR | 355,000 | 365,646 | |||||
Tennessee State Taxable Series B, 6.00% due 2/1/2013 | Aa1/AA+ | 500,000 | 524,235 | |||||
Texas Tech University Revenue, 6.00% due 8/15/2011 (Insured: MBIA) | Aa3/AA | 245,000 | 253,842 | |||||
University of Illinois Revenue, 6.35% due 4/1/2011 (Insured: FGIC) | Aa3/AA- | 1,000,000 | 1,041,290 | |||||
Victor New York, 9.20% due 5/1/2014 | NR/NR | 1,250,000 | 1,302,138 | |||||
Wisconsin State General Revenue, 4.80% due 5/1/2013 (Insured: FSA) | Aaa/AAA | 200,000 | 200,074 | |||||
Wisconsin State Health & Educational Facilities Series B, 7.08% due 6/1/2016 (Insured: ACA) | NR/NR | 2,610,000 | 2,540,652 | |||||
TOTAL MUNICIPAL BONDS (Cost $61,376,525) | 61,356,651 | |||||||
YANKEE BONDS — 0.26% | ||||||||
BANKS — 0.09% | ||||||||
COMMERCIAL BANKS — 0.09% | ||||||||
Glitnir Banki HF, 3.255% due 1/18/2012 (2) | A2/BBB+ | 400,000 | 304,456 | |||||
| 304,456 | ||||||||
42 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund |
September 30, 2008 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||
MISCELLANEOUS — 0.17% | ||||||||
MISCELLANEOUS — 0.17% | ||||||||
Nova Scotia Province Canada, 5.75% due 2/27/2012 | Aa2/A+ | $ | 500,000 | $ | 532,016 | |||
| 532,016 | ||||||||
TOTAL YANKEE BONDS (Cost $830,496) | 836,472 | |||||||
TOTAL INVESTMENTS — 97.16% (Cost $323,075,344) | $ | 310,360,100 | ||||||
OTHER ASSETS LESS LIABILITIES — 2.84% | 9,059,771 | |||||||
NET ASSETS — 100.00% | $ | 319,419,871 | ||||||
Footnote Legend
| † | Credit ratings are unaudited. Rating changes may have occurred prior to or subsequent to the reporting period end. |
| (1) | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
| (2) | Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of September 30, 2008, the aggregate value of these securities in the Fund’s portfolio was $60,543,119, representing 18.95% of the Fund’s net assets. |
| (3) | Bond in default. |
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. |
| CMO | Collateralized Mortgage Obligation |
| CPI | Consumer Price Index |
| Cupids | Cumulative Undivided Preferred Interests In Debt Securities |
| ETM | Escrowed to Maturity |
| FGIC | Insured by Financial Guaranty Insurance Co. |
| FHLMC | Insured by Federal Home Loan Mortgage Corp. |
| FNMA | Collateralized by Federal National Mortgage Association |
| FSA | Insured by Financial Security Assurance Co. |
| GNMA | Insured by Government National Mortgage Co. |
| IDA | Industrial Development Authority |
| LOC | Letter of Credit |
| MBIA | Insured by Municipal Bond Investors Assurance |
| Mtg | Mortgage |
See notes to financial statements.
Certified Annual Report 43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Limited Term Income Funds
To the Trustees and Shareholders of
Thornburg Limited Term U.S. Government Fund
Thornburg Limited Term Income Fund
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Limited Term U.S. Government Fund and Thornburg Limited Term Income Fund (separate portfolios of Thornburg Investment Trust, hereafter referred to as the “Funds”) at September 30, 2008, 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, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
44 Certified Annual Report
| EXPENSE EXAMPLE | ||
Thornburg Limited Term Income Funds |
September 30, 2008 (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, 2008 and held until September 30, 2008.
| Beginning Account Value 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
| U.S. Government Fund | |||||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,002.90 | $ | 4.62 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.39 | $ | 4.66 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 996.10 | $ | 11.28 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.69 | $ | 11.38 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,001.50 | $ | 6.13 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.87 | $ | 6.19 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,004.40 | $ | 3.18 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.83 | $ | 3.20 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,003.40 | $ | 4.96 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | |||
| Income Fund | |||||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 967.80 | $ | 4.85 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.07 | $ | 4.98 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 966.50 | $ | 6.09 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.26 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 969.50 | $ | 3.18 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.77 | $ | 3.26 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 967.80 | $ | 4.87 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | |||
| † | Thornburg Limited Term U.S. Government Fund expenses are equal to the annualized expense ratio for each class (A: 0.92%; B: 2.26%; C: 1.23%; I: 0.63%; and R3: 0.99%) multiplied by the average account value over the period, multiplied by 183/366 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: 0.65%; and R3: 0.99%) multiplied by the average account value over the period, multiplied by 183/366 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 Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ 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 Funds 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 45
| INDEX COMPARISON | ||
|
September 30, 2008 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 11/16/87) | 4.15 | % | 2.74 | % | 4.33 | % | 5.91 | % | ||||
B Shares (Incep: 11/1/02) | (0.63 | )% | 1.24 | % | N/A | 1.78 | % | |||||
C Shares (Incep: 9/1/94) | 5.01 | % | 2.76 | % | 4.16 | % | 4.91 | % | ||||
I Shares (Incep: 7/5/96) | 6.06 | % | 3.36 | % | 4.83 | % | 5.48 | % | ||||
R3 Shares (Incep: 7/1/03) | 5.77 | % | 3.09 | % | N/A | 2.98 | % |
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 sales charge for Class I shares or Class R3 shares.
The Barclays Capital Intermediate Government Bond Index is an unmanaged market-weighted index generally representative of all public obligations of the U.S. Government, its agencies and instrumentalities having maturities of up to ten years.
Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
46 Certified Annual Report
| INDEX COMPARISON | ||
Thornburg Limited Term Income Fund |
September 30, 2008 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 10/1/92) | (1.08 | )% | 1.93 | % | 4.09 | % | 5.07 | % | ||||
C Shares (Incep: 9/1/94) | (0.30 | )% | 1.98 | % | 3.92 | % | 4.83 | % | ||||
I Shares (Incep: 7/5/96) | 0.77 | % | 2.57 | % | 4.57 | % | 5.31 | % | ||||
R3 Shares (Incep: 7/1/03) | 0.44 | % | 2.25 | % | N/A | 2.24 | % |
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 sales charge for Class I shares or Class R3 shares.
The Barclays Capital 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.
Certified Annual Report 47
| TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Income Funds |
September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 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, 49 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 | ||
48 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
| Thornburg Limited Term Income Funds | September 30, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Certified Annual Report 49
TRUSTEES AND OFFICERS, CONTINUED
| Thornburg Limited Term Income Funds | September 30, 2008 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
50 Certified Annual Report
Thornburg Limited Term Income Funds | September 30, 2008 (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 Funds file with the Securities and Exchange Commission schedules of their portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Funds’ Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also make this information available on their website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT FOR 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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by 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 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 reviewed 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 considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events in view of the Fund’s investment objectives and policies.
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.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations over various periods. The Trustees further noted in this regard that the Fund’s investment performance exceeded the performance in most of the last 11 calendar years for a category of short-term U.S. government bond
Certified Annual Report 51
OTHER INFORMATION, CONTINUED
| Thornburg Limited Term Income Funds | September 30, 2008 (Unaudited) |
funds assembled by a mutual fund analyst firm, that the Fund’s performance fell in or near the top quartile for the one, three, five and ten year periods ended with the second quarter of the current year for the same fund category and fell in or near the top quartile for a second fund category for the same periods. Measures of portfolio volatility and risk considered by the Trustees demonstrated that the Fund’s relative portfolio volatility had continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 extent 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 somewhat higher than the median and comparable to the average expense ratios for the same fund group. The Trustees noted their previous observations respecting fee rates charged by the Advisor to other types of investment management clients, and their conclusion 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 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses charged to the Fund to fees and expenses charged to other mutual funds.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT FOR 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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by 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 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.
52 Certified Annual Report
OTHER INFORMATION, CONTINUED
| Thornburg Limited Term Income Funds | September 30, 2008 (Unaudited) |
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 bond 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 considered the effects of recent market and economic events on the Fund and the Advisor’s responses to these events in view of the Fund’s investment objectives and policies.
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.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations over various periods. The Trustees further noted in this regard that the Fund’s investment performance in most of the last 11 calendar years had exceeded the performance for a category of short-term bond mutual funds selected by an independent mutual fund analyst firm, that the Fund’s investment performance fell within the top quartile of the same fund category for the one, three, five and ten year periods ended in the second quarter of the current year, and that the Fund’s investment performance also fell within the top quartile of a second fund category for the same periods.
Measures of portfolio volatility and risk considered by the Trustees demonstrated that the Fund’s relative portfolio volatility had continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 approximately equal to the average) expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, that the management fee was higher to a small extent 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 other factors considered. The Trustees noted their previous observations respecting fee rates charged by the Advisor to other investment management clients, and their conclusion 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 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
Certified Annual Report 53
OTHER INFORMATION, CONTINUED
| Thornburg Limited Term Income Funds | September 30, 2008 (Unaudited) |
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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses charged to the Fund to fees and expenses charged to other mutual funds.
54 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 ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
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This page is not part of the Annual Report. 59
Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to ..19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
60 This page is not part of the Annual Report.
Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
Sincerely,
 |
Brian McMahon |
CEO and Chief Investment Officer |
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62 This page is not part of the Annual Report.
Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
This page is not part of the Annual Report. 63
 | Waste not, |  | ||||
| Wait not | ||||||
|
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: Thornburg Investment Management® 800.847.0200
Distributor: Thornburg Securities Corporation® 800.847.0200
TH076 |
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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, 2008. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; they 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 may invest a portion of the assets in small capitalization companies, which may increase the risk of greater price fluctuations. Funds invested in a limited number of holdings may expose an investor to greater volatility. 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.
Class I, R3, R4, and R5 shares may not be available to all investors. Minimum investments for Class I shares may be higher than those for other classes.
Glossary
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
Standard & Poor’s 500 Stock Index (S&P 500) – The S&P 500 Index is a broad measure of the U.S. stock market.
Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index. The performance of any index is not indicative of the performance of any particular investment.
Beta – 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.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
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
| KEY PORTFOLIO ATTRIBUTES | ||||
| As of 9/30/08 | ||||
Portfolio P/E Trailing 12-months* | 11.4 | x | ||
Portfolio Price to Cash Flow* | 6.2 | |||
Portfolio Price to Book Value* | 1.9 | |||
Median Market Cap* | $ | 22.6 | B | |
7-Year Beta (A Shares vs. S&P 500)* | 1.01 | |||
Equity Holdings | 50 | |||
| * | Source: FactSet |
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 1.27%, as disclosed in the most recent Prospectus.
Finding Promising Companies at a Discount
The Thornburg Value 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.
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 research approach in identifying and analyzing investment ideas. 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 combination of financial analysis, collaborative research, and business evaluation 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.
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 2008
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | |||||||||
A Shares (Incep: 10/2/95) | ||||||||||||
Without Sales Charge | (29.52 | )% | (0.13 | )% | 4.76 | % | 6.18 | % | ||||
With Sales Charge | (32.69 | )% | (1.66 | )% | 3.80 | % | 5.69 | % | ||||
S&P 500 Index | ||||||||||||
(Since: 10/2/95) | (21.98 | )% | 0.22 | % | 5.17 | % | 3.06 | % | ||||
4 This page is not part of the Annual Report. |
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 change 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.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/08
| Top Contributors | Top Detractors | |
Apache Corp. | Las Vegas Sands Corp. | |
Genentech, Inc. | Rite Aid Corp. | |
Chunghwa Telecom Co. Ltd. | Hertz Global Holdings, Inc. | |
Varian Medical Systems, Inc. | American International Group, Inc. | |
DIRECTV Group, Inc. | Office Depot, Inc. | |
Source: FactSet |
TOP TEN HOLDINGS
As of 9/30/08
Exxon Mobil Corp. | 4.5 | % | |
Comcast Corp. | 4.0 | % | |
AT&T, Inc. | 3.8 | % | |
ConocoPhillips | 3.7 | % | |
DIRECTV Group, Inc. | 3.7 | % | |
Eli Lilly & Co. | 3.5 | % | |
Microsoft Corp. | 3.5 | % | |
Toyota Motor Corp. | 3.3 | % | |
Allstate Corp. | 3.2 | % | |
Ace Ltd. | 3.1 | % |
| This page is not part of the Annual Report 5 |
Thornburg Value Fund
September 30, 2008
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.
| 6 Certified Annual Report |
| October 20, 2008
Dear Fellow Shareholder:
How quickly things can change! A year ago we were writing on the back of three strong years of relative and absolute performance. The most recent fiscal year has been very disappointing, both relative to our benchmark and with regard to the preservation of your and our investment capital. Thornburg Value Fund Class A shares at net asset value (NAV) returned negative 29.52% vs. negative 21.98% for the S&P 500 Index. A year ago we wrote, “The cases for both a domestic recession and accelerating inflation are easily supported.” Today we are more worried about deflationary pressures than inflationary ones, and a domestic, or even global recession, is much more likely today.
Our 2008 fiscal year began just as the first signs of the financial crisis were emerging. Problems at two Bear Stearns hedge funds, Countrywide Financial’s near bankruptcy, and a run on the U.K. bank Northern Rock all preceded our October 1, 2007 fiscal-year beginning. Since then, trillions of dollars in equity value have been lost globally, in both company specific liquidity crises (Bear Stearns, Indymac, Fannie Mae and Freddie Mac, Lehman, AIG) and in general market declines.
Unfortunately, negative developments have accelerated recently as a seizing-up of the credit markets and significantly increasing volatility indicators helped precipitate one of Wall Street’s worst weeks on record. As we write, governments of the leading economies around the world are working to restore confidence in the global financial system. We are hopeful that these efforts will bear fruit and that the actions will be enough to avert a significant destruction of global demand for goods and services.
In this very challenging environment we are focused on executing the same investment philosophy and approach that has been successful over the long term. We continue to look for promising companies at a discount, and attempt to buy them when they are out of favor. Our basket approach is intended to provide a portfolio with a spectrum of opportunities as well as diversification of risks. In our consistent earner basket, we own stocks |
| Certified Annual Report 7 |
Letter to Shareholders
Continued
| that we believe will prove more resilient than the average U.S. stock in a tough environment. Within our basic value and emerging franchise baskets, we invest in companies that we expect to lead when investors remember that the U.S. and global economies will eventually recover. Sound cash-generating businesses do have value. | ||
| Of all stocks owned during the fiscal year, only around one-fifth contributed positively to performance. Each basket was well represented amongst our top contributors including four basic value stocks (Apache Corp., Chunghwa Telecom Co. Ltd., JPMorgan Chase & Co., and recently purchased Goldman Sachs Group Inc.), four consistent earners (Genentech Inc., DIRECTV Group Inc., Visa Inc., and Teva Pharmaceutical Industries Ltd.) and two emerging franchises (Varian Medical Services Inc. and Hologic). Visa, Apache, Chunghwa and Hologic were sold at price targets during the year. Poor individual stock performance among the other four-fifths of the stocks in the portfolio drove our poor absolute and relative performance during the fiscal year ended September 30, 2008. | ||
| The stocks which hurt portfolio performance the most tended to be highly financially levered. Las Vegas Sands Corp., Rite Aid Corp., Hertz Global Holdings Inc., Freddie Mac, American International Group Inc., Office Depot Inc., and Wachovia were all among the leading detractors and had significant debt on their balance sheets. Motorola Inc., WellPoint Inc. and AT&T Inc. were within the bottom ten underperformers but do not have a heavy debt burden. Specific business disappointments were more at play with these holdings. Motorola suffered from declining sales and profit margins as its products did not have the degree of consumer acceptance that the company anticipated. WellPoint suffered lower underwriting margins when the company underestimated the cost of medical services that it had already contracted to provide its customers. The weak share price performance at AT&T was not entirely explain- able by fundamental developments, although weakening wireline business performance is likely a factor. AT&T was unique among our bottom performers in that we have added to that position and it is currently one of the largest holdings in the portfolio. We have sold seven of the ten leading detractors and while this was unpleasant, in a number of cases it avoided material further value erosion. | ||
| In periods of extreme volatility and economic uncertainty, share prices can be driven far from their underlying values as some investors focus on macro themes and ignore company specific fundamentals, while other investors sell out of fear or necessity. This type of environment is very attractive for opportunistic, bottom-up, fundamental investors. We have had the opportunity to make investments in companies that we believe have great promise at extraordinary discounts to their underlying value. Although we are disappointed with recent returns, we remain confident that our current portfolio will produce the investment results you expect from our stock selection philosophy and process. | ||
| 8 Certified Annual Report |
| 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 as 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 |
Thornburg Value Fund | September 30, 2008 | |
| ASSETS | ||||
Investments at value (cost $4,418,320,861) (Note 2) | $ | 3,703,109,809 | ||
Cash | 74,841,123 | |||
Receivable for investments sold | 88,770,013 | |||
Receivable for fund shares sold | 7,427,336 | |||
Unrealized gain on forward exchange contracts (Note 7) | 7,651,780 | |||
Dividends receivable | 6,139,496 | |||
Interest receivable | 1,984,472 | |||
Prepaid expenses and other assets | 54,855 | |||
Total Assets | 3,889,978,884 | |||
| LIABILITIES | ||||
Payable for securities purchased | 25,959,784 | |||
Payable for fund shares redeemed | 16,346,602 | |||
Payable to investment advisor and other affiliates (Note 3) | 3,386,402 | |||
Accounts payable and accrued expenses | 1,687,479 | |||
Dividends payable | 17,960 | |||
Total Liabilities | 47,398,227 | |||
| NET ASSETS | $ | 3,842,580,657 | ||
| NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 4,912,939 | ||
Net unrealized depreciation on investments | (707,578,473 | ) | ||
Accumulated net realized gain (loss) | (285,876,639 | ) | ||
Net capital paid in on shares of beneficial interest | 4,831,122,830 | |||
| $ | 3,842,580,657 | |||
| 10 Certified Annual Report |
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Value Fund | September 30, 2008 | |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share | $ | 28.02 | |
Maximum sales charge, 4.50% of offering price | 1.32 | ||
Maximum offering price per share | $ | 29.34 | |
Class B Shares: | |||
Net asset value and offering price per share * | $ | 26.66 | |
Class C Shares: | |||
Net asset value and offering price per share * | $ | 26.99 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share | $ | 28.47 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share | $ | 27.86 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share | $ | 27.99 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share | $ | 28.45 | |
| * | 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, 2008 | |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $ 1,822,645) | $ | 76,710,991 | ||
Interest income | 8,684,458 | |||
Total Income | 85,395,449 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 34,331,989 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,759,604 | |||
Class B Shares | 113,782 | |||
Class C Shares | 657,213 | |||
Class I Shares | 1,180,208 | |||
Class R3 Shares | 215,369 | |||
Class R4 Shares | 33,323 | |||
Class R5 Shares | 66,000 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 3,517,036 | |||
Class B Shares | 908,901 | |||
Class C Shares | 5,250,674 | |||
Class R3 Shares | 861,703 | |||
Class R4 Shares | 66,746 | |||
Transfer agent fees | ||||
Class A Shares | 1,871,380 | |||
Class B Shares | 138,870 | |||
Class C Shares | 669,170 | |||
Class I Shares | 2,123,320 | |||
Class R3 Shares | 451,302 | |||
Class R4 Shares | 70,073 | |||
Class R5 Shares | 262,939 | |||
Registration and filing fees | ||||
Class A Shares | 55,077 | |||
Class B Shares | 15,550 | |||
Class C Shares | 23,170 | |||
Class I Shares | 112,244 | |||
Class R3 Shares | 20,665 | |||
Class R4 Shares | 20,741 | |||
Class R5 Shares | 27,470 | |||
Custodian fees (Note 3) | 434,389 | |||
Professional fees | 148,782 | |||
Accounting fees | 158,580 | |||
Trustee fees | 81,600 | |||
Other expenses | 724,417 | |||
Total Expenses | 56,372,287 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (661,249 | ) | ||
Fees paid indirectly (Note 3) | (68,524 | ) | ||
Net Expenses | 55,642,514 | |||
Net Investment Income | $ | 29,752,935 | ||
| 12 Certified Annual Report |
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Value Fund | Year Ended September 30, 2008 | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | (269,065,954 | ) | |
Foreign currency transactions | (338,072 | ) | ||
| (269,404,026 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,370,396,923 | ) | ||
Foreign currency translation | 7,632,579 | |||
| (1,362,764,344 | ) | |||
Net Realized and Unrealized Loss | (1,632,168,370 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (1,602,415,435 | ) | |
See notes to financial statements.
| Certified Annual Report 13 |
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Value Fund
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 29,752,935 | $ | 28,639,753 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (269,404,026 | ) | 455,862,583 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | (1,362,764,344 | ) | 268,367,897 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (1,602,415,435 | ) | 752,870,233 | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (5,630,222 | ) | (9,517,757 | ) | ||||
Class B Shares | (7,933 | ) | (62,759 | ) | ||||
Class C Shares | (85,943 | ) | (455,165 | ) | ||||
Class I Shares | (18,551,738 | ) | (18,072,475 | ) | ||||
Class R3 Shares | (726,604 | ) | (707,632 | ) | ||||
Class R4 Shares | (170,180 | ) | (24,305 | ) | ||||
Class R5 Shares | (1,086,258 | ) | (578,768 | ) | ||||
From realized gains | ||||||||
Class A Shares | (145,917,343 | ) | (40,724,358 | ) | ||||
Class B Shares | (10,428,887 | ) | (3,458,689 | ) | ||||
Class C Shares | (57,732,547 | ) | (17,561,097 | ) | ||||
Class I Shares | (223,563,517 | ) | (39,645,604 | ) | ||||
Class R3 Shares | (14,403,384 | ) | (1,897,722 | ) | ||||
Class R4 Shares | (1,166,969 | ) | — | |||||
Class R5 Shares | (9,376,741 | ) | (456,993 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 120,614,733 | 254,630,938 | ||||||
Class B Shares | (7,316,619 | ) | 70,097 | |||||
Class C Shares | 20,666,716 | 43,074,529 | ||||||
Class I Shares | 597,263,995 | 1,059,702,770 | ||||||
Class R3 Shares | 84,257,580 | 87,096,462 | ||||||
Class R4 Shares | 33,018,022 | 6,750,585 | ||||||
Class R5 Shares | 83,701,115 | 88,298,634 | ||||||
Net Increase (Decrease) in Net Assets | (1,159,058,159 | ) | 2,159,330,924 | |||||
NET ASSETS: | ||||||||
Beginning of year | 5,001,638,816 | 2,842,307,892 | ||||||
End of year | $ | 3,842,580,657 | $ | 5,001,638,816 | ||||
Undistributed net investment income | $ | 4,912,939 | $ | 2,143,362 | ||||
See notes to financial statements.
| 14 Certified Annual Report |
| NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Value Fund | September 30, 2008 | |
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 thirteen 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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. As a secondary objective, the Fund also seeks some current income.
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 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 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 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 Investments: 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.
Any debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations 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 obligations 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.
Quotations in foreign currencies for foreign portfolio investments are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
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 procedures approved by the Trustees, which may include the use of prices obtained from an independent pricing service. The pricing service ordinarily values equity securities in these instances, using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures and index data and other data. 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the debt obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
| Certified Annual Report 15 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2008 | |
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Foreign currency translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund, to the shareholders. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and/or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset 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.
| 16 Certified Annual Report |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2008 | |
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, 2008, 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, 2008, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $531,653 for Class R3 shares, $62,840 for Class R4 Shares, and $66,756 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, 2008, the Distributor has advised the Fund that it earned net commissions aggregating $142,483 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $56,539 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, 2008, 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, 2008, fees paid indirectly were $68,524.
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, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 11,174,321 | $ | 399,226,305 | 13,429,422 | $ | 547,664,978 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 3,754,600 | 138,338,268 | 1,156,240 | 45,570,783 | ||||||||||
Shares repurchased | (12,304,141 | ) | (416,973,786 | ) | (8,199,947 | ) | (338,622,249 | ) | ||||||
Redemption fees received** | — | 23,946 | — | 17,426 | ||||||||||
Net Increase (Decrease) | 2,624,780 | $ | 120,614,733 | 6,385,715 | $ | 254,630,938 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 129,348 | $ | 4,492,381 | 238,194 | $ | 9,443,286 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 256,872 | 9,083,791 | 83,508 | 3,126,334 | ||||||||||
Shares repurchased | (649,891 | ) | (20,894,338 | ) | (316,970 | ) | (12,500,818 | ) | ||||||
Redemption fees received** | — | 1,547 | — | 1,295 | ||||||||||
Net Increase (Decrease) | (263,671 | ) | $ | (7,316,619 | ) | 4,732 | $ | 70,097 | ||||||
| Certified Annual Report 17 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2008 | |
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 1,768,463 | $ | 62,269,164 | 2,252,675 | $ | 89,691,497 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,418,890 | 50,776,902 | 417,160 | 15,793,087 | ||||||||||
Shares repurchased | (2,816,339 | ) | (92,388,285 | ) | (1,569,020 | ) | (62,416,929 | ) | ||||||
Redemption fees received** | — | 8,935 | — | 6,874 | ||||||||||
Net Increase (Decrease) | 371,014 | $ | 20,666,716 | 1,100,815 | $ | 43,074,529 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 33,733,127 | $ | 1,210,083,621 | 29,796,837 | $ | 1,246,028,389 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 5,086,814 | 189,825,719 | 1,185,152 | 47,802,515 | ||||||||||
Shares repurchased | (23,528,996 | ) | (802,685,508 | ) | (5,579,299 | ) | (234,149,563 | ) | ||||||
Redemption fees received** | — | 40,163 | — | 21,429 | ||||||||||
Net Increase (Decrease) | 15,290,945 | $ | 597,263,995 | 25,402,690 | $ | 1,059,702,770 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 3,326,232 | $ | 116,410,112 | 2,874,263 | $ | 117,754,787 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 401,141 | 14,656,658 | 64,233 | 2,541,337 | ||||||||||
Shares repurchased | (1,371,429 | ) | (46,812,136 | ) | (795,418 | ) | (33,200,944 | ) | ||||||
Redemption fees received** | — | 2,946 | — | 1,282 | ||||||||||
Net Increase (Decrease) | 2,355,944 | $ | 84,257,580 | 2,143,078 | $ | 87,096,462 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 1,140,551 | $ | 41,174,367 | 170,003 | $ | 7,199,837 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 34,386 | 1,249,751 | 555 | 24,227 | ||||||||||
Shares repurchased | (281,635 | ) | (9,406,561 | ) | (11,119 | ) | (473,504 | ) | ||||||
Redemption fees received** | — | 465 | — | 25 | ||||||||||
Net Increase (Decrease) | 893,302 | $ | 33,018,022 | 159,439 | $ | 6,750,585 | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 3,316,951 | $ | 117,084,163 | 2,430,984 | $ | 101,996,046 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 282,183 | 10,452,223 | 24,855 | 1,035,760 | ||||||||||
Shares repurchased | (1,235,288 | ) | (43,837,491 | ) | (343,451 | ) | (14,733,830 | ) | ||||||
Redemption fees received** | — | 2,220 | — | 658 | ||||||||||
Net Increase (Decrease) | 2,363,846 | $ | 83,701,115 | 2,112,388 | $ | 88,298,634 | ||||||||
| * | Effective date of Class R4 shares was February 1, 2007. |
| ** | The Fund charges a redemption fee of 1% of the Class A and Class I shares redeemed or 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, 2008 | |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $3,804,722,188 and $3,209,808,365, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 4,415,978,419 | ||
Gross unrealized appreciation on a tax basis | $ | 118,153,581 | ||
Gross unrealized depreciation on a tax basis | (831,022,191 | ) | ||
Net unrealized appreciation | $ | (712,868,610 | ) | |
At September 30, 2008, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2007 of $338,072, and $275,314,874 respectively. For tax purposes, such losses will be reflected in the year ending September 30, 2009.
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $724,480 and decreased net realized investment loss by $724,480. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from currency losses, class action litigation settlement and the disposition of a partnership investment.
The tax character of distributions paid during the year ended September 30, 2008, and September 30, 2007, was as follows:
| 2008 | 2007 | |||||
Distributions from: | ||||||
Ordinary income | $ | 129,259,793 | $ | 33,091,951 | ||
Capital gains | 359,588,473 | 100,071,373 | ||||
Total Distributions | $ | 488,848,266 | $ | 133,163,324 | ||
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2008, 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 BUY OR SELL:
Contract Description | Buy/Sell | Contract Amount | Contract Value date | Value (USD) | Unrealized Appreciation | Unrealized (Depreciation) | |||||||||
Euro Dollar | Sell | 60,000,000 | 12/02/2008 | $ | 92,382,000 | $ | 7,651,780 | $ | — | ||||||
Total unrealized appreciation (depreciation) from forward exchange contracts | $ | 7,651,780 | $ | — | |||||||||||
| Certified Annual Report 19 |
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2008 | |
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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
| 20 Certified Annual Report |
Thornburg Value Fund |
| Year Ended September 30, | ||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 44.17 | $ | 37.59 | $ | 32.79 | $ | 28.11 | $ | 26.29 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.18 | 0.29 | 0.35 | 0.32 | 0.20 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (12.26 | ) | 7.86 | 4.76 | 4.64 | 1.81 | ||||||||||||||
Total from investment operations | (12.08 | ) | 8.15 | 5.11 | 4.96 | 2.01 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.14 | ) | (0.27 | ) | (0.31 | ) | (0.28 | ) | (0.19 | ) | ||||||||||
Net realized gains | (3.93 | ) | (1.30 | ) | — | — | — | |||||||||||||
Total dividends | (4.07 | ) | (1.57 | ) | (0.31 | ) | (0.28 | ) | (0.19 | ) | ||||||||||
Change in net asset value | (16.15 | ) | 6.58 | 4.80 | 4.68 | 1.82 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 28.02 | $ | 44.17 | $ | 37.59 | $ | 32.79 | $ | 28.11 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | (29.52 | ) | 22.23 | 15.63 | 17.70 | 7.61 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 0.52 | 0.70 | 1.02 | 1.05 | 0.69 | |||||||||||||||
Expenses, after expense reductions (%) | 1.27 | 1.27 | 1.35 | 1.40 | 1.37 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.27 | 1.27 | 1.34 | 1.40 | 1.37 | |||||||||||||||
Expenses, before expense reductions (%) | 1.27 | 1.27 | 1.35 | 1.40 | 1.37 | |||||||||||||||
Portfolio turnover rate (%) | 70.65 | 79.29 | 51.36 | 58.90 | 68.74 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,088,766 | $ | 1,599,976 | $ | 1,121,720 | $ | 972,478 | $ | 1,086,448 | ||||||||||
| (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 Value Fund
| Year Ended September 30, | ||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Class B Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 42.36 | $ | 36.17 | $ | 31.60 | $ | 27.13 | $ | 25.47 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.09 | ) | (0.04 | ) | 0.07 | 0.08 | (0.03 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (11.68 | ) | 7.55 | 4.58 | 4.47 | 1.74 | ||||||||||||||
Total from investment operations | (11.77 | ) | 7.51 | 4.65 | 4.55 | 1.71 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.00 | )(a) | (0.02 | ) | (0.08 | ) | (0.08 | ) | (0.05 | ) | ||||||||||
Net realized gains | (3.93 | ) | (1.30 | ) | — | — | — | |||||||||||||
Total dividends | (3.93 | ) | (1.32 | ) | (0.08 | ) | (0.08 | ) | (0.05 | ) | ||||||||||
Change in net asset value | (15.70 | ) | 6.19 | 4.57 | 4.47 | 1.66 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 26.66 | $ | 42.36 | $ | 36.17 | $ | 31.60 | $ | 27.13 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (30.05 | ) | 21.26 | 14.71 | 16.78 | 6.71 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | (0.28 | ) | (0.09 | ) | 0.21 | 0.27 | (0.12 | ) | ||||||||||||
Expenses, after expense reductions (%) | 2.05 | 2.07 | 2.15 | 2.17 | 2.18 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.05 | 2.07 | 2.14 | 2.17 | 2.18 | |||||||||||||||
Expenses, before expense reductions (%) | 2.05 | 2.07 | 2.15 | 2.17 | 2.20 | |||||||||||||||
Portfolio turnover rate (%) | 70.65 | 79.29 | 51.36 | 58.90 | 68.74 | |||||||||||||||
Net assets at end of year (thousands) | $ | 64,287 | $ | 113,299 | $ | 96,587 | $ | 92,410 | $ | 93,508 | ||||||||||
| (a) | Dividends from net investment income per share were less than $(0.01). |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 22 Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Value Fund
| Year Ended September 30, | ||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 42.82 | $ | 36.55 | $ | 31.92 | $ | 27.40 | $ | 25.70 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.08 | ) | (0.02 | ) | 0.09 | 0.09 | (0.02 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (11.81 | ) | 7.62 | 4.62 | 4.51 | 1.77 | ||||||||||||||
Total from investment operations | (11.89 | ) | 7.60 | 4.71 | 4.60 | 1.75 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.01 | ) | (0.03 | ) | (0.08 | ) | (0.08 | ) | (0.05 | ) | ||||||||||
Net realized gains | (3.93 | ) | (1.30 | ) | — | — | — | |||||||||||||
Total dividends | (3.94 | ) | (1.33 | ) | (0.08 | ) | (0.08 | ) | (0.05 | ) | ||||||||||
Change in net asset value | (15.83 | ) | 6.27 | 4.63 | 4.52 | 1.70 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 26.99 | $ | 42.82 | $ | 36.55 | $ | 31.92 | $ | 27.40 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (30.03 | ) | 21.29 | 14.77 | 16.80 | 6.81 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | (0.23 | ) | (0.05 | ) | 0.27 | 0.31 | (0.07 | ) | ||||||||||||
Expenses, after expense reductions (%) | 2.02 | 2.03 | 2.09 | 2.14 | 2.14 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.01 | 2.03 | 2.09 | 2.14 | 2.14 | |||||||||||||||
Expenses, before expense reductions (%) | 2.02 | 2.03 | 2.09 | 2.14 | 2.15 | |||||||||||||||
Portfolio turnover rate (%) | 70.65 | 79.29 | 51.36 | 58.90 | 68.74 | |||||||||||||||
Net assets at end of year (thousands) | $ | 401,880 | $ | 621,687 | $ | 490,399 | $ | 446,567 | $ | 475,296 | ||||||||||
| + | 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, | ||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 44.80 | $ | 38.11 | $ | 33.23 | $ | 28.49 | $ | 26.64 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.32 | 0.44 | 0.50 | 0.45 | 0.31 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (12.45 | ) | 7.96 | 4.82 | 4.70 | 1.84 | ||||||||||||||
Total from investment operations | (12.13 | ) | 8.40 | 5.32 | 5.15 | 2.15 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.27 | ) | (0.41 | ) | (0.44 | ) | (0.41 | ) | (0.30 | ) | ||||||||||
Net realized gains | (3.93 | ) | (1.30 | ) | — | — | — | |||||||||||||
Total dividends | (4.20 | ) | (1.71 | ) | (0.44 | ) | (0.41 | ) | (0.30 | ) | ||||||||||
Change in net asset value | (16.33 | ) | 6.69 | 4.88 | 4.74 | 1.85 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 28.47 | $ | 44.80 | $ | 38.11 | $ | 33.23 | $ | 28.49 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (29.24 | ) | 22.62 | 16.10 | 18.16 | 8.04 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 0.92 | 1.05 | 1.41 | 1.44 | 1.07 | |||||||||||||||
Expenses, after expense reductions (%) | 0.91 | 0.93 | 0.98 | 0.99 | 0.99 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.90 | 0.92 | 0.97 | 0.98 | 0.99 | |||||||||||||||
Expenses, before expense reductions (%) | 0.91 | 0.93 | 0.98 | 1.00 | 0.99 | |||||||||||||||
Portfolio turnover rate (%) | 70.65 | 79.29 | 51.36 | 58.90 | 68.74 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,961,495 | $ | 2,401,473 | $ | 1,074,492 | $ | 457,788 | $ | 378,334 | ||||||||||
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 24 Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Value Fund
| Year Ended September 30, | ||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Class R3 Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 43.94 | $ | 37.43 | $ | 32.68 | $ | 28.06 | $ | 26.27 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.17 | 0.26 | 0.37 | 0.33 | 0.17 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (12.19 | ) | 7.81 | 4.71 | 4.60 | 1.85 | ||||||||||||||
Total from investment operations | (12.02 | ) | 8.07 | 5.08 | 4.93 | 2.02 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.13 | ) | (0.26 | ) | (0.33 | ) | (0.31 | ) | (0.23 | ) | ||||||||||
Net realized gains | (3.93 | ) | (1.30 | ) | — | — | — | |||||||||||||
Total dividends | (4.06 | ) | (1.56 | ) | (0.33 | ) | (0.31 | ) | (0.23 | ) | ||||||||||
Change in net asset value | (16.08 | ) | 6.51 | 4.75 | 4.62 | 1.79 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 27.86 | $ | 43.94 | $ | 37.43 | $ | 32.68 | $ | 28.06 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (29.54 | ) | 22.11 | 15.60 | 17.64 | 7.68 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 0.50 | 0.63 | 1.05 | 1.07 | 0.61 | |||||||||||||||
Expenses, after expense reductions (%) | 1.35 | 1.35 | 1.36 | 1.35 | 1.34 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.35 | 1.35 | 1.35 | 1.35 | 1.34 | |||||||||||||||
Expenses, before expense reductions (%) | 1.66 | 1.63 | 1.69 | 1.94 | 2.22 | |||||||||||||||
Portfolio turnover rate (%) | 70.65 | 79.29 | 51.36 | 58.90 | 68.74 | |||||||||||||||
Net assets at end of year (thousands) | $ | 161,517 | $ | 151,260 | $ | 48,627 | $ | 11,661 | $ | 5,754 | ||||||||||
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| Certified Annual Report 25 |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Value Fund
| Year Ended Sept. 30, 2008 | Period Ended Sept. 30, 2007(a) | |||||||
Class R4 Shares: | ||||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 44.14 | $ | 41.00 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.19 | 0.20 | ||||||
Net realized and unrealized gain (loss) on investments | (12.23 | ) | 3.12 | |||||
Total from investment operations | (12.04 | ) | 3.32 | |||||
Less dividends from: | ||||||||
Net investment income | (0.18 | ) | (0.18 | ) | ||||
Net realized gains | (3.93 | ) | — | |||||
Total dividends | (4.11 | ) | (0.18 | ) | ||||
Change in net asset value | (16.15 | ) | 3.14 | |||||
NET ASSET VALUE, end of period | $ | 27.99 | $ | 44.14 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | (29.47 | ) | 8.09 | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 0.58 | 0.70 | (c) | |||||
Expenses, after expense reductions (%) | 1.24 | 1.25 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 1.24 | 1.25 | (c) | |||||
Expenses, before expense reductions (%) | 1.48 | 2.34 | (c) | |||||
Portfolio turnover rate (%) | 70.65 | 79.29 | ||||||
Net assets at end of period (thousands) | $ | 29,462 | $ | 7,038 | ||||
| (a) | Effective date of this class of shares was February 1, 2007. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 26 Certified Annual Report |
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Value Fund
| Year Ended September 30, | Period Ended September 30, 2005 (a) | |||||||||||||||
| 2008 | 2007 | 2006 | ||||||||||||||
Class R5 Shares: | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 44.78 | $ | 38.09 | $ | 33.22 | $ | 30.75 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.32 | 0.49 | 0.24 | 0.28 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (12.47 | ) | 7.91 | 5.07 | 2.45 | |||||||||||
Total from investment operations | (12.15 | ) | 8.40 | 5.31 | 2.73 | |||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.25 | ) | (0.41 | ) | (0.44 | ) | (0.26 | ) | ||||||||
Net realized gains | (3.93 | ) | (1.30 | ) | — | — | ||||||||||
Total dividends | (4.18 | ) | (1.71 | ) | (0.44 | ) | (0.26 | ) | ||||||||
Change in net asset value | (16.33 | ) | 6.69 | 4.87 | 2.47 | |||||||||||
NET ASSET VALUE, end of period | $ | 28.45 | $ | 44.78 | $ | 38.09 | $ | 33.22 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return (%)(b) | (29.30 | ) | 22.63 | 16.07 | 8.93 | |||||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) (%) | 0.92 | 1.14 | 0.64 | 1.31 | (c) | |||||||||||
Expenses, after expense reductions (%) | 0.98 | 0.91 | 1.00 | 1.00 | (c) | |||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.98 | 0.91 | 0.98 | 0.99 | (c) | |||||||||||
Expenses, before expense reductions (%) | 1.03 | 0.93 | 3.24 | 127.30 | (c)(d) | |||||||||||
Portfolio turnover rate (%) | 70.65 | 79.29 | 51.36 | 58.90 | ||||||||||||
Net assets at end of period (thousands) | $ | 135,173 | $ | 106,906 | $ | 10,483 | $ | 31 | ||||||||
| (a) | Effective date of this class of shares was February 1, 2005. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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 |
Thornburg Value Fund | September 30, 2008 | |
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 9/30/08
Energy | 14.8 | % | Automobiles & Components | 3.3 | % | |||
Telecommunication Services | 12.0 | % | Utilities | 2.9 | % | |||
Pharmaceuticals, Biotechnology & Life Sciences | 11.0 | % | Banks | 2.4 | % | |||
Insurance | 9.8 | % | Food, Beverage & Tobacco | 1.9 | % | |||
Media | 7.7 | % | Materials | 1.9 | % | |||
Technology Hardware & Equipment | 6.1 | % | Retailing | 1.7 | % | |||
Diversified Financials | 5.9 | % | Transportation | 1.3 | % | |||
Software & Services | 4.6 | % | Consumer Services | 1.0 | % | |||
Semiconductors & Semiconductor Equipment | 3.8 | % | Food & Staples Retailing | 0.8 | % | |||
Health Care Equipment & Services | 3.5 | % | Other Assets & Cash Equivalents | 3.6 | % | |||
| Shares/ Principal Amount | Value | ||||
COMMON STOCK — 95.09% | |||||
AUTOMOBILES & COMPONENTS — 3.30% | |||||
AUTOMOBILES — 3.30% | |||||
Toyota Motor Corp.(1) | 2,963,200 | $ | 126,684,129 | ||
| 126,684,129 | |||||
BANKS — 2.40% | |||||
COMMERCIAL BANKS — 2.40% | |||||
Fifth Third Bancorp | 2,794,027 | 33,248,921 | |||
U.S. Bancorp | 1,636,648 | 58,952,061 | |||
| 92,200,982 | |||||
CONSUMER SERVICES — 1.01% | |||||
HOTELS, RESTAURANTS & LEISURE — 1.01% | |||||
Life Time Fitness, Inc.+ | 1,235,600 | 38,637,212 | |||
| 38,637,212 | |||||
| 28 Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2008 | |
| Shares/ Principal Amount | Value | ||||
DIVERSIFIED FINANCIALS — 5.61% | |||||
CAPITAL MARKETS — 2.19% | |||||
AllianceBernstein Holdings LP | 450,954 | $ | 16,689,807 | ||
Goldman Sachs Group, Inc. | 526,344 | 67,372,032 | |||
DIVERSIFIED FINANCIAL SERVICES — 3.42% | |||||
CIT Group, Inc. | 2,103,400 | 14,639,664 | |||
Hong Kong Exchanges & Clearing Ltd.(1) | 3,432,700 | 42,278,557 | |||
JPMorgan Chase & Co. | 849,250 | 39,659,975 | |||
KKR Financial Holdings LLC | 5,485,100 | 34,885,236 | |||
| 215,525,271 | |||||
ENERGY — 14.85% | |||||
ENERGY EQUIPMENT & SERVICES — 1.43% | |||||
Transocean, Inc.+ | 500,500 | 54,974,920 | |||
OIL, GAS & CONSUMABLE FUELS — 13.42% | |||||
Addax Petroleum Corp. | 564,500 | 15,323,848 | |||
ConocoPhillips | 1,961,300 | 143,665,225 | |||
Exxon Mobil Corp. | 2,214,000 | 171,939,240 | |||
Marathon Oil Corp. | 2,927,500 | 116,719,425 | |||
OAO Gazprom ADR | 2,199,000 | 68,059,050 | |||
| 570,681,708 | |||||
FOOD & STAPLES RETAILING — 0.75% | |||||
FOOD & STAPLES RETAILING — 0.75% | |||||
Rite Aid Corp.+ | 34,525,652 | 29,001,548 | |||
| 29,001,548 | |||||
FOOD, BEVERAGE & TOBACCO — 1.92% | |||||
BEVERAGES — 1.92% | |||||
Dr. Pepper Snapple Group, Inc.+ | 2,779,941 | 73,612,838 | |||
| 73,612,838 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 3.47% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 2.08% | |||||
Varian Medical Services, Inc.+ | 1,399,600 | 79,959,148 | |||
HEALTH CARE TECHNOLOGY — 1.39% | |||||
Eclipsys Corp.+ | 2,543,140 | 53,278,783 | |||
| 133,237,931 | |||||
INSURANCE — 9.78% | |||||
INSURANCE — 9.78% | |||||
Ace Ltd. | 2,233,441 | 120,896,161 | |||
Allstate Corp. | 2,706,000 | 124,800,720 | |||
Cincinnati Financial Corp. | 2,763,664 | 78,598,604 | |||
Hartford Financial Services Group | 1,255,400 | 51,458,846 | |||
| 375,754,331 | |||||
MATERIALS — 1.87% | |||||
CHEMICALS — 1.87% | |||||
Praxair, Inc. | 1,002,500 | 71,919,350 | |||
| 71,919,350 | |||||
| Certified Annual Report 29 |
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Value Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | ||||
MEDIA — 7.68% | |||||
MEDIA — 7.68% | |||||
Comcast Corp. | 7,847,050 | $ | 154,743,826 | ||
DIRECTV Group, Inc.+ | 5,360,092 | 140,273,608 | |||
| 295,017,434 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 10.98% | |||||
BIOTECHNOLOGY — 4.67% | |||||
Genentech, Inc.+ | 666,500 | 59,105,220 | |||
Gilead Sciences, Inc.+ | 2,637,800 | 120,230,924 | |||
PHARMACEUTICALS — 6.31% | |||||
Eli Lilly & Co. | 3,089,443 | 136,028,175 | |||
Roche Holdings AG(1) | 253,700 | 39,714,656 | |||
Teva Pharmaceutical Industries Ltd. ADR | 1,462,236 | 66,955,787 | |||
| 422,034,762 | |||||
RETAILING — 1.71% | |||||
INTERNET & CATALOG RETAIL — 1.71% | |||||
Priceline.com, Inc.+ | 957,859 | 65,546,291 | |||
| 65,546,291 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.81% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.81% | |||||
Intel Corp. | 5,710,300 | 106,953,919 | |||
ON Semiconductor Corp.+ | 5,819,627 | 39,340,679 | |||
| 146,294,598 | |||||
SOFTWARE & SERVICES — 4.60% | |||||
INFORMATION TECHNOLOGY SERVICES — 1.13% | |||||
Paychex, Inc. | 1,316,900 | 43,497,207 | |||
SOFTWARE — 3.47% | |||||
Microsoft Corp. | 4,987,200 | 133,108,368 | |||
| 176,605,575 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 6.17% | |||||
COMMUNICATIONS EQUIPMENT — 2.17% | |||||
Corning, Inc. | 5,324,800 | 83,279,872 | |||
COMPUTERS & PERIPHERALS — 4.00% | |||||
Apple, Inc.+ | 301,850 | 34,308,271 | |||
Dell, Inc.+ | 7,261,800 | 119,674,464 | |||
| 237,262,607 | |||||
TELECOMMUNICATION SERVICES — 11.04% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 7.63% | |||||
AT&T Inc. | 5,200,000 | 145,184,000 | |||
France Telecom SA(1) | 3,091,700 | 86,720,978 | |||
Level 3 Communications, Inc.+ | 22,656,400 | 61,172,280 | |||
WIRELESS TELECOMMUNICATION SERVICES — 3.41% | |||||
China Mobile Ltd.(1) | 4,566,800 | 45,748,712 | |||
Crown Castle International Corp.+ | 2,951,850 | 85,515,095 | |||
| 424,341,065 | |||||
| 30 Certified Annual Report |
SCHEDULE OF INVESTMENTS, CONTINUED
| ||
| Thornburg Value Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | |||||
TRANSPORTATION — 1.29% | ||||||
AIRLINES — 0.40% | ||||||
JetBlue Airways Corp.+ | 3,097,500 | $ | 15,332,625 | |||
ROAD & RAIL — 0.89% | ||||||
Hertz Global Holdings, Inc.+ | 4,537,016 | 34,345,211 | ||||
| 49,677,836 | ||||||
UTILITIES — 2.85% | ||||||
ELECTRIC UTILITIES — 2.85% | ||||||
Entergy Corp. | 1,232,136 | 109,672,425 | ||||
| 109,672,425 | ||||||
TOTAL COMMON STOCK (Cost $ 4,359,932,493) | 3,653,707,893 | |||||
PREFERRED STOCK — 0.27% | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.27% | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.27% | ||||||
CIT Group, Inc. | 319,700 | 10,527,721 | ||||
TOTAL PREFERRED STOCK (Cost $15,985,000) | 10,527,721 | |||||
CORPORATE BONDS — 1.01% | ||||||
TELECOMMUNICATION SERVICES — 1.01% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.01% | ||||||
Level 3 Financing, Inc., 9.25%, 11/1/2014 | $ | 51,489,000 | 38,874,195 | |||
TOTAL CORPORATE BONDS (Cost $42,403,368) | 38,874,195 | |||||
TOTAL INVESTMENTS — 96.37% (Cost $4,418,320,861) | $ | 3,703,109,809 | ||||
OTHER ASSETS LESS LIABILITIES — 3.63% | 139,470,848 | |||||
NET ASSETS — 100.00% | $ | 3,842,580,657 | ||||
Footnote Legend
| + | Non-income producing |
| (1) | Security fair valued by independent pricing service on valuation date, September 30, 2008. |
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, 2008, 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, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
| 32 Certified Annual Report |
| EXPENSE EXAMPLE | ||
| Thornburg Value Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
| Beginning Account Value 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
| Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 848.30 | $ | 5.97 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.54 | $ | 6.52 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 845.10 | $ | 9.50 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.71 | $ | 10.37 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 845.20 | $ | 9.39 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.83 | $ | 10.25 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 850.00 | $ | 4.26 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.40 | $ | 4.65 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 848.20 | $ | 6.24 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.25 | $ | 6.81 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 848.70 | $ | 5.72 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.81 | $ | 6.25 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 849.60 | $ | 4.61 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.02 | $ | 5.03 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.29%; B: 2.06%; C: 2.03%; I: 0.92%; R3: 1.35%; R4: 1.24%; and R5: 1.00%) multiplied by the average account value over the period, multiplied by 183/366 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 Value Fund | September 30, 2008 (Unaudited) | |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 10/2/95) | (32.69 | )% | 3.80 | % | 5.69 | % | 9.49 | % | ||||
B Shares (Incep: 4/3/00) | (33.20 | )% | 3.58 | % | — | (0.31 | )% | |||||
C Shares (Incep: 10/2/95) | (30.66 | )% | 3.97 | % | 5.36 | % | 9.03 | % | ||||
I Shares (Incep: 11/2/98) | (29.24 | )% | 5.16 | % | — | 5.47 | % | |||||
R3 Shares (Incep: 7/1/03) | (29.54 | )% | 4.73 | % | — | 4.84 | % | |||||
R4 Shares (Incep: 2/1/07) | (29.47 | )% | — | — | (15.08 | )% | ||||||
R5 Shares (Incep: 2/1/05) | (29.30 | )% | — | — | 2.54 | % | ||||||
S&P 500 Index (Since: 10/2/95) | (21.98 | )% | 5.17 | % | 3.06 | % | 7.31 | % |
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.
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 I, R3, R4 and R5 shares. Class A and I shares are subject to a 1% 30-day redemption fee.
| 34 Certified Annual Report |
| TRUSTEES AND OFFICERS | ||
| Thornburg Value Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.).
| Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004
| Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 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, 49 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, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc.
| Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc.
| Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc.
| Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc.
| Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004.
| Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc.
| Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc.
| Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc.
| Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc.
| Not applicable | ||
| 36 Certified Annual Report |
| TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2008 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected
| Principal Occupation(s) During Past Five Years
| Other Directorships Held by Trustee
| ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc.
| Not applicable | ||
Lei Wang, 37 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.
| Not applicable | ||
Connor Browne, 29 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, 34 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.
| Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008.
| Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008.
| Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007.
| Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004.
| Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
| Certified Annual Report 37 |
| OTHER INFORMATION | ||
Thornburg Value Fund | September 30, 2008 (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, 2008, the Fund designates long-term capital gain dividends of $359,588,473.
For the tax year ended September 30, 2008, the Thornburg Value Fund designates 68.47% (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.
63.13% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2008 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, 2008. Complete information will be computed and reported in conjunction with your 2008 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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of that information with the Trustees and addressed questions presented by 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 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 considered the effects of recent market and economic events on the Fund and the Advisor’s responses to these events in view of the Fund’s investment objectives and policies.
| 38 Certified Annual Report |
| OTHER INFORMATION, CONTINUED | ||
Thornburg Value Fund | September 30, 2008 (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.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s slightly lower investment performance for the second quarter of the current year and lower investment performance for the year to date and the 12 months ending with the second quarter relative to two broad based securities indices and a category of equity mutual funds selected by an independent mutual fund analyst firm, but observed that the Fund’s performance exceeded the performance of the indices in most of the nine most recent calendar years, that the Fund’s performance similarly exceeded the performance of the category in most of those years, and that the Fund’s relative performance in three, five and ten year periods ending with the second quarter fell within or close to the top quartile of the category. The Trustees also considered in this regard the Fund’s higher historical cumulative return relative to the Standard & Poor’s 500 Index.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 was comparable to 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 other factors considered. The Trustees noted their previous observations respecting fees charged by the Advisor to other investment management clients, and their conclusion 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 required.
In reviewing the profitability of the Advisor, the Trustees considered 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses 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 ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/ 2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
| This page is not part of the Annual Report. 43 |
Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to .19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
44 This page is not part of the Annual Report. |
Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
Sincerely,
Brian McMahon
CEO and Chief Investment Officer
| This page is not part of the Annual Report. 45 |
46 This page is not part of the Annual Report. |
Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
* This fund does not use the laddering strategy.
| This page is not part of the Annual Report. 47 |
|
|
| This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. |
Investment Advisor:
Thornburg Investment Management® 800.847.0200
Distributor:
Thornburg Securities Corporation® 800.847.0200
TH077 |
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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, 2008. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; they 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. Funds invested in a limited number of holdings may expose an investor to greater volatility. 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.
Class I, R3, R4, and R5 shares may not be available to all investors. Minimum investments for Class I shares may be higher than those for other classes.
Glossary
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
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 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.
Basis Point – A unit that is equal to 1/100th of 1%. A 1% change = 100 basis points (bps)
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.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
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
CO-PORTFOLIO MANAGERS
Left to right: Lei Wang,CFA, Bill Fries,CFA, Wendy Trevisani
KEY PORTFOLIO ATTRIBUTES
As of 9/30/08
Portfolio P/E Trailing 12-months* | 12.4x | ||
Portfolio Price to Cash Flow* | 2.0 | ||
Portfolio Price to Book Value* | 2.4 | ||
Median Market Cap* | $ | 29.1 B | |
7-Year Beta (A Shares vs. MSCI EAFE)* | 0.92 | ||
Holdings | 58 |
| * | Source: FactSet |
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 1.29%, as disclosed in the most recent Prospectus.
Finding Promising Companies at a Discount
The Thornburg International Value 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.
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. 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,
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 2008
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | |||||||||
A Shares (Incep: 5/28/98) | ||||||||||||
Without Sales Charge | (27.77 | )% | 6.62 | % | 13.27 | % | 12.30 | % | ||||
With Sales Charge | (31.01 | )% | 5.00 | % | 12.24 | % | 11.79 | % | ||||
MSCI EAFE Index | ||||||||||||
(Since: 5/28/98) | (30.50 | )% | 1.12 | % | 9.69 | % | 5.02 | % |
4 This page is not part of the Annual Report.
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.
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 change 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.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/08
Top Contributors | Top Detractors | |
| Potash Corp. of Saskatchewan, Inc. | Nokia Corp. | |
| Teva Pharmaceutical Industries Ltd. | Country Garden Holdings Co. Ltd. | |
| Novartis AG | UBS Ag | |
| Shiseido Co. Ltd. | Hong Kong Exchanges & Clearing Ltd. | |
| China Life Insurance Co. Ltd. | Porsche Automobil Holding SE |
Source: FactSet
MARKET CAPITALIZATION EXPOSURE
As of 9/30/08
TOP TEN HOLDINGS
As of 9/30/08
Teva Pharma Ind. Ltd. ADR | 3.6 | % | |
Nestle SA | 3.1 | % | |
AXA | 3.0 | % | |
Novo Nordisk A/S | 2.8 | % | |
Roche Holding AG | 2.7 | % | |
Telefónica SA | 2.6 | % | |
BNP Paribas | 2.6 | % | |
Nintendo Co. Ltd. | 2.5 | % | |
Rogers Communications, Inc. | 2.3 | % | |
Standard Chartered plc | 2.1 | % |
BASKET STRUCTURE
As of 9/30/08
This page is not part of the Annual Report. 5
Thornburg International Value Fund
September 30, 2008
Table of Contents | ||
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| 10 | ||
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| 15 | ||
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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
Wendy Trevisani Co-Portfolio Manager
Lei Wang,CFA Co-Portfolio Manager | October 22, 2008
Dear Fellow Shareholder:
How the world has changed. A year ago we were reporting extraordinary performance that we are certain delighted shareholders, with a total return for fiscal 2007 of positive 40.64%. Today we are reporting very different results. For the fiscal year ended September 30, 2008, the Thornburg International Value Fund (Class A shares at NAV) recorded a total return of negative 27.77%, versus the negative 30.50% return of the Morgan Stanley Capital International Europe, Australasia, Far East Index (MSCI EAFE Index). While comfortably ahead of the index, negative absolute returns are always disappointing. Expectations earlier in the year that markets and companies around the world might be effectively adjusting to the stress in financial markets proved misplaced. Today, we worry about deflationary pressures while ongoing concern about inflation has not disappeared. The fear of global recession weighs more heavily on investors’ minds today than in recent memory. As markets tend to discount future events, it is possible that recessionary forces do not translate into continued declines in global markets. That is our hope.
Since the start of the 2008 fiscal year, trillions of dollars in equity value have vanished, from both company-specific liquidity crises and general market declines. Equity markets have been universally weak, with emerging markets reacting more violently than developed, largely due to the natural resource or export-dependent nature of many of these economies, and indigestion related to risk appetite. It is also worth noting that capital outflow has further exacerbated negative stock price performance.
Only a select number of stocks posted positive absolute returns for the year. Potash Corporation of Saskatchewan was up sharply, especially during the first half of the fiscal year. Consumer staples stocks such as Nestlé and Reckitt Benckiser held up relatively well, contributing to our overweight in the consistent earners basket.
Generally speaking, financial, commodity, and other economically sensitive issues performed poorly, especially late in the fiscal year. Additionally, Nokia, China Mobile and Vodafone were also among stocks negatively impacting |
Certified Annual Report 7
Letter to Shareholders
| Continued | ||
performance. This was somewhat surprising to us given the historically defensive nature of the telecommunications business model. Less surprising was the negative contribution from emerging market related holdings. Country Garden, Hong Kong Exchange, Sberbank, Shinhan Financial and Gazprom were among the largest detractors. Financial holdings UBS and Lloyds TSB, and UK retailers Marks & Spencer and Next also contributed negatively. Essentially anything that touched the consumer, specifically in sensitive economies such as the United Kingdom, was penalized. In the cases where we felt there were company-specific fundamentals that could create headwinds to performance, holdings were either trimmed or eliminated during the year.
On a promising note, governments of the leading economies around the world are working to restore confidence in the global financial system. We are optimistic that these efforts will bear fruit, and that the actions taken thus far will work in the short term to restore stability to markets, and in the long run soften the economic adjustment that is essentially universal. At this writing, there is some indication of modest improvement in financial system liquidity. Although with less-than-perfect transparency and lack of detailed comprehension of a variety of financial assets and liabilities, confidence may be slow in returning to both the credit and stock markets.
Perhaps an ancient Chinese proverb is appropriate today: “Chaos begets the order of the universe.” In this challenging environment, we are focused on executing the investment philosophy and approach that has proven successful for us in the past. We continue to look for promising companies available at a discount to our view of their intrinsic value. The silver lining in the market anguish of the last year is that we have more opportunities. Stocks around the world are down sharply and valuations compare favorably with most historical measures. Though it is not obvious today, a few years down the road, our rearview mirror may reveal this period as a unique and unprecedented opportunity. Our investment philosophy is meant to foster success. Our comprehensive value approach is intended to provide a portfolio with a spectrum of opportunities as well as a diversification of risks. In our consistent earners basket, we own business models that we believe will prove more resilient than average in a tough economic environment. The other two baskets, basic value and emerging franchises, represent sound, cash-generating companies that should lead when global economies and markets eventually recover.
During periods of extreme volatility and economic uncertainty, share prices can stray from their underlying value as focus turns to macro themes and company-specific fundamentals are ignored. This type of environment is very attractive for value-oriented, bottom-up, fundamental investors. We have been presented with the opportunity to make investments in companies that we believe have great promise at extraordinary discounts to their underlying | ||
8 Certified Annual Report
value. When earnings stabilize, visibility improves and confidence returns to the markets, these are the companies we would expect to lead the recovery. Although we are disappointed about recent returns, we retain a firm belief that our current portfolio will produce the investment results you expect from our stock selection philosophy and process.
To quote English poet Percy Shelley: “If winter comes, can spring be far behind?” Perhaps we should be reminded to retain confidence in these trying times. We thank you for your trust and confidence during this period of exceptional challenge.
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 as our other funds and investment topics.
Sincerely,
| ||||||||||
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| 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, 2008 | |
ASSETS | ||||
Investments at value (cost $15,210,175,034) (Note 2) | $ | 14,051,586,712 | ||
Cash | 567,089,061 | |||
Cash denominated in foreign currency (cost $1,080,723) | 1,081,941 | |||
Receivable for investments sold | 37,050 | |||
Receivable for fund shares sold | 51,061,453 | |||
Unrealized gain on forward exchange contracts (Note 7) | 136,049,554 | |||
Dividends receivable | 24,238,321 | |||
Foreign dividend tax reclaims receivable | 10,395,861 | |||
Interest receivable | 778,634 | |||
Prepaid expenses and other assets | 102,698 | |||
Total Assets | 14,842,421,285 | |||
LIABILITIES | ||||
Payable for securities purchased | 38,528,125 | |||
Payable for fund shares redeemed | 70,509,058 | |||
Unrealized loss on forward exchange contracts (Note 7) | 20,463,982 | |||
Payable to investment advisor and other affiliates (Note 3) | 12,960,074 | |||
Accounts payable and accrued expenses | 7,965,965 | |||
Total Liabilities | 150,427,204 | |||
NET ASSETS | $ | 14,691,994,081 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 17,441,994 | ||
Net unrealized depreciation on investments | (1,043,938,851 | ) | ||
Accumulated net realized gain (loss) | (824,807,596 | ) | ||
Net capital paid in on shares of beneficial interest | 16,543,298,534 | |||
| $ | 14,691,994,081 | |||
10 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 | |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share | $ | 23.68 | |
Maximum sales charge, 4.50% of offering price | 1.12 | ||
Maximum offering price per share | $ | 24.80 | |
Class B Shares: | |||
Net asset value and offering price per share * | $ | 22.37 | |
Class C Shares: | |||
Net asset value and offering price per share * | $ | 22.46 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share | $ | 24.18 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share | $ | 23.73 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share | $ | 23.60 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share | $ | 24.14 | |
| * | 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, 2008 | |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $44,679,125) | $ | 418,270,791 | ||
Interest income | 20,123,552 | |||
Total Income | 438,394,343 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 119,871,745 | |||
Administration fees (Note 3) | ||||
Class A Shares | 9,022,006 | |||
Class B Shares | 161,278 | |||
Class C Shares | 2,946,216 | |||
Class I Shares | 2,846,198 | |||
Class R3 Shares | 1,314,102 | |||
Class R4 Shares | 185,152 | |||
Class R5 Shares | 396,504 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 18,024,018 | |||
Class B Shares | 1,289,618 | |||
Class C Shares | 23,562,566 | |||
Class R3 Shares | 5,262,224 | |||
Class R4 Shares | 369,021 | |||
Transfer agent fees | ||||
Class A Shares | 11,576,270 | |||
Class B Shares | 199,437 | |||
Class C Shares | 2,987,815 | |||
Class I Shares | 5,277,970 | |||
Class R3 Shares | 2,673,072 | |||
Class R4 Shares | 375,453 | |||
Class R5 Shares | 1,659,892 | |||
Registration and filing fees | ||||
Class A Shares | 256,410 | |||
Class B Shares | 28,382 | |||
Class C Shares | 96,502 | |||
Class I Shares | 344,588 | |||
Class R3 Shares | 27,379 | |||
Class R4 Shares | 46,902 | |||
Class R5 Shares | 35,352 | |||
Custodian fees (Note 3) | 5,601,955 | |||
Professional fees | 352,247 | |||
Accounting fees | 541,050 | |||
Trustee fees | 308,540 | |||
Other expenses | 2,303,450 | |||
Total Expenses | 219,943,314 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (2,169,996 | ) | ||
Fees paid indirectly (Note 3) | (258,155 | ) | ||
Net Expenses | 217,515,163 | |||
Net Investment Income | $ | 220,879,180 | ||
12 Certified Annual Report
| STATEMENT OF OPERATIONS, CONTINUED | ||
| Thornburg International Value Fund | Year Ended September 30, 2008 | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | (665,991,923 | ) | |
Foreign currency transactions | (142,944,498 | ) | ||
| (808,936,421 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (5,056,259,214 | ) | ||
Foreign currency translation | 108,283,449 | |||
| (4,947,975,765 | ) | |||
Net Realized and Unrealized Loss | (5,756,912,186 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (5,536,033,006 | ) | |
See notes to financial statements.
Certified Annual Report 13
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg International Value Fund
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 220,879,180 | $ | 103,966,190 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (808,936,421 | ) | 1,428,445,088 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | (4,947,975,765 | ) | 2,536,203,304 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (5,536,033,006 | ) | 4,068,614,582 | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (75,245,625 | ) | (51,935,263 | ) | ||||
Class B Shares | (664,681 | ) | (290,064 | ) | ||||
Class C Shares | (13,733,669 | ) | (5,990,504 | ) | ||||
Class I Shares | (86,528,884 | ) | (49,998,965 | ) | ||||
Class R3 Shares | (10,260,007 | ) | (5,881,366 | ) | ||||
Class R4 Shares | (2,772,322 | ) | (152,359 | ) | ||||
Class R5 Shares | (13,817,161 | ) | (3,086,424 | ) | ||||
From realized gains | ||||||||
Class A Shares | (600,769,404 | ) | (108,430,244 | ) | ||||
Class B Shares | (11,739,966 | ) | (2,187,195 | ) | ||||
Class C Shares | (203,158,109 | ) | (34,058,224 | ) | ||||
Class I Shares | (426,254,876 | ) | (53,149,660 | ) | ||||
Class R3 Shares | (85,519,217 | ) | (12,229,262 | ) | ||||
Class R4 Shares | (4,805,028 | ) | — | |||||
Class R5 Shares | (39,612,380 | ) | (1,466,007 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 1,289,526,844 | 1,139,200,293 | ||||||
Class B Shares | 15,813,625 | 19,169,835 | ||||||
Class C Shares | 509,105,066 | 466,723,398 | ||||||
Class I Shares | 2,388,464,998 | 1,923,676,047 | ||||||
Class R3 Shares | 349,026,118 | 317,048,006 | ||||||
Class R4 Shares | 262,833,310 | 36,735,755 | ||||||
Class R5 Shares | 844,102,498 | 338,549,227 | ||||||
Net Increase (Decrease) in Net Assets | (1,452,041,876 | ) | 7,980,861,606 | |||||
NET ASSETS: | ||||||||
Beginning of year | 16,144,035,957 | 8,163,174,351 | ||||||
End of year | $ | 14,691,994,081 | $ | 16,144,035,957 | ||||
Undistributed net investment income | $ | 17,441,994 | $ | 5,460,264 | ||||
See notes to financial statements.
14 Certified Annual Report
Thornburg International Value Fund | September 30, 2008 |
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 thirteen 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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. As a secondary objective, the Fund also seeks some current income.
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 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 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 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 Investments: 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.
Any debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations 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 obligations 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.
Quotations in foreign currencies for foreign portfolio investments are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
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 procedures approved by the Trustees, which may include the use of prices obtained from an independent pricing service. The pricing service ordinarily values equity securities in these instances, using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures and index data and other data. 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the debt obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation held by the Fund may
Certified Annual Report 15
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 | |
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 obligation.
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Foreign currency translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund, to the shareholders. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and/or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient 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.
16 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 | |
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, 2008, 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, 2008, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,815,686 for Class R3 shares, $229,329 for Class R4 shares, and $124,981 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, 2008, the Distributor has advised the Fund that it earned net commissions aggregating $1,006,548 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $580,010 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, 2008, 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, 2008, fees paid indirectly were $258,155.
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, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 108,956,029 | $ | 3,391,672,055 | 88,417,092 | $ | 2,708,357,987 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 18,277,901 | 582,600,796 | 4,398,998 | 126,296,864 | ||||||||||
Shares repurchased | (91,613,103 | ) | (2,684,825,344 | ) | (56,529,130 | ) | (1,695,490,555 | ) | ||||||
Redemption fees received** | — | 79,337 | — | 35,997 | ||||||||||
Net Increase (Decrease) | 35,620,827 | $ | 1,289,526,844 | 36,286,960 | $ | 1,139,200,293 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 839,348 | $ | 25,311,160 | 900,271 | $ | 26,066,084 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 287,761 | 8,760,191 | 66,554 | 1,752,230 | ||||||||||
Shares repurchased | (669,684 | ) | (18,259,141 | ) | (295,251 | ) | (8,649,193 | ) | ||||||
Redemption fees received** | — | 1,415 | — | 714 | ||||||||||
Net Increase (Decrease) | 457,425 | $ | 15,813,625 | 671,574 | $ | 19,169,835 | ||||||||
Certified Annual Report 17
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 | |
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 27,283,818 | $ | 819,809,729 | 22,218,387 | $ | 645,166,990 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 4,272,790 | 130,242,728 | 871,513 | 23,106,077 | ||||||||||
Shares repurchased | (16,133,810 | ) | (440,973,314 | ) | (6,906,854 | ) | (201,561,323 | ) | ||||||
Redemption fees received** | — | 25,923 | — | 11,654 | ||||||||||
Net Increase (Decrease) | 15,422,798 | $ | 509,105,066 | 16,183,046 | $ | 466,723,398 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 114,796,742 | $ | 3,562,363,852 | 80,379,355 | $ | 2,448,318,070 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 10,634,700 | 342,652,908 | 2,384,953 | 71,218,240 | ||||||||||
Shares repurchased | (51,339,452 | ) | (1,516,614,397 | ) | (19,106,830 | ) | (595,884,029 | ) | ||||||
Redemption fees received** | — | 62,635 | — | 23,766 | ||||||||||
Net Increase (Decrease) | 74,091,990 | $ | 2,388,464,998 | 63,657,478 | $ | 1,923,676,047 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 22,845,687 | $ | 711,229,882 | 17,797,234 | $ | 542,413,469 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,601,406 | 82,998,888 | 540,505 | 15,509,752 | ||||||||||
Shares repurchased | (14,653,445 | ) | (445,214,207 | ) | (7,865,942 | ) | (240,879,799 | ) | ||||||
Redemption fees received** | — | 11,555 | — | 4,584 | ||||||||||
Net Increase (Decrease) | 10,793,648 | $ | 349,026,118 | 10,471,797 | $ | 317,048,006 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 10,423,276 | $ | 310,505,054 | 1,119,583 | $ | 37,786,085 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 199,073 | 6,047,020 | 3,999 | 139,613 | ||||||||||
Shares repurchased | (1,883,686 | ) | (53,720,408 | ) | (34,705 | ) | (1,189,970 | ) | ||||||
Redemption fees received** | — | 1,644 | — | 27 | ||||||||||
Net Increase (Decrease) | 8,738,663 | $ | 262,833,310 | 1,088,877 | $ | 36,735,755 | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 33,390,724 | $ | 1,036,104,971 | 11,580,206 | $ | 374,139,434 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,568,885 | 49,576,729 | 140,876 | 4,458,789 | ||||||||||
Shares repurchased | (8,111,555 | ) | (241,587,993 | ) | (1,252,025 | ) | (40,050,137 | ) | ||||||
Redemption fees received** | — | 8,791 | — | 1,141 | ||||||||||
Net Increase (Decrease) | 26,848,054 | $ | 844,102,498 | 10,469,057 | $ | 338,549,227 | ||||||||
| * | Effective date of Class R4 shares was February 1, 2007. |
| ** | The Fund charges a redemption fee of 1% of the Class A and Class I shares redeemed or 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, 2008 | |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $8,455,371,263 and $4,531,762,118, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 15,210,175,034 | ||
Gross unrealized appreciation on a tax basis | $ | 1,272,722,619 | ||
Gross unrealized depreciation on a tax basis | (2,431,310,941 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (1,158,588,322 | ) | |
Distributable earnings - ordinary income | $ | 23,276,524 |
At September 30, 2008, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2007 of $5,830,128 and $709,222,026 respectively. For tax purposes, such losses will be reflected in the year ending September 30, 2009.
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $5,875,101 and decreased accumulated net realized investment loss by $5,875,101. This reclassification has no impact on the net asset value of the Fund. Reclassification resulted primarily from currency gains/losses.
The tax character of distributions paid during the year ended September 30, 2008, and September 30, 2007, was as follows:
| 2008 | 2007 | |||||
Distributions from: | ||||||
Ordinary income | $ | 874,665,689 | $ | 136,409,922 | ||
Capital gains | 700,215,640 | 192,445,615 | ||||
Total | $ | 1,574,881,329 | $ | 328,855,537 | ||
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2008, 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 BUY OR SELL:
Contract description | Buy/Sell | Contract Amount | Contract Value Date | Value (USD) | Unrealized Appreciation | Unrealized (Depreciation) | ||||||||||
Euro Dollar | Sell | 502,213,000 | 12/19/08 | $ | 770,881,889 | $ | 61,569,696 | $ | — | |||||||
Euro Dollar | Sell | 260,785,000 | 12/19/08 | 380,480,099 | 12,154,349 | — | ||||||||||
Euro Dollar | Sell | 916,086,500 | 12/19/08 | 1,309,509,008 | 15,652,968 | — | ||||||||||
Euro Dollar | Buy | 303,354,500 | 12/19/08 | 428,567,103 | — | (117,331 | ) | |||||||||
Great Britain Pound | Sell | 82,325,000 | 12/29/08 | 159,018,147 | 12,248,594 | — | ||||||||||
Great Britain Pound | Sell | 255,847,000 | 12/29/08 | 449,326,177 | — | (6,799,541 | ) | |||||||||
Mexican Peso | Sell | 6,600,000,000 | 12/08/08 | 623,317,750 | 24,921,662 | — | ||||||||||
Mexican Peso | Buy | 506,500,000 | 12/08/08 | 46,268,384 | — | (346,018 | ) | |||||||||
Mexican Peso | Buy | 860,000,000 | 12/08/08 | 81,822,160 | — | (3,849,337 | ) | |||||||||
Mexican Peso | Buy | 1,275,000,000 | 12/08/08 | 124,951,000 | — | (9,351,755 | ) | |||||||||
Swiss Franc | Sell | 155,526,000 | 12/23/08 | 148,932,747 | 9,502,285 | — | ||||||||||
Total unrealized appreciation (depreciation) from forward exchange contracts | $ | 136,049,554 | $ | (20,463,982 | ) | |||||||||||
Certified Annual Report 19
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 | |
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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
20 Certified Annual Report
Thornburg International Value Fund
| Year Ended September 30, | |||||||||||||||||||
| Class A Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
PER SHARE PERFORMANCE | |||||||||||||||||||
(for a share outstanding throughout the year)+ | |||||||||||||||||||
Net asset value, beginning of year | $ | 36.09 | $ | 26.51 | $ | 22.80 | $ | 18.18 | $ | 14.95 | |||||||||
Income from investment operations: | |||||||||||||||||||
Net investment income (loss) | 0.37 | 0.27 | 0.32 | 0.18 | 0.15 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (9.59 | ) | 10.25 | 4.00 | 4.63 | 3.08 | |||||||||||||
Total from investment operations | (9.22 | ) | 10.52 | 4.32 | 4.81 | 3.23 | |||||||||||||
Less dividends from: | |||||||||||||||||||
Net investment income | (0.31 | ) | (0.29 | ) | (0.21 | ) | (0.19 | ) | — | ||||||||||
Net realized gains | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | — | |||||||||||
Total dividends | (3.19 | ) | (0.94 | ) | (0.61 | ) | (0.19 | ) | — | ||||||||||
Change in net asset value | (12.41 | ) | 9.58 | 3.71 | 4.62 | 3.23 | |||||||||||||
NET ASSET VALUE, end of year | $ | 23.68 | $ | 36.09 | $ | 26.51 | $ | 22.80 | $ | 18.18 | |||||||||
RATIOS/SUPPLEMENTAL DATA | |||||||||||||||||||
Total return (%)(a) | (27.77 | ) | 40.64 | 19.30 | 26.51 | 21.61 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||
Net investment income (loss) (%) | 1.23 | 0.88 | 1.25 | 0.87 | 0.88 | ||||||||||||||
Expenses, after expense reductions (%) | 1.28 | 1.29 | 1.33 | 1.44 | 1.49 | ||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.28 | 1.29 | 1.33 | 1.44 | 1.49 | ||||||||||||||
Expenses, before expense reductions (%) | 1.28 | 1.29 | 1.33 | 1.44 | 1.51 | ||||||||||||||
Portfolio turnover rate (%) | 27.31 | 64.77 | 36.58 | 34.17 | 35.84 | ||||||||||||||
Net assets at end of year (thousands) | $ | 5,510,070 | $ | 7,111,205 | $ | 4,261,892 | $ | 2,205,924 | $ | 948,631 | |||||||||
| (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, | ||||||||||||||||||||
| Class B Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 34.33 | $ | 25.28 | $ | 21.82 | $ | 17.39 | $ | 14.43 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.13 | 0.03 | 0.11 | 0.01 | (0.02 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (9.06 | ) | 9.75 | 3.81 | 4.44 | 2.98 | ||||||||||||||
Total from investment operations | (8.93 | ) | 9.78 | 3.92 | 4.45 | 2.96 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.15 | ) | (0.08 | ) | (0.06 | ) | (0.02 | ) | — | |||||||||||
Net realized gains | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | — | ||||||||||||
Total dividends | (3.03 | ) | (0.73 | ) | (0.46 | ) | (0.02 | ) | — | |||||||||||
Change in net asset value | (11.96 | ) | 9.05 | 3.46 | 4.43 | 2.96 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 22.37 | $ | 34.33 | $ | 25.28 | $ | 21.82 | $ | 17.39 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (28.33 | ) | 39.55 | 18.32 | 25.59 | 20.51 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 0.44 | 0.11 | 0.44 | 0.04 | (0.12 | ) | ||||||||||||||
Expenses, after expense reductions (%) | 2.04 | 2.06 | 2.13 | 2.26 | 2.36 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.04 | 2.06 | 2.13 | 2.25 | 2.36 | |||||||||||||||
Expenses, before expense reductions (%) | 2.04 | 2.06 | 2.13 | 2.27 | 2.42 | |||||||||||||||
Portfolio turnover rate (%) | 27.31 | 64.77 | 36.58 | 34.17 | 35.84 | |||||||||||||||
Net assets at end of year (thousands) | $ | 98,541 | $ | 135,486 | $ | 82,799 | $ | 47,306 | $ | 22,181 | ||||||||||
+ | 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, | |||||||||||||||||||
| Class C Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
PER SHARE PERFORMANCE | |||||||||||||||||||
(for a share outstanding throughout the year)+ | |||||||||||||||||||
Net asset value, beginning of year | $ | 34.45 | $ | 25.37 | $ | 21.89 | $ | 17.46 | $ | 14.47 | |||||||||
Income from investment operations: | |||||||||||||||||||
Net investment income (loss) | 0.15 | 0.05 | 0.13 | 0.03 | 0.01 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (9.10 | ) | 9.78 | 3.82 | 4.45 | 2.98 | |||||||||||||
Total from investment operations | (8.95 | ) | 9.83 | 3.95 | 4.48 | 2.99 | |||||||||||||
Less dividends from: | |||||||||||||||||||
Net investment income | (0.16 | ) | (0.10 | ) | (0.07 | ) | (0.05 | ) | — | ||||||||||
Net realized gains | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | — | |||||||||||
Total dividends | (3.04 | ) | (0.75 | ) | (0.47 | ) | (0.05 | ) | — | ||||||||||
Change in net asset value | (11.99 | ) | 9.08 | 3.48 | 4.43 | 2.99 | |||||||||||||
NET ASSET VALUE, end of year | $ | 22.46 | $ | 34.45 | $ | 25.37 | $ | 21.89 | $ | 17.46 | |||||||||
| RATIOS/SUPPLEMENTAL DATA | |||||||||||||||||||
Total return (%) | (28.28 | ) | 39.63 | 18.41 | 25.65 | 20.66 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||
Net investment income (loss) (%) | 0.50 | 0.17 | 0.55 | 0.16 | 0.04 | ||||||||||||||
Expenses, after expense reductions (%) | 2.00 | 2.01 | 2.06 | 2.16 | 2.26 | ||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.00 | 2.01 | 2.05 | 2.15 | 2.26 | ||||||||||||||
Expenses, before expense reductions (%) | 2.00 | 2.01 | 2.06 | 2.16 | 2.26 | ||||||||||||||
Portfolio turnover rate (%) | 27.31 | 64.77 | 36.58 | 34.17 | 35.84 | ||||||||||||||
Net assets at end of year (thousands) | $ | 1,852,185 | $ | 2,309,487 | $ | 1,290,250 | $ | 635,833 | $ | 243,955 | |||||||||
+ | 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, | |||||||||||||||||||
| Class I Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
PER SHARE PERFORMANCE | |||||||||||||||||||
(for a share outstanding throughout the year)+ | |||||||||||||||||||
Net asset value, beginning of year | $ | 36.77 | $ | 26.99 | $ | 23.19 | $ | 18.48 | $ | 15.13 | |||||||||
Income from investment operations: | |||||||||||||||||||
Net investment income (loss) | 0.51 | 0.41 | 0.43 | 0.28 | 0.24 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (9.79 | ) | 10.42 | 4.06 | 4.72 | 3.11 | |||||||||||||
Total from investment operations | (9.28 | ) | 10.83 | 4.49 | 5.00 | 3.35 | |||||||||||||
Less dividends from: | |||||||||||||||||||
Net investment income | (0.43 | ) | (0.40 | ) | (0.29 | ) | (0.29 | ) | — | ||||||||||
Net realized gains | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | — | |||||||||||
Total dividends | (3.31 | ) | (1.05 | ) | (0.69 | ) | (0.29 | ) | — | ||||||||||
Change in net asset value | (12.59 | ) | 9.78 | 3.80 | 4.71 | 3.35 | |||||||||||||
NET ASSET VALUE, end of year | $ | 24.18 | $ | 36.77 | $ | 26.99 | $ | 23.19 | $ | 18.48 | |||||||||
| RATIOS/SUPPLEMENTAL DATA | |||||||||||||||||||
Total return (%) | (27.45 | ) | 41.17 | 19.76 | 27.15 | 22.14 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||
Net investment income (loss) (%) | 1.64 | 1.32 | 1.67 | 1.32 | 1.35 | ||||||||||||||
Expenses, after expense reductions (%) | 0.89 | 0.90 | 0.94 | 0.99 | 0.99 | ||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.89 | 0.90 | 0.94 | 0.99 | 0.99 | ||||||||||||||
Expenses, before expense reductions (%) | 0.89 | 0.90 | 0.94 | 1.02 | 1.11 | ||||||||||||||
Portfolio turnover rate (%) | 27.31 | 64.77 | 36.58 | 34.17 | 35.84 | ||||||||||||||
Net assets at end of year (thousands) | $ | 5,152,506 | $ | 5,113,109 | $ | 2,034,453 | $ | 892,216 | $ | 293,583 | |||||||||
+ | 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, | |||||||||||||||||||
| Class R3 Shares: | 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
PER SHARE PERFORMANCE | |||||||||||||||||||
(for a share outstanding throughout the year)+ | |||||||||||||||||||
Net asset value, beginning of year | $ | 36.18 | $ | 26.58 | $ | 22.88 | $ | 18.28 | $ | 15.01 | |||||||||
Income from investment operations: | |||||||||||||||||||
Net investment income (loss) | 0.33 | 0.23 | 0.33 | 0.21 | 0.19 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (9.63 | ) | 10.26 | 3.97 | 4.63 | 3.08 | |||||||||||||
Total from investment operations | (9.30 | ) | 10.49 | 4.30 | 4.84 | 3.27 | |||||||||||||
Less dividends from: | |||||||||||||||||||
Net investment income | (0.27 | ) | (0.24 | ) | (0.20 | ) | (0.24 | ) | — | ||||||||||
Net realized gains | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | — | |||||||||||
Total dividends | (3.15 | ) | (0.89 | ) | (0.60 | ) | (0.24 | ) | — | ||||||||||
Change in net asset value | (12.45 | ) | 9.60 | 3.70 | 4.60 | 3.27 | |||||||||||||
NET ASSET VALUE, end of year | $ | 23.73 | $ | 36.18 | $ | 26.58 | $ | 22.88 | $ | 18.28 | |||||||||
| RATIOS/SUPPLEMENTAL DATA | |||||||||||||||||||
Total return (%) | (27.90 | ) | 40.43 | 19.15 | 26.54 | 21.79 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||
Net investment income (loss) (%) | 1.07 | 0.75 | 1.29 | 0.99 | 1.08 | ||||||||||||||
Expenses, after expense reductions (%) | 1.45 | 1.45 | 1.45 | 1.45 | 1.45 | ||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.45 | 1.45 | 1.45 | 1.45 | 1.45 | ||||||||||||||
Expenses, before expense reductions (%) | 1.62 | 1.61 | 1.61 | 1.72 | 2.42 | ||||||||||||||
Portfolio turnover rate (%) | 27.31 | 64.77 | 36.58 | 34.17 | 35.84 | ||||||||||||||
Net assets at end of year (thousands) | $ | 902,150 | $ | 984,587 | $ | 445,081 | $ | 118,436 | $ | 11,207 | |||||||||
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 25
| FINANCIAL HIGHLIGHTS, CONTINUED | ||
| Thornburg International Value Fund | ||
Class R4 Shares: | Year Ended Sept. 30, 2008 | Period Ended Sept. 30, 2007(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 36.02 | $ | 28.86 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.44 | 0.09 | ||||||
Net realized and unrealized gain (loss) on investments | (9.62 | ) | 7.36 | |||||
Total from investment operations | (9.18 | ) | 7.45 | |||||
Less dividends from: | ||||||||
Net investment income | (0.36 | ) | (0.29 | ) | ||||
Net realized gains | (2.88 | ) | — | |||||
Total dividends | (3.24 | ) | (0.29 | ) | ||||
Change in net asset value | (12.42 | ) | 7.16 | |||||
NET ASSET VALUE, end of period | $ | 23.60 | $ | 36.02 | ||||
| RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | (27.73 | ) | 25.90 | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 1.51 | 0.42 | (c) | |||||
Expenses, after expense reductions (%) | 1.25 | 1.25 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 1.25 | 1.25 | (c) | |||||
Expenses, before expense reductions (%) | 1.40 | 1.70 | (c) | |||||
Portfolio turnover rate (%) | 27.31 | 64.77 | ||||||
Net assets at end of period (thousands) | $ | 231,960 | $ | 39,217 | ||||
| (a) | Effective date of this class of shares was February 1, 2007. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| + | 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 September 30, 2005(a) | |||||||||||||||
| Class R5 Shares: | 2008 | 2007 | 2006 | |||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 36.74 | $ | 26.97 | $ | 23.18 | $ | 20.37 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.50 | 0.43 | 0.45 | 0.16 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (9.81 | ) | 10.39 | 4.03 | 2.84 | |||||||||||
Total from investment operations | (9.31 | ) | 10.82 | 4.48 | 3.00 | |||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.41 | ) | (0.40 | ) | (0.29 | ) | (0.19 | ) | ||||||||
Net realized gains | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | |||||||||
Total dividends | (3.29 | ) | (1.05 | ) | (0.69 | ) | (0.19 | ) | ||||||||
Change in net asset value | (12.60 | ) | 9.77 | 3.79 | 2.81 | |||||||||||
NET ASSET VALUE, end of period | $ | 24.14 | $ | 36.74 | $ | 26.97 | $ | 23.18 | ||||||||
| RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return (%)(b) | (27.54 | ) | 41.13 | 19.72 | 14.72 | |||||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) (%) | 1.65 | 1.33 | 1.76 | 1.10 | (c) | |||||||||||
Expenses, after expense reductions (%) | 0.99 | 0.94 | 0.95 | 1.00 | (c) | |||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.94 | 0.95 | 0.99 | (c) | |||||||||||
Expenses, before expense reductions (%) | 1.01 | 0.95 | 0.96 | 2.13 | (c) | |||||||||||
Portfolio turnover rate (%) | 27.31 | 64.77 | 36.58 | 34.17 | ||||||||||||
Net assets at end of period (thousands) | $ | 944,582 | $ | 450,944 | $ | 48,699 | $ | 14,458 | ||||||||
| (a) | Effective date of this class of shares was February 1, 2005. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 27
| SCHEDULE OF INVESTMENTS | ||
| Thornburg International Value Fund | September 30, 2008 | |
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 9/30/08
Telecommunication Services | 12.4 | % | Consumer Services | 2.3 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 10.5 | % | Retailing | 2.2 | % | |||||
Food, Beverage & Tobacco | 8.3 | % | Consumer Durables & Apparel | 2.1 | % | |||||
Banks | 7.6 | % | Household & Personal Products | 1.9 | % | |||||
Energy | 7.3 | % | Transportation | 1.9 | % | |||||
Insurance | 6.6 | % | Food & Staples Retailing | 1.2 | % | |||||
Software & Services | 6.1 | % | Health Care Equipment & Services | 1.1 | % | |||||
Capital Goods | 4.8 | % | Diversified Financials | 0.9 | % | |||||
Materials | 4.3 | % | Semiconductors & Semiconductor Equipment | 0.6 | % | |||||
Utilities | 4.1 | % | Real Estate | 0.3 | % | |||||
Automobiles & Components | 3.5 | % | Other Assets & Cash Equivalents | 7.0 | % | |||||
Technology Hardware & Equipment | 3.0 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/08 (percent of equity holdings)
France | 13.3 | % | China | 5.6 | % | Netherlands | 2.3 | % | |||||||||
UK | 12.9 | % | Finland | 4.4 | % | Sweden | 2.0 | % | |||||||||
Switzerland | 11.4 | % | Israel | 3.9 | % | Brazil | 1.8 | % | |||||||||
Canada | 8.7 | % | Mexico | 3.0 | % | Turkey | 1.0 | % | |||||||||
Japan | 8.0 | % | Spain | 2.8 | % | Hong Kong | 1.0 | % | |||||||||
Denmark | 6.1 | % | Russia | 2.7 | % | Australia | 0.9 | % | |||||||||
Germany | 5.6 | % | Greece | 2.6 | % |
28 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 | |
| Shares/ Principal Amount | Value | ||||
COMMON STOCK — 92.92% | |||||
AUTOMOBILES & COMPONENTS — 3.45% | |||||
AUTOMOBILES — 3.45% | |||||
Porsche Automobil Holding SE+(1) | 1,867,475 | $ | 202,509,564 | ||
Toyota Motor Corp.(1) | 7,129,400 | 304,799,485 | |||
| 507,309,049 | |||||
BANKS — 7.63% | |||||
COMMERCIAL BANKS — 7.63% | |||||
BNP Paribas(1) | 3,939,100 | 376,016,671 | |||
China Merchants Bank Co., Ltd.(1) | 64,511,903 | 155,789,452 | |||
National Bank of Greece SA(1) | 6,737,537 | 273,035,783 | |||
Standard Chartered plc+(1) | 12,828,123 | 315,642,886 | |||
| 1,120,484,792 | |||||
CAPITAL GOODS — 4.75% | |||||
AEROSPACE & DEFENSE — 0.97% | |||||
Empresa Brasileira de Aeronautica SA ADR | 5,302,345 | 143,216,338 | |||
ELECTRICAL EQUIPMENT — 0.94% | |||||
Vestas Wind Systems A/S+(1) | 1,581,585 | 138,048,391 | |||
MACHINERY — 2.84% | |||||
Fanuc Ltd.(1) | 3,174,800 | 238,845,951 | |||
Komatsu Ltd.(1) | 10,892,655 | 178,329,111 | |||
| 698,439,791 | |||||
CONSUMER DURABLES & APPAREL — 2.07% | |||||
TEXTILES, APPAREL & LUXURY GOODS — 2.07% | |||||
LVMH Moet Hennessy Louis Vuitton SA(1) | 3,457,596 | 303,555,096 | |||
| 303,555,096 | |||||
CONSUMER SERVICES — 2.34% | |||||
HOTELS, RESTAURANTS & LEISURE — 2.34% | |||||
Carnival plc(1) | 8,974,400 | 267,482,710 | |||
OPAP SA(1) | 2,473,530 | 75,922,716 | |||
| 343,405,426 | |||||
DIVERSIFIED FINANCIALS — 0.92% | |||||
DIVERSIFIED FINANCIAL SERVICES — 0.92% | |||||
Hong Kong Exchanges & Clearing Ltd.(1) | 10,980,200 | 135,236,697 | |||
| 135,236,697 | |||||
ENERGY — 7.31% | |||||
ENERGY EQUIPMENT & SERVICES — 2.12% | |||||
Schlumberger Ltd. | 3,982,800 | 311,016,852 | |||
OIL, GAS & CONSUMABLE FUELS — 5.19% | |||||
Canadian Natural Resources Ltd. | 3,884,200 | 266,428,565 | |||
Canadian Oil Sands Trust | 1,963,700 | 71,517,982 | |||
Nexen, Inc. | 2,293,500 | 53,229,457 | |||
OAO Gazprom ADR | 7,239,103 | 224,060,707 | |||
Rosneft Oil Company(1) | 21,365,050 | 147,866,400 | |||
| 1,074,119,963 | |||||
Certified Annual Report 29
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 | |
| Shares/ Principal Amount | Value | ||||
FOOD & STAPLES RETAILING — 1.15% | |||||
FOOD & STAPLES RETAILING — 1.15% | |||||
Wal-Mart de Mexico SAB de C.V. | 48,287,300 | $ | 169,103,789 | ||
| 169,103,789 | |||||
FOOD, BEVERAGE & TOBACCO — 8.28% | |||||
BEVERAGES — 3.04% | |||||
Carlsberg A/S Class B(1) | 3,662,200 | 279,218,426 | |||
Sabmiller plc(1) | 8,615,750 | 168,219,633 | |||
FOOD PRODUCTS — 5.24% | |||||
Groupe Danone(1) | 4,361,800 | 309,390,671 | |||
Nestle SA(1) | 10,646,000 | 460,093,548 | |||
| 1,216,922,278 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 1.07% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 1.07% | |||||
Smith & Nephew plc(1) | 14,823,325 | 156,555,629 | |||
| 156,555,629 | |||||
HOUSEHOLD & PERSONAL PRODUCTS — 1.93% | |||||
HOUSEHOLD PRODUCTS — 1.93% | |||||
Reckitt Benckiser plc(1) | 5,846,430 | 283,463,448 | |||
| 283,463,448 | |||||
INSURANCE — 6.58% | |||||
INSURANCE — 6.58% | |||||
AXA(1) | 13,469,100 | 440,902,492 | |||
China Life Insurance Co.(1) | 83,682,000 | 311,745,246 | |||
Swiss Re(1) | 3,858,711 | 214,179,518 | |||
| 966,827,256 | |||||
MATERIALS — 4.28% | |||||
CHEMICALS — 3.46% | |||||
Air Liquide SA(1) | 1,615,421 | 177,509,429 | |||
Givaudan SA(1) | 177,329 | 148,114,923 | |||
Potash Corp. of Saskatchewan, Inc. | 1,386,800 | 183,071,468 | |||
METALS & MINING — 0.82% | |||||
BHP Billiton Ltd.(1) | 4,614,340 | 119,375,794 | |||
| 628,071,614 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 10.46% | |||||
PHARMACEUTICALS — 10.46% | |||||
Novartis AG(1) | 3,792,665 | 199,682,038 | |||
Novo Nordisk A/S(1) | 7,970,350 | 413,200,868 | |||
Roche Holding AG(1) | 2,522,800 | 394,923,665 | |||
Teva Pharmaceutical Industries Ltd. ADR | 11,542,900 | 528,549,391 | |||
| 1,536,355,962 | |||||
REAL ESTATE — 0.30% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 0.30% | |||||
Country Garden Holdings Co.(1) | 140,604,300 | 44,672,814 | |||
| 44,672,814 | |||||
30 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 | |
| Shares/ Principal Amount | Value | ||||
RETAILING — 2.17% | |||||
MULTILINE RETAIL — 0.31% | |||||
Next plc(1) | 2,457,534 | $ | 45,312,602 | ||
SPECIALTY RETAIL — 1.86% | |||||
Hennes & Mauritz AB(1) | 6,663,487 | 272,841,785 | |||
| 318,154,387 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.60% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.60% | |||||
Arm Holdings plc(1) | 50,986,100 | 88,602,599 | |||
| 88,602,599 | |||||
SOFTWARE & SERVICES — 6.15% | |||||
INFORMATION TECHNOLOGY SERVICES — 0.72% | |||||
Redecard SA | 8,091,900 | 105,799,817 | |||
SOFTWARE — 5.43% | |||||
Amdocs Ltd.+ | 6,593,900 | 180,540,982 | |||
Nintendo Co. Ltd.(1) | 863,131 | 366,117,503 | |||
Sap AG(1) | 4,708,494 | 250,769,305 | |||
| 903,227,607 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 3.03% | |||||
COMMUNICATIONS EQUIPMENT — 2.09% | |||||
Nokia Oyj(1) | 16,481,900 | 307,411,052 | |||
COMPUTERS & PERIPHERALS — 0.94% | |||||
Logitech International SA+(1) | 6,057,621 | 138,276,116 | |||
| 445,687,168 | |||||
TELECOMMUNICATION SERVICES — 12.43% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.11% | |||||
France Telecom SA(1) | 7,895,275 | 221,459,380 | |||
Telefónica SA(1) | 16,058,400 | 381,829,555 | |||
WIRELESS TELECOMMUNICATION SERVICES — 8.32% | |||||
América Móvil SAB de C.V. ADR | 5,173,344 | 239,836,228 | |||
China Mobile Ltd.(1) | 25,144,172 | 251,886,112 | |||
Rogers Communications, Inc. | 10,259,100 | 332,764,042 | |||
Turkcell(1) | 25,027,800 | 139,213,673 | |||
Vodafone Group plc ADR | 11,719,483 | 259,000,574 | |||
| 1,825,989,564 | |||||
TRANSPORTATION — 1.91% | |||||
ROAD & RAIL — 1.91% | |||||
Canadian National Railway Co. | 5,889,800 | 281,027,995 | |||
| 281,027,995 | |||||
UTILITIES — 4.11% | |||||
ELECTRIC UTILITIES — 4.11% | |||||
E. ON AG+(1) | 6,177,001 | 310,930,947 | |||
Fortum Oyj(1) | 8,739,252 | 293,282,841 | |||
| 604,213,788 | |||||
TOTAL COMMON STOCK (Cost $14,810,015,034) | 13,651,426,712 | ||||
Certified Annual Report 31
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 | |
| Shares/ Principal Amount | Value | |||||
SHORT TERM INVESTMENTS — 2.72% | ||||||
General Electric Co., 2.15%, 10/1/2008 | $ | 300,000,000 | $ | 300,000,000 | ||
Lehigh County Pennsylvania (Muhlenberg College; LOC: Bank of America) (weekly demand note) put 10/7/2008, 7.50%, 11/1/2037 | 16,500,000 | 16,500,000 | ||||
Massachusetts State Health & Education Facilities (Essex Museum; LOC: Bank of America) (weekly demand note) put 10/7/2008, 7.20%, 7/1/2033 | 14,525,000 | 14,525,000 | ||||
Palm Beach County Florida (St. Andrews School; LOC: Bank of America) (weekly demand note) put 10/7/2008, 7.25%, 10/1/2028 | 13,275,000 | 13,275,000 | ||||
South Fulton Georgia Municipal Water & Sewer Authority (weekly demand note) put 10/7/2008, 7.25%, 1/1/2033 | 14,755,000 | 14,755,000 | ||||
Triborough Bridge & Tunnel Authority New York (weekly demand note) put 10/7/2008, 10.00%, 1/1/2033 | 41,105,000 | 41,105,000 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $400,160,000) | 400,160,000 | |||||
TOTAL INVESTMENTS — 95.64% (Cost $15,210,175,034) | $ | 14,051,586,712 | ||||
OTHER ASSETS LESS LIABILITIES — 4.36% | 640,407,369 | |||||
NET ASSETS — 100.00% | $ | 14,691,994,081 | ||||
Footnote Legend
| + | Non-income producing |
| (1) | Security fair valued by independent pricing service on valuation date, September 30, 2008. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR American Depository Receipt
LOC Letter of Credit
See notes to financial statements.
32 Certified Annual Report
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, 2008, 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, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
Certified Annual Report 33
| EXPENSE EXAMPLE | ||
| Thornburg International Value Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
| Beginning Account Value 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 807.80 | $ | 5.94 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.43 | $ | 6.63 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 804.80 | $ | 9.37 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.61 | $ | 10.46 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 805.00 | $ | 9.14 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.87 | $ | 10.20 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 809.80 | $ | 4.11 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.46 | $ | 4.59 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 807.40 | $ | 6.55 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.75 | $ | 7.31 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 808.10 | $ | 5.68 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.72 | $ | 6.34 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 808.80 | $ | 4.78 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,019.72 | $ | 5.33 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.31%; B: 2.08%; C: 2.03%; I: 0.91%; R3: 1.45%; R4: 1.26%; and R5: 1.06%) multiplied by the average account value over the period, multiplied by 183/366 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.
34 Certified Annual Report
| INDEX COMPARISON | ||
| Thornburg International Value Fund | September 30, 2008 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg International Value Fund versus MSCI EAFE Index (May 28, 1998 to September 30, 2008)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 5/28/98) | (31.01 | )% | 12.24 | % | 11.79 | % | 9.28 | % | ||||
B Shares (Incep: 4/3/00) | (31.59 | )% | 12.11 | % | — | 5.82 | % | |||||
C Shares (Incep: 5/28/98) | (28.93 | )% | 12.45 | % | 11.39 | % | 8.87 | % | ||||
I Shares (Incep: 3/30/01) | (27.45 | )% | 13.75 | % | — | 9.58 | % | |||||
R3 Shares (Incep: 7/1/03) | (27.90 | )% | 13.20 | % | — | 14.69 | % | |||||
R4 Shares (Incep: 2/1/07) | (27.73 | )% | — | — | (5.53 | )% | ||||||
R5 Shares (Incep: 2/1/05) | (27.54 | )% | — | — | 9.72 | % | ||||||
MSCI EAFE Index (Since: 5/28/98) | (30.50 | )% | 9.69 | % | 5.02 | % | 3.39 | % |
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 I, R3, R4 and R5 shares. Class A and I shares are subject to a 1% 30-day redemption fee.
The Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East Index (EAFE) is an unmanaged index. It is a generally accepted benchmark for major overseas markets. Index weightings represent the relative capitalizations of the major overseas markets included in the index on a U.S. dollar adjusted basis. The index is calculated with net dividends reinvested in U.S. dollars. Unless otherwise noted, index returns do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
Certified Annual Report 35
| TRUSTEES AND OFFICERS | ||
| Thornburg International Value Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 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, 49 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 International Value Fund | September 30, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Certified Annual Report 37
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
38 Certified Annual Report
| OTHER INFORMATION | ||
| Thornburg International Value Fund | September 30, 2008 (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, 2008, the Fund designates long-term capital gain dividends of $700,215,640.
For the tax year ended September 30, 2008, the Thornburg International Value Fund designates 49.26% (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, 2008, foreign taxes paid and foreign source income is $43,992,633 and $453,925,405, 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, 2008. Complete information will be computed and reported in conjunction with your 2008 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 2008 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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan their 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 subsequently reviewed portions of the specified information with the Trustees and addressed questions from 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 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 “foreign large blend” 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 considered the effects of recent market and economic events on the Fund and the Advisor’s responses to these events in view of the Fund’s investment objectives and policies.
Certified Annual Report 39
| OTHER INFORMATION, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2008 (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, 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.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s lower investment performance for the second quarter of the current year and for the year to date relative to two broad-based securities indices and the category of foreign large blend equity mutual funds selected by an independent mutual fund analyst firm, but observed that the Fund’s performance exceeded the performance of the indices in most of the recent eight calendar years and also exceeded the performance of the category in each of those years, and that the Fund’s relative performance in one, three, five and ten year periods fell in or close to the top decile of the fund category. The Trustees also considered in this regard the Fund’s higher cumulative return since the Fund’s inception relative to the Morgan Stanley Capital International Europe, Australasia and Far East Index.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 somewhat lower 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 also was somewhat lower than the average and median expense ratios for the same fund group. The Trustees noted their previous observations respecting fees charged by the Advisor to other investment management clients, and their conclusion 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 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses 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 ongoing 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 70 1/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
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Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to .19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
Exhibit I: KOSPI Stock Index/Korea, 10/31/88 - 9/30/08 (in USD)
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
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Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
Sincerely,
Brian McMahon
CEO and Chief Investment Officer
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46 This page is not part of the Annual Report.
Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
This page is not part of the Annual Report. 47
 | This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: Thornburg Investment Management® 800.847.0200
Distributor: Thornburg Securities Corporation® 800.847.0200
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Important Information
The information presented on the following pages was current as of September 30, 2008. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; they 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 may invest a portion of the assets in small capitalization companies, which may increase the risk of greater price fluctuations. Funds invested in a limited number of holdings may expose an investor to greater volatility. 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.
Class I, R3, R4, and R5 shares may not be available to all investors. Minimum investments for Class I shares may be higher than those for other classes.
Glossary
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
NASDAQ Composite Index – The NASDAQ Composite Index is a market-value weighted, technology-oriented index comprised of over 3,000 domestic and non-U.S.-based securities.
Russell 3000 Growth Index – The Russell 3000 Growth Index (Russell 3K G) 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.
Basis Point (BPS) – Unit equal to 1/100th of 1%. A 1% change = 100 basis points (bps) 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.
Estimated EPS Growth – The estimated growth in earnings per share (EPS) over a given time period. For example, estimated EPS growth for a single year would be calculated as: [(estimated earnings for the upcoming year—current earnings) x 100] divided by current earnings.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
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.
Selection Effect – The portion of portfolio excess return attributable to choosing different securities within groups from the benchmark. A group’s selection effect equals the weight of the benchmark’s group multiplied by the total return of the portfolio’s group minus the total return of the benchmark’s group.
This page is not part of the Annual Report. 3
Thornburg Core Growth Fund
Continually Evaluating the Risk Equation
KEY PORTFOLIO ATTRIBUTES
As of 9/30/08
Portfolio P/E Trailing 12-months* | 18.3x | ||
Portfolio Price to Cash Flow* | 6.9 | ||
Portfolio Price to Book Value* | 3.6 | ||
Median Market Cap* | $ | 5.1 B | |
7-Year Beta (A shares vs. Russell 3K G)* | 1.14 | ||
Holdings | 34 |
| * | Source: FactSet |
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 1.37%, as disclosed in the most recent Prospectus.
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 focuses 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, the Fund’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, 2008
| 1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||
A Shares (Incep: 12/27/00) | ||||||||||||
Without Sales Charge | (35.48 | )% | (1.47 | )% | 6.10 | % | 1.68 | % | ||||
With Sales Charge | (38.40 | )% | (2.97 | )% | 5.12 | % | 1.08 | % | ||||
Russell 3000 Growth | ||||||||||||
Index (since: 12/27/00) | (20.60 | )% | 0.15 | % | 3.96 | % | (2.53 | )% |
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 9/30/08
Top Contributors | Top Detractors | |
Genentech, Inc. | Las Vegas Sands Corp. | |
Visa, Inc. | ATP Oil & Gas Corp. | |
Western Union Co. | Bare Escentuals, Inc. | |
Gilead Sciences, Inc. | AirMedia Group, Inc. | |
Alexion Pharmaceuticals, Inc. | Porsche Automobil Holding SE |
Source: FactSet
TOP TEN HOLDINGS
As of 9/30/08
Western Union Co. | 5.8 | % | |
Amdocs Ltd. | 5.7 | % | |
DIRECTV Group, Inc. | 4.8 | % | |
AT&T, Inc. | 4.1 | % | |
América Móvil SAB de C.V. | 4.1 | % | |
Gilead Sciences, Inc. | 4.0 | % | |
Microsoft Corp. | 3.6 | % | |
Comcast Corp. | 3.6 | % | |
Vistaprint Ltd. | 3.4 | % | |
Hansen Natural Corp. | 3.3 | % |
This page is not part of the Annual Report. 5
Awards
Thornburg Core Growth Fund
 | Four-Time Lipper Fund Award Winner | |
| Multi-cap Growth Category | ||
2008 – Class A shares won for the five-year period ended | ||
| 12/31/07, among 332 funds | ||
2007 – Class I shares won for the three-year period ended | ||
| 12/31/06, among 371 funds and Class A shares won for the | ||
| 5-year period, among 294 funds | ||
| 2006 – Class A shares won for the three-year period ended | ||
| 12/31/05, among 340 funds | ||
| 2004 – Class A shares won for the three-year period ended | ||
| 12/31/03, among 287 funds | ||
| Lipper Fund Awards are granted annually to the fund in each Lipper classification that consistently delivered the strongest risk-adjusted performance over the period (calculated with dividends reinvested and without sales charges). Individual fund classification awards are given for three-year, five-year, and ten-year periods. The Fund did not receive the award for all eligible time periods in every year. | ||
| Past performance does not guarantee future results. | ||
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Thornburg Core Growth Fund
September 30, 2008
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 7
October 17, 2008
Dear Fellow Shareholder:
“May you live in interesting times,” a supposedly ancient Chinese proverb, is certainly appropriate today. The quote is meant as a curse, in the sense of an actual Chinese proverb, “It is better to be a dog in a peaceful time than a man in a chaotic period.” In the capital market sense, we live in interesting times indeed. Leadership is tested during times of turmoil.
Discipline is a central tenet to investing. While I don’t agree, I can understand the argument that, in our management of the Fund, we are not extremely disciplined in our approach because our mandate is so broad and our analytical approach is so flexible. But we are disciplined. We apply our approach consistently and we evolve our process gradually over time as we learn and as the market changes.
Flexibility is important. Central to our philosophy is that using one template to find great investments is not the winning approach. Some investors like to “wait for their pitch,” which is a great approach, but if three strikes are thrown, and none of those were “your pitch,” you are out and you get no more pitches. Mutual fund managers need to make the most of each appearance at the plate. With that in mind, we are constantly exercising our judgment about what is good enough to buy, and what is great. Our preference is obviously to buy great stocks, and we are advantaged in the sense that we only have to own thirty stocks, but we can only buy the best of what the market gives us. In strong equity markets of long duration, stocks get expensive and our judgment and our approach to valuation becomes more relative than absolute. In the current environment, while there is still danger, many stocks offer compelling investment opportunities. Many stocks are cheap, not “cheap relative to the market,” but outright cheap. Of those that are cheap, some are our favorite kind of cheap – “cheap with prospects.”
For the fiscal year ended September 30, 2008, the Thornburg Core Growth Fund had challenging relative and absolute performance. On September 30, 2007, the net asset value (NAV) for the Class A shares was $20.72. As of the end of this fiscal year, the Fund’s NAV was $13.36. The Fund’s Class A shares underperformed its benchmark with a total return of negative 35.48% over that period. The Russell 3000 Growth Index returned negative 20.60% for the year ended September 30, 2008.
Core Growth shareholders have faced other periods of underperformance in the past, in spite of the fact that our long-term record has been good. Without a doubt, the recent market turmoil has impacted our returns on both an absolute and a relative basis. I have been a shareholder since the earliest days of this fund and it remains a material investment. Since inception, we have seen two similar periods of poor relative performance. The first
8 Certified Annual Report
ended on August 8, 2002. On a trailing twelve-month basis, the Fund returned negative 31.13%, which was not only bad absolute performance, but the Fund also trailed the Russell 3000 Growth Index by 400 basis points over that period. Times were dark on the equity investing landscape. Fear ran rampant and 9/11 had happened less than a year earlier. The internet “bubble” was still unwinding and all stocks were under pressure. Shareholders from that point earned, over the next twelve months, a positive return of over 52%. The index increased not quite 11%.
On an absolute return basis, the summer of 2002 represented the best comparison to the current situation. However, on a relative basis, the twelve-month period prior to July 28, 2004 was our previously largest period of underperformance. Going into July 29th, the Fund had returned negative 3.37%, compared with positive 7.24% for the Russell Index. Not only were we more than 1,000 basis points behind, but nobody likes to be losing money when others are making it. Over the next twelve months, that gap closed and then reversed with the Fund up by more than 42% while the benchmark (Russell 3000 Growth) returned 15.7%.
Your portfolio is home to many well-known and well-regarded growth companies, such as Google Inc., Western Union Co., Gilead Sciences Inc., Electronic Arts Inc., Microsoft Corp., Qualcomm Inc., Comcast Corp., DIRECTV Group, Ecolab Inc., AT&T Inc., and Carlsberg A/S. These companies are some of the best franchises that exist globally. Just because these are great businesses does not mean they’ve been good stocks, however. Microsoft has built its franchise on two near-monopolies: the operating system (Windows) and the productivity suite (Office). The stock, on a total return basis was down 24% for the year and is currently trading at the lowest multiples to earnings and sales that we have seen this decade.
It is not clear to me that Microsoft’s business is broken or even very depressed. In the fiscal year ended June 30, 2008, the company grew revenues 18% vs. fiscal year 2007. More than 25 cents on every dollar of sales drops to the bottom line after taxes. You are not just buying a growing business with unbelievable entry barriers; you are also buying one of the best balance sheets in the world. Microsoft has $23 billion in cash and short-term investments on the books, against no debt. In fact, when you look at the right side of the balance sheet, you notice half of it is equity and another 18% is deferred revenue.
While some of our performance has been self-induced, a bigger problem has been that our portfolio has become cheaper. This can happen in one of two ways, either prices can fall or earnings can rise. Earnings growth has not accelerated, but prices have come under pressure. In the accompanying chart, the precipitous decline in the blue line represents the falling valuation of the portfolio (based on the forward 1-year price/estimated earnings ratio). The portfolio is cheaper on an earnings basis than it has ever been.
Certified Annual Report 9
Letter to Shareholders
Continued
The more range-bound gold line represents the estimated forward 3–5 year earnings growth rate of the portfolio. The takeaway is that the aggregate-weighted average growth rate of the portfolio is in line with historical trends, while the portfolio has become cheaper. I consider this extremely encouraging; the portfolio is undervalued relative to its history.
There has been a lot of rhetoric about Wall Street greed and how that is correlated to the declining economy. Aggressive lending practices by predatory lenders, without a doubt, contributed to the leveraging of the American consumer. Enabled by the Fed, investment banks explored new ways to drive their business based around securitizing these and other assets. Wall Street, the consumer and the government all levered up their balance sheets without really contemplating the consequences. If squirrels ate every nut when it fell from the tree, how many squirrels would be left?
Much like “buying the dip” (the winning retail investment approach of the 1990s) most everyone involved has learned over time that overleveraging is okay because something will save them – increasing house prices, the stock market, fiscal policy, tax cuts, economic expansion . . . something. This led to historically high equity drawdowns at a time of unprecedented residential housing price appreciation, resulting in many homeowners with little or no equity in their homes. Homeowners became unable to effectively deal with rising gas prices, commodity inflation, U.S. dollar weakness (reduced purchasing power), and declining employment prospects.
“The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear.”
This quote comes from Berkshire Hathaway’s 2002 annual report. The danger of derivatives has not exactly been a secret, but since that market has been a central component of growth for certain financial institutions, there has been little incentive to curb their use. The regulators are either not sophisticated enough (SEC, Congress) or motivated enough (FINRA). FINRA exists to “self regulate” the industry; while they may have the best of intentions, in the current situation those intentions are best used as paving material.
Evaluating risk is something we spend a lot of time doing before investing in a company. Understanding a balance sheet does not prevent us from losing money, but it does help us comprehend whether the “calculated risk” that is equity investing is in our favor or not. We think our approach gives us a competitive advantage in most markets against many of our growth-oriented competitors. Derivatives serve a useful function in the market; like many things, they can be used thoughtfully and in moderation, or wildly and to excess. We have always been careful of businesses where just a small part of the risk is apparent and much of the risk is hidden away and obscured by accounting complexities.
As of this writing, policy makers have been attempting to provide relief to banks (both commercial and investment). If liquidity increases above the critical threshold, lending will happen (more carefully and at more rational risk-adjusted rates). At this point, I would expect normalcy to prevail and great businesses will appreciate into more appropriate valuations. As for derivatives, it seems likely that, over time, many will move from over-the-counter to being exchange-traded. This won’t eliminate the risk of these instruments, but it will create a better understanding of their liquidity and their systematic structural risk.
10 Certified Annual Report
The average investor, on a dollar-weighted return basis, does considerably worse than the market. According to a study by Dalbar, the annualized return of the S&P 500 Index from 1988-2007 (20 years) was 11.8%. The average stock fund investor earned an annualized return of just 4.5% over the same period. Some of this can be explained by fees, inflation, and manager underperformance. The biggest piece of lost return comes from selling funds at the wrong time. Whether you call it the “herd mentality” or “fear overcoming greed,” the typical investor has historically not made correct timing decisions.
Let’s call the price level of the market 10 years in the future “X”. If the representative market is the Russell 3000 Growth Index, then the market’s price as of September 30, 2008 was 394.38. The formula for our future return is (X/394.38)^( 1/10)-1. The level of X will be determined by many things, most happening years from now. At that point, investors won’t care that 10 years in the past there existed an investment bank called Lehman Brothers that went out of business or that Treasury bill yields briefly went negative. Your return over the next 10 years is driven by two aspects: the price at which you buy (“buy low, sell high”) and the manner in which you invest your money (market proxy, active manager, manager selection, etc.).
“Growth with both feet on the ground” is how Thornburg Investment Management’s CEO and CIO, Brian McMahon, describes the process we apply to the Thornburg Core Growth Fund. It’s a fitting tag-line because our approach is rooted in detailed research, valuing businesses, and being very conscious of risks while we are investing our shareholders’ money.
Without a doubt, the equity market environment in 2008 has been unusual. Our portfolio is full of many examples of holdings where the business is performing well while the stock is doing awfully. AirMedia Group Inc. is a great example.
AirMedia sells advertising on their digital media network in airports in China and on airlines operating in the region. AirMedia offers exclusive access to affluent Chinese travelers and has concession contracts with the top 30 airports in China and 11 airlines. It is in the process of rolling out a digital frame network in their airports which has led to explosive growth with revenues growing 252% in the most recent quarter. Increasing utilization and price increases should drive growth and margin expansion once the capacity expansion is complete. Concession contracts run 3–5 years and AirMedia owns the media infrastructure they install in the airports, leading to competitive barriers and attractive economics. We believe in the next year, revenues and earnings can more than double. The current P/E multiple on next year’s consensus earnings is 8 times $0.91. We think they can achieve better-than-consensus earnings, making the valuation even more attractive.
Over the past 12 months, AirMedia has declined almost 60%. While the stock has declined, trailing revenues expanded from $27 million to $75 million. While AirMedia is a small cap stock, it is highly profitable. Net margins in the most recent quarter exceeded 26%. The company has no debt and holds $185 million
Certified Annual Report 11
Letter to Shareholders
Continued
in cash. As emerging markets have become unpopular with investors and China has gone out of favor, this stock has been crushed. It is our belief that in a normal environment this company is worth considerably more than it is trading at today, especially in light of its clean balance sheet and robust growth.
As I think about returns and the attribution of those returns, what I notice immediately is that stock selection has been poor. Historically, most or all of our returns have come from picking stocks (versus being in the “right” sectors). This time around we have been on the wrong side of the market; our sector selection on average was slightly favorable, but our stocks were tough. Financials, Staples, and Consumer Discretionary were the pain points, led by stocks like Las Vegas Sands Corp., Bare Escentuals Inc., and AirMedia Group. As might be expected given the fiasco in the financial sector, we had only one relative contributor from that sector (Affiliated Managers Group Inc.). While CB Richard Ellis had real estate exposure and Assured Guaranty had stock specific issues, most of our exposure came from a group which suffered considerable multiple compression: the exchanges (CME Group Inc., NYSE Euronext, Nymex, BM&F Bovespa SA).
Some areas worked. Health care, traditionally a strength, continued to be an area where we added value. With the exception of our investment in WellPoint Inc. (which had been a successful investment for years), all of our other holdings in the sector had a positive selection effect (Gilead Sciences, Alexion Pharmaceuticals Inc., Genentech Inc., Celgene Corp., Illumina Inc., Cytyc/Hologic, and Masimo Corp.).
Information Technology, another classically popular growth sector, was a strength of the portfolio. ON Semiconductor Corp., Giant Interactive, and Qualcomm Inc. led the detractors, but the Fund received solid relative contributions from Western Union, Visa Inc., MEMC Electronic Materials Inc., Vistaprint Ltd., and Equinix Inc. Particularly in the technology arena, we have been proactively exercising our discipline around valuation by actively reducing exposure at higher valuations and adding on downdrafts.
We started your Fund on December 27, 2000, with the following mission statement: “To generate consistent returns by purchasing promising growth companies with sound business fundamentals at a discount to their long-term value.” We use our basket structure (dividing the portfolio into three roughly equally sized categories: Growth Industry Leaders, Consistent Growth Companies, and Emerging Growth Companies) to help in our goal of consistency over time. While consistency is our goal, we tread in treacherous waters; we keep your portfolio focused in a limited number of holdings in order to build the most favorable risk/ reward portfolio that we can.
Over time, we have delivered on our mission statement. Markets have difficult periods, created by incredibly negative sentiment. We launched the Fund nearly eight years ago as the internet bubble was in the process of imploding, and over that time we have outperformed (from inception to 9/30/08, A shares at NAV) the Russell 3000 Growth Index by 421 basis points annualized.
12 Certified Annual Report
Thornburg Investment Management has, over the past 26 years, built a very strong culture oriented around shareholder returns and service. Specific to how we invest, the culture has developed to prioritize security selection and risk management. Adherence to our core approach is reinforced by the culture and by the simple fact that every day I work with shareholders of the Core Growth Fund, who exist at all levels of our organization. Our firm-wide approach to investing is driven by three characteristics: having an intense focus on business fundamentals and valuation, being globally aware investors, and openly and proactively sharing investment information internally. Our culture has been an important part of our success historically and we anticipate it will be in the future as well.
Our motto is “Strategies for Building Real Wealth.” 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 managing 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.
Sincerely,
 |
| Alexander M.V. Motola,CFA |
| Managing Director |
| 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 13
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
ASSETS | ||||
Investments at value (Note 2) | ||||
Non-controlled affiliated issuers (cost $ 96,722,041) | $ | 39,425,142 | ||
Non-affiliated issuers (cost $ 2,259,400,911) | 1,933,912,151 | |||
Cash | 67,066,583 | |||
Receivable for investments sold | 5,912,864 | |||
Receivable for fund shares sold | 2,567,359 | |||
Unrealized gain on forward exchange contracts (Note 7) | 901,079 | |||
Dividends receivable | 284,281 | |||
Prepaid expenses and other assets | 37,454 | |||
Total Assets | 2,050,106,913 | |||
LIABILITIES | ||||
Payable for securities purchased | 1,445,048 | |||
Payable for fund shares redeemed | 13,212,485 | |||
Unrealized loss on forward exchange contracts (Note 7) | 12,167 | |||
Payable to investment advisor and other affiliates (Note 3) | 1,908,725 | |||
Accounts payable and accrued expenses | 1,617,854 | |||
Total Liabilities | 18,196,279 | |||
NET ASSETS | $ | 2,031,910,634 | ||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (569,936 | ) | |
Net unrealized depreciation on investments | (381,896,747 | ) | ||
Accumulated net realized gain (loss) | (310,712,288 | ) | ||
Net capital paid in on shares of beneficial interest | 2,725,089,605 | |||
| $ | 2,031,910,634 | |||
14 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($738,456,776 applicable to 55,259,021 shares of beneficial interest outstanding - Note 4) | $ | 13.36 | |
Maximum sales charge, 4.50% of offering price | 0.63 | ||
Maximum offering price per share | $ | 13.99 | |
Class C Shares: | |||
Net asset value and offering price per share * ($385,110,236 applicable to 30,743,359 shares of beneficial interest outstanding - Note 4) | $ | 12.53 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($346,497,485 applicable to 25,277,908 shares of beneficial interest outstanding - Note 4) | $ | 13.71 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($289,499,909 applicable to 21,651,702 shares of beneficial interest outstanding - Note 4) | $ | 13.37 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($21,047,493 applicable to 1,574,331 shares of beneficial interest outstanding - Note 4) | $ | 13.37 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($ 251,298,735 applicable to 18,346,535 shares of beneficial interest outstanding - Note 4) | $ | 13.70 | |
| * | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 15
| STATEMENT OF OPERATIONS | ||
| Thornburg Core Growth Fund | Year Ended September 30, 2008 | |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $1,336,623) | $ | 19,695,542 | ||
Interest income | 3,731,351 | |||
Total Income | 23,426,893 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 22,819,570 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,552,798 | |||
Class C Shares | 722,690 | |||
Class I Shares | 266,323 | |||
Class R3 Shares | 459,900 | |||
Class R4 Shares | 22,935 | |||
Class R5 Shares | 135,507 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 3,100,863 | |||
Class C Shares | 5,777,657 | |||
Class R3 Shares | 1,837,699 | |||
Class R4 Shares | 45,953 | |||
Transfer agent fees | ||||
Class A Shares | 2,313,825 | |||
Class C Shares | 1,063,095 | |||
Class I Shares | 459,870 | |||
Class R3 Shares | 1,012,917 | |||
Class R4 Shares | 79,114 | |||
Class R5 Shares | 821,242 | |||
Registration and filing fees | ||||
Class A Shares | 84,089 | |||
Class C Shares | 35,655 | |||
Class I Shares | 50,469 | |||
Class R3 Shares | 18,782 | |||
Class R4 Shares | 17,421 | |||
Class R5 Shares | 29,535 | |||
Custodian fees (Note 3) | 628,770 | |||
Professional fees | 104,689 | |||
Accounting fees | 123,920 | |||
Trustee fees | 52,015 | |||
Other expenses | 707,030 | |||
Total Expenses | 44,344,333 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,387,708 | ) | ||
Net Expenses | 42,956,625 | |||
Net Investment Loss | $ | (19,529,732 | ) | |
16 Certified Annual Report
| STATEMENT OF OPERATIONS, CONTINUED | ||
| Thornburg Core Growth Fund | Year Ended September 30, 2008 | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments | ||||
Non-controlled affiliated issuers | $ | (80,612,294 | ) | |
Non-affiliated issuers | (227,385,752 | ) | ||
Foreign currency transactions | (3,127,315 | ) | ||
| (311,125,361 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (958,441,069 | ) | ||
Foreign currency translation | 2,952,446 | |||
| (955,488,623 | ) | |||
Net Realized and Unrealized Loss | (1,266,613,984 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (1,286,143,716 | ) | |
See notes to financial statements.
Certified Annual Report 17
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (19,529,732 | ) | $ | (18,562,754 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | (311,125,361 | ) | 3,094,193 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | (955,488,623 | ) | 469,309,506 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (1,286,143,716 | ) | 453,840,945 | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From realized gains | ||||||||
Class A Shares | (868,507 | ) | — | |||||
Class C Shares | (412,872 | ) | — | |||||
Class I Shares | (352,383 | ) | — | |||||
Class R3 Shares | (247,109 | ) | — | |||||
Class R4 Shares | (4,219 | ) | — | |||||
Class R5 Shares | (106,648 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (210,044,230 | ) | 752,891,071 | |||||
Class C Shares | (29,193,088 | ) | 390,687,789 | |||||
Class I Shares | (68,000,355 | ) | 362,304,238 | |||||
Class R3 Shares | 35,651,603 | 274,389,436 | ||||||
Class R4 Shares | 25,878,562 | 3,331,607 | ||||||
Class R5 Shares | 213,479,491 | 146,669,595 | ||||||
Net Increase (Decrease) in Net Assets | (1,320,363,471 | ) | 2,384,114,681 | |||||
NET ASSETS: | ||||||||
Beginning of year | 3,352,274,105 | 968,159,424 | ||||||
End of year | $ | 2,031,910,634 | $ | 3,352,274,105 | ||||
See notes to financial statements.
18 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
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 thirteen 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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, 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 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 administrative and legal expenses. Currently, class specific expenses of the Fund are limited to service and distribution fees, administration fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: 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.
Any debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations 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 obligations 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.
Quotations in foreign currencies for foreign portfolio investments are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
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 procedures approved by the Trustees, which may include the use of prices obtained from an independent pricing service. The pricing service ordinarily values equity securities in these instances, using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures and index data and other data. 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the debt obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to
Certified Annual Report 19
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Options Transactions: The Fund may buy or write put and call options through listed exchanges and the over-the-counter market. The buyer has the right to purchase (in the case of a call option) or sell (in the case of a put option) a specified quantity of a specific security or other underlying asset at a specified price prior to or on a specified expiration date. The writer of an option is exposed to the risk of loss if the market price of the underlying asset declines (in the case of a put option) or increases (in the case of a call option). The writer of an option can never profit by more than the premium paid by the buyer but can lose an unlimited amount. The writer also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist.
Premiums received/paid from writing/purchasing options are recorded as liabilities/assets on the Statement of Assets and Liabilities, and are subsequently adjusted to current values. The difference between the current value of an option and the premium received/paid is treated as an unrealized gain or loss. When a purchased option expires on its stipulated expiration date or when a closing transaction is entered into, the premium paid on the purchase of the option is treated by the Fund as a realized loss.
When a written option expires on its stipulated expiration date or when a closing transaction is entered into, the related liability is extinguished and the Fund realizes a gain (loss if the cost of the closing transaction exceeds the premium received when the option was written).
Foreign currency translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
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 tax-able 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.
20 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
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, 2008, 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, 2008, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $802,334 for Class R3 shares, $60,407 for Class R4 shares, and $524,967 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, 2008, the Distributor has advised the Fund that it earned commissions aggregating $295,479 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $271,126 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, 2008, 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, 2008, no fees were paid indirectly.
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, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 26,809,564 | $ | 495,189,261 | 54,188,818 | $ | 1,016,770,034 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 40,087 | 785,693 | — | — | ||||||||||
Shares repurchased | (42,528,073 | ) | (706,046,372 | ) | (13,920,905 | ) | (263,891,441 | ) | ||||||
Redemption fees received** | — | 27,188 | — | 12,478 | ||||||||||
Net Increase (Decrease) | (15,678,422 | ) | $ | (210,044,230 | ) | 40,267,913 | $ | 752,891,071 | ||||||
Certified Annual Report 21
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 8,646,972 | $ | 152,462,922 | 24,042,126 | $ | 428,699,736 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 16,338 | 302,087 | — | — | ||||||||||
Shares repurchased | (11,861,766 | ) | (181,970,668 | ) | (2,109,546 | ) | (38,017,920 | ) | ||||||
Redemption fees received** | — | 12,571 | — | 5,973 | ||||||||||
Net Increase (Decrease) | (3,198,456 | ) | $ | (29,193,088 | ) | 21,932,580 | $ | 390,687,789 | ||||||
Class I Shares | ||||||||||||||
Shares sold | 15,461,535 | $ | 279,059,846 | 24,674,852 | $ | 471,936,086 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 14,035 | 281,124 | — | — | ||||||||||
Shares repurchased | (20,541,257 | ) | (347,352,869 | ) | (5,639,994 | ) | (109,638,046 | ) | ||||||
Redemption fees received** | — | 11,544 | — | 6,198 | ||||||||||
Net Increase (Decrease) | (5,065,687 | ) | $ | (68,000,355 | ) | 19,034,858 | $ | 362,304,238 | ||||||
Class R3 Shares | ||||||||||||||
Shares sold | 12,855,510 | $ | 228,947,293 | 17,655,868 | $ | 335,551,232 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 12,192 | 239,334 | — | — | ||||||||||
Shares repurchased | (11,177,709 | ) | (193,542,866 | ) | (3,183,342 | ) | (61,165,475 | ) | ||||||
Redemption fees received** | — | 7,842 | — | 3,679 | ||||||||||
Net Increase (Decrease) | 1,689,993 | $ | 35,651,603 | 14,472,526 | $ | 274,389,436 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 1,828,792 | $ | 32,886,157 | 172,095 | $ | 3,388,183 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 176 | 3,449 | — | — | ||||||||||
Shares repurchased | (423,841 | ) | (7,011,429 | ) | (2,891 | ) | (56,581 | ) | ||||||
Redemption fees received** | — | 385 | — | 5 | ||||||||||
Net Increase (Decrease) | 1,405,127 | $ | 25,878,562 | 169,204 | $ | 3,331,607 | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 16,258,681 | $ | 304,900,695 | 8,452,082 | $ | 166,122,436 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 4,768 | 95,440 | — | — | ||||||||||
Shares repurchased | (5,390,743 | ) | (91,522,347 | ) | (980,958 | ) | (19,454,052 | ) | ||||||
Redemption fees received** | — | 5,703 | — | 1,211 | ||||||||||
Net Increase (Decrease) | 10,872,706 | $ | 213,479,491 | 7,471,124 | $ | 146,669,595 | ||||||||
| * | Effective date of Class R4 shares was February 1, 2007. |
| ** | The Fund charges a redemption fee of 1% of the Class A and Class I shares redeemed or 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. |
22 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $2,323,819,374 and $2,363,004,863, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 2,360,981,763 | ||
Gross unrealized appreciation on a tax basis | $ | 95,099,969 | ||
Gross unrealized depreciation on a tax basis | (482,744,439 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (387,644,470 | ) | |
At September 30, 2008, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2007 of $569,936 and $295,770,118. For tax purposes, such losses will be reflected in the year ending September 30, 2009.
At September 30, 2008, the Fund had tax basis capital losses of $10,083,359, which may be carried forward 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 carry forwards will expire September 30, 2016.
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $19,948,429, decreased accumulated net realized investment loss by $569,523, and decreased net investment loss by $19,378,906. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from nondeductible net operating loss and currency losses.
The tax character of distributions paid during the year ended September 30, 2008, and September 30, 2007, was as follows:
| 2008 | 2007 | |||||
Distributions from: | ||||||
Capital gains | $ | 1,991,738 | $ | — | ||
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2008, 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 BUY OR SELL:
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value (USD) | Unrealized Appreciation | Unrealized (Depreciation) | ||||||||||
Philippine Peso | Sell | 2,600,000,000 | 12/16/08 | $ | 55,877,928 | $ | 603,090 | $ | — | |||||||
Philippine Peso | Buy | 100,000,000 | 12/16/08 | 2,138,123 | — | (12,167 | ) | |||||||||
Philippine Peso | Buy | 191,200,000 | 12/16/08 | 3,968,452 | 96,375 | — | ||||||||||
Philippine Peso | Buy | 437,450,000 | 12/16/08 | 9,098,378 | 201,614 | — | ||||||||||
Total unrealized appreciation (depreciation) from forward exchange contracts | $ | 901,079 | $ | (12,167 | ) | |||||||||||
Certified Annual Report 23
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
24 Certified Annual Report
Thornburg Core Growth Fund
| Year Ended September 30, | ||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 20.72 | $ | 16.38 | $ | 14.21 | $ | 10.87 | $ | 10.11 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.10 | ) | (0.15 | ) | (0.14 | ) | (0.14 | ) | (0.15 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | (7.25 | ) | 4.49 | 2.54 | 3.48 | 0.90 | ||||||||||||||
Total from investment operations | (7.35 | ) | 4.34 | 2.40 | 3.34 | 0.75 | ||||||||||||||
Redemption fees added to paid in capital | — | — | 0.01 | — | 0.01 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net realized gains | (0.01 | ) | — | (0.24 | ) | — | — | |||||||||||||
Change in net asset value | (7.36 | ) | 4.34 | 2.17 | 3.34 | 0.76 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 13.36 | $ | 20.72 | $ | 16.38 | $ | 14.21 | $ | 10.87 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | (35.48 | ) | 26.50 | 17.20 | 30.73 | 7.52 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | (0.58 | ) | (0.78 | ) | (0.86 | ) | (1.14 | ) | (1.37 | ) | ||||||||||
Expenses, after expense reductions (%) | 1.38 | 1.37 | 1.48 | 1.60 | 1.62 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.38 | 1.36 | 1.46 | 1.57 | 1.61 | |||||||||||||||
Expenses, before expense reductions (%) | 1.38 | 1.37 | 1.48 | 1.60 | 1.70 | |||||||||||||||
Portfolio turnover rate (%) | 79.73 | 82.37 | 98.00 | 115.37 | 108.50 | |||||||||||||||
Net assets at end of year (thousands) | $ | 738,457 | $ | 1,470,020 | $ | 502,345 | $ | 110,836 | $ | 40,899 | ||||||||||
| (a) | Sales loads are not reflected in computing total return. |
| + | 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, | ||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 19.57 | $ | 15.59 | $ | 13.63 | $ | 10.51 | $ | 9.85 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.22 | ) | (0.28 | ) | (0.24 | ) | (0.23 | ) | (0.22 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | (6.81 | ) | 4.26 | 2.43 | 3.35 | 0.88 | ||||||||||||||
Total from investment operations | (7.03 | ) | 3.98 | 2.19 | 3.12 | 0.66 | ||||||||||||||
Redemption fees added to paid in capital | — | — | 0.01 | — | — | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net realized gains | (0.01 | ) | — | (0.24 | ) | — | — | |||||||||||||
Change in net asset value | (7.04 | ) | 3.98 | 1.96 | 3.12 | 0.66 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 12.53 | $ | 19.57 | $ | 15.59 | $ | 13.63 | $ | 10.51 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (35.93 | ) | 25.53 | 16.38 | 29.69 | 6.70 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | (1.34 | ) | (1.53 | ) | (1.63 | ) | (1.91 | ) | (2.13 | ) | ||||||||||
Expenses, after expense reductions (%) | 2.13 | 2.12 | 2.25 | 2.37 | 2.38 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.13 | 2.11 | 2.23 | 2.34 | 2.37 | |||||||||||||||
Expenses, before expense reductions (%) | 2.13 | 2.12 | 2.25 | 2.37 | 2.52 | |||||||||||||||
Portfolio turnover rate (%) | 79.73 | 82.37 | 98.00 | 115.37 | 108.50 | |||||||||||||||
Net assets at end of year (thousands) | $ | 385,110 | $ | 664,252 | $ | 187,180 | $ | 41,737 | $ | 14,693 | ||||||||||
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
26 Certified Annual Report
| FINANCIAL HIGHLIGHTS, CONTINUED |
| Thornburg Core Growth Fund |
| Year Ended September 30, | Period Ended September 30, 2004(a) | |||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | |||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||||||
Net asset value, beginning of period | $ | 21.16 | $ | 16.66 | $ | 14.37 | $ | 10.93 | $ | 10.87 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.03 | ) | (0.08 | ) | (0.06 | ) | (0.07 | ) | (0.08 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | (7.41 | ) | 4.58 | 2.58 | 3.51 | 0.14 | ||||||||||||||
Total from investment operations | (7.44 | ) | 4.50 | 2.52 | 3.44 | 0.06 | ||||||||||||||
Redemption fees added to paid in capital | — | — | 0.01 | — | — | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net realized gains | (0.01 | ) | — | (0.24 | ) | — | — | |||||||||||||
Change in net asset value | (7.45 | ) | 4.50 | 2.29 | 3.44 | 0.06 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 13.71 | $ | 21.16 | $ | 16.66 | $ | 14.37 | $ | 10.93 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(b) | (35.17 | ) | 27.01 | 17.85 | 31.47 | 0.55 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | (0.17 | ) | (0.39 | ) | (0.40 | ) | (0.55 | ) | (0.74 | )(c) | ||||||||||
Expenses, after expense reductions (%) | 0.96 | 0.98 | 1.01 | 1.02 | 1.00 | (c) | ||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.96 | 0.97 | 0.99 | 0.99 | 0.99 | (c) | ||||||||||||||
Expenses, before expense reductions (%) | 0.96 | 0.98 | 1.10 | 1.15 | 1.31 | (c) | ||||||||||||||
Portfolio turnover rate (%) | 79.73 | 82.37 | 98.00 | 115.37 | 108.50 | |||||||||||||||
Net assets at end of period (thousands) | $ | 346,497 | $ | 642,143 | $ | 188,422 | $ | 49,975 | $ | 21,578 | ||||||||||
| (a) | Effective date of this class of shares was November 1, 2003. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| + | 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, | ||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Class R3 Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 20.75 | $ | 16.43 | $ | 14.26 | $ | 10.90 | $ | 10.11 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.13 | ) | (0.18 | ) | (0.14 | ) | (0.14 | ) | (0.12 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | (7.24 | ) | 4.50 | 2.54 | 3.50 | 0.91 | ||||||||||||||
Total from investment operations | (7.37 | ) | 4.32 | 2.40 | 3.36 | 0.79 | ||||||||||||||
Redemption fees added to paid in capital | — | — | 0.01 | — | — | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net realized gains | (0.01 | ) | — | (0.24 | ) | — | — | |||||||||||||
Change in net asset value | (7.38 | ) | 4.32 | 2.17 | 3.36 | 0.79 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 13.37 | $ | 20.75 | $ | 16.43 | $ | 14.26 | $ | 10.90 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (35.53 | ) | 26.29 | 17.14 | 30.83 | 7.81 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | (0.74 | ) | (0.91 | ) | (0.90 | ) | (1.08 | ) | (1.17 | ) | ||||||||||
Expenses, after expense reductions (%) | 1.50 | 1.51 | 1.53 | 1.52 | 1.50 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.50 | 1.50 | 1.50 | 1.49 | 1.49 | |||||||||||||||
Expenses, before expense reductions (%) | 1.72 | 1.64 | 1.73 | 3.56 | 722.79 | (a) | ||||||||||||||
Portfolio turnover rate (%) | 79.73 | 82.37 | 98.00 | 115.37 | 108.50 | |||||||||||||||
Net assets at end of year (thousands) | $ | 289,500 | $ | 414,267 | $ | 90,167 | $ | 6,345 | $ | 16 | ||||||||||
| (a) | 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
| FINANCIAL HIGHLIGHTS, CONTINUED |
| Thornburg Core Growth Fund |
| Year Ended Sept. 30, 2008 | Period Ended Sept. 30, 2007(a) | |||||||
Class R4 Shares: | ||||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 20.73 | $ | 18.90 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | (0.13 | ) | (0.12 | ) | ||||
Net realized and unrealized gain (loss) on investments | (7.22 | ) | 1.95 | |||||
Total from investment operations | (7.35 | ) | 1.83 | |||||
Less dividends from: | ||||||||
Net realized gains | (0.01 | ) | — | |||||
Change in net asset value | (7.36 | ) | 1.83 | |||||
NET ASSET VALUE, end of period | $ | 13.37 | $ | 20.73 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | (35.47 | ) | 9.68 | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | (0.78 | ) | (0.93 | )(c) | ||||
Expenses, after expense reductions (%) | 1.40 | 1.41 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 1.40 | 1.40 | (c) | |||||
Expenses, before expense reductions (%) | 1.73 | 8.74 | (c)(d) | |||||
Portfolio turnover rate (%) | 79.73 | 82.37 | ||||||
Net assets at end of period (thousands) | $ | 21,047 | $ | 3,508 | ||||
| (a) | Effective date of this class of shares was February 1, 2007. (b) Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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 29
| FINANCIAL HIGHLIGHTS, CONTINUED |
| Thornburg Core Growth Fund |
| Year Ended September 30, | Period Ended September 30, 2006(a) | |||||||||||
| 2008 | 2007 | |||||||||||
Class R5 Shares: | ||||||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 21.15 | $ | 16.65 | $ | 14.43 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | (0.05 | ) | (0.07 | ) | (0.06 | ) | ||||||
Net realized and unrealized gain (loss) on investments | (7.39 | ) | 4.57 | 2.51 | ||||||||
Total from investment operations | (7.44 | ) | 4.50 | 2.45 | ||||||||
Redemption fees added to paid in capital | — | — | 0.01 | |||||||||
Less dividends from: | ||||||||||||
Net realized gains | (0.01 | ) | — | (0.24 | ) | |||||||
Change in net asset value | (7.45 | ) | 4.50 | 2.22 | ||||||||
NET ASSET VALUE, end of period | $ | 13.70 | $ | 21.15 | $ | 16.65 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | (35.19 | ) | 27.03 | 17.29 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | (0.30 | ) | (0.37 | ) | (0.38 | )(c) | ||||||
Expenses, after expense reductions (%) | 0.99 | 0.95 | 1.01 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.95 | 0.99 | (c) | ||||||||
Expenses, before expense reductions (%) | 1.18 | 0.97 | 176.54 | (c)(d) | ||||||||
Portfolio turnover rate (%) | 79.73 | 82.37 | 98.00 | |||||||||
Net assets at end of period (thousands) | $ | 251,299 | $ | 158,084 | $ | 45 | ||||||
| (a) | Effective date of this class of shares was October 3, 2005. (b) Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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.
30 Certified Annual Report
| SCHEDULE OF INVESTMENTS | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
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 9/30/08
Software & Services | 28.1 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 11.9 | % | |
Media | 9.5 | % | |
Telecommunication Services | 8.3 | % | |
Food, Beverage & Tobacco | 6.6 | % | |
Technology Hardware & Equipment | 5.6 | % | |
Retailing | 4.9 | % | |
Utilities | 3.8 | % | |
Diversified Financials | 3.3 | % | |
| Semiconductors & Semiconductor Equipment | 3.2 | % | |
| Automobiles & Components | 2.7 | % | |
| Materials | 2.3 | % | |
| Household & Personal Products | 2.2 | % | |
| Consumer Services | 2.0 | % | |
| Energy | 1.9 | % | |
| Capital Goods | 0.7 | % | |
| Health Care Equipment & Services | 0.1 | % | |
| Other Assets & Cash Equivalents | 2.9 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/08 (percent of equity holdings)
United States | 79.6 | % | |
United Kingdom | 5.8 | % | |
Mexico | 4.3 | % | |
| Denmark | 3.3 | % | |
| Germany | 2.8 | % | |
| Philippines | 2.4 | % | |
| China | 1.1 | % | |
| Brazil | 0.7 | % |
Certified Annual Report 31
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
| Shares/ Principal Amount | Value | ||||
COMMON STOCK — 97.12% | |||||
AUTOMOBILES & COMPONENTS — 2.74% | |||||
AUTOMOBILES — 2.74% | |||||
Porsche Automobil Holding SE+(1) | 513,900 | $ | 55,727,474 | ||
| 55,727,474 | |||||
CAPITAL GOODS — 0.71% | |||||
ELECTRICAL EQUIPMENT — 0.71% | |||||
GT Solar International, Inc.+ | 1,328,352 | 14,412,619 | |||
| 14,412,619 | |||||
CONSUMER SERVICES — 1.98% | |||||
HOTELS, RESTAURANTS & LEISURE — 1.98% | |||||
Las Vegas Sands Corp.+ | 1,116,111 | 40,302,768 | |||
| 40,302,768 | |||||
DIVERSIFIED FINANCIALS — 3.32% | |||||
CAPITAL MARKETS — 2.64% | |||||
Affiliated Managers Group, Inc.+ | 646,689 | 53,578,183 | |||
DIVERSIFIED FINANCIAL SERVICES — 0.68% | |||||
BM&F Bovespa SA | 3,090,100 | 13,803,064 | |||
| 67,381,247 | |||||
ENERGY — 1.94% | |||||
OIL, GAS & CONSUMABLE FUELS — 1.94% | |||||
ATP Oil & Gas Corp.+(2) | 2,213,652 | 39,425,142 | |||
| 39,425,142 | |||||
FOOD, BEVERAGE & TOBACCO — 6.55% | |||||
BEVERAGES — 6.55% | |||||
Carlsberg A/S Class B(1) | 862,200 | 65,737,023 | |||
Hansen Natural Corp.+ | 2,227,290 | 67,375,523 | |||
| 133,112,546 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 0.08% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 0.08% | |||||
Masimo Corp.+ | 40,658 | 1,512,478 | |||
| 1,512,478 | |||||
HOUSEHOLD & PERSONAL PRODUCTS — 2.19% | |||||
PERSONAL PRODUCTS — 2.19% | |||||
Bare Escentuals, Inc.+ | 4,087,342 | 44,429,407 | |||
| 44,429,407 | |||||
MATERIALS — 2.25% | |||||
CHEMICALS — 2.25% | |||||
Ecolab, Inc. | 943,600 | 45,783,472 | |||
| 45,783,472 | |||||
32 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
| Shares/Principal Amount | Value | ||||
MEDIA — 9.46% | |||||
MEDIA — 9.46% | |||||
Airmedia Group, Inc. ADR+ | 2,938,927 | $ | 21,895,006 | ||
Comcast Corp. Special Class A | 3,738,400 | 73,721,248 | |||
DIRECTV Group, Inc.+ | 3,691,421 | 96,604,488 | |||
| 192,220,742 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 11.94% | |||||
BIOTECHNOLOGY — 9.72% | |||||
Alexion Pharmaceuticals, Inc.+ | 1,444,816 | 56,781,269 | |||
Celgene Corp.+ | 953,034 | 60,307,992 | |||
Gilead Sciences, Inc.+ | 1,766,200 | 80,503,396 | |||
LIFE SCIENCES TOOLS & SERVICES — 2.22% | |||||
Illumina, Inc.+ | 1,112,776 | 45,100,811 | |||
| 242,693,468 | |||||
RETAILING — 4.87% | |||||
INTERNET & CATALOG RETAIL — 2.10% | |||||
Priceline.com, Inc.+ | 624,336 | 42,723,312 | |||
SPECIALTY RETAIL — 2.77% | |||||
Guess?, Inc. | 1,615,872 | 56,216,187 | |||
| 98,939,499 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.25% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.25% | |||||
ON Semiconductor Corp.+ | 9,751,998 | 65,923,506 | |||
| 65,923,506 | |||||
SOFTWARE & SERVICES — 28.12% | |||||
INFORMATION TECHNOLOGY SERVICES — 5.80% | |||||
Western Union Co. | 4,777,637 | 117,864,305 | |||
INTERNET SOFTWARE & SERVICES — 9.96% | |||||
Equinix, Inc.+ | 961,543 | 66,788,777 | |||
Google, Inc.+ | 167,205 | 66,968,946 | |||
Vistaprint Ltd.+ | 2,089,583 | 68,621,906 | |||
SOFTWARE — 12.36% | |||||
Amdocs Ltd.+ | 4,200,341 | 115,005,336 | |||
Electronic Arts, Inc.+ | 1,679,142 | 62,111,463 | |||
Microsoft Corp. | 2,773,800 | 74,032,722 | |||
| 571,393,455 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 5.62% | |||||
COMMUNICATIONS EQUIPMENT — 2.85% | |||||
Qualcomm, Inc. | 1,349,200 | 57,975,124 | |||
COMPUTERS & PERIPHERALS — 2.77% | |||||
Data Domain, Inc.+ | 2,527,932 | 56,297,046 | |||
| 114,272,170 | |||||
Certified Annual Report 33
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 | |
TELECOMMUNICATION SERVICES — 8.27% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.14% | |||||
AT&T, Inc. | 3,008,700 | $ | 84,002,904 | ||
WIRELESS TELECOMMUNICATION SERVICES — 4.13% | |||||
América Móvil SAB de C.V. | 36,208,000 | 83,960,580 | |||
| 167,963,484 | |||||
UTILITIES — 3.83% | |||||
ELECTRIC UTILITIES — 1.52% | |||||
Entergy Corp. | 348,000 | 30,975,480 | |||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 2.31% | |||||
PNOC Energy Development Corp.(1) | 538,091,030 | 46,868,336 | |||
| 77,843,816 | |||||
TOTAL COMMON STOCK (Cost $ 2,356,122,952) | 1,973,337,293 | ||||
TOTAL INVESTMENTS — 97.12% (Cost $ 2,356,122,952) | $ | 1,973,337,293 | |||
OTHER ASSETS LESS LIABILITIES — 2.88% | 58,573,341 | ||||
NET ASSETS — 100.00% | $ | 2,031,910,634 | |||
Footnote Legend
| + | Non-income producing |
| (1) | Security fair valued by independent pricing service on valuation date, September 30, 2008. (2) 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, 2007 | Gross Additions | Gross Reductions | Shares at Sept. 30, 2008 | Market Value Sept. 30, 2008 | Dividend Income | ||||||||
ATP Oil & Gas Corp. | 1,817,631 | 482,186 | 86,165 | 2,213,652 | $ | 39,425,142 | $ | — | ||||||
NeuStar Inc. Class A | 3,847,800 | 380,600 | 4,228,400 | — | — | — | ||||||||
Trident Microsystems, Inc. | 4,804,400 | — | 4,804,400 | — | — | — | ||||||||
| $ | 39,425,142 | $ | — | |||||||||||
Total non-controlled affiliated issuers – 1.94% of net assets.
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR American Depository Receipt
See notes to financial statements.
34 Certified Annual Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Core Growth Fund
To the Trustees and Shareholders of
Thornburg Core Growth Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Core Growth Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2008, 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, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
Certified Annual Report 35
| EXPENSE EXAMPLE | ||
| Thornburg Core Growth Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
| Beginning Account Value 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 820.60 | $ | 6.74 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.60 | $ | 7.47 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 817.90 | $ | 10.15 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.84 | $ | 11.24 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 822.90 | $ | 4.74 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,019.80 | $ | 5.25 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 820.70 | $ | 6.83 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.50 | $ | 7.57 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 821.30 | $ | 6.51 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.85 | $ | 7.21 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 822.80 | $ | 4.68 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,019.87 | $ | 5.18 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.48%; C: 2.23%; I: 1.04%; R3: 1.50%; R4: 1.43% and R5: 1.03%) multiplied by the average account value over the period, multiplied by 183/366 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.
36 Certified Annual Report
| INDEX COMPARISON | ||
| Thornburg Core Growth Fund | September 30, 2008 (Unaudited) | |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yrs | Since Inception | |||||||
A Shares (Incep: 12/27/00) | (38.40 | )% | 5.12 | % | 1.08 | % | |||
C Shares (Incep: 12/27/00) | (36.57 | )% | 5.31 | % | 0.86 | % | |||
I Shares (Incep: 11/3/03) | (35.17 | )% | — | 5.20 | % | ||||
R3 Shares (Incep: 7/1/03) | (35.53 | )% | 6.11 | % | 6.88 | % | |||
R4 Shares (Incep: 2/1/07) | (35.47 | )% | — | (18.79 | )% | ||||
R5 Shares (Incep: 10/3/05) | (35.19 | )% | — | (1.16 | )% | ||||
Russell 3000 Growth Index (Since: 12/27/00) | (20.60 | )% | 3.96 | % | (2.53 | )% |
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 I, R3, R4, and R5 shares. Class A and I shares are subject to a 1% 30-day redemption fee.
Effective February 1, 2008, the Fund changed the broad-based securities market index against which the Fund compares its performance from the NASDAQ Composite Index to the Russell 3000 Growth Index, which the investment advisor believes provides a more appropriate comparison to the Fund’s portfolio holdings. 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. The NASDAQ Composite Index is a market-value weighted, technology-oriented index comprised of over 3,000 domestic and non-U.S.-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 37
| TRUSTEES AND OFFICERS | ||
| Thornburg Core Growth Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 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, 49 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 | ||
38 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Certified Annual Report 39
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
40 Certified Annual Report
| OTHER INFORMATION | ||
| Thornburg Core Growth Fund | September 30, 2008 (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, 2008, the Fund designates long-term capital gain dividends of $1,921,589.
The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2008. Complete information will be computed and reported in conjunction with your 2008 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 15, 2008.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of this information with the Trustees and addressed questions presented by 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 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 considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events in view of the Fund’s investment objective and policies.
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.
Certified Annual Report 41
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2008 (Unaudited) | |
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s lower investment performance for the second quarter of the year, the year-to-date and for the year ending with the second quarter, relative to two broad-based securities indices and the category of equity mutual funds selected by an independent mutual fund analyst firm, but observed that the Fund’s investment performance exceeded the performance of the indices in each of the seven calendar years since the Fund’s inception and also exceeded the performance of the category in a majority of the calendar years since the Fund’s inception, and that the Fund’s relative investment performance in three and five year periods ending with the second quarter fell at the midpoint of the fund category. The Trustees also considered in this regard the Fund’s higher cumulative return relative to the Russell 3000 Growth Index.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 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 of the Fund fell between the median and average expense ratios for the same fund group. The Trustees noted their previous observations respecting fees charged by the Advisor to other investment management clients, and their conclusion 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 required.
In reviewing the profitability of the Advisor, the Trustees considered 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses charged to the Fund to fees and expenses charged to other mutual funds.
42 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 ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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44 This page is not part of the Annual Report.
Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 45
Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to .19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
46 This page is not part of the Annual Report.
Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia.
Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,”
International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,”
The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,”
Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,”
The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,”
The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,”
The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
Sincerely,
 |
Brian McMahon |
CEO and Chief Investment Officer |
This page is not part of the Annual Report. 47
Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
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Important Information
The information presented on the following pages was current as of September 30, 2008. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; they 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 may invest 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 principal value of bond funds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. 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.
Class I, R3, R4, and R5 shares may not be available to all investors. Minimum investments for Class I shares may be higher than those for other classes.
Glossary
Blended Index – The blended index is comprised of 25% Barclays Capital Aggregate Bond Index and 75% MSCI World Index. The Barclays Capital 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 equity securities traded in 23 of the world’s most developed countries. The index is calculated with net dividends reinvested, in U.S. dollars.
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
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 March 2008, the MSCI All Country Asia ex-Japan Index consisted of the following 11 developed and emerging market country indices: 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 2007, 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 2007, 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.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
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.
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 income taxes.
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. As the economy slowed in the recent downturn, earnings-per-share on average have declined, causing the payout ratio to climb.
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 a preference towards reinvesting retained earnings in growth initiatives.
Today, the recent downturn notwithstanding, corporate executives appear more willing to recognize that cash which cannot be invested at high rates of return should be returned to shareholders in the form of dividends.
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 | |||||
Total Financials | 51 | % | 64 | % | ||
Banks & Other Financials | 28 | % | 21 | % | ||
Real Estate | 23 | % | 43 | % | ||
Utilities | 16 | % | 0 | % | ||
Consumer Discretionary | 10 | % | 11 | % | ||
Telecommunication Services | 7 | % | 5 | % | ||
Industrials | 4 | % | 6 | % | ||
Materials | 4 | % | 0 | % | ||
Consumer Staples | 3 | % | 3 | % | ||
Health Care | 3 | % | 0 | % | ||
Energy | 2 | % | 8 | % | ||
Technology | 0 | % | 3 | % |
Source: FactSet, as of September 30, 2008; (Numbers may not add to 100% due to rounding.)
In the (large cap) Russell 1000 Index, 51% of the top 100 dividend payers are in the Financials sector. In the (small cap) Russell 2000 Index, 64% 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 1.30%, as disclosed in the most recent Prospectus.
We do not expect each sequential quarter’s dividend to increase over that of the prior quarter, since dividend payments outside the United States 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 | |||||||||||||||
2008 | 17.9 | ¢ | 21.7 | ¢ | 26.0 | ¢ | N/A | N/A | |||||||
2007 | 14.2 | ¢ | 18.5 | ¢ | 21.5 | ¢ | 36.8 | ¢ | 91.0 | ¢ | |||||
2006 | 12.5 | ¢ | 16.0 | ¢ | 19.2 | ¢ | 33.0 | ¢ | 80.7 | ¢ | |||||
2005 | 11.0 | ¢ | 13.6 | ¢ | 17.4 | ¢ | 29.0 | ¢ | 71.0 | ¢ | |||||
30-day SEC Yield as of September 30, 2008 (A Shares): 5.54% | |||||||||||||||
KEY PORTFOLIO ATTRIBUTES
Equity Statistics | ||||
Portfolio P/E (12-mo. trailing) | 9.8x | |||
Median Market Cap | $ | 11.2 B | ||
Common Equity Holdings | 58 | |||
Fixed Income Statistics | ||||
Weighted Average Coupon | 6.5 | % | ||
Average Credit Quality | A | |||
Average Maturity | 5.1 yrs | |||
Duration | 2.5 yrs | |||
Bond & Pref. Equity Holdings | 129 | |||
TOP TEN EQUITY HOLDINGS
Telefónica SA | 4.0 | % | |
Enel SpA | 3.0 | % | |
Entergy Corp. | 2.8 | % | |
McDonald’s Corp. | 2.8 | % | |
Eli Lilly & Co. | 2.7 | % | |
Eni SpA | 2.7 | % | |
OPAP SA | 2.3 | % | |
Philip Morris | 2.2 | % | |
Intel Corp. | 2.0 | % | |
Diamond Offshore Drilling, Inc. | 1.9 | % |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008
| 1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||
A Shares (Incep: 12/24/02) | ||||||||||||
Without Sales Charge | (22.48 | )% | 4.65 | % | 9.91 | % | 11.74 | % | ||||
With Sales Charge | (25.97 | )% | 3.07 | % | 8.90 | % | 10.85 | % | ||||
Blended Index*(Since: 12/24/02) | (19.24 | )% | 1.75 | % | 6.58 | % | 7.93 | % | ||||
S&P 500 Index (Since: 12/24/02) | (21.98 | )% | 0.22 | % | 5.17 | % | 6.73 | % |
| * | Blended Index: 75% MSCI World Equity Index/25% Barclays Capital 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 9/30/08
Telecommunication Services | 14.3 | % | |
Banks | 12.4 | % | |
Energy | 10.4 | % | |
Diversified Financials | 8.3 | % | |
Utilities | 7.7 | % | |
Consumer Services | 7.5 | % | |
Food, Beverage & Tobacco | 6.1 | % | |
Materials | 4.5 | % | |
Semiconductors & Semi Equipment | 3.9 | % | |
Insurance | 3.7 | % |
TOP TEN INDUSTRIES
As of 6/30/08
Telecommunication Services | 16.7 | % | |
Energy | 10.2 | % | |
Food, Beverage & Tobacco | 9.2 | % | |
Utilities | 8.9 | % | |
Banks | 8.8 | % | |
Diversified Financials | 7.4 | % | |
Consumer Services | 6.6 | % | |
Materials | 4.4 | % | |
Semiconductors & Semi Equipment | 4.1 | % | |
Insurance | 3.5 | % |
TOP TEN INDUSTRIES
As of 3/31/08
Telecommunication Services | 17.7 | % | |
Banks | 11.0 | % | |
Food, Beverage & Tobacco | 8.8 | % | |
Energy | 8.7 | % | |
Utilities | 8.1 | % | |
Diversified Financials | 7.7 | % | |
Consumer Services | 5.7 | % | |
Insurance | 5.2 | % | |
Materials | 4.9 | % | |
Semiconductors & Semi Equipment | 3.6 | % |
TOP TEN INDUSTRIES
As of 12/31/07
Telecommunication Services | 15.1 | % | |
Utilities | 10.8 | % | |
Energy | 10.3 | % | |
Banks | 10.1 | % | |
Food, Beverage & Tobacco | 9.0 | % | |
Diversified Financials | 8.7 | % | |
Consumer Services | 6.4 | % | |
Semiconductors & Semi Equipment | 3.9 | % | |
Materials | 3.9 | % | |
Transportation | 2.9 | % |
8 This page is not part of the Annual Report.
Thornburg Investment Income Builder Fund
September 30, 2008
Table of Contents
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| 49 | ||
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 29, 2008
Dear Fellow Shareholder:
This letter will be longer than others we have written for the financial reports of Thornburg Investment Income Builder Fund. In addition to covering the basic results of your Fund’s investment activities for the twelve-month period ended September 30, 2008, we believe it is appropriate to comment more extensively on the overall investment landscape, which has changed in important ways in recent months.
Thornburg Investment Income Builder Fund paid dividends of $1.02 per Class A share in the twelve months ended September 30, 2008, up 17.4% over the prior year. The dividends per share were higher for Class I and R5 shares, and lower on the Class C, R3, and R4 shares, to account for varying class-specific expenses. In addition, your Fund’s net asset value per Class A share decreased by $6.49 to $16.86. This decrease includes capital gain distributions of 47¢ per share, paid to shareholders in November 2007.
With a negative total return of 22.48% for the fiscal year ended September 30, 2008, Thornburg Investment Income Builder Class A shares at NAV underperformed the S&P 500 Index by 1/2 of one percent, and underperformed the blended index of 75% MSCI World Index/25% Barclays Capital Aggregate Bond Index by 3.24%. We caution against drawing definitive conclusions from short-term performance comparisons, since your Fund pursues strategies for long-term income development. Each sector of the equity portfolio and each sector of both the MSCI World and S&P 500 indexes delivered negative price performance for the year. Relative to index weightings, Thornburg Investment Income Builder Fund had a relatively small allocation to health care equities, a sector that delivered one of the least negative returns for the period. We maintained a large weighting in cash-generative telecommunication service providers. The price performance of these stocks, down 19% on average, was significantly worse than we expected, even though the revenue, earnings, and dividend developments of these businesses have been satisfactory. Within its bond portfolio, Investment Income Builder owned significantly fewer U.S. government and agency bonds than the Barclays Capital Index, and significantly more corporate bonds. Government bond prices generally increased, while corporate bond prices declined over the fiscal year, and even more sharply in the weeks following September 30, 2008.
Over the three-year, five-year, and since inception time periods, your Fund has significantly outperformed both indices, as noted on page 7 of this booklet for Class A shares. Performance relative to indices for all share classes over various periods is set forth on page 45.
We do not expect to pay any capital gain distributions in 2008.
Recall that Thornburg Investment Income Builder seeks to generate attractive, and rising, dividends over time from its portfolio of income producing stocks, bonds and hybrid securities. We made good progress in generating income during the period ended September 30, 2008. On the other hand, we are disappointed with the declines in the market prices of most of the stocks and bonds that generate the income that powers your Fund’s dividends. What happened?
10 Certified Annual Report
In brief, an enormous buildup in financial leverage throughout the developed world, and especially in the United States, is being unwound. This liquidation has exerted downward pressure on prices of stocks and bonds for more than a year, as debt previously accumulated by banks, brokerage firms, hedge funds and others has been reduced via asset liquidations. Both the liquidations and price reductions have become particularly disorderly in recent months, and the degree of downward price pressure has exceeded our expectations. The most acute price declines generally coincided with the demise of Lehman Brothers in September, which has been followed by one of the largest going-out-of-business inventory liquidations ever seen . . . hundreds of billions of dollars of financial assets accumulated over years. The consequent decline in financial asset prices has pushed other investors holding these assets against future liabilities, including insurance companies and hedge funds, to sell. Finally, certain other investors who have become caught up in the drama of falling prices have joined in the selling.
It is instructive to note how much leverage was built up in recent years. The U.S. Securities & Exchange Commission publishes a composite balance sheet for all U.S. registered broker dealers, which shows the following dynamic over the four-year period from December 31, 2002 to December 31, 2006:
Category | $ Billions 12/31/2002 | $ Billions 12/31/2006 | $ Billions Change | Percent Change | |||||||||
Total Assets | $ | 3,114 | $ | 5,908 | +$2,794 | +88 | % | ||||||
Total Liabilities | $ | 2,990 | $ | 5,743 | +$2,753 | +92 | % | ||||||
Total Equity Capital | $ | 124.5 | $ | 165.4 | +$40.9 | +33 | % | ||||||
Equity Capital/Total Assets | 4.0 | % | 2.8 | % | 1.46% on increase | ||||||||
Number of Firms | 5,394 | 5,077 | |||||||||||
(source: U.S. Securities & Exchange Commission, FOCUS Reports)
At first glance, the figures in the preceding chart might not seem extraordinary to you. For perspective, the $2.794 trillion buildup in assets on the balance sheets of the brokerage industry over the four years 2003–2006 far exceeds the change in deposits held by all commercial banks in the United States over the same period. At the end of 2006, the assets held by brokerage firms were: (i) roughly equal to the total of all bank deposits in the United States; (ii) more than two times the combined assets of all money market funds in the United States; and (iii) more than four times the combined assets of all bond mutual funds in the United States. Notice that the $2.794 trillion of additional assets on brokerage firm balance sheets were supported by incremental equity capital of only $40.9 billion, which means the new assets on brokerage firm balance sheets were financed by 1.46% equity capital and 98.54% incremental leverage. A portion of the $2.794 trillion asset buildup was residential mortgage loans. The total also included other financial assets: commercial mortgages, business loans, bonds of every description, and stocks.
Certified Annual Report 11
Letter to Shareholders
Continued
During 2008, the short-maturity borrowings used to finance this asset accumulation have been called for repayment by lenders. Because the size of the financial asset pool that must be liquidated to repay these borrowings is so large relative to the overall size of the pool of unlevered savings in the United States, financial asset prices have fallen significantly in order to attract buyer interest in the assets being sold to repay debt. Normal savers, frightened by the rapid declines in prices of stocks and bonds, have generally stayed away from the liquidation sales so far, preferring the safety of short U.S. government bonds and other very liquid, very high-quality investments. Belatedly, the U.S. government has come to the realization that savers around the globe will willingly lend money to it at very low yields to buy up these assets, and the government is buying some of them. For now, other buyers are scarce.
On page 41 of the Annual Report, you will notice under the heading “Short Term Investments” that Investment Income Builder owned some $232 million of money market notes from municipal issuers at September 30, 2008. At the time, tax exempt money market funds, the normal holders of these notes, were concerned about redemptions. The dealers who handle the day to day placement of these notes were in balance sheet shrinkage mode, with no capability to hold them over quarter-end; therefore, they offered the notes at eye catching interest rates to attract cash buyers such as ourselves. From California State notes at a weekly yield of 7.60% to Mississippi revenue bonds at 9.50%, we were happy to put our cash reserves to work. As the municipal money market has recovered in recent weeks, municipal note rates have declined to traditional levels (below 2.5%), and we have sold these to more traditional holders.
Other corners of the bond market, however, are now even more dislocated than the short maturity municipal money market was at the end of September. An October 28, 2008, story from the Bloomberg news service read: “Barclay’s plc, the U.K.’s second largest bank, is seeking bids for $1.5 billion of bonds and $3.5 billion of credit default swap contracts held by a hedge fund, according to people with knowledge of the auction.” We have seen similar auctions, usually unaccompanied by publicity, on a regular basis recently. We are allocating funds to purchase bonds from motivated sellers at what we believe are very attractive prices, in some cases selling stocks to fund these purchases.
In the September 2008 fiscal year, approximately 82% of Income Builder’s income was derived from stock dividends, with the remaining 18% coming from interest. In the next fiscal year, this mix will likely include a higher proportion of interest income. As an unleveraged cash buyer, we have been able to acquire both investment-grade and high-yield bonds at the liquidation sales of recent weeks at very attractive yields, relative to expected returns from many equities or cash. Long-time Income Builder shareholders know that we kept your portfolio’s bond weighting somewhat lower than what we believe will be a long-term average between 2004–2007, due to low yields available on these investments during a period of below average defaults and low costs for leveraged investors to purchase these bonds at high prices with borrowed money. Now, default rates are climbing, financing to the leveraged investors is being withdrawn, and prices on corporate loans and bonds have plummeted. We perceive good value, since we expect discounted bond prices and significantly higher yields to offset rising default rates.
12 Certified Annual Report
As shareholders and portfolio managers of Thornburg Investment Income Builder, we believe there is excellent value in the majority of the financial assets we own at the close of the fiscal year ended September 30, 2008. We sold most of the stocks and bonds that we least expect to contribute to your Fund’s objective of paying attractive income today, and offering strong potential to pay even higher income in the future. Consider the following simple attributes from the FactSet database, which applied to the equities in your Fund’s portfolio at September 30, 2008:
| Average Change in Revenue | = | +11.1% | (2008 expected, vs 2007) | |||||
| Average Change in Earnings | = | +11.3% | (2008 expected, vs 2007) | |||||
| Average Change in Dividend | = | +11% | (2008 year to date, vs comparable 2007) | |||||
| Average Change in Share Price | = | -41% | (12/31/07 or acquisition date to 10/24/08) | |||||
| Average Price/Earnings Ratio | = | 8.1x | (at 10/24/08, using expected 2008 EPS) | |||||
Market prices of most stocks and bonds owned in the Income Builder portfolio have declined over the course of 2008, with the price declines continuing since the end of our fiscal year on September 30th. While specifics pertaining to the business outlooks of individual firms differ widely, the overall trend of price declines for stocks in your Fund’s portfolio between October 1, 2007 and September 30, 2008 is attributable to (i) a lower multiple being applied to current year earnings than in the recent past; (ii) apparent anxiety about the growth of future earnings, particularly in the face of an expected economic slowdown in the near term; and (iii) diminished investor preference for dividend income from businesses that are capable of generating this income, relative to preferences for absolute stability of invested funds, liquidity, and debt repayment. In the past, we have commented specifically on best and worst performing stocks in your portfolio. Since most stock prices have declined this year by material percentages, we will briefly highlight performances of the largest holdings.
Certified Annual Report 13
Letter to Shareholders
Continued
On page 7 of the accompanying informational brochure, the top ten equity holdings of the Investment Income Builder as of September 30, 2008 are listed. Below, we summarize their attributes, noting that the earnings changes for 2008 and 2009 were tabulated based upon analyst forecasts which are subject to change:
Company (2008 P/E*) | 2008 Revenue Change | 2008 Earnings Change | 2008 Dividend Change | 2008 YTD Share Price Change | ||||||||
Telefónica SA (8.4x) | -.65 | % | +2.1 | % | +43 | % | -44.4 | % | ||||
Enel SpA (8.0x) | +18 | % | +15.1 | % | 0 | % | -42.6 | % | ||||
Entergy Corp. (11.8x) | +11.6 | % | +17.9 | % | +39 | % | -33.5 | % | ||||
McDonald’s Corp. (14.7x) | +3.9 | % | +23 | % | +33 | % | -5.7 | % | ||||
Eli Lilly & Co. (8.0x) | +11.1 | % | +11.5 | % | +11 | % | -37.3 | % | ||||
Eni SpA (5.3x) | +15 | % | +19.1 | % | +8 | % | -42.6 | % | ||||
OPAP SA (8.2x) | +9.7 | % | +18.3 | % | +5.7 | % | -39.9 | % | ||||
Philip Morris (8.7x) | (newly created spinoff of Altria, 2007 data not available) | |||||||||||
Intel Corp. (11.4x) | +3.8 | % | +5.1 | % | +24 | % | -45.6 | % | ||||
Diamond Offshore Drilling, Inc. (7.4x) | +38 | % | +51.3 | % | +167 | % | -48.1 | % | ||||
| * | P/E ratios from FactSet tabulations of analyst estimates for 2008 expected earnings, as of October 24, 2008. Revenue and earnings changes are measured in $U.S., as of September 30, 2008, using FactSet tabulations. Observed share price changes from December 31, 2007 to October 24, 2008 are reported in $U.S. Dividend changes are measured in currencies in which the companies pay dividends, using year-over-year changes for the most recent dividends paid. We first acquired Eli Lilly in December 2007. Philip Morris was spun out of Altria as a new independent entity in March 2008. We owned the other firms listed above throughout the fiscal year ended September 30, 2008. |
Eventually, we expect the financial asset liquidation sales to end. In the meantime, we are doing our best to attend as many liquidation sales as possible. Keeping in mind our objective to generate attractive levels of income without employing leverage, we offer low bids to the sellers. Increasingly, our low bids are higher than any other bidders. The leveraged players of yesteryear have no bankers willing to finance them as purchasers. As prices fall, more bankers of the leveraged investors force them to be sellers, and more investors in hedge funds, mutual funds, and other pooled investment vehicles withdraw funds from their managers. MSCI, which compiles equity indices around the world, reported on October 24th that prices of all 48 developed and emerging market indexes it compiles were down in 2008 to date. Twenty-two of these indices were down by more than 50%! Consequently, declining prices for stocks and bonds of a wide variety of issuers globally appear ever more attractive to us, though we recognize that the current economic environment presents challenges to most businesses. GDP will either slow significantly or fall below zero in the second half of 2008 and into 2009. Financial asset prices appear to anticipate this scenario. We believe that most of our portfolio companies can emerge from the current recession in stronger competitive positions than when they entered it.
Over the last five years, the annual dividends paid by Thornburg Investment Income Builder from net investment income have increased at an average annual rate of 16.7%, from 55¢ per Class A share for the year ended September 30, 2004 to $1.02 for the fiscal year just ended. Over time, higher income dividends
14 Certified Annual Report
are their own reward, so long as an investment portfolio that powers them remains in place. While it is clear that the market prices of most Income Builder investments have declined over the past year, we continue to believe that the income generators in your portfolio have considerable intrinsic value. In time, we expect these values to be recognized.
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 | ||
| CEO & 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 15
STATEMENT OF ASSETS AND LIABILITIES
| Thornburg Investment Income Builder Fund | September 30, 2008 |
ASSETS | ||||
Investments at value (Note 2) | ||||
Non-controlled affiliated issuers (cost $156,593,977) | $ | 71,180,019 | ||
Non-affiliated issuers (cost $3,838,091,299) | 3,394,395,933 | |||
Cash | 118,473,867 | |||
Cash denominated in foreign currency (cost $932,064) | 885,080 | |||
Receivable for investments sold | ||||
Non-controlled affiliated issuers | 710,226 | |||
Non-affiliated issuers | 2,181,361 | |||
Receivable for fund shares sold | 6,516,377 | |||
Unrealized gain on forward exchange contracts (Note 7) | 64,293,282 | |||
Dividends receivable | 8,705,201 | |||
Interest receivable | 13,673,506 | |||
Prepaid expenses and other assets | 30,229 | |||
Total Assets | 3,681,045,081 | |||
LIABILITIES | ||||
Payable for securities purchased | 51,445,746 | |||
Payable for fund shares redeemed | 29,486,154 | |||
Unrealized loss on forward exchange contracts (Note 7) | 21,003,829 | |||
Payable to investment advisor and other affiliates (Note 3) | 3,939,759 | |||
Accounts payable and accrued expenses | 1,504,039 | |||
Dividends payable | 1,358,307 | |||
Total Liabilities | 108,737,834 | |||
NET ASSETS | $ | 3,572,307,247 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 23,305,063 | ||
Net unrealized depreciation on investments | (486,118,924 | ) | ||
Accumulated net realized gain (loss) | (161,493,530 | ) | ||
Net capital paid in on shares of beneficial interest | 4,196,614,638 | |||
| $ | 3,572,307,247 | |||
16 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($1,393,267,604 applicable to 82,629,356 shares of beneficial interest outstanding - Note 4) | $ | 16.86 | |
Maximum sales charge, 4.50% of offering price | 0.79 | ||
Maximum offering price per share | $ | 17.65 | |
Class C Shares: | |||
Net asset value and offering price per share * ($1,399,947,136 applicable to 82,990,019 shares of beneficial interest outstanding - Note 4) | $ | 16.87 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($766,772,029 applicable to 45,185,890 shares of beneficial interest outstanding - Note 4) | $ | 16.97 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($11,847,910 applicable to 703,236 shares of beneficial interest outstanding - Note 4) | $ | 16.85 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($251,220 applicable to 14,833 shares of beneficial interest outstanding - Note 4) | $ | 16.94 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($221,348 applicable to 13,038 shares of beneficial interest outstanding - Note 4) | $ | 16.98 | |
| * | 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 17
| Thornburg Investment Income Builder Fund | Year Ended September 30, 2008 |
INVESTMENT INCOME: | ||||
Dividend income | ||||
Non-controlled affiliated issuers (net of foreign taxes withheld of $546,634) | $ | 12,803,735 | ||
Non-affiliated issuers (net of foreign taxes withheld of $13,017,673) | 202,403,494 | |||
Interest income (net of premium amortized of $377,694) | 47,415,858 | |||
Total Income | 262,623,087 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 30,825,381 | |||
Administration fees (Note 3) | ||||
Class A Shares | 2,246,514 | |||
Class C Shares | 2,071,745 | |||
Class I Shares | 364,972 | |||
Class R3 Shares | 14,356 | |||
Class R4 Shares | 136 | |||
Class R5 Shares | 104 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 4,507,305 | |||
Class C Shares | 16,635,741 | |||
Class R3 Shares | 57,094 | |||
Class R4 Shares | 272 | |||
Transfer agent fees | ||||
Class A Shares | 1,491,980 | |||
Class C Shares | 1,721,010 | |||
Class I Shares | 356,600 | |||
Class R3 Shares | 24,031 | |||
Class R4 Shares | 1,256 | |||
Class R5 Shares | 2,196 | |||
Registration and filing fees | ||||
Class A Shares | 136,264 | |||
Class C Shares | 83,570 | |||
Class I Shares | 55,318 | |||
Class R3 Shares | 16,833 | |||
Class R4 Shares | 15,942 | |||
Class R5 Shares | 20,483 | |||
Custodian fees (Note 3) | 1,182,038 | |||
Professional fees | 179,629 | |||
Accounting fees | 131,225 | |||
Trustee fees | 75,030 | |||
Other expenses | 662,151 | |||
Total Expenses | 62,879,176 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (2,125,283 | ) | ||
Fees paid indirectly (Note 3) | (56,638 | ) | ||
Net Expenses | 60,697,255 | |||
Net Investment Income | $ | 201,925,832 | ||
18 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
| Thornburg Investment Income Builder Fund | Year Ended September 30, 2008 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | ||||
Non-controlled affiliated issuers | $ | (27,099,462 | ) | |
Non-affiliated issuers | (100,310,413 | ) | ||
Foreign currency transactions | (59,309,685 | ) | ||
| (186,719,560 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,158,217,017 | ) | ||
Foreign currency translation | 69,299,608 | |||
| (1,088,917,409 | ) | |||
Net Realized and Unrealized Loss | (1,275,636,969 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (1,073,711,137 | ) | |
See notes to financial statements.
Certified Annual Report 19
STATEMENTS OF CHANGES IN NET ASSETS
| Thornburg Investment Income Builder Fund |
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 201,925,832 | $ | 116,042,585 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (186,719,560 | ) | 108,360,392 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | (1,088,917,409 | ) | 435,315,306 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (1,073,711,137 | ) | 659,718,283 | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (87,293,427 | ) | (50,204,595 | ) | ||||
Class C Shares | (69,974,272 | ) | (35,449,856 | ) | ||||
Class I Shares | (38,332,930 | ) | (19,870,628 | ) | ||||
Class R3 Shares | (528,541 | ) | (149,347 | ) | ||||
Class R4 Shares | (5,226 | ) | — | |||||
Class R5 Shares | (10,324 | ) | (317 | ) | ||||
From realized gains | ||||||||
Class A Shares | (36,128,892 | ) | (25,096,354 | ) | ||||
Class C Shares | (32,902,777 | ) | (18,583,927 | ) | ||||
Class I Shares | (13,856,430 | ) | (8,637,003 | ) | ||||
Class R3 Shares | (182,203 | ) | (52,085 | ) | ||||
Class R5 Shares | (1,810 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 262,958,781 | 568,545,293 | ||||||
Class C Shares | 396,649,527 | 706,003,815 | ||||||
Class I Shares | 372,408,738 | 252,258,521 | ||||||
Class R3 Shares | 8,197,717 | 5,498,993 | ||||||
Class R4 Shares | 294,327 | — | ||||||
Class R5 Shares | 223,121 | 67,758 | ||||||
Net Increase (Decrease) in Net Assets | (312,195,758 | ) | 2,034,048,551 | |||||
NET ASSETS: | ||||||||
Beginning of year | 3,884,503,005 | 1,850,454,454 | ||||||
End of year | $ | 3,572,307,247 | $ | 3,884,503,005 | ||||
Undistributed net investment income | $ | 23,305,063 | $ | 20,548,540 | ||||
See notes to financial statements.
20 Certified Annual Report
| Thornburg Investment Income Builder Fund | September 30, 2008 |
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 thirteen 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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 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, 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 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 administrative and legal expenses. Currently, class specific expenses of the Fund are limited to service and distribution fees, administration fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: 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.
Any debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations 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 obligations 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.
Quotations in foreign currencies for foreign portfolio investments are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
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 procedures approved by the Trustees, which may include the use of prices obtained from an independent pricing service. The pricing service ordinarily values equity securities in these instances, using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures and index data and other data. 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the debt obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation held by the Fund may
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
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 obligation.
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Foreign currency translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund, to the shareholders. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and/or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient 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.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
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, 2008, 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, 2008, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $2,054,288 for Class C shares, $31,688 for Class R3 shares, $16,945 for Class R4 shares, and $22,362 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, 2008, the Distributor has advised the Fund that it earned commissions aggregating $993,389 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $535,169 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, 2008, 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, 2008, fees paid indirectly were $56,638.
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, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 32,312,509 | $ | 694,658,919 | 32,442,895 | $ | 692,883,081 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 4,928,456 | 101,966,780 | 2,915,652 | 61,056,323 | ||||||||||
Shares repurchased | (27,276,934 | ) | (533,691,076 | ) | (8,821,730 | ) | (185,406,263 | ) | ||||||
Redemption fees received** | — | 24,158 | — | 12,152 | ||||||||||
Net Increase (Decrease) | 9,964,031 | $ | 262,958,781 | 26,536,817 | $ | 568,545,293 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 28,098,198 | $ | 605,445,590 | 34,745,769 | $ | 739,818,421 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 3,780,967 | 78,327,028 | 1,908,232 | 40,045,995 | ||||||||||
Shares repurchased | (14,602,336 | ) | (287,145,318 | ) | (3,442,710 | ) | (73,871,246 | ) | ||||||
Redemption fees received** | — | 22,227 | — | 10,645 | ||||||||||
Net Increase (Decrease) | 17,276,829 | $ | 396,649,527 | 33,211,291 | $ | 706,003,815 | ||||||||
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 28,502,232 | $ | 584,478,619 | 14,887,196 | $ | 318,805,598 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,872,549 | 38,475,342 | 1,043,149 | 22,020,961 | ||||||||||
Shares repurchased | (12,599,865 | ) | (250,554,875 | ) | (4,191,444 | ) | (88,572,580 | ) | ||||||
Redemption fees received** | — | 9,652 | — | 4,542 | ||||||||||
Net Increase (Decrease) | 17,774,916 | $ | 372,408,738 | 11,738,901 | $ | 252,258,521 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 530,412 | $ | 11,253,161 | 313,697 | $ | 6,751,609 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 32,259 | 656,744 | 9,170 | 195,546 | ||||||||||
Shares repurchased | (182,609 | ) | (3,712,337 | ) | (66,150 | ) | (1,448,208 | ) | ||||||
Redemption fees received** | — | 149 | — | 46 | ||||||||||
Net Increase (Decrease) | 380,062 | $ | 8,197,717 | 256,717 | $ | 5,498,993 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 14,552 | $ | 289,196 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 281 | 5,130 | — | — | ||||||||||
Shares repurchased | — | — | — | — | ||||||||||
Redemption fees received** | — | 1 | — | — | ||||||||||
Net Increase (Decrease) | 14,833 | $ | 294,327 | — | $ | — | ||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 22,563 | $ | 462,911 | 3,057 | $ | 67,798 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 342 | 6,456 | 3 | 64 | ||||||||||
Shares repurchased | (12,922 | ) | (246,249 | ) | (5 | ) | (104 | ) | ||||||
Redemption fees received** | — | 3 | — | — | ||||||||||
Net Increase (Decrease) | 9,983 | $ | 223,121 | 3,055 | $ | 67,758 | ||||||||
| * | Effective date for Class R4 shares was February 1, 2008 and for Class R5 shares was February 1, 2007. |
| ** | The Fund charges a redemption fee of 1% of the Class A and Class I shares redeemed or 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, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments and U. S. Government obligations) of $2,657,360,671 and $1,833,625,442, respectively.
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 4,001,211,142 | ||
Gross unrealized appreciation on a tax basis | $ | 146,953,453 | ||
Gross unrealized depreciation on a tax basis | (682,588,643 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (535,635,190 | ) | |
Distributable earnings – ordinary income | $ | 26,753,630 |
At September 30, 2008, the Fund had tax basis capital losses of $4,262,779 which may be carried forward 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 carry forwards expire at September 30, 2016.
At September 30, 2008, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2007 of $616,236 and $110,250,670, respectively. For tax purposes, such losses will be reflected in the year ending September 30, 2009.
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $3,024,589, decreased accumulated net realized investment loss by $2,226,563, and increased net capital paid in on shares of beneficial interest by $798,026. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from gain/(loss) on foreign currency transactions, investments in partnerships, recharacterization of income received and distributions paid.
The tax character of distributions paid during the year ended September 30, 2008, and September 30, 2007, was as follows:
| 2008 | 2007 | |||||
Distributions from: | ||||||
Ordinary income | $ | 240,357,528 | $ | 125,439,291 | ||
Capital gains | 38,859,304 | 32,604,821 | ||||
Total Distributions | $ | 279,216,832 | $ | 158,044,112 | ||
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2008, 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 BUY OR SELL:
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value (USD) | Unrealized Appreciation | Unrealized (Depreciation) | ||||||||||
Euro Dollar | Sell | 394,000,000 | 11/06/08 | $ | 600,771,200 | $ | 44,337,230 | $ | — | |||||||
Euro Dollar | Buy | 136,740,000 | 11/06/08 | 201,554,760 | — | (8,441,102 | ) | |||||||||
Great Britain Pound | Sell | 101,500,000 | 11/06/08 | 198,199,050 | 17,300,628 | — | ||||||||||
Great Britain Pound | Buy | 25,500,000 | 11/06/08 | 49,874,175 | — | (4,426,788 | ) | |||||||||
Great Britain Pound | Buy | 22,560,000 | 11/06/08 | 44,156,688 | — | (3,949,117 | ) | |||||||||
Great Britain Pound | Buy | 16,080,000 | 11/06/08 | 31,845,475 | — | (3,186,888 | ) | |||||||||
Great Britain Pound | Buy | 13,840,000 | 11/06/08 | 25,666,280 | — | (999,934 | ) | |||||||||
Swiss Franc | Sell | 50,700,000 | 11/06/08 | 47,935,103 | 2,655,424 | — | ||||||||||
Total unrealized appreciation (depreciation) from forward exchange contracts | $ | 64,293,282 | $ | (21,003,829 | ) | |||||||||||
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
26 Certified Annual Report
Thornburg Investment Income Builder Fund
| Year Ended September 30, | ||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 23.35 | $ | 19.58 | $ | 17.93 | $ | 15.60 | $ | 13.77 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 1.04 | 0.93 | 0.78 | 0.73 | 0.72 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (6.04 | ) | 4.23 | 1.98 | 2.24 | 1.66 | ||||||||||||||
Total from investment operations | (5.00 | ) | 5.16 | 2.76 | 2.97 | 2.38 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (1.02 | ) | (0.88 | ) | (0.77 | ) | (0.64 | ) | (0.55 | ) | ||||||||||
Net realized gains | (0.47 | ) | (0.51 | ) | (0.34 | ) | — | — | ||||||||||||
Total dividends | (1.49 | ) | (1.39 | ) | (1.11 | ) | (0.64 | ) | (0.55 | ) | ||||||||||
Change in net asset value | (6.49 | ) | 3.77 | 1.65 | 2.33 | 1.83 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 16.86 | $ | 23.35 | $ | 19.58 | $ | 17.93 | $ | 15.60 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | (22.48 | ) | 27.40 | 16.05 | 19.21 | 17.40 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 5.01 | 4.39 | 4.22 | 4.26 | 4.72 | |||||||||||||||
Expenses, after expense reductions (%) | 1.25 | 1.30 | 1.38 | 1.47 | 1.50 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.25 | 1.30 | 1.38 | 1.47 | 1.49 | |||||||||||||||
Expenses, before expense reductions (%) | 1.25 | 1.30 | 1.38 | 1.47 | 1.50 | |||||||||||||||
Portfolio turnover rate (%) | 46.07 | 62.60 | 55.29 | 76.76 | 109.21 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,393,268 | $ | 1,697,061 | $ | 903,347 | $ | 515,915 | $ | 224,522 | ||||||||||
| (a) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 27
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Investment Income Builder Fund
| Year Ended September 30, | ||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 23.37 | $ | 19.60 | $ | 17.95 | $ | 15.62 | $ | 13.79 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.90 | 0.81 | 0.70 | 0.66 | 0.66 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (6.04 | ) | 4.22 | 1.97 | 2.24 | 1.66 | ||||||||||||||
Total from investment operations | (5.14 | ) | 5.03 | 2.67 | 2.90 | 2.32 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.89 | ) | (0.75 | ) | (0.68 | ) | (0.57 | ) | (0.49 | ) | ||||||||||
Net realized gains | (0.47 | ) | (0.51 | ) | (0.34 | ) | — | — | ||||||||||||
Total dividends | (1.36 | ) | (1.26 | ) | (1.02 | ) | (0.57 | ) | (0.49 | ) | ||||||||||
Change in net asset value | (6.50 | ) | 3.77 | 1.65 | 2.33 | 1.83 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 16.87 | $ | 23.37 | $ | 19.60 | $ | 17.95 | $ | 15.62 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | (23.02 | ) | 26.64 | 15.45 | 18.70 | 16.89 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 4.36 | 3.79 | 3.73 | 3.84 | 4.33 | |||||||||||||||
Expenses, after expense reductions (%) | 1.90 | 1.90 | 1.90 | 1.90 | 1.89 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.90 | 1.89 | 1.90 | 1.89 | 1.89 | |||||||||||||||
Expenses, before expense reductions (%) | 2.03 | 2.06 | 2.15 | 2.23 | 2.25 | |||||||||||||||
Portfolio turnover rate (%) | 46.07 | 62.60 | 55.29 | 76.76 | 109.21 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,399,947 | $ | 1,535,532 | $ | 636,947 | $ | 337,489 | $ | 143,122 | ||||||||||
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
28 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Investment Income Builder Fund
| Year Ended September 30, | Period Ended September 30, 2004 (a) | |||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | |||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||||||
Net asset value, beginning of period | $ | 23.50 | $ | 19.71 | $ | 18.03 | $ | 15.64 | $ | 14.45 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 1.10 | 1.02 | 0.88 | 0.84 | 0.74 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (6.06 | ) | 4.24 | 1.98 | 2.22 | 1.01 | ||||||||||||||
Total from investment operations | (4.96 | ) | 5.26 | 2.86 | 3.06 | 1.75 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (1.10 | ) | (0.96 | ) | (0.84 | ) | (0.67 | ) | (0.56 | ) | ||||||||||
Net realized gains | (0.47 | ) | (0.51 | ) | (0.34 | ) | — | — | ||||||||||||
Total dividends | (1.57 | ) | (1.47 | ) | (1.18 | ) | (0.67 | ) | (0.56 | ) | ||||||||||
Change in net asset value | (6.53 | ) | 3.79 | 1.68 | 2.39 | 1.19 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 16.97 | $ | 23.50 | $ | 19.71 | $ | 18.03 | $ | 15.64 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(b) | (22.20 | ) | 27.80 | 16.53 | 19.73 | 12.19 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 5.34 | 4.74 | 4.68 | 4.86 | 5.33 | (c) | ||||||||||||||
Expenses, after expense reductions (%) | 0.89 | 0.95 | 0.99 | 1.00 | 0.99 | (c) | ||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.89 | 0.94 | 0.98 | 0.99 | 0.99 | (c) | ||||||||||||||
Expenses, before expense reductions (%) | 0.89 | 0.95 | 1.02 | 1.09 | 1.21 | (c) | ||||||||||||||
Portfolio turnover rate (%) | 46.07 | 62.60 | 55.29 | 76.76 | 109.21 | |||||||||||||||
Net assets at end of period (thousands) | $ | 766,772 | $ | 644,294 | $ | 308,859 | $ | 129,110 | $ | 33,247 | ||||||||||
| (a) | Effective date of this class of shares was November 1, 2003. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 29
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Investment Income Builder Fund
| Year Ended September 30, | Period Ended September 30, 2005(a) | |||||||||||||||
| 2008 | 2007 | 2006 | ||||||||||||||
Class R3 Shares: | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 23.34 | $ | 19.58 | $ | 17.93 | $ | 16.98 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 1.00 | 0.86 | 0.82 | 0.50 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (6.05 | ) | 4.24 | 1.92 | 0.79 | |||||||||||
Total from investment operations | (5.05 | ) | 5.10 | 2.74 | 1.29 | |||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.97 | ) | (0.83 | ) | (0.75 | ) | (0.34 | ) | ||||||||
Net realized gains | (0.47 | ) | (0.51 | ) | (0.34 | ) | — | |||||||||
Total dividends | (1.44 | ) | (1.34 | ) | (1.09 | ) | (0.34 | ) | ||||||||
Change in net asset value | (6.49 | ) | 3.76 | 1.65 | 0.95 | |||||||||||
NET ASSET VALUE, end of period | $ | 16.85 | $ | 23.34 | $ | 19.58 | $ | 17.93 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return (%)(b) | (22.69 | ) | 27.10 | 15.91 | 7.67 | |||||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) (%) | 4.89 | 4.00 | 4.36 | 4.27 | (c) | |||||||||||
Expenses, after expense reductions (%) | 1.49 | 1.50 | 1.50 | 1.50 | (c) | |||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.49 | 1.50 | 1.50 | 1.49 | (c) | |||||||||||
Expenses, before expense reductions (%) | 1.77 | 2.16 | 6.05 | 28.93 | (c)(d) | |||||||||||
Portfolio turnover rate (%) | 46.07 | 62.60 | 55.29 | 76.76 | ||||||||||||
Net assets at end of period (thousands) | $ | 11,848 | $ | 7,544 | $ | 1,301 | $ | 280 | ||||||||
| (a) | Effective date of this class of shares was February 1, 2005. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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.
30 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Investment Income Builder Fund
| Period Ended September 30, 2008 (a) | ||||
Class R4 Shares: | ||||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 21.22 | ||
Income from investment operations: | ||||
Net investment income (loss) | 0.66 | |||
Net realized and unrealized gain (loss) on investments | (4.39 | ) | ||
Total from investment operations | (3.73 | ) | ||
Less dividends from: | ||||
Net investment income | (0.55 | ) | ||
Change in net asset value | (4.28 | ) | ||
NET ASSET VALUE, end of period | $ | 16.94 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%)(b) | (17.79 | ) | ||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 5.28 | (c) | ||
Expenses, after expense reductions (%) | 1.40 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 1.40 | (c) | ||
Expenses, before expense reductions (%) | 16.97 | (c)(d) | ||
Portfolio turnover rate (%) | 46.07 | |||
Net assets at end of period (thousands) | $ | 251 | ||
| (a) | Effective date of this class of shares was February 1, 2008. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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 31
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Investment Income Builder Fund
| Year Ended Sept. 30, 2008 | Period Ended Sept. 30, 2007(a) | |||||||
Class R5 Shares: | ||||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 23.51 | $ | 20.74 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 1.11 | 0.46 | ||||||
Net realized and unrealized gain (loss) on investments | (6.09 | ) | 2.87 | |||||
Total from investment operations | (4.98 | ) | 3.33 | |||||
Less dividends from: | ||||||||
Net investment income | (1.08 | ) | (0.56 | ) | ||||
Net realized gains | (0.47 | ) | — | |||||
Total dividends | (1.55 | ) | (0.56 | ) | ||||
Change in net asset value | (6.53 | ) | 2.77 | |||||
NET ASSET VALUE, end of period | $ | 16.98 | $ | 23.51 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | (22.27 | ) | 16.19 | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 5.48 | 3.17 | (c) | |||||
Expenses, after expense reductions (%) | 0.99 | 0.99 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.98 | (c) | |||||
Expenses, before expense reductions (%) | 11.77 | (d) | 278.77 | (c)(d) | ||||
Portfolio turnover rate (%) | 46.07 | 62.60 | ||||||
Net assets at end of period (thousands) | $ | 221 $ | 72 | |||||
| (a) | Effective date of this class of shares was February 1, 2007. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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.
32 Certified Annual Report
| Thornburg Investment Income Builder Fund | September 30, 2008 |
CUSIPS: CLASS A—885-215-558, CLASS C—885-215-541, CLASS I—885-215-467, CLASS R3—885-215-384, CLASS R4—885-215-186, CLASS R5—885-215-236
NASDAQ SYMBOLS: CLASS A—TIBAX, CLASS C—TIBCX, CLASS I—TIBIX, CLASS R3—TIBRX, CLASS R4—TIBGX, CLASS R5—TIBMX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/08
Telecommunication Services | 14.3 | % | |
Banks | 12.4 | % | |
Energy | 10.4 | % | |
Diversified Financials | 8.3 | % | |
Utilities | 7.7 | % | |
Consumer Services | 7.5 | % | |
Food, Beverage & Tobacco | 6.1 | % | |
Materials | 4.5 | % | |
Semiconductors & Semiconductor Equipment | 3.9 | % | |
Insurance | 3.7 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 2.9 | % | |
Transportation | 2.4 | % | |
Media | 1.4 | % | |
Commercial & Professional Supplies | 1.1 | % | |
Technology Hardware & Equipment | 0.6 | % | |
Food & Staples Retailing | 0.3 | % | |
Retailing | 0.2 | % | |
Real Estate | 0.2 | % | |
Software & Services | 0.1 | % | |
Other Non-Classified Securities: | |||
Taxable Municipal Bonds | 6.6 | % | |
Asset Backed Securities | 1.0 | % | |
Other Securities | 0.5 | % | |
U.S. Government Agencies | 0.5 | % | |
Foreign Bonds | 0.4 | % | |
Other Assets & Cash Equivalents | 3.0 | % | |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/08
United States | 51.1 | % | |
Italy | 8.0 | % | |
Spain | 5.9 | % | |
Australia | 5.2 | % | |
Switzerland | 3.5 | % | |
Greece | 3.2 | % | |
France | 2.8 | % | |
China | 2.6 | % | |
United Kingdom | 2.5 | % | |
Canada | 2.3 | % | |
Mexico | 1.6 | % | |
Taiwan | 1.3 | % | |
Hong Kong | 1.0 | % | |
South Africa | 0.9 | % | |
Israel | 0.9 | % | |
Norway | 0.8 | % | |
Germany | 0.6 | % | |
Turkey | 0.6 | % | |
Russia | 0.6 | % | |
Malaysia | 0.5 | % | |
United Arab Emirates | 0.3 | % | |
Korea | 0.2 | % | |
Luxembourg | 0.2 | % | |
Brazil | 0.2 | % | |
Bermuda | 0.1 | % | |
Ireland | 0.1 | % | |
Other Assets & Cash Equivalents | 3.0 | % | |
Certified Annual Report 33
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | ||||
COMMON STOCK — 70.93% | |||||
BANKS — 9.54% | |||||
COMMERCIAL BANKS — 9.54% | |||||
Associated Banc-Corp. | 1,100,000 | $ | 21,945,000 | ||
BancorpSouth, Inc. | 368,600 | 10,368,718 | |||
BBVA(1) | 2,750,000 | 44,469,491 | |||
EFG Eurobank Ergasias(1) | 1,800,000 | 32,810,545 | |||
Huntington Bancshares, Inc. | 2,500,000 | 19,975,000 | |||
Intesa Sanpaolo(1) | 9,950,000 | 54,720,798 | |||
Liechtensteinische Landesbank AG(1) | 910,000 | 59,988,860 | |||
Old National Bancorp | 1,124,744 | 22,517,375 | |||
U.S. Bancorp | 1,450,000 | 52,229,000 | |||
Webster Financial Corp. | 860,000 | 21,715,000 | |||
| 340,739,787 | |||||
COMMERCIAL & PROFESSIONAL SERVICES — 1.04% | |||||
PROFESSIONAL SERVICES — 1.04% | |||||
Seek Ltd.(1) | 9,000,000 | 37,248,961 | |||
| 37,248,961 | |||||
CONSUMER SERVICES — 7.10% | |||||
HOTELS, RESTAURANTS & LEISURE — 7.10% | |||||
Aristocrat Leisure Ltd.(1) | 8,000,000 | 41,916,673 | |||
Berjaya Sports Toto Berhad(1) | 12,750,000 | 16,675,155 | |||
FU JI Food & Catering Services(1) | 13,000,000 | 13,296,694 | |||
McDonald’s Corp. | 1,600,000 | 98,720,000 | |||
OPAP SA(1) | 2,700,000 | 82,874,003 | |||
| 253,482,525 | |||||
DIVERSIFIED FINANCIALS — 4.93% | |||||
CAPITAL MARKETS — 2.31% | |||||
AllianceBernstein Holdings LP | 435,420 | 16,114,894 | |||
Apollo Investment Corp. | 1,912,501 | 32,608,142 | |||
GMP Capital Trust | 1,497,100 | 14,179,721 | |||
Henderson Group plc(1) | 5,300,000 | 10,457,625 | |||
Henderson Group plc-CDI(1) | 4,800,000 | 9,133,015 | |||
DIVERSIFIED FINANCIAL SERVICES — 2.62% | |||||
Bolsas y Mercados Espanoles(1) | 900,000 | 23,268,367 | |||
Hong Kong Exchanges & Clearing Ltd.(1) | 1,900,000 | 23,401,188 | |||
KKR Financial Holdings, LLC(2) | 7,400,000 | 47,064,000 | |||
| 176,226,952 | |||||
ENERGY — 8.25% | |||||
ENERGY EQUIPMENT & SERVICES — 2.63% | |||||
Diamond Offshore Drilling, Inc. | 650,000 | 66,989,000 | |||
Fred Olsen Energy ASA(1) | 700,000 | 27,026,535 | |||
OIL, GAS & CONSUMABLE FUELS — 5.62% | |||||
Canadian Oil Sands Trust | 1,310,800 | 47,739,354 | |||
Eni SpA(1) | 3,620,000 | 95,951,944 | |||
Total SA(1) | 575,000 | 34,931,197 | |||
Tupras-Turkiye Petrol Rafinerileri A.S.(1) | 1,250,000 | 21,899,594 | |||
| 294,537,624 | |||||
34 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | ||||
FOOD, BEVERAGE & TOBACCO — 5.39% | |||||
BEVERAGES — 1.78% | |||||
Coca Cola Co. | 1,200,000 | $ | 63,456,000 | ||
FOOD PRODUCTS — 1.46% | |||||
Kraft Foods, Inc. A | 1,450,000 | 47,487,500 | |||
Reddy Ice Holdings, Inc.(2) | 1,257,412 | 4,589,554 | |||
TOBACCO — 2.15% | |||||
Philip Morris | 1,600,000 | 76,960,000 | |||
| 192,493,054 | |||||
INSURANCE — 3.27% | |||||
INSURANCE — 3.27% | |||||
AXA(1) | 900,000 | 29,460,932 | |||
Hannover Rueckversicherung AG(1) | 600,000 | 21,958,891 | |||
Swiss Re(1) | 1,180,000 | 65,496,440 | |||
| 116,916,263 | |||||
MATERIALS — 3.24% | |||||
CHEMICALS — 0.89% | |||||
Israel Chemicals Ltd.(1) | 2,500,000 | 31,683,623 | |||
METALS & MINING — 2.35% | |||||
Impala Platinum Holdings Ltd.(1) | 1,600,000 | 32,663,029 | |||
Southern Copper Corp. | 2,700,000 | 51,516,000 | |||
| 115,862,652 | |||||
MEDIA — 1.08% | |||||
MEDIA — 1.08% | |||||
Mediaset SpA(1) | 4,500,000 | 28,579,195 | |||
Sinclair Broadcast Group, Inc. | 2,000,000 | 10,080,000 | |||
| 38,659,195 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 2.71% | |||||
PHARMACEUTICALS — 2.71% | |||||
Eli Lilly & Co. | 2,200,000 | 96,866,000 | |||
| 96,866,000 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.36% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.36% | |||||
Intel Corp. | 3,900,000 | 73,047,000 | |||
Taiwan Semiconductor Mfg. Co. Ltd. ADR | 5,030,401 | 47,134,857 | |||
| 120,181,857 | |||||
TELECOMMUNICATION SERVICES — 12.72% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 7.75% | |||||
AT&T, Inc. | 1,844,900 | 51,509,608 | |||
France Telecom SA(1) | 1,250,000 | 35,062,012 | |||
Telefónica SA(1) | 5,950,000 | 141,476,477 | |||
Telstra Corp. Ltd.(1) | 14,558,781 | 48,844,091 | |||
WIRELESS TELECOMMUNICATION SERVICES — 4.97% | |||||
América Móvil SAB de C.V. ADR | 1,200,000 | 55,632,000 | |||
China Mobile Ltd.(1) | 6,000,000 | 60,106,042 | |||
Vodafone Group plc(1) | 28,000,000 | 61,836,036 | |||
| 454,466,266 | |||||
Certified Annual Report 35
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | |||||
TRANSPORTATION — 1.92% | ||||||
TRANSPORTATION INFRASTRUCTURE — 1.92% | ||||||
Hopewell Highway(1) | 15,643,500 | $ | 10,885,624 | |||
Macquarie Airports(1) | 18,334,671 | 40,308,626 | ||||
Shenzhen Chiwan Wharf Holdings Ltd.(1) | 14,665,727 | 17,251,266 | ||||
| 68,445,516 | ||||||
UTILITIES — 6.38% | ||||||
ELECTRIC UTILITIES — 5.83% | ||||||
Enel SpA(1) | 13,000,000 | 108,519,861 | ||||
Entergy Corp. | 1,120,000 | 99,691,200 | ||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.55% | ||||||
Algonquin Power Income Fund Trust(2) | 3,710,900 | 19,526,465 | ||||
| 227,737,526 | ||||||
TOTAL COMMON STOCK (Cost $2,942,954,349) | 2,533,864,178 | |||||
PREFERRED STOCK — 1.53% | ||||||
BANKS — 1.39% | ||||||
COMMERCIAL BANKS — 1.39% | ||||||
Barclays Bank plc | 200,000 | 2,898,000 | ||||
First Tennessee Bank(3) | 12,000 | 4,365,000 | ||||
Huntington Bancshares | 55,000 | 42,239,450 | ||||
| 49,502,450 | ||||||
DIVERSIFIED FINANCIALS — 0.14% | ||||||
CAPITAL MARKETS — 0.14% | ||||||
Merrill Lynch & Co., Inc. | 420,000 | 3,759,000 | ||||
Morgan Stanley | 120,000 | 1,258,800 | ||||
| 5,017,800 | ||||||
TOTAL PREFERRED STOCK (Cost $78,736,622) | 54,520,250 | |||||
ASSET BACKED SECURITIES — 0.96% | ||||||
BANKS — 0.53% | ||||||
COMMERCIAL BANKS — 0.27% | ||||||
Wells Fargo Asset Securities Corp. Series 2005-AR2 Class B1, 4.543%, 2/25/2035 | $ | 10,600,824 | 5,021,504 | |||
Wells Fargo Asset Securities Corp. Series 2005-AR2 Class B1, 4.686%, 3/25/2035 | 9,909,084 | 4,752,595 | ||||
THRIFTS & MORTGAGE FINANCE — 0.26% | ||||||
Providian Master Note Trust Series 2006-A1A Class A, 2.518%, 1/15/2013(3) | 9,500,000 | 9,242,626 | ||||
| 19,016,725 | ||||||
DIVERSIFIED FINANCIALS — 0.43% | ||||||
CAPITAL MARKETS — 0.17% | ||||||
Bear Stearns ARM Mtg. Series 2003-6 Class 2B-1, 4.829%, 8/25/2033 | 1,305,979 | 915,001 | ||||
Merrill Lynch Mtg. Investors Trust, 4.233%, 8/25/2034 | 7,307,497 | 5,067,184 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.26% | ||||||
Banc of America Funding Corp. Series 2006-I Class SB1, 4.738%, 12/20/2036 | 3,337,267 | 1,501,770 | ||||
Banc of America Mtg. Securities Series 2005-A Class B1, 4.868%, 2/25/2035 | 5,439,000 | 3,290,595 | ||||
Citigroup Mtg. Loan Trust, Inc., 5.081%, 3/25/2034 | 2,524,320 | 1,774,913 | ||||
Structured Asset Security Corp. Series 2002-27A Class B1, 5.288%, 1/25/2033 | 3,943,071 | 2,878,442 | ||||
| 15,427,905 | ||||||
TOTAL ASSET BACKED SECURITIES (Cost $48,308,780) | 34,444,630 | |||||
36 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | |||||
CORPORATE BONDS — 13.60% | ||||||
BANKS — 1.52% | ||||||
COMMERCIAL BANKS — 1.03% | ||||||
Alfa Diversified, 4.819%, 3/15/2012(3) | $ | 6,125,000 | $ | 5,857,950 | ||
Fifth Third Bancorp, 6.25%, 5/1/2013 | 5,000,000 | 4,249,470 | ||||
First Tennessee Bank, 5.316%, 12/8/2008 | 10,000,000 | 9,922,030 | ||||
MDM DPR Finance Company SA, 4.819%, 6/15/2012(1)(3) | 7,500,000 | 6,900,000 | ||||
National City Bank, 7.25%, 7/15/2010 | 5,000,000 | 4,008,145 | ||||
Provident Bank MD, 9.50%, 5/1/2018 | 4,250,000 | 3,796,036 | ||||
Wells Fargo Capital XIII Preferred Note, 7.70%, 12/29/2049 | 2,500,000 | 2,180,025 | ||||
THRIFTS & MORTGAGE FINANCE — 0.49% | ||||||
Sovereign Bancorp, Inc., 3.09%, 3/1/2009 | 6,220,000 | 5,082,934 | ||||
Sovereign Bancorp, Inc., 3.44%, 3/23/2010 | 17,500,000 | 12,420,905 | ||||
| 54,417,495 | ||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.02% | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.02% | ||||||
Allied Waste North America, Inc., 6.375%, 4/15/2011 | 500,000 | 485,000 | ||||
Waste Management, Inc., 7.375%, 8/1/2010 | 175,000 | 181,218 | ||||
| 666,218 | ||||||
CONSUMER SERVICES — 0.44% | ||||||
HOTELS, RESTAURANTS & LEISURE — 0.44% | ||||||
NPC International, Inc., 9.50%, 5/1/2014 | 12,835,000 | 10,524,700 | ||||
Seneca Nation of Indians Capital Improvements Authority, 6.75%, 12/1/2013(3) | 5,550,000 | 5,318,287 | ||||
| 15,842,987 | ||||||
DIVERSIFIED FINANCIALS — 2.01% | ||||||
CAPITAL MARKETS — 0.39% | ||||||
Goldman Sachs Group, Inc., 5.95%, 1/18/2018 | 5,000,000 | 4,124,820 | ||||
Goldman Sachs Group, Inc., 6.15%, 4/1/2018 | 5,000,000 | 4,157,570 | ||||
Goldman Sachs Group, Inc., 5.625%, 1/15/2017 | 8,000,000 | 5,678,296 | ||||
CONSUMER FINANCE — 1.47% | ||||||
American Express Credit Co., 5.875%, 5/2/2013 | 5,000,000 | 4,608,245 | ||||
American Honda Finance, 7.625%, 10/1/2018(3)(4) | 7,000,000 | 6,959,981 | ||||
Capital One Financial Corp., 6.15%, 9/1/2016 | 25,500,000 | 19,137,240 | ||||
SLM Corp., 4.00%, 1/15/2009 | 5,000,000 | 4,100,000 | ||||
SLM Corp., 4.50%, 7/26/2010 | 12,800,000 | 9,728,000 | ||||
SLM Corp. CPI Floating Rate Note, 6.22%, 3/2/2009 | 5,500,000 | 5,120,280 | ||||
SLM Corp. Floating Rate, 3.10%, 1/27/2014 | 5,000,000 | 2,852,520 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.15% | ||||||
CIT Group, Inc., 5.00%, 2/13/2014 | 9,500,000 | 5,373,855 | ||||
| 71,840,807 | ||||||
ENERGY — 1.76% | ||||||
ENERGY EQUIPMENT & SERVICES — 0.21% | ||||||
Calfrac Holdings, 7.75%, 2/15/2015(3) | 7,900,000 | 6,557,000 | ||||
Seitel, Inc., 9.75%, 2/15/2014 | 1,000,000 | 815,000 | ||||
OIL, GAS & CONSUMABLE FUELS — 1.55% | ||||||
Chesapeake Energy Corp., 7.00%, 8/15/2014 | 5,000,000 | 4,675,000 | ||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 5,900,000 | 4,756,757 | ||||
Gaz Capital SA, 7.343%, 4/11/2013(3) | 2,000,000 | 1,810,000 | ||||
Gaz Capital SA, 8.146%, 4/11/2018(3) | 2,000,000 | 1,750,000 | ||||
Certified Annual Report 37
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | |||||
GS Caltex Corp., 7.25%, 7/2/2013(1)(3) | $ | 7,000,000 | $ | 7,000,000 | ||
Murphy Oil Corp., 6.375%, 5/1/2012 | 5,000,000 | 5,222,085 | ||||
NuStar Logistics, 7.65%, 4/15/2018 | 19,000,000 | 19,100,966 | ||||
Petroleum Development Corp., 12.00%, 2/15/2018 | 5,500,000 | 5,280,000 | ||||
Petroplus Finance Ltd., 6.75%, 5/1/2014(3) | 4,000,000 | 3,380,000 | ||||
Plains Exploration & Production Co., 7.625%, 6/1/2018 | 1,000,000 | 885,000 | ||||
Teppco Partners LP, 7.00%, 6/1/2067 | 2,000,000 | 1,678,998 | ||||
| 62,910,806 | ||||||
FOOD & STAPLES RETAILING — 0.18% | ||||||
FOOD & STAPLES RETAILING — 0.18% | ||||||
Rite Aid Corp., 8.625%, 3/1/2015 | 3,000,000 | 1,575,000 | ||||
Rite Aid Corp., 9.375%, 12/15/2015 | 9,500,000 | 4,987,500 | ||||
| 6,562,500 | ||||||
FOOD, BEVERAGE & TOBACCO — 0.75% | ||||||
BEVERAGES — 0.51% | ||||||
Anheuser Busch Cos., Inc., 4.70%, 4/15/2012 | 3,750,000 | 3,458,179 | ||||
Constellation Brands, Inc., 8.375%, 12/15/2014 | 11,000,000 | 10,890,000 | ||||
Diageo Capital plc, 5.50%, 9/30/2016 | 4,000,000 | 3,837,744 | ||||
FOOD PRODUCTS — 0.24% | ||||||
Kraft Foods, Inc., 6.50%, 8/11/2017 | 5,000,000 | 4,811,015 | ||||
Kraft Foods, Inc., 6.125%, 2/1/2018 | 4,000,000 | 3,747,108 | ||||
| 26,744,046 | ||||||
INSURANCE — 0.43% | ||||||
INSURANCE — 0.43% | ||||||
American General Finance Corp., 4.875%, 7/15/2012 | 1,000,000 | 534,969 | ||||
International Lease Finance Corp., 5.125%, 11/1/2010 | 5,000,000 | 3,211,300 | ||||
Liberty Mutual Group, Inc., 5.75%, 3/15/2014(3) | 1,000,000 | 893,286 | ||||
Metlife, Inc. Series A, 6.817%, 8/15/2018 | 4,250,000 | 4,021,367 | ||||
Pacific Life Global Funding CPI Floating Rate Note, 7.20%, 2/6/2016(3) | 2,000,000 | 1,876,720 | ||||
Prudential Holdings LLC, 8.695%, 12/18/2023(3) | 4,300,000 | 4,971,144 | ||||
| 15,508,786 | ||||||
MATERIALS — 1.24% | ||||||
CONSTRUCTION MATERIALS — 0.54% | ||||||
Ace Hardware Corp., 9.125%, 6/1/2016(3) | 6,250,000 | 5,343,750 | ||||
C8 Capital Ltd., 6.64%, 12/31/2049(3) | 2,000,000 | 1,868,980 | ||||
CRH America, Inc., 8.125%, 7/15/2018 | 12,250,000 | 12,018,291 | ||||
METALS & MINING — 0.43% | ||||||
Bemax Resources, 9.375%, 7/15/2014(3) | 5,000,000 | 4,225,000 | ||||
Freeport-McMoRan Copper & Gold, 8.25%, 4/1/2015 | 4,500,000 | 4,421,250 | ||||
GTL Trade Finance, Inc., 7.25%, 10/20/2017(3) | 7,000,000 | 6,711,530 | ||||
PAPER & FOREST PRODUCTS — 0.27% | ||||||
International Paper Co., 7.40%, 6/15/2014 | 9,500,000 | 9,514,573 | ||||
| 44,103,374 | ||||||
MEDIA — 0.34% | ||||||
MEDIA — 0.34% | ||||||
AOL Time Warner, Inc., 6.875%, 5/1/2012 | 425,000 | 421,386 | ||||
Comcast Corp., 6.30%, 11/15/2017 | 5,000,000 | 4,597,510 | ||||
DIRECTV Holdings, 6.375%, 6/15/2015 | 5,100,000 | 4,488,000 | ||||
DIRECTV Holdings, 7.625%, 5/15/2016(3) | 3,000,000 | 2,715,000 | ||||
| 12,221,896 | ||||||
38 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.19% | ||||||
BIOTECHNOLOGY — 0.19% | ||||||
Biogen Idec, Inc., 6.00%, 3/1/2013 | $ | 4,000,000 | $ | 3,949,608 | ||
Tiers Inflation Linked Trust Series Wyeth 2004 21 Trust Certificate CPI Floating Rate Note, 6.872%, 2/1/2014 | 3,000,000 | 2,715,630 | ||||
| 6,665,238 | ||||||
REAL ESTATE — 0.18% | ||||||
REAL ESTATE — 0.18% | ||||||
Agile Property Holdings Ltd., 9.00%, 9/22/2013(3) | 10,000,000 | 6,400,000 | ||||
| 6,400,000 | ||||||
RETAILING — 0.21% | ||||||
INTERNET & CATALOG RETAIL — 0.04% | ||||||
Ticketmaster, 10.75%, 8/1/2016(3) | 1,500,000 | 1,410,000 | ||||
MULTILINE RETAIL — 0.06% | ||||||
Parkson Retail Group, 7.125%, 5/30/2012 | 2,110,000 | 1,962,300 | ||||
SPECIALTY RETAIL — 0.11% | ||||||
Best Buy Co., Inc., 6.75%, 7/15/2013(3) | 4,000,000 | 4,043,008 | ||||
| 7,415,308 | ||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.56% | ||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.56% | ||||||
KLA Instruments Corp., 6.90%, 5/1/2018 | 10,000,000 | 9,298,000 | ||||
National Semiconductor, 3.05%, 6/15/2010 | 11,200,000 | 10,758,362 | ||||
| 20,056,362 | ||||||
SOFTWARE & SERVICES — 0.11% | ||||||
SOFTWARE — 0.11% | ||||||
BMC Software, Inc., 7.25%, 6/1/2018 | 4,000,000 | 4,032,580 | ||||
| 4,032,580 | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.55% | ||||||
COMMUNICATIONS EQUIPMENT — 0.45% | ||||||
Corning, Inc., 6.05%, 6/15/2015(5) | 8,094,000 | 7,735,128 | ||||
Motorola, Inc., 6.00%, 11/15/2017 | 10,000,000 | 8,448,770 | ||||
COMPUTERS & PERIPHERALS — 0.10% | ||||||
Jabil Circuit, Inc., 5.875%, 7/15/2010 | 3,485,000 | 3,345,600 | ||||
| 19,529,498 | ||||||
TELECOMMUNICATION SERVICES — 1.30% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.30% | ||||||
Level 3 Financing, Inc., 9.25%, 11/1/2014 | 33,600,000 | 25,368,000 | ||||
Level 3 Financing, Inc. Senior Notes, 12.25%, 3/15/2013 | 6,000,000 | 5,310,000 | ||||
TCI Communications, Inc., 7.875%, 8/1/2013 | 2,285,000 | 2,374,497 | ||||
Vimpelcom, 8.25%, 5/23/2016(3) | 4,500,000 | 3,195,000 | ||||
Windstream Corp., 8.125%, 8/1/2013 | 10,800,000 | 10,260,000 | ||||
| 46,507,497 | ||||||
TRANSPORTATION — 0.46% | ||||||
AIR FREIGHT & LOGISTICS — 0.14% | ||||||
FedEx Corp., 5.50%, 8/15/2009 | 5,000,000 | 4,980,040 | ||||
ROAD & RAIL — 0.32% | ||||||
Hertz Corp., 8.875%, 1/1/2014 | 13,205,000 | 11,389,312 | ||||
| 16,369,352 | ||||||
Certified Annual Report 39
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | |||||
UTILITIES — 1.35% | ||||||
ELECTRIC UTILITIES — 0.51% | ||||||
Monongahela Power, 5.70%, 3/15/2017(3) | $ | 7,000,000 | $ | 6,437,025 | ||
Taqa Abu Dhabi National Energy Co., 7.25%, 8/1/2018(3) | 3,500,000 | 3,412,189 | ||||
Taqa Abu Dhabi National Energy Co., 6.60%, 8/1/2013(3) | 8,500,000 | 8,438,213 | ||||
GAS UTILITIES — 0.77% | ||||||
Oneok Partners, LP Senior Notes, 5.90%, 4/1/2012 | 3,000,000 | 2,951,280 | ||||
Southern Union Co., 7.20%, 11/1/2066 | 19,900,000 | 14,614,719 | ||||
Southwest Gas Corp., 7.625%, 5/15/2012 | 9,465,000 | 9,788,457 | ||||
MULTI-UTILITIES — 0.07% | ||||||
Union Electric Co., 6.70%, 2/1/2019 | 2,500,000 | 2,414,078 | ||||
| 48,055,961 | ||||||
TOTAL CORPORATE BONDS (Cost $546,295,473) | 485,850,711 | |||||
CONVERTIBLE BONDS — 1.58% | ||||||
DIVERSIFIED FINANCIALS — 1.18% | ||||||
DIVERSIFIED FINANCIAL SERVICES — 1.18% | ||||||
KKR Financial Holdings, LLC, 7.00%, 7/15/2012(3) | 56,600,000 | 42,096,250 | ||||
| 42,096,250 | ||||||
FOOD & STAPLES RETAILING — 0.07% | ||||||
FOOD & STAPLES RETAILING — 0.07% | ||||||
Rite Aid Corp., 8.50%, 5/15/2015 | 4,250,000 | 2,555,312 | ||||
| 2,555,312 | ||||||
TELECOMMUNICATION SERVICES — 0.33% | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.33% | ||||||
NII Holdings, 3.125%, 6/15/2012 | 15,800,000 | 11,692,000 | ||||
| 11,692,000 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $65,148,096) | 56,343,562 | |||||
MUNICIPAL BONDS — 0.11% | ||||||
Short Pump Town Center Community Development, 6.26%, 2/1/2009 | 2,000,000 | 2,017,520 | ||||
Victor New York, 9.20%, 5/1/2014 | 2,000,000 | 2,083,420 | ||||
TOTAL MUNICIPAL BONDS (Cost $4,112,699) | 4,100,940 | |||||
U.S. GOVERNMENT AGENCIES — 0.45% | ||||||
Federal National Mtg. Association CPI Floating Rate Note, 6.162%, 2/17/2009 | 2,000,000 | 2,000,000 | ||||
Federal National Mtg. Association Remic Series 2006-B1 Class AB, 6.00%, 6/25/2016 | 13,867,984 | 13,945,004 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $15,818,789) | 15,945,004 | |||||
FOREIGN BONDS — 0.38% | ||||||
ENERGY — 0.19% | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.19% | ||||||
OAO Gazprom, 7.25%, 2/22/2010 (RUB) | 195,000,000 | 6,858,450 | ||||
| 6,858,450 | ||||||
40 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | |||||
MEDIA — 0.02% | ||||||
MEDIA — 0.02% | ||||||
Independent News & Media plc, 5.75%, 5/17/2009 (EUR) | $ | 600,000 | $ | 810,893 | ||
| 810,893 | ||||||
MISCELLANEOUS — 0.17% | ||||||
MISCELLANEOUS — 0.17% | ||||||
Republic of Brazil, 12.50%, 1/5/2016 (BRL) | 10,750,000 | 5,861,120 | ||||
| 5,861,120 | ||||||
TOTAL FOREIGN BONDS (Cost $14,878,380) | 13,530,463 | |||||
YANKEE BONDS — 0.51% | ||||||
BANKS — 0.12% | ||||||
COMMERCIAL BANKS — 0.12% | ||||||
Korea Development Bank, 5.30%, 1/17/2013 | 800,000 | 794,613 | ||||
Landsbanki Islands HF, 7.431%, 12/31/2049(3) | 5,000,000 | 2,763,575 | ||||
Shinhan Bank, 6.819%, 9/20/2036 | 900,000 | 713,981 | ||||
| 4,272,169 | ||||||
ENERGY — 0.39% | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.39% | ||||||
Griffin Coal Mining Ltd., 9.50%, 12/1/2016(3) | 22,000,000 | 14,080,000 | ||||
| 14,080,000 | ||||||
TOTAL YANKEE BONDS (Cost $28,628,775) | 18,352,169 | |||||
OTHER SECURITIES — 0.46% | ||||||
LOAN PARTICIPATIONS — 0.46% | ||||||
Fairpoint Communications, Inc. Term Loan B, 5.75%, 3/8/2015 | 4,438,776 | 3,591,724 | ||||
Fairpoint Communications, Inc. Term Loan B, 5.75%, 3/9/2015 | 38,265 | 30,963 | ||||
Fairpoint Communications, Inc. Term Loan B, 5.75%, 3/31/2015 | 271,684 | 219,838 | ||||
Fairpoint Communications, Inc. Term Loan B, 5.75%, 3/31/2015 | 42,092 | 34,059 | ||||
Fairpoint Communications, Inc. Term Loan B, 5.75%, 3/8/2015 | 4,209,184 | 3,405,945 | ||||
Mylan Laboratories, Inc., 5.75%, 10/2/2014 | 4,081,455 | 3,810,488 | ||||
Mylan Laboratories, Inc., 7.063%, 10/2/2014 | 3,912,363 | 3,652,621 | ||||
Mylan Laboratories, Inc., 7.063%, 10/2/2014 | 1,956,182 | 1,826,311 | ||||
TOTAL OTHER SECURITIES (Cost $17,751,217) | 16,571,949 | |||||
SHORT TERM INVESTMENTS — 6.50% | ||||||
California State, (LOC: Bank of America), (weekly demand note) put 10/7/2008, 7.60%, 5/1/2040 | 14,675,000 | 14,667,369 | ||||
Charlotte-Mecklenberg Hospital Authority, (Carolina B; Insured: Bayeriche Landesbank) put 10/7/2008, 7.25%, 1/15/2038 | 89,150,000 | 89,150,000 | ||||
Eastern Municipal Water District California, (LOC: JP Morgan Chase), (weekly demand note) put 10/7/2008, 7.67%, 7/1/2020 | 17,620,000 | 17,609,428 | ||||
Harris County Texas Health Facilities, (Baylor College of Medicine; LOC: JP Morgan Chase), (weekly demand note) put 10/7/2008, 7.94%, 11/15/2047 | 65,000,000 | 64,988,750 | ||||
JEA Florida Electrical Services Revenue, (Insured: Dexia Credit Local), (weekly demand note) put 10/7/2008, 7.95%, 10/1/2036 | 14,050,000 | 14,041,289 | ||||
Mississippi State, (Nissan; Insured: Bank of America), (weekly demand note) put 10/7/2008, 9.50%, 11/1/2028 | 31,600,000 | 31,595,260 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $232,052,096) | 232,052,096 | |||||
Certified Annual Report 41
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 |
| Value | |||
TOTAL INVESTMENTS — 97.01% (Cost $3,994,685,276) | $ | 3,465,575,952 | |
OTHER ASSETS LESS LIABILITIES — 2.99% | 106,731,295 | ||
NET ASSETS — 100.00% | $ | 3,572,307,247 | |
Footnote Legend
| + | Non-income producing |
| (1) | Foreign equity security fair valued by independent pricing service on valuation date, September 30, 2008, or debt obligation currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
| (2) | 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, 2007 | Gross Additions | Gross Reductions | Shares at Sept 30, 2008 | Market value Sept 30, 2008 | Dividend Income | ||||||||
Algonquin Power Income Fund Trust | 4,183,700 | — | 472,800 | 3,710,900 | $ | 19,526,465 | $ | 3,097,593 | ||||||
KKR Financial Holdings, LLC | 2,556,500 | 4,843,500 | — | 7,400,000 | 47,064,000 | 8,686,836 | ||||||||
Reddy Ice Holdings, Inc. | 2,174,471 | 325,529 | 1,242,588 | 1,257,412 | 4,589,554 | 1,019,306 | ||||||||
| $ | 71,180,019 | $ | 12,803,735 | |||||||||||
Total non-controlled affiliated issuers – 1.99% of net assets.
| (3) | Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of September 30, 2008, the aggregate value of these securities in the Fund’s portfolio was $180,021,514, representing 5.04% of the Fund’s net assets. |
| (4) | When-issued security. |
| (5) | Segregated as collateral for a when-issued security. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ADR | American Depository Receipt |
| ARM | Adjustable Rate Mortgage |
| BRL | Denominated in Brazilian Dollars |
| CPI | Consumer Price Index |
| EUR | Denominated in Euro Dollars |
| LOC | Letter of Credit |
| Mtg | Mortgage |
| REMIC | Real Estate Mortgage Investment Conduit |
| RUB | Denominated in Russian Rubles |
| SPA | Stand-by Purchase Agreement |
See notes to financial statements.
42 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, 2008, 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, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
Certified Annual Report 43
| Thornburg Investment Income Builder Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
| Beginning Account Value 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 842.60 | $ | 5.88 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.62 | $ | 6.44 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 840.00 | $ | 8.74 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,015.50 | $ | 9.57 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 844.40 | $ | 4.18 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.46 | $ | 4.58 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 842.40 | $ | 6.82 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.60 | $ | 7.47 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 843.00 | $ | 6.45 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.00 | $ | 7.07 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 844.20 | $ | 4.56 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.28%; C: 1.90%; I: 0.91%; R3: 1.48%; R4: 1.40%; and R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/366 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.
44 Certified Annual Report
| Thornburg Investment Income Builder Fund | September 30, 2008 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008 (with sales charge)
| 1 Yr | 5 Yr | Since Inception | |||||||
A Shares (Incep: 12/24/02) | (25.97 | )% | 8.90 | % | 10.85 | % | |||
C Shares (Incep: 12/24/02) | (23.74 | )% | 9.33 | % | 11.18 | % | |||
I Shares (Incep: 11/3/03) | (22.20 | )% | — | 9.43 | % | ||||
R3 Shares (Incep: 2/1/05) | (22.69 | )% | — | 5.73 | % | ||||
R4 Shares (Incep: 2/1/08) | — | — | (17.79 | )%* | |||||
R5 Shares (Incep: 2/1/07) | (22.27 | )% | — | (5.95 | )% | ||||
Blended Index (Since: 12/24/02) | (19.24 | )% | 6.58 | % | 7.93 | % | |||
S&P 500 Index (Since: 12/24/02) | (21.98 | )% | 5.17 | % | 6.73 | % |
| * | 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 I, R3, R4, or R5 shares. Class A and I shares are subject to a 1% 30-day redemption fee.
The Blended Index is comprised of 25% Barclays Capital Aggregate Bond Index and 75% MSCI World Index. The Barclays Capital 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 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 45
| Thornburg Investment Income Builder Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 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, 49 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 | ||
46 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Certified Annual Report 47
TRUSTEES AND OFFICERS, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
48 Certified Annual Report
| Thornburg Investment Income Builder Fund | September 30, 2008 (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, 2008, the Fund designates long-term capital gain dividends of $38,859,304.
For the tax year ended September 30, 2008, the Thornburg Investment Income Builder Fund designates 87.19% (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.
27.43% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2008 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, 2008. Complete information will be computed and reported in conjunction with your 2008 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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by 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, 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 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, relative to the Standard & Poor’s 500 Index, and relative to a blended performance benchmark comprised of two broad-based securities indices, (iv) cumulative return data of the Fund relative to the blended performance benchmark, and (v) comparative
Certified Annual Report 49
OTHER INFORMATION, CONTINUED
| Thornburg Investment Income Builder Fund | September 30, 2008 (Unaudited) |
measures of portfolio volatility, risk and return. The Trustees considered and discussed the effects of recent market and economic events on the Fund and the Advisor’s responses to these events in the context of the Fund’s investment objectives and policies.
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.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment performance was lower than the blended benchmark, the Standard & Poor’s 500 Index and the world allocation fund category for the second quarter of the year and in the year to date, and that the Fund’s performance also was lower than the blended benchmark and the category in the 12 months ending with the second quarter. The Trustees also noted in this regard, however, that the Fund’s investment performance had been higher than the benchmark, the index and the category in each calendar year since the Fund’s inception, and that the Fund’s performance fell within the top quartile of the category for the three and five year periods. The Trustees further noted the levels of the Fund’s dividend payments in each quarter since the Fund’s inception together with the annual increase in the Fund’s dividend in each year, and that the Fund’s cumulative return since inception exceeded the cumulative return of the blended benchmark.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 average and median fees and expenses charged to a group of equity 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 average and median expense ratios for the group of equity income 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 other factors considered. The Trustees noted their previous observations respecting fee rates charged by the Advisor to other investment management clients, and their conclusion that 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 required.
In reviewing the profitability of the Advisor, the Trustees considered 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses charged to the Fund to fees and expenses charged to other mutual funds.
50 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 ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report. 51
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52 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. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
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Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to ..19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
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Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
Sincerely,
 |
| Brian McMahon |
| CEO and Chief Investment Officer |
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Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
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 | Waste not,
Wait not |  | ||||
 |
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: Thornburg Investment Management® 800.847.0200
Distributor: Thornburg Securities Corporation® 800.847.0200
TH857 |
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Important Information
The information presented on the following pages was current as of September 30, 2008. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; they 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. Funds invested in a limited number of holdings may expose an investor to greater volatility. 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.
Class I, R3, R4, and R5 shares may not be available to all investors. Minimum investments for Class I shares may be 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
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
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.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
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.
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 income taxes.
Gross Domestic Product (GDP) – The market value of goods and services produced by labor and property in the United States, regardless of nationality.
This page is not part of the Annual Report. 3
Thornburg Global Opportunities Fund
CO-PORTFOLIO MANAGERS
| ||||
Left to right: W. Vinson Walden,CFA, and Brian McMahon | ||||
KEY PORTFOLIO ATTRIBUTES
As of 9/30/08
Portfolio P/E Trailing 12-months* | 11.1x | ||
Portfolio Price to Cash Flow* | 7.1 | ||
Portfolio Price to Book Value* | 2.0 | ||
Median Market Cap* | $ | 7.4 B | |
Equity Holdings | 33 | ||
* Source: FactSet | |||
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 1.55%, as disclosed in the most recent Prospectus.
Investment fads come and go, and the landscape is littered with funds which generated an avalanche of interest for a brief period of time, then fell by the wayside when the market turned its attention to the next hot trend. At Thornburg Investment Management, we believe that the soundest investments over the long-term are conceptually simple and grounded in common sense. It is with this mindset that we created the Thornburg Global Opportunities Fund.
The Fund was launched in 2006 to capitalize on what Thornburg Investment Management is known for — solid, bottom-up research based on a team-oriented, flexible approach to uncovering value. The goal in creating the Fund was to leverage the research of the entire Thornburg equity investment team, while employing a broad mandate to pursue companies across the globe. Once identified, a focused number of stocks are combined into a compact, yet diversified portfolio.
The philosophy of Thornburg Global Opportunities Fund is straightforward — to purchase promising companies that the team feels are trading at a discount to their intrinsic value. As the balance sheets of global companies become more complex, it is getting increasingly difficult to see how some companies actually make money. These companies are not the ones pursued in the Global Opportunities Fund.
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED 9/30/08
| 1 Yr | Since Inception | |||||
A Shares (Incep: 7/28/06) | ||||||
Without Sales Charge | (30.85 | )% | 7.69 | % | ||
With Sales Charge | (33.98 | )% | 5.44 | % | ||
MSCI AC World Index (Since: 7/28/06) | (26.87 | )% | (2.77 | )% |
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Rather, we believe that straightforward business models executed by capable management teams make the best investments.
The Thornburg Global Opportunities Fund is unique in the marketplace. Currently, assets in the global stock universe are concentrated in a few very large funds. Based on size alone, these funds must focus on the largest-capitalization stocks, or alternatively, spread their assets across a tremendous number of names. In fact, about 85% of category assets are concentrated in 10 funds, and the average world stock fund holds approximately 180 stocks (as of 9/30/08).
Thornburg Global Opportunities Fund is different, in that it will typically be focused in 30–40 stocks which the management team feels have the best combination of promise and discount. Each stock is analyzed thoroughly on its own merits, and the team then combines them into a portfolio of stocks, which, working in concert with each other, provides what they believe are the best long-term prospects for investors. The result is a Fund which looks quite unlike either the MSCI AC World Index or its peers.
Thornburg Global Opportunities Fund is grounded in common sense principles, which we think resonate well with investors and make sense over the long-term.
STOCKS CONTRIBUTING AND DETRACTING
FOR YEAR ENDED 9/30/08
Top Contributors | Top Detractors | |
| Quadra Realty Trust, Inc. | Country Garden Holdings Co. Ltd. | |
| Apache Corp. | KKR Financial Holdings LLC | |
| Huron Consulting Group, Inc. | Mercator Minerals Ltd. | |
| Crown Castle International Corp. | Eastern Platinum Ltd. | |
| Deutsche Bank AG | Hong Kong Exchanges & Clearing Ltd. | |
| Source: FactSet | ||
MARKET CAPITALIZATION EXPOSURE
As of 9/30/08
TOP TEN HOLDINGS
As of 9/30/08
Eclipsys Corp. | 4.5 | % | |
Telefónica SA | 4.4 | % | |
Comcast Corp. | 4.3 | % | |
China Mobile Ltd. | 4.2 | % | |
Hong Kong Exchanges & Clearing Ltd. | 3.9 | % | |
Global Crossing Ltd. | 3.9 | % | |
Swiss Re | 3.9 | % | |
Millicom International Cellular S.A. | 3.8 | % | |
Liechtensteinische Landesbank AG | 3.8 | % | |
Teva Pharmaceutical Industries Ltd. | 3.8 | % |
PORTFOLIO COMPOSITION
As of 9/30/08
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Thornburg Global Opportunities Fund
September 30, 2008
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 7
October 28, 2008
Dear Fellow Shareholder:
This letter will be longer than others we have written for the financial reports of Thornburg Global Opportunities Fund. In addition to covering the basic results of your Fund’s investment activities for the twelve-month period ended September 30, 2008, we believe it is appropriate to comment more extensively on the overall investment landscape, which has changed in important ways in recent months.
For the fiscal year ended September 30, 2008, the Fund’s net asset value (NAV) per Class A share decreased by $6.68 to $13.38. This decrease includes capital gain distributions of 53.9¢ per share, paid to shareholders in November 2007. The Fund also paid income dividends of 13.6¢ per Class A share. The income dividends per share were higher for Class I and R5 shares, and lower on the Class C, R3, and R4 shares, to account for varying class-specific expenses. Total return for the fiscal year was negative 30.85% for Class A shares at NAV. The MSCI AC World Index had a total return of negative 26.87%.
For the fiscal year ended September 30, 2008, Thornburg Global Opportunities Fund underperformed the MSCI AC World Index by 3.98%. We caution against drawing definitive conclusions from short-term performance comparisons. Each industry sector of your equity portfolio and each industry sector of the MSCI AC World Index delivered negative price performance for the year. Your Fund’s holdings in the energy, materials, and financial sectors underperformed relative to index portfolio stocks in these sectors. In the prior year, many of these same stocks contributed strongly to the Fund’s performance. While we harvested some gains, it is obvious that we could have harvested more. We maintained a large weighting in cash generative telecommunication service providers. The price performance of these telecom stocks, down 29.7% on average, did not cushion the overall Fund portfolio performance as much as we would have anticipated, even though results of most of these businesses have been in line with our expectations. Since inception, your Fund has outperformed the MSCI AC World Index by 10.46%, as noted on page 4 of this booklet for Class A shares at NAV. Performance relative to indices for all share classes over various periods is set forth on page 35.
We do not expect to pay any capital gain distributions in 2008.
We are not pleased with the depreciation in the market prices of most of the stocks in your Fund’s portfolio over the fiscal year, and in the following weeks. What happened?
In brief, an enormous buildup in financial leverage throughout the developed world, and especially in the United States, is being unwound. This liquidation has exerted downward pressure on prices of stocks and bonds for more than a year, as debt previously accumulated by banks, brokerage firms, hedge funds and others has been reduced via asset liquidations. Both the liquidations and price reductions have become particularly disorderly in recent months, and the degree of downward price pressure has exceeded our expectations. The most acute price declines generally coincided with the demise of Lehman Brothers in September, which has been followed by one of the largest going-out-of-business inventory liquidations ever
8 Certified Annual Report
seen . . . hundreds of billions of dollars of financial assets accumulated over years. The consequent decline in financial asset prices has pushed other investors holding these assets against future liabilities, including insurance companies and hedge funds, to sell. Finally, certain other investors who have become caught up in the drama of falling prices have joined in the selling.
It is instructive to note how much leverage was built up in recent years. The U.S. Securities & Exchange Commission publishes a composite balance sheet for all U.S. registered broker dealers, which shows the following dynamic over the four-year period from December 31, 2002 to December 31, 2006:
Category | $ Billions 12/31/2002 | $ Billions 12/31/2006 | $ Billions Change | Percent Change | |||||||||
Total Assets | $ | 3,114 | $ | 5,908 | +$2,794 | +88 | % | ||||||
Total Liabilities | $ | 2,990 | $ | 5,743 | +$2,753 | +92 | % | ||||||
Total Equity Capital | $ | 124.5 | $ | 165.4 | +$40.9 | +33 | % | ||||||
Equity Capital/Total Assets | 4.0 | % | 2.8 | % | 1.46% on increase | ||||||||
Number of Firms | 5,394 | 5,077 | |||||||||||
(source: U.S. Securities & Exchange Commission, FOCUS Reports)
At first glance, the figures in the preceding chart might not seem extraordinary. For perspective, the $2.8 trillion buildup in assets on the balance sheets of the brokerage industry over the four years 2003–2006 far exceeds the change in deposits held by all commercial banks in the United States over the same period. At the end of 2006, the assets held by brokerage firms were roughly equal to the total of all bank deposits in the United States. These assets were more than two times the combined assets of all money market funds in the United States, and were more than four times the combined assets of all bond mutual funds in the United States. Notice that the $2.8 trillion of additional assets on brokerage firm balance sheets were supported by incremental equity capital of only $40.9 billion, which means the new assets on brokerage firm balance sheets were financed by 1.46% equity capital and 98.54% incremental leverage. A portion of the $2.8 trillion asset buildup was residential mortgage loans. The total also included other financial assets: commercial mortgages, business loans, bonds of every description, and stocks.
Now, these assets are being sold, and the leverage is unwinding as rapidly as possible. Because the size of the financial asset pool that must be liquidated – around $2.8 trillion from U.S. brokerage firms alone – is so large relative to the overall size of the pool of unlevered savings in the United States, financial asset prices have fallen significantly in order to attract buyer interest. Normal savers, frightened by the rapid declines in prices of stocks and bonds, have generally stayed away from the liquidation sales so far, preferring the safety of short U.S. government bonds and other very liquid, very high quality investments. Belatedly, the U.S. government has come to the realization that savers around the world will willingly lend money to it at very low yields to buy up these assets, but other buyers are scarce. As you have seen in news reports, the U.S. government is borrowing at very low interest rates in order to invest . . . hopefully, at much higher yields . . . in these financial assets that “normal buyers” now shun.
As shareholders and portfolio managers of Thornburg Global Opportunities Fund, we believe there is excellent value in the majority of the financial assets in the Fund portfolio. We sold certain stocks that we believe will not contribute enough to your Fund’s objective of long-term capital appreciation. Consider the following simple attributes from the FactSet database, applying to the equities in your Fund’s portfolio at September 30, 2008:
| Average Change in Revenue | = | +22.2 | % | (2008 expected, vs 2007) | |||
| Average Change in Earnings | = | +27.1 | % | (2008 expected, vs 2007) | |||
| Average Change in Dividend | = | +20 | % | (2009 expected, vs 2008) | |||
| Average Change in Share Price | = | -50.7 | % | (12/31/07 or acquisition date to 10/24/08) | |||
| Average Price/Earnings Ratio | = | 9.3 | x | (at 10/24/08, using expected 2008 EPS) | |||
Certified Annual Report 9
Letter to Shareholders
Continued
Market prices of most stocks owned in the Global Opportunities portfolio have declined over the course of 2008, with the price declines continuing since the end of our fiscal year on September 30, 2008. While specifics pertaining to the business outlooks of individual firms differ widely, the overall trend of price declines for stocks in your Fund’s portfolio between October 1, 2007 and September 30, 2008 is attributable to (i) a lower multiple being applied to current year earnings than in the recent past; (ii) apparent anxiety about the growth of future earnings, particularly in the face of an expected economic slowdown in the near term; and (iii) diminished investor preference for dividend income from businesses that are capable of generating this income, relative to preferences for absolute stability of invested funds, liquidity, and debt repayment. In the past, we have commented specifically on best and worst performing stocks in your portfolio. Since most stock prices have declined this year by material percentages, we will briefly highlight performances of the largest holdings.
On page 5 of the Annual Report, the top ten equity holdings of the Global Opportunities Fund as of September 30th are listed. Below, we summarize their attributes, noting that the earnings changes for 2008 and 2009 were tabulated based upon analyst forecasts, which are subject to change:
| 2008 est. | 2008 est. | 2009 est. | 2008 YTD | |||||||||
Company (2008 P/E*) | Revenue Change | Earnings Change | Earnings Change | Share Price Change | ||||||||
Eclipsys Corp. (14.8x) | +10.5 | % | +30.8 | % | -11.4 | % | -42.8 | % | ||||
Telefónica SA (8.4x) | -.65 | % | +2.1 | % | +43 | % | -44.4 | % | ||||
Comcast Corp. (14.9x) | +11.1 | % | +18.9 | % | +19.1 | % | -29.1 | % | ||||
China Mobile Ltd. (8.9x) | +24.6 | % | +39.0 | % | +14.1 | % | -58.1 | % | ||||
Hong Kong Exchanges & Clearing Ltd. (14.5x) | +13.1 | % | -9.8 | % | +7.2 | % | -67.3 | % | ||||
Global Crossing Ltd. (n.a.) | +15.2 | % | not applicable | not applicable | -69.3 | % | ||||||
Swiss Re (5.1x) | -33.4 | % | -15.6 | % | +28.5 | % | -47.5 | % | ||||
Millicom International Cellular (5.1x) | +32.8 | % | +18.7 | % | +16.7 | % | -76.5 | % | ||||
Liechtensteinische Landesbank AG (8.7x) | -9.6 | % | -17.3 | % | +12.7 | % | -40.2 | % | ||||
Teva Pharmaceutical Industries Ltd. (14.1x) | +19.8 | % | +16.1 | % | +10.4 | % | -16.7 | % |
| * | P/E ratios from FactSet tabulations of analyst estimates for 2008 expected earnings, as of October 24, 2008. Revenue and earnings expected changes are measured in $U.S., as of September 30, 2008, using FactSet tabulations of analyst estimates. Share prices are measured in $U.S. from December 31, 2007 to October 24, 2008. We first acquired Global Crossing and Millicom Intl. in June and August 2008, respectively. We owned the other firms listed above throughout the fiscal year ended September 30, 2008. |
Eventually, we expect the financial asset liquidation sales to end. In the meantime, rapid price changes can re-arrange relative values in a manner that will cause us to reduce certain existing positions, add to others, or initiate new investment positions. As prices of more stocks and bonds around the world fall, more bankers of the leveraged investors force them to be sellers, and more investors in hedge funds, mutual funds, and other pooled investment vehicles withdraw funds from their managers.
10 Certified Annual Report
MSCI, which compiles equity indices around the world, reported on October 24th that prices of all 48 developed and emerging market indexes it compiles were down in 2008 to date. Twenty-two of these indices were down by more than 50%! Consequently, declining prices for stocks and bonds of a wide variety of issuers globally appear ever more attractive to us, though we recognize that the current economic environment presents challenges to most businesses.
GDP expectations for the next twelve months have been reduced in most markets around the world, with many countries now forecast for outright recessions in the second half of 2008 lasting into 2009. We have made changes to your portfolio based upon our perceptions of how evolving circumstances will impact various businesses, and relative price changes have also affected portfolio weightings. We have reduced your portfolio’s exposure to natural resource and emerging markets companies. In many cases, the prospects for these two categories are related. Health care related companies now form a larger percentage of your portfolio.
Thank you for being a shareholder of Thornburg Global Opportunities Fund. In retrospect, we underestimated the downward pressure that liquidation sales by leveraged investors would exert on stock prices around the world, and on the normal functioning of systems of financial intermediation. As October 2008 draws to a close, financial asset liquidations are well under way, a global recession is widely expected, and global equity prices are off by an average of more than 40% for the year. If prior experience is a guide, stock prices will appreciate, perhaps substantially, well before the economic news turns positive again. We believe that most of your portfolio businesses carry low enough valuations to set the stage for future price appreciation, once they come through the current economic challenges with their competitive positions intact or improved.
Remember that you can review descriptions of many of the stocks in your portfolio on our internet site, www.thornburg.com/funds. Best wishes for a wonderful holiday season and New Year.
| Sincerely, | ||||
 |  | |||
| Brian McMahon | W. Vinson Walden,CFA | |||
| Co-Portfolio Manager | Co-Portfolio Manager | |||
| CEO & 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 11
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg Global Opportunities Fund | September 30, 2008 | |
ASSETS | ||||
Investments at value (cost $524,214,262) (Note 2) | $ | 394,634,613 | ||
Cash | 19,735,122 | |||
Receivable for investments sold | 745,713 | |||
Receivable for fund shares sold | 816,669 | |||
Unrealized gain on forward exchange contracts (Note 7) | 3,172,349 | |||
Dividends receivable | 485,198 | |||
Prepaid expenses and other assets | 50,869 | |||
Total Assets | 419,640,533 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 2,879,886 | |||
Unrealized loss on forward exchange contracts (Note 7) | 11,681 | |||
Payable to investment advisor and other affiliates (Note 3) | 437,751 | |||
Accounts payable and accrued expenses | 264,518 | |||
Dividends payable | 788 | |||
Total Liabilities | 3,594,624 | |||
NET ASSETS | $ | 416,045,909 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 5,841,965 | ||
Net unrealized depreciation on investments | (126,454,220 | ) | ||
Accumulated net realized gain (loss) | (39,424,368 | ) | ||
Net capital paid in on shares of beneficial interest | 576,082,532 | |||
| $ | 416,045,909 | |||
12 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share | $ | 13.38 | |
Maximum sales charge, 4.50% of offering price | 0.63 | ||
Maximum offering price per share | $ | 14.01 | |
Class C Shares: | |||
Net asset value and offering price per share * | $ | 13.22 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share | $ | 13.45 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share | $ | 13.37 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share | $ | 13.38 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share | $ | 13.46 | |
| * | 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 Global Opportunities Fund | Year Ended September 30, 2008 | |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $858,101) | $ | 18,082,571 | ||
Interest income | 917,512 | |||
Total Income | 19,000,083 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 5,140,973 | |||
Administration fees (Note 3) | ||||
Class A Shares | 322,372 | |||
Class C Shares | 167,290 | |||
Class I Shares | 100,647 | |||
Class R3 Shares | 32 | |||
Class R4 Shares | 2 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 640,301 | |||
Class C Shares | 1,329,607 | |||
Class R3 Shares | 130 | |||
Class R4 Shares | 5 | |||
Transfer agent fees | ||||
Class A Shares | 382,280 | |||
Class C Shares | 200,605 | |||
Class I Shares | 161,661 | |||
Class R3 Shares | 1,031 | |||
Class R4 Shares | 1,168 | |||
Class R5 Shares | 910 | |||
Registration and filing fees | ||||
Class A Shares | 49,512 | |||
Class C Shares | 27,741 | |||
Class I Shares | 32,598 | |||
Class R3 Shares | 15,978 | |||
Class R4 Shares | 15,978 | |||
Class R5 Shares | 15,978 | |||
Custodian fees (Note 3) | 255,232 | |||
Professional fees | 85,957 | |||
Accounting fees | 25,350 | |||
Trustee fees | 10,996 | |||
Other expenses | 151,466 | |||
Total Expenses | 9,135,800 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (275,271 | ) | ||
Fees paid indirectly (Note 3) | (11,012 | ) | ||
Net Expenses | 8,849,517 | |||
Net Investment Income | $ | 10,150,566 | ||
14 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
| Thornburg Global Opportunities Fund | Year Ended September 30, 2008 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | (36,399,681 | ) | |
Foreign currency transactions | (361,218 | ) | ||
| (36,760,899 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (187,232,525 | ) | ||
Foreign currency translation | 3,323,953 | |||
| (183,908,572 | ) | |||
Net Realized and Unrealized Loss | (220,669,471 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (210,518,905 | ) | |
See notes to financial statements.
Certified Annual Report 15
| STATEMENTS OF CHANGES IN NET ASSETS |
| Thornburg Global Opportunities Fund |
| Year Ended | Year Ended | |||||||
| September 30, 2008 | September 30, 2007 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 10,150,566 | $ | 728,863 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (36,760,899 | ) | 16,816,919 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | (183,908,572 | ) | 56,558,223 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (210,518,905 | ) | 74,104,005 | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,015,112 | ) | (2,647 | ) | ||||
Class C Shares | (334,642 | ) | — | |||||
Class I Shares | (2,715,611 | ) | (17,567 | ) | ||||
Class R3 Shares | (441 | ) | — | |||||
Class R4 Shares | (22 | ) | — | |||||
Class R5 Shares | (27 | ) | — | |||||
From realized gains | ||||||||
Class A Shares | (8,262,772 | ) | (223,855 | ) | ||||
Class C Shares | (3,642,010 | ) | (86,617 | ) | ||||
Class I Shares | (5,983,950 | ) | (226,047 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (5,314,571 | ) | 217,027,928 | |||||
Class C Shares | 47,611,421 | 87,907,758 | ||||||
Class I Shares | 128,935,073 | 74,800,459 | ||||||
Class R3 Shares | 46,867 | — | ||||||
Class R4 Shares | 3,327 | — | ||||||
Class R5 Shares | 3,227 | — | ||||||
Net Increase (Decrease) in Net Assets | (62,188,148 | ) | 453,283,417 | |||||
NET ASSETS: | ||||||||
Beginning of year | 478,234,057 | 24,950,640 | ||||||
End of year | $ | 416,045,909 | $ | 478,234,057 | ||||
Undistributed net investment income | $ | 5,841,965 | $ | 652,672 | ||||
See notes to financial statements.
16 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Global Opportunities Fund | September 30, 2008 | |
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 thirteen 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, Thornburg International Growth Fund, and Thornburg Strategic Income 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 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, 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 R4 shares are sold at net asset value without a 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 administrative and legal expenses. Currently, class specific expenses of the Fund are limited to service and distribution fees, administration fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: 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.
Any debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations 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 obligations 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.
Quotations in foreign currencies for foreign portfolio investments are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
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 procedures approved by the Trustees, which may include the use of prices obtained from an independent pricing service. The pricing service ordinarily values equity securities in these instances, using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures and index data and other data. 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the debt obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 |
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Foreign currency translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund, to the shareholders. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and/or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient 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
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 |
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, 2008, 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, 2008, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $224,199 for Class I shares, $17,037 for Class R3 shares, $17,147 for Class R4 shares, and $16,888 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, 2008, the Distributor has advised the Fund that it earned commissions aggregating $134,292 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $125,298 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, 2008, 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, 2008, fees paid indirectly were $11,012.
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, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 7,801,931 | $ | 146,068,191 | 13,660,081 | $ | 238,770,592 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 487,847 | 9,037,357 | 14,864 | 208,773 | ||||||||||
Shares repurchased | (9,414,853 | ) | (160,449,772 | ) | (1,252,603 | ) | (21,960,678 | ) | ||||||
Redemption fees received** | — | 29,653 | — | 9,241 | ||||||||||
Net Increase (Decrease) | (1,125,075 | ) | $ | (5,314,571 | ) | 12,422,342 | $ | 217,027,928 | ||||||
Class C Shares | ||||||||||||||
Shares sold | 4,215,177 | $ | 78,470,996 | 5,344,378 | $ | 91,693,393 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 170,775 | 3,149,277 | 4,462 | 62,462 | ||||||||||
Shares repurchased | (2,077,837 | ) | (34,024,836 | ) | (221,453 | ) | (3,852,049 | ) | ||||||
Redemption fees received** | — | 15,984 | — | 3,952 | ||||||||||
Net Increase (Decrease) | 2,308,115 | $ | 47,611,421 | 5,127,387 | $ | 87,907,758 | ||||||||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 |
| Year Ended | Year Ended | |||||||||||||
| September 30, 2008 | September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 11,051,219 | $ | 214,187,269 | 4,793,763 | $ | 81,916,342 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 389,918 | 7,203,956 | 16,374 | 230,652 | ||||||||||
Shares repurchased | (5,362,705 | ) | (92,479,984 | ) | (438,535 | ) | (7,351,459 | ) | ||||||
Redemption fees received** | — | 23,832 | — | 4,924 | ||||||||||
Net Increase (Decrease) | 6,078,432 | $ | 128,935,073 | 4,371,602 | $ | 74,800,459 | ||||||||
Class R3 Shares* | ||||||||||||||
Shares sold | 3,492 | $ | 60,788 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 27 | 441 | — | — | ||||||||||
Shares repurchased | (894 | ) | (14,366 | ) | — | — | ||||||||
Redemption fees received** | — | 4 | — | — | ||||||||||
Net Increase (Decrease) | 2,625 | $ | 46,867 | — | $ | — | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 187 | $ | 3,304 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1 | 23 | — | — | ||||||||||
Shares repurchased | — | — | — | — | ||||||||||
Redemption fees received** | — | — | — | — | ||||||||||
Net Increase (Decrease) | 188 | $ | 3,327 | — | $ | — | ||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 179 | $ | 3,200 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1 | 27 | — | — | ||||||||||
Shares repurchased | — | — | — | — | ||||||||||
Redemption fees received** | — | — | — | — | ||||||||||
Net Increase (Decrease) | 180 | $ | 3,227 | — | $ | — | ||||||||
| * | Effective date of these classes of shares was February 1, 2008. |
| ** | The Fund charges a redemption fee of 1% of the Class A and Class I shares redeemed or 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, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $667,657,178 and $468,023,401, respectively.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 |
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 530,554,082 | ||
Gross unrealized appreciation on a tax basis | $ | 59,673 | ||
Gross unrealized depreciation on a tax basis | (135,979,142 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (135,919,469 | ) | |
Distributable earnings – ordinary income | $ | 4,604,011 |
At September 30, 2008, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2007 of $56,198 and $28,793,156, respectively. For tax purposes, such losses will be reflected in the year ending September 30, 2009.
At September 30, 2008, the Fund had tax basis capital losses of $88,134, which may be carried forward 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 carry forwards expire September 30, 2016.
In order to account for permanent book/tax differences, the Fund increased net capital paid in on shares of beneficial interest by $1,129,826, increased net realized investment loss by $1,234,408, and increased undistributed net investment income by $104,582. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains/losses, recharacterization of income from passive foreign investment company gains/ losses and distributions paid.
The tax character of distributions paid during the year ended September 30, 2008, and September 30, 2007, was as follows:
| 2008 | 2007 | |||||
Distributions from: | ||||||
Ordinary income | $ | 21,195,150 | $ | 556,733 | ||
Capital gains | 1,759,437 | — | ||||
Total Distributions | $ | 22,954,587 | $ | 556,733 | ||
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2008, 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 BUY OR SELL:
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value (USD) | Unrealized Appreciation | Unrealized (Depreciation) | ||||||||||
Euro Dollar | Sell | 17,100,000 | 2/20/09 | $ | 24,905,637 | $ | 761,721 | $ | — | |||||||
Swiss Franc | Sell | 41,000,000 | 11/06/08 | 38,764,087 | 2,147,385 | — | ||||||||||
Philippine Peso | Sell | 600,000,000 | 12/16/08 | 12,894,907 | 139,175 | — | ||||||||||
Philippine Peso | Buy | 96,000,000 | 12/16/08 | 2,052,598 | — | (11,681 | ) | |||||||||
Philippine Peso | Buy | 160,000,000 | 12/16/08 | 3,320,880 | 80,648 | — | ||||||||||
Philippine Peso | Buy | 94,210,000 | 12/16/08 | 1,959,443 | 43,420 | — | ||||||||||
Total unrealized appreciation (depreciation) from forward exchange contracts | $ | 3,172,349 | $ | (11,681 | ) | |||||||||||
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 |
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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
22 Certified Annual Report
Thornburg Global Opportunities Fund
| Year Ended September 30, | Period Ended September 30, | |||||||||||
| 2008 | 2007 | 2006 (a) | ||||||||||
Class A Shares: | ||||||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 20.06 | $ | 12.86 | $ | 11.94 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.30 | 0.07 | 0.01 | |||||||||
Net realized and unrealized gain (loss) on investments | (6.30 | ) | 7.29 | 0.91 | ||||||||
Total from investment operations | (6.00 | ) | 7.36 | 0.92 | ||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.14 | ) | (0.00 | )(b) | — | |||||||
Net realized gains | (0.54 | ) | (0.16 | ) | — | |||||||
Total dividends | (0.68 | ) | (0.16 | ) | — | |||||||
Change in net asset value | (6.68 | ) | 7.20 | 0.92 | ||||||||
NET ASSET VALUE, end of period | $ | 13.38 | $ | 20.06 | $ | 12.86 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(c) | (30.85 | ) | 57.75 | 7.71 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | 1.68 | 0.41 | 0.34 | (d) | ||||||||
Expenses, after expense reductions (%) | 1.50 | 1.51 | 1.70 | (d) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.49 | 1.50 | 1.63 | (d) | ||||||||
Expenses, before expense reductions (%) | 1.50 | 1.55 | 6.12 | (d)(e) | ||||||||
Portfolio turnover rate (%) | 83.70 | 91.02 | 6.08 | |||||||||
Net assets at end of period (thousands) | $ | 159,996 | $ | 262,475 | $ | 8,477 | ||||||
| (a) | Fund commenced operations on July 28, 2006. |
| (b) | Dividends from net investment income per share were less than $(0.01). |
| (c) | Sales loads are not reflected in computing total return, which is not annualized for periods less than one year. |
| (d) | Annualized. |
| (e) | 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 23
FINANCIAL HIGHLIGHTS, CONTINUED
| Thornburg Global Opportunities Fund |
| Year Ended September 30, | Period Ended September 30, 2006 (a) | |||||||||||
| 2008 | 2007 | |||||||||||
Class C Shares: | ||||||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 19.87 | $ | 12.84 | $ | 11.94 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.17 | (0.06 | ) | (0.01 | ) | |||||||
Net realized and unrealized gain (loss) on investments | (6.24 | ) | 7.25 | 0.91 | ||||||||
Total from investment operations | (6.07 | ) | 7.19 | 0.90 | ||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.04 | ) | — | — | ||||||||
Net realized gains | (0.54 | ) | (0.16 | ) | — | |||||||
Total dividends | (0.58 | ) | (0.16 | ) | — | |||||||
Change in net asset value | (6.65 | ) | 7.03 | 0.90 | ||||||||
NET ASSET VALUE, end of period | $ | 13.22 | $ | 19.87 | $ | 12.84 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | (31.38 | ) | 56.48 | 7.54 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | 0.97 | (0.34 | ) | (0.40 | )(c) | |||||||
Expenses, after expense reductions (%) | 2.25 | 2.28 | 2.41 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.24 | 2.28 | 2.35 | (c) | ||||||||
Expenses, before expense reductions (%) | 2.25 | 2.33 | 9.01 | (c)(d) | ||||||||
Portfolio turnover rate (%) | 83.70 | 91.02 | 6.08 | |||||||||
Net assets at end of period (thousands) | $ | 101,908 | $ | 107,298 | $ | 3,505 | ||||||
| (a) | Fund commenced operations on July 28, 2006. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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 Global Opportunities Fund
| Year Ended September 30, | Period Ended September 30, 2006 (a) | |||||||||||
| 2008 | 2007 | |||||||||||
Class I Shares: | ||||||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 20.16 | $ | 12.87 | $ | 11.94 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.40 | 0.17 | 0.02 | |||||||||
Net realized and unrealized gain (loss) on investments | (6.34 | ) | 7.29 | 0.91 | ||||||||
Total from investment operations | (5.94 | ) | 7.46 | 0.93 | ||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.23 | ) | (0.01 | ) | — | |||||||
Net realized gains | (0.54 | ) | (0.16 | ) | — | |||||||
Total dividends | (0.77 | ) | (0.17 | ) | — | |||||||
Change in net asset value | (6.71 | ) | 7.29 | 0.93 | ||||||||
NET ASSET VALUE, end of period | $ | 13.45 | $ | 20.16 | $ | 12.87 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | (30.49 | ) | 58.51 | 7.79 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | 2.25 | 0.97 | 0.90 | (c) | ||||||||
Expenses, after expense reductions (%) | 0.99 | 1.00 | 1.04 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.99 | (c) | ||||||||
Expenses, before expense reductions (%) | 1.10 | 1.20 | 2.98 | (c) | ||||||||
Portfolio turnover rate (%) | 83.70 | 91.02 | 6.08 | |||||||||
Net assets at end of period (thousands) | $ | 154,102 | $ | 108,461 | $ | 12,968 | ||||||
| (a) | Fund commenced operations on July 28, 2006. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 25
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Global Opportunities Fund
| Period Ended September 30, 2008 (a) | ||||
Class R3 Shares: | ||||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 17.91 | ||
Income from investment operations: | ||||
Net investment income (loss) | 0.29 | |||
Net realized and unrealized gain (loss) on investments | (4.70 | ) | ||
Total from investment operations | (4.41 | ) | ||
Less dividends from: | ||||
Net investment income | (0.13 | ) | ||
Change in net asset value | (4.54 | ) | ||
NET ASSET VALUE, end of period | $ | 13.37 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%)(b) | (24.78 | ) | ||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 2.61 | (c) | ||
Expenses, after expense reductions (%) | 1.49 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 1.49 | (c) | ||
Expenses, before expense reductions (%) | 67.47 | (c)(d) | ||
Portfolio turnover rate (%) | 83.70 | |||
Net assets at end of period (thousands) | $ | 35 | ||
| (a) | Effective date of this class of shares was February 1, 2008. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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 Global Opportunities Fund
| Period Ended September 30, 2008 (a) | ||||
Class R4 Shares: | ||||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 17.91 | ||
Income from investment operations: | ||||
Net investment income (loss) | 0.28 | |||
Net realized and unrealized gain (loss) on investments | (4.69 | ) | ||
Total from investment operations | (4.41 | ) | ||
Less dividends from: | ||||
Net investment income | (0.12 | ) | ||
Change in net asset value | (4.53 | ) | ||
NET ASSET VALUE, end of period | $ | 13.38 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%)(b) | (24.74 | ) | ||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 2.48 | (c) | ||
Expenses, after expense reductions (%) | 1.41 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 1.40 | (c) | ||
Expenses, before expense reductions (%) | 864.00 | (c)(d) | ||
Portfolio turnover rate (%) | 83.70 | |||
Net assets at end of period (thousands) | $ | 3 | ||
| (a) | Effective date of this class of shares was February 1, 2008. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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 Global Opportunities Fund
| Period Ended September 30, 2008 (a) | ||||
Class R5 Shares: | ||||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 17.98 | ||
Income from investment operations: | ||||
Net investment income (loss) | 0.33 | |||
Net realized and unrealized gain (loss) on investments | (4.70 | ) | ||
Total from investment operations | (4.37 | ) | ||
Less dividends from: | ||||
Net investment income | (0.15 | ) | ||
Change in net asset value | (4.52 | ) | ||
NET ASSET VALUE, end of period | $ | 13.46 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%)(b) | (24.47 | ) | ||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 2.97 | (c) | ||
Expenses, after expense reductions (%) | 0.92 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 0.92 | (c) | ||
Expenses, before expense reductions (%) | 850.59 | (c)(d) | ||
Portfolio turnover rate (%) | 83.70 | |||
Net assets at end of period (thousands) | $ | 2 | ||
| (a) | Effective date of this class of shares was February 1, 2008. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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
| Thornburg Global Opportunities Fund | September 30, 2008 |
CUSIPS: CLASS A - 885-215-343, CLASS C - 885-215-335, CLASS I - 885-215-327, CLASS R3 - 885-215-145, CLASS R4 - 885-215-137, CLASS R5 - 885-215-129
NASDAQ SYMBOLS: CLASS A - THOAX, CLASS C - THOCX, CLASS I - THOIX, CLASS R3 - THORX, CLASS R4 - THOVX, CLASS R5 - - THOFX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/08
Telecommunication Services | 22.0 | % | |
Energy | 10.7 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 10.2 | % | |
Diversified Financials | 7.8 | % | |
Insurance | 7.0 | % | |
Banks | 6.1 | % | |
Materials | 4.8 | % | |
Health Care Equipment & Services | 4.5 | % | |
Media | 4.3 | % | |
| Technology Hardware & Equipment | 3.5 | % | |
| Transportation | 3.0 | % | |
| Semiconductors & Semiconductor Equipment | 2.8 | % | |
| Consumer Services | 2.5 | % | |
| Commercial & Professional Services | 2.4 | % | |
| Utilities | 1.6 | % | |
| Real Estate | 1.0 | % | |
| Capital Goods | 0.6 | % | |
| Other Assets & Cash Equivalents | 5.2 | % | |
SUMMARY OF COUNTRY EXPOSURE As of 9/30/08 (percent of equity holdings) |
| ||
United States | 27.7 | % | |
Switzerland | 14.9 | % | |
China | 7.9 | % | |
Hong Kong | 7.2 | % | |
Canada | 5.8 | % | |
Spain | 4.6 | % | |
Greece | 4.3 | % | |
Bermuda | 4.1 | % | |
Luxembourg | 4.0 | % | |
| Israel | 4.0 | % | |
| Russia | 3.5 | % | |
| United Kingdom | 3.4 | % | |
| Italy | 3.2 | % | |
| Mexico | 2.9 | % | |
| Philippines | 1.7 | % | |
| Ireland | 0.6 | % | |
| Brazil | 0.2 | % | |
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | ||||
COMMON STOCK — 94.85% | |||||
BANKS — 6.07% | |||||
COMMERCIAL BANKS — 6.07% | |||||
China Merchants Bank Co., Ltd.(1) | 3,905,000 | $ | 9,430,164 | ||
Liechtensteinische Landesbank AG(1) | 240,000 | 15,821,238 | |||
| 25,251,402 | |||||
CAPITAL GOODS — 0.61% | |||||
TRADING COMPANIES & DISTRIBUTORS — 0.61% | |||||
Babcock & Brown Air Ltd. ADR | 269,965 | 2,524,173 | |||
| 2,524,173 | |||||
COMMERCIAL & PROFESSIONAL SERVICES — 2.41% | |||||
PROFESSIONAL SERVICES — 2.41% | |||||
Huron Consulting Group, Inc.+ | 176,056 | 10,031,671 | |||
| 10,031,671 | |||||
CONSUMER SERVICES — 2.53% | |||||
HOTELS, RESTAURANTS & LEISURE — 2.53% | |||||
OPAP SA(1) | 343,400 | 10,540,345 | |||
| 10,540,345 | |||||
DIVERSIFIED FINANCIALS — 7.76% | |||||
DIVERSIFIED FINANCIAL SE RVICES — 7.76% | |||||
BVM&F Bovespa SA | 219,889 | 982,215 | |||
Hong Kong Exchanges & Clearing Ltd.(1) | 1,302,900 | 16,047,057 | |||
KKR Financial Holdings LLC | 2,401,129 | 15,271,180 | |||
| 32,300,452 | |||||
ENERGY — 10.72% | |||||
OIL, GAS & CONSUMABLE FUELS — 10.72% | |||||
Canadian Natural Resources Ltd. | 170,500 | 11,695,091 | |||
Capital Product Partners LP | 592,174 | 6,442,853 | |||
Eni S.p.A.(1) | 480,400 | 12,733,512 | |||
OAO Gazprom ADR(1) | 430,100 | 13,744,448 | |||
| 44,615,904 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 4.48% | |||||
HEALTH CARE TECHNOLOGY — 4.48% | |||||
Eclipsys Corp.+ | 889,000 | 18,624,550 | |||
| 18,624,550 | |||||
INSURANCE — 7.04% | |||||
INSURANCE — 7.04% | |||||
Swiss Re(1) | 288,925 | 16,036,914 | |||
Willis Group Holdings Ltd. | 411,400 | 13,271,764 | |||
| 29,308,678 | |||||
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | ||||
MATERIALS — 4.85% | |||||
METALS & MINING — 4.85% | |||||
Eastern Platinum Ltd. | 12,368,700 | $ | 11,389,548 | ||
Freeport-McMoRan Copper & Gold, Inc. | 21,700 | 1,233,645 | |||
Mercator Minerals Ltd.+ | 1,825,200 | 7,546,046 | |||
| 20,169,239 | |||||
MEDIA — 4.31% | |||||
MEDIA — 4.31% | |||||
Comcast Corp. | 908,300 | 17,911,676 | |||
| 17,911,676 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 10.22% | |||||
LIFE SCIENCES TOOLS & SERVICES — 3.03% | |||||
Bachem Holding AG(1) | 159,500 | 12,618,566 | |||
PHARMACEUTICALS — 7.19% | |||||
Roche Holding AG(1) | 90,000 | 14,088,763 | |||
Teva Pharmaceutical Industries Ltd. ADR | 345,400 | 15,815,866 | |||
| 42,523,195 | |||||
REAL ESTATE — 1.01% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 1.01% | |||||
Country Garden Holdings Co.(1) | 13,277,749 | 4,218,608 | |||
| 4,218,608 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.76% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.76% | |||||
Intel Corp. | 613,500 | 11,490,855 | |||
| 11,490,855 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 3.47% | |||||
COMPUTERS & PERIPHERALS — 3.47% | |||||
Dell Inc.+ | 875,600 | 14,429,888 | |||
| 14,429,888 | |||||
TELECOMMUNICATION SERVICES — 22.00% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 11.14% | |||||
Global Crossing Ltd.+ | 1,057,952 | 16,038,552 | |||
Level 3 Communications, Inc.+ | 4,511,600 | 12,181,320 | |||
Telefonica SA(1) | 762,500 | 18,130,389 | |||
WIRELESS TELECOMMUNICATION SERVICES — 10.86% | |||||
América Móvil SAB de C.V. ADR | 249,400 | 11,562,184 | |||
China Mobile Ltd.(1) | 1,762,500 | 17,656,150 | |||
Millicom International Cellular S.A. | 232,500 | 15,965,775 | |||
| 91,534,370 | |||||
TRANSPORTATION — 2.97% | |||||
TRANSPORTATION INFRASTRUCTURE — 2.97% | |||||
Shenzhen Chiwan Wharf Holdings Ltd.(1) | 10,492,803 | 12,342,664 | |||
| 12,342,664 | |||||
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | ||||
UTILITIES — 1.64% | |||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 1.64% | |||||
PNOC Energy Development Corp.(1) | 78,264,700 | $ | 6,816,943 | ||
| 6,816,943 | |||||
TOTAL COMMON STOCK (Cost $524,214,262) | 394,634,613 | ||||
TOTAL INVESTMENTS — 94.85% (Cost $524,214,262) | $ | 394,634,613 | |||
OTHER ASSETS LESS LIABILITIES — 5.15% | 21,411,296 | ||||
NET ASSETS — 100.00% | $ | 416,045,909 | |||
Footnote Legend
| + | Non-income producing |
| (1) | Security fair valued by independent pricing service on valuation date, September 30, 2008. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
See notes to financial statements.
32 Certified Annual Report
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, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years 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, 2008 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
Certified Annual Report 33
| Thornburg Global Opportunities Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
| Beginning Account Value 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 791.30 | $ | 7.13 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.04 | $ | 8.03 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 788.40 | $ | 10.30 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.48 | $ | 11.60 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 793.90 | $ | 4.44 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 791.60 | $ | 6.68 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.52 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 792.00 | $ | 6.27 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.00 | $ | 7.06 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 794.10 | $ | 4.13 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.39 | $ | 4.66 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.59%; C: 2.30%; I: 0.99%; R3: 1.49%; R4: 1.40%; R5: 0.92%) multiplied by the average account value over the period, multiplied by 183/366 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.
34 Certified Annual Report
| Thornburg Global Opportunities Fund | September 30, 2008 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Global opportunities Fund versus MSCI AC World Index (July 28, 2006 to September 30, 2008)
| AVERAGE ANNUAL TOTAL RETURNS | ||||||
| For periods ended September 30, 2008 (with sales charge) | ||||||
| 1 Yr | Since Inception | |||||
A Shares (Incep: 07/28/06) | (33.98 | )% | 5.44 | % | ||
C Shares (Incep: 07/28/06) | (32.04 | )% | 6.84 | % | ||
I Shares (Incep: 07/28/06) | (30.49 | )% | 8.22 | % | ||
R3 Shares (Incep: 02/01/08) | — | (24.78 | )%* | |||
R4 Shares (Incep: 02/01/08) | — | (24.74 | )%* | |||
R5 Shares (Incep: 02/01/08) | — | (24.47 | )%* | |||
MSCI AC World Index | ||||||
(Since: 07/28/06) | (26.87 | )% | (2.77 | )% | ||
| * | 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 I, R3, R4 and R5 shares. Class A and 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.
Certified Annual Report 35
| Thornburg Global Opportunities Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, & Nominating Committee, | CEO, 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, 63 Trustee since 1994, | 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, 67 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, 62 Chairman of Governance & Nominating Committee, | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 Member of Governance & | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 49 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 Global Opportunities Fund | September 30, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
| Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Certified Annual Report 37
TRUSTEES AND OFFICERS, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
38 Certified Annual Report
Thornburg Global Opportunities Fund | September 30, 2008 (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, 2008, the Fund designates long-term capital gain dividends of $1,759,437.
For the tax year ended September 30, 2008, the Thornburg Global Opportunities Fund designates 33.62% (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.
6.18% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2008 qualified for the corporate dividends received deduction.
For the year ended September 30, 2008, foreign taxes paid and foreign source income is $858,101 and $14,874,630, 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, 2008. Complete information will be computed and reported in conjunction with your 2008 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 2008 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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by 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 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 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
Certified Annual Report 39
OTHER INFORMATION, CONTINUED
| Thornburg Global Opportunities Fund | September 30, 2008 (Unaudited) |
equity mutual funds selected by an independent mutual fund analyst firm, and relative to a broad-based securities index, (iv) cumulative return data of the Fund relative to the securities index, and (v) a comparative measure of estimated portfolio earnings per share growth. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to these events in view of the Fund’s investment objectives and policies.
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, likely will vary from the methods for selecting the investments for other funds.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment performance was generally equivalent in the most recent calendar quarter and in the year to date to the performance of a broad-based securities index and the category of world stock equity mutual funds selected by an independent mutual fund analyst firm, and observed that the Fund’s performance exceeded the performance of the index in the one full calendar year of the Fund’s existence (2007) and since inception and exceeded the performance of the category in calendar year 2007, and that the Fund’s relative performance fell in the top quartile of the category for the 12 months ending with the second quarter. The Trustees also considered in this regard the Fund’s higher historical cumulative return relative to the index since the Fund’s inception.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 global 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 fell between 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 expense ratio and higher to a small degree than the median expense ratio for the same fund group. The Trustees noted their previous observations respecting fee rates charged by the Advisor to other investment management clients, and their conclusion that 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 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 and other 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 ongoing 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
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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. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 43
Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
Exhibit 1: KOSPI Stock Index/Korea, 10/31/88 – 9/30/08 (in USD)
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to ..19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
44 This page is not part of the Annual Report.
Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
Sincerely, |
|
Brian McMahon |
CEO and Chief Investment Officer |
This page is not part of the Annual Report. 45
Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
This page is not part of the Annual Report. 47
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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, 2008. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; they 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. Funds invested in a limited number of holdings may expose an investor to greater volatility. 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.
Class I, R3, R4, and R5 shares may not be available to all investors. Minimum investments for Class I shares may be 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 investments may decline. Therefore, investors should not rely on these past gains as an indication of future performance.
Glossary
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
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.
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.
Basis Point (BPS) – A unit equal to 1/100th of 1%. A 1% change = 100 basis points (bps).
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
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 Growth Fund
Comprehensive International Growth Investing
PORTFOLIO MANAGER
KEY PORTFOLIO ATTRIBUTES
As of 9/30/08
Portfolio P/E Trailing 12-months* | 14.3x | ||
Portfolio Price to Cash Flow* | 3.0 | ||
Portfolio Price to Book Value* | 2.8 | ||
Median Market Cap* | $ | 9.4 B | |
Equity Holdings | 41 |
| * | Source: FactSet |
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 2.10%, as disclosed in the most recent Prospectus. Thornburg Investment Management intends to waive fees and reimburse expenses so that actual Class A expenses do not exceed 1.63%. The fee waivers and expense reimbursements are voluntary and may be terminated at any time.
Across the world, economic growth is presenting a tremendous number of opportunities for investors. In an effort to capture these opportunities, Thornburg Investment Management launched the Thornburg International Growth Fund in 2007.
The Fund’s process is centered on identifying attractively valued international growth companies from the bottom-up. The management team will leave it to others to make broad-based calls on the direction of the market. Instead, portfolio manager Alex Motola and his team will employ a comprehensive, “go-everywhere” approach to growth investing. The team classifies stocks into various growth baskets: Growth Industry Leaders, Consistent Growers, or Emerging Growth Companies. From those baskets, the team will build a portfolio of 40–50 stocks which they believe provides the best long-term prospects for investors. While stocks are analyzed on their individual merits, their role as part of a diversified portfolio is also taken into account.
Equity investing, especially disciplines focused on growing companies, can bring volatility. The Thornburg International Growth Fund team recognizes this and strives to balance the aims of generating a strong long-term record while managing downside volatility. Portfolio construction and geographic diversification provide part of the answer, but fundamental analysis can often play a more important role. While other growth funds limit volatility by diversifying across a large number of names, the team managing the Thornburg International Growth Fund believes that a more robust understanding of a smaller number of portfolio holdings is one of the most effective forms of risk management.
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED 9/30/08
| 1 Yr | Since Inception | |||||
A Shares (Incep: 2/1/07) | ||||||
Without Sales Charge | (28.98 | )% | (6.94 | )% | ||
With Sales Charge | (32.16 | )% | (9.47 | )% | ||
MSCI AC World ex-U.S. | ||||||
Growth Index (Since: 2/1/07) | (29.45 | )% | (10.38 | )% |
4 This page is not part of the Annual Report.
Much of the research process is focused on identifying how the overall market came to price a security. Many of the ideas are sourced through a quantitative screening process of the universe of international companies. Only those with the most appealing growth and valuation characteristics pass on to the step of having a complex financial model built. Thornburg’s growth investment team scours regulatory filings, visits company management, and interviews suppliers and customers. By doing this work, they develop their own view of the intrinsic value of the company. Only if their view is materially higher than the market do they make an investment.
Others may question how the team manages a growth portfolio, especially an international one, from Santa Fe, New Mexico. At Thornburg Investment Management, we embrace our location, away from the ancillary noise of the major money centers. We have access to Wall Street research, but prefer to come to our own conclusions about the value of an investment. The investment process allows the team to take a very broad view of what an attractively valued, international growth company looks like, and invest in those few companies that they believe provide the most attractive risk-reward trade-off. The result is a portfolio which at any given time will look quite unlike the MSCI AC World ex-U.S. Growth Index or the competition. All of this is done with a goal of providing attractive, consistent returns over the long term.
STOCKS CONTRIBUTING AND DETRACTING
YEAR ENDED 9/30/08
Top Contributors | Top Detractors | |
China Digital TV Holding Co. Ltd. | BM&F Bovespa | |
Open Text Corp. | Las Vegas Sands Corp. | |
Coca-Cola Içecek Sanayi A.Ş. | AirMedia Group Inc. (ADS) | |
Swiss Reinsurance Co. | Porsche Automobil Holding SE | |
VistaPrint Ltd. | HHLA |
Source: FactSet
TOP TEN HOLDINGS
As of 9/30/08
Telefónica SA | 4.5 | % | |
Amdocs Ltd. | 4.4 | % | |
HHLA | 4.3 | % | |
Nestlé SA-REG | 3.9 | % | |
Roche Holding AG | 3.8 | % | |
Novo Nordisk A/S | 3.7 | % | |
América Móvil SAB de C.V. | 3.7 | % | |
PNOC Energy Development Corp. | 3.5 | % | |
Nintendo Co. Ltd. | 3.5 | % | |
Porsche Automobil Holding SE | 3.2 | % |
This page is not part of the Annual Report. 5
Thornburg International Growth Fund
September 30, 2008
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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
 | October 20, 2008
| |
Dear Fellow Shareholder:
For the year ended September 30, 2008, the Thornburg International Growth Fund returned negative 28.98% for Class A shares at net asset value (NAV). It was a very challenging period for equity investors globally, with major international indices posting double digit percentage losses. Against such a backdrop, the International Growth Fund slightly outperformed its benchmark, the MSCI AC World ex-US Growth Index, which returned negative 29.45%. On September 30, 2007, the NAV per Class A share of the Fund was $14.92 and it ended the fiscal year on September 30, 2008, with an NAV of $10.35. Investments in initial public offerings within the Fund contributed negative 3.90% to performance during the period.
In such a difficult environment for international equities, it is important to make the distinction between absolute and relative performance. Every sector of the benchmark posted negative returns, with several sectors falling in excess of 30%. Within utilities, information technology, and telecommunications, our stocks fell in aggregate. However, they declined on average less than other stocks in their sectors, leading to outperformance on a relative basis.
Utilities were a sector in which we were overweight the benchmark; and two of our holdings posted small gains in a year of broadly negative returns for stocks. Our investment in Austrian-based utility Verbund rose over the period. Verbund generates electricity using hydropower assets, which gives it a competitive advantage over other utilities when fuel prices are rising. This advantage was recognized by the market through the first three quarters of the fiscal year, as oil and coal prices rose sharply. The shares of CEZ Group, a producer and supplier of electricity to the Czech Republic and Eastern Europe also rose early in the period as demand for power and wholesale energy prices climbed.
Information technology was a source of relative strength for the International Growth Fund, with Open Text Corporation contributing to performance. This Canadian IT firm provides software which enables companies to manage enterprise-level content. With strong cash flows and solid distribution partnerships through major software providers, shares of its stock rose in the second half of the fiscal year. Vistaprint Ltd., a provider of customized print and graphic design services to small businesses, continues to execute and grow its business. The market recognized Vistaprint’s promise, and the stock rose since being added to the Fund in March 2008.
As the International Growth Fund is built from the bottom-up, as opposed to top-down, other contributions came from a variety of sectors. Despite the turmoil in the financial |
Certified Annual Report 7
Letter to Shareholders
Continued
markets, Swiss Re rose after being added to the Fund late in the period. We purchased the stock late in the fiscal year during a period of particular distress in the markets. Our valuation discipline was rewarded, as the stock rose shortly after being purchased. Coca-Cola Içecek A.Ş. is a Turkish based bottler and distributor of soft drinks. Shares of the company rose on news of strong results and opportunities presented by its entry into the Pakistani soft-drink market.
Not surprisingly, given the market environment, stocks that declined in value outnumbered those that rose. Particularly tough for the International Growth Fund were holdings in the consumer discretionary and financial sectors. Las Vegas Sands Corp. was a leading detractor to performance. While the company is based in the United States, it is developing a global reach, with new properties being developed on the Cotai Strip on Macau, as well as Singapore. Incredibly high expectations for the Macau property were not immediately met, and that, combined with concerns of an overall slowdown in consumer spending pushed the investment thesis, centered on strong future cash flows, well out into the horizon. Therefore, we subsequently exited the position. Another consumer discretionary holding, AirMedia Group Inc., sells advertising on their digital media networks in airports in China and on airlines operating in the region. Despite the fact that the company owns no debt, grew revenues by over 250%, and maintains margins in excess of 25%, the stock declined by over 60% as Chinese equities fell out of favor. Shares of Porsche Automobil Holdings fell amidst a slowdown in auto sales worldwide, as well as questions surrounding its acquisition of Volkswagen.
Over the short life of the International Growth Fund, a number of the stocks of financial exchanges have been owned. BM&F Bovespa SA is an example, and unfortunately it was a leading detractor to performance over the fiscal year. As trading volumes worldwide have declined, the shares of the financial exchanges, including Bovespa, have suffered considerable multiple compression. Another financial holding, EFG Eurobank Ergasias, significantly detracted amidst a generally weak environment for European financials.
Other detractors to performance included Smartrac NV and HHLA. Smartrac supplies inlays that transmit data for contactless credit cards and ePassports. Profits and revenues of the firm have historically ebbed and flowed, and the stock declined against a backdrop of recent weakness. As is the case with all of our portfolio holdings, we continue to monitor business development. HHLA operates three terminals in the Port of Hamburg Germany, Europe’s second largest port. While we believe that long-term dynamics favor HHLA, short-term concerns surrounding declining volumes and pricing weighed on the stock.
Since launching the International Growth Fund in February 2007, our mission has been to generate long-term growth of capital by investing in equity securities selected for their growth potential. With an approach rooted in detailed research, we search for promising international growth companies trading at a discount to their long-term value. We manage risk by diversifying the portfolio across growth investing styles (we divide the portfolio into stocks we classify as Growth Industry Leaders, Consistent Growers, or Emerging Growth companies), geographies, market capitalizations, and industries.
8 Certified Annual Report
There is no doubt that the past fiscal year presented an unusual and challenging environment for international equity investors. The process we employ is not centered on predicting when the market will turn. Rather, we operate under the premise that identification of solid growth companies with sound fundamentals, trading at attractive valuations will be rewarded over the long term. Despite the fact that the current environment is unsettling, we believe that opportunities to purchase promising growth companies continue to exist. We encourage you to learn more about the Thornburg International Growth Fund. Highlights of the portfolio, as well as descriptions of each holding can be found at www.thornburg.com/funds.
| Sincerely, |
 |
Alexander M.V. Motola,CFA Managing Director 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 9
STATEMENT OF ASSETS AND LIABILITIES
| Thornburg International Growth Fund | September 30, 2008 |
ASSETS | ||||
Investments at value (cost $107,798,946) (Note 2) | $ | 79,217,089 | ||
Cash | 2,540,772 | |||
Receivable for investments sold | 135,649 | |||
Receivable for fund shares sold | 88,212 | |||
Unrealized gain on forward exchange contracts (Note 7) | 2,161,870 | |||
Dividends receivable | 181,848 | |||
Prepaid expenses and other assets | 29,947 | |||
Total Assets | 84,355,387 | |||
LIABILITIES | ||||
Payable for securities purchased | 1,367,392 | |||
Payable for fund shares redeemed | 917,687 | |||
Unrealized loss on forward exchange contracts (Note 7) | 1,450,132 | |||
Payable to investment advisor and other affiliates (Note 3) | 69,731 | |||
Accounts payable and accrued expenses | 217,109 | |||
Dividends payable | 53 | |||
Total Liabilities | 4,022,104 | |||
NET ASSETS | $ | 80,333,283 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 972,581 | ||
Net unrealized depreciation on investments | (27,877,865 | ) | ||
Accumulated net realized gain (loss) | (5,646,116 | ) | ||
Net capital paid in on shares of beneficial interest | 112,884,683 | |||
| $ | 80,333,283 | |||
10 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($28,413,928 applicable to 2,745,054 shares of beneficial interest outstanding - Note 4) | $ | 10.35 | |
Maximum sales charge, 4.50% of offering price | 0.49 | ||
Maximum offering price per share | $ | 10.84 | |
Class C Shares: | |||
Net asset value and offering price per share * ($23,637,883 applicable to 2,312,001 shares of beneficial interest outstanding - Note 4) | $ | 10.22 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($28,163,858 applicable to 2,692,646 shares of beneficial interest outstanding - Note 4) | $ | 10.46 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($112,833 applicable to 10,889 shares of beneficial interest outstanding - Note 4) | $ | 10.36 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($2,387 applicable to 230 shares of beneficial interest outstanding - Note 4) | $ | 10.36 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($2,394 applicable to 229 shares of beneficial interest outstanding - Note 4) | $ | 10.46 | |
| * | 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 Growth Fund | Year Ended September 30, 2008 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $247,763) | $ | 1,898,083 | ||
Interest income | 269,494 | |||
Total Income | 2,167,577 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 919,460 | |||
Administration fees (Note 3) | ||||
Class A Shares | 52,920 | |||
Class C Shares | 35,631 | |||
Class I Shares | 17,084 | |||
Class R3 Shares | 85 | |||
Class R4 Shares | 2 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 105,654 | |||
Class C Shares | 280,819 | |||
Class R3 Shares | 341 | |||
Class R4 Shares | 5 | |||
Transfer agent fees | ||||
Class A Shares | 53,261 | |||
Class C Shares | 55,682 | |||
Class I Shares | 20,723 | |||
Class R3 Shares | 1,082 | |||
Class R4 Shares | 1,002 | |||
Class R5 Shares | 1,002 | |||
Registration and filing fees | ||||
Class A Shares | 27,474 | |||
Class C Shares | 21,440 | |||
Class I Shares | 24,511 | |||
Class R3 Shares | 15,802 | |||
Class R4 Shares | 15,802 | |||
Class R5 Shares | 15,802 | |||
Custodian fees (Note 3) | 94,335 | |||
Professional fees | 61,659 | |||
Accounting fees | 3,386 | |||
Trustee fees | 1,761 | |||
Other expenses | 39,320 | |||
Total Expenses | 1,866,045 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (130,324 | ) | ||
Investment advisory fees waived by investment advisor (Note 3) | (72,431 | ) | ||
Fees paid indirectly (Note 3) | (7,915 | ) | ||
Net Expenses | 1,655,375 | |||
Net Investment Income | $ | 512,202 | ||
12 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
| Thornburg International Growth Fund | Year Ended September 30, 2008 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments sold | $ | (3,059,377 | ) | |
Foreign currency transactions | (1,479,285 | ) | ||
| (4,538,662 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (34,705,846 | ) | ||
Foreign currency translation | 742,335 | |||
| (33,963,511 | ) | |||
Net Realized and Unrealized Loss | (38,502,173 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (37,989,971 | ) | |
See notes to financial statements.
Certified Annual Report 13
STATEMENTS OF CHANGES IN NET ASSETS
| Thornburg International Growth Fund | September 30, 2008 |
| Year Ended September 30, 2008 | For the period from commencement of operations on February 1, 2007 through September 30, 2007 | ||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | |||||||
OPERATIONS: | |||||||
Net investment income | $ | 512,202 | $ | 5,873 | |||
Net realized gain (loss) on investments and foreign currency transactions | (4,538,662 | ) | 1,924,301 | ||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | (33,963,511 | ) | 6,085,646 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (37,989,971 | ) | 8,015,820 | ||||
DIVIDENDS TO SHAREHOLDERS: | |||||||
From realized gains | |||||||
Class A Shares | (1,043,825 | ) | — | ||||
Class C Shares | (692,219 | ) | — | ||||
Class I Shares | (841,205 | ) | — | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | |||||||
Class A Shares | 19,403,825 | 22,548,699 | |||||
Class C Shares | 23,121,017 | 11,229,605 | |||||
Class I Shares | 13,038,441 | 23,386,744 | |||||
Class R3 Shares | 149,898 | — | |||||
Class R4 Shares | 3,200 | — | |||||
Class R5 Shares | 3,254 | — | |||||
Net Increase in Net Assets | 15,152,415 | 65,180,868 | |||||
NET ASSETS: | |||||||
Beginning of period | 65,180,868 | — | |||||
End of period | $ | 80,333,283 | $ | 65,180,868 | |||
Undistributed net investment income | $ | 972,581 | $ | — | |||
See notes to financial statements.
14 Certified Annual Report
| Thornburg International Growth Fund | September 30, 2008 |
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 thirteen 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, Thornburg Global Opportunities Fund, and Thornburg Strategic Income 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, 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 R4 shares are sold at net asset value without a 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 administrative and legal expenses. Currently, class specific expenses of the Fund are limited to service and distribution fees, administration fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: 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.
Any debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations 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 obligations 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.
Quotations in foreign currencies for foreign portfolio investments are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
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 procedures approved by the Trustees, which may include the use of prices obtained from an independent pricing service. The pricing service ordinarily values equity securities in these instances, using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures and index data and other data. 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 obligation held by the Fund, the valuation and pricing committee determines a fair value for the debt obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 |
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Foreign currency translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund, to the shareholders. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and/or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient 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.
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 |
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, 2008, 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, 2008, the Advisor voluntarily waived investment advisory fees of $72,431. 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, 2008, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,496 for Class A shares, $15,927 for Class C shares, $62,318 for Class I shares, $16,975 for Class R3 shares, $16,804 for Class R4 shares, and $16,804 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, 2008, the Distributor has advised the Fund that it earned commissions aggregating $40,919 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $18,717 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, 2008, 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, 2008, fees paid indirectly were $7,915.
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, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 2,783,429 | $ | 40,878,185 | 1,859,640 | $ | 24,943,384 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 63,051 | 972,881 | — | — | ||||||||||
Shares repurchased | (1,786,855 | ) | (22,448,682 | ) | (174,211 | ) | (2,395,601 | ) | ||||||
Redemption fees received** | — | 1,441 | — | 916 | ||||||||||
Net Increase (Decrease) | 1,059,625 | $ | 19,403,825 | 1,685,429 | $ | 22,548,699 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 1,946,922 | $ | 28,877,850 | 842,383 | $ | 11,352,704 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 28,999 | 444,555 | — | — | ||||||||||
Shares repurchased | (497,198 | ) | (6,202,344 | ) | (9,105 | ) | (123,492 | ) | ||||||
Redemption fees received** | — | 956 | — | 393 | ||||||||||
Net Increase (Decrease) | 1,478,723 | $ | 23,121,017 | 833,278 | $ | 11,229,605 | ||||||||
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 |
| Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 1,311,234 | $ | 18,680,586 | 1,901,175 | $ | 24,150,347 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 48,137 | 747,089 | — | — | ||||||||||
Shares repurchased | (511,958 | ) | (6,390,352 | ) | (55,942 | ) | (764,907 | ) | ||||||
Redemption fees received** | — | 1,118 | — | 1,304 | ||||||||||
Net Increase (Decrease) | 847,413 | $ | 13,038,441 | 1,845,233 | $ | 23,386,744 | ||||||||
Class R3 Shares* | ||||||||||||||
Shares sold | 11,033 | $ | 151,712 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||
Shares repurchased | (144 | ) | (1,815 | ) | — | — | ||||||||
Redemption fees received** | — | 1 | — | — | ||||||||||
Net Increase (Decrease) | 10,889 | $ | 149,898 | — | $ | — | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 230 | $ | 3,200 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||
Shares repurchased | — | — | — | — | ||||||||||
Redemption fees received** | — | — | — | — | ||||||||||
Net Increase (Decrease) | 230 | $ | 3,200 | — | $ | — | ||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 229 | $ | 3,254 | — | $ | — | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||
Shares repurchased | — | — | — | — | ||||||||||
Redemption fees received** | — | — | — | — | ||||||||||
Net Increase (Decrease) | 229 | $ | 3,254 | — | $ | — | ||||||||
| * | Effective date of these classes of shares was February 1, 2008. |
| ** | The Fund charges a redemption fee of 1% of the Class A and Class I shares redeemed or exchanged within 30 days of purchase. Redemption fees charged to any class are allocated to all classes upon receipt of payment based on relative net asset values of each class or other appropriate allocation methods. |
The advisor, its owners, employees, and affiliated entities of the Advisor have invested amounts in the Fund valued at $13,076,368, representing 16.28% of the net asset value as of September 30, 2008.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $105,972,978 and $50,858,790, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 107,798,946 | ||
Gross unrealized appreciation on a tax basis | $ | 1,299,646 | ||
Gross unrealized depreciation on a tax basis | (29,881,503 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (28,581,857 | ) | |
Distributable earnings - ordinary income | $ | 972,668 |
At September 30, 2008, the Fund had tax basis capital losses of $4,974,731 which may be carried forward 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 carry forwards expire at September 30, 2016.
In order to account for permanent book/tax differences, the Fund increased accumulated net realized investment loss by $498,514, and increased undistributed net investment income by $498,514. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from passive foreign investment company gains (losses), foreign capital gains tax, and foreign currency gains (losses).
The tax character of distributions paid during the year ended September 30, 2008, and September 30, 2007, was as follows:
| 2008 | 2007 | |||||
Distributions from: | ||||||
Ordinary Income | $ | 2,577,249 | $ | — | ||
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the year ended September 30, 2008, 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 BUY OR SELL:
| ||||||||||||||||
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value (USD) | Unrealized Appreciation | Unrealized (Depreciation) | ||||||||||
Euro Dollar | Sell | 8,300,000 | 12/02/08 | $ | 12,779,510 | $ | 1,058,496 | $ | — | |||||||
Euro Dollar | Sell | 8,600,000 | 12/02/08 | 13,206,590 | 1,061,925 | — | ||||||||||
Philippine Peso | Sell | 121,000,000 | 12/16/08 | 2,600,473 | 28,067 | — | ||||||||||
Euro Dollar | Buy | 8,335,000 | 12/02/08 | 13,219,477 | — | (1,449,037 | ) | |||||||||
Philippine Peso | Buy | 8,000,000 | 12/16/08 | 169,563 | 513 | — | ||||||||||
Philippine Peso | Buy | 8,925,000 | 12/16/08 | 185,243 | 4,499 | — | ||||||||||
Philippine Peso | Buy | 18,161,000 | 12/16/08 | 377,725 | 8,370 | — | ||||||||||
Philippine Peso | Buy | 9,000,000 | 12/16/08 | 192,431 | — | (1,095 | ) | |||||||||
Total unrealized appreciation (depreciation) from forward exchange contracts | $ | 2,161,870 | $ | (1,450,132 | ) | |||||||||||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 |
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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the applicable prior fiscal years remain subject to examination by the Internal Revenue Service.
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” (“FAS 157”). FAS 157 defines fair value, provides guidelines for measuring fair value in accordance with generally accepted accounting principles, and addresses disclosure about fair value measurements. FAS 157 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). FAS 157 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 FAS 157 is applied. Management is evaluating the impact, if any, that the adoption of FAS 157 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
20 Certified Annual Report
Thornburg International Growth Fund
Class A Shares: | Year Ended Sept. 30, 2008 | Period Ended Sept. 30, 2007(a) | ||||||
| PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 14.92 | $ | 11.94 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.07 | (0.03 | ) | |||||
Net realized and unrealized gain (loss) on investments | (4.27 | ) | 3.01 | |||||
Total from investment operations | (4.20 | ) | 2.98 | |||||
Less dividends from: | ||||||||
Net realized gains | (0.37 | ) | — | |||||
Change in net asset value | (4.57 | ) | 2.98 | |||||
NET ASSET VALUE, end of period | $ | 10.35 | $ | 14.92 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | (28.98 | ) | 24.96 | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 0.53 | (0.29 | )(c) | |||||
Expenses, after expense reductions (%) | 1.56 | 1.64 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 1.55 | 1.62 | (c) | |||||
Expenses, before expense reductions (%) | 1.63 | 2.10 | (c) | |||||
Portfolio turnover rate (%) | 54.31 | 113.34 | ||||||
Net assets at end of period (thousands) | $ | 28,414 | $ | 25,145 | ||||
| (a) | Fund commenced operations on February 1, 2007. |
| (b) | Sales loads are not reflected in computing total return, which is not annualized for periods less than one year. |
| (c) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 21
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Growth Fund
Class C Shares: | Year Ended Sept. 30, 2008 | Period Ended Sept. 30, 2007(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 14.85 | $ | 11.94 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | (0.03 | ) | (0.10 | ) | ||||
Net realized and unrealized gain (loss) on investments | (4.23 | ) | 3.01 | |||||
Total from investment operations | (4.26 | ) | 2.91 | |||||
Less dividends from: | ||||||||
Net realized gains | (0.37 | ) | — | |||||
Change in net asset value | (4.63 | ) | 2.91 | |||||
NET ASSET VALUE, end of period | $ | 10.22 | $ | 14.85 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | (29.53 | ) | 24.37 | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | (0.23 | ) | (1.13 | )(c) | ||||
Expenses, after expense reductions (%) | 2.32 | 2.39 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 2.32 | 2.38 | (c) | |||||
Expenses, before expense reductions (%) | 2.45 | 3.23 | (c) | |||||
Portfolio turnover rate (%) | 54.31 | 113.34 | ||||||
Net assets at end of period (thousands) | $ | 23,638 | $ | 12,376 | ||||
| (a) | Fund commenced operations on February 1, 2007. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
22 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Growth Fund
Class I Shares: | Year Ended Sept. 30, 2008 | Period Ended Sept. 30, 2007(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 14.99 | $ | 11.94 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.14 | 0.05 | ||||||
Net realized and unrealized gain (loss) on investments | (4.30 | ) | 3.00 | |||||
Total from investment operations | (4.16 | ) | 3.05 | |||||
Less dividends from: | ||||||||
Net realized gains | (0.37 | ) | — | |||||
Change in net asset value | (4.53 | ) | 3.05 | |||||
NET ASSET VALUE, end of period | $ | 10.46 | $ | 14.99 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | (28.57 | ) | 25.54 | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 1.03 | 0.52 | (c) | |||||
Expenses, after expense reductions (%) | 1.00 | 1.01 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | (c) | |||||
Expenses, before expense reductions (%) | 1.25 | 1.64 | (c) | |||||
Portfolio turnover rate (%) | 54.31 | 113.34 | ||||||
Net assets at end of period (thousands) | $ | 28,164 | $ | 27,659 | ||||
| (a) | Fund commenced operations on February 1, 2007. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 23
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Growth Fund
Class R3 Shares: | Period Ended Sept. 30, 2008(a) | |||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 13.94 | ||
Income from investment operations: | ||||
Net investment income (loss) | 0.09 | |||
Net realized and unrealized gain (loss) on investments | (3.67 | ) | ||
Total from investment operations | (3.58 | ) | ||
Change in net asset value | (3.58 | ) | ||
NET ASSET VALUE, end of period | $ | 10.36 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%)(b) | (25.68 | ) | ||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 1.08 | (c) | ||
Expenses, after expense reductions (%) | 1.50 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 1.49 | (c) | ||
Expenses, before expense reductions (%) | 26.47 | (c)(d) | ||
Portfolio turnover rate (%) | 54.31 | |||
Net assets at end of period (thousands) | $ | 113 | ||
| (a) | Effective date of this class of shares was February 1, 2008. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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 International Growth Fund |
Class R4 Shares: | Period Ended Sept. 30, 2008(a) | |||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 13.94 | ||
Income from investment operations: | ||||
Net investment income (loss) | 0.10 | |||
Net realized and unrealized gain (loss) on investments | (3.68 | ) | ||
Total from investment operations | (3.58 | ) | ||
Change in net asset value | (3.58 | ) | ||
NET ASSET VALUE, end of period | $ | 10.36 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%)(b) | (25.68 | ) | ||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 1.16 | (c) | ||
Expenses, after expense reductions (%) | 1.40 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 1.40 | (c) | ||
Expenses, before expense reductions (%) | 861.94 | (c)(d) | ||
Portfolio turnover rate (%) | 54.31 | |||
Net assets at end of period (thousands) | $ | 2 | ||
| (a) | Effective date of this class of shares was February 1, 2008. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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 Growth Fund |
Class R5 Shares: | Period Ended Sept. 30, 2008(a) | |||
PER SHARE PERFORMANCE | ||||
(for a share outstanding throughout the period)+ | ||||
Net asset value, beginning of period | $ | 14.03 | ||
Income from investment operations: | ||||
Net investment income (loss) | 0.14 | |||
Net realized and unrealized gain (loss) on investments | (3.71 | ) | ||
Total from investment operations | (3.57 | ) | ||
Change in net asset value | (3.57 | ) | ||
NET ASSET VALUE, end of period | $ | 10.46 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%)(b) | (25.45 | ) | ||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 1.57 | (c) | ||
Expenses, after expense reductions (%) | 0.96 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 0.95 | (c) | ||
Expenses, before expense reductions (%) | 851.43 | (c)(d) | ||
Portfolio turnover rate (%) | 54.31 | |||
Net assets at end of period (thousands) | $ | 2 | ||
| (a) | Effective date of this class of shares was February 1, 2008. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| (d) | 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 International Growth Fund | September 30, 2008 |
CUSIPS: CLASS A - 885-215-319, CLASS C - 885-215-293, CLASS I - 885-215-244, CLASS R3 - 885-215-178, CLASS R4 - 885-215-160, CLASS R5 - 885-215-152
NASDAQ SYMBOLS: CLASS A - TIGAX, CLASS C - TIGCX, CLASS I - TINGX, CLASS R3 - TIGVX, CLASS R4 - TINVX, CLASS R5 - - TINFX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/08
Telecommunication Services | 13.2 | % | |
Food, Beverage & Tobacco | 11.3 | % | |
Utilities | 11.1 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 9.9 | % | |
Software & Services | 9.9 | % | |
Diversified Financials | 8.0 | % | |
Banks | 6.3 | % | |
Media | 5.3 | % | |
Automobiles & Components | 4.9 | % | |
Transportation | 4.3 | % | |
Real Estate | 2.8 | % | |
Consumer Services | 2.5 | % | |
Energy | 2.2 | % | |
Commercial & Professional Services | 2.0 | % | |
Technology Hardware & Equipment | 1.5 | % | |
Materials | 1.3 | % | |
Insurance | 1.1 | % | |
Capital Goods | 0.7 | % | |
Consumer Durables & Apparel | 0.4 | % | |
Other Assets & Cash Equivalents | 1.3 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/08 (percent of equity holdings)
Germany | 12.9 | % | |
Switzerland | 11.5 | % | |
Denmark | 8.7 | % | |
United Kingdom | 6.8 | % | |
Spain | 4.6 | % | |
South Africa | 4.4 | % | |
Netherlands | 4.1 | % | |
Brazil | 3.9 | % | |
Mexico | 3.7 | % | |
Philippines | 3.6 | % | |
Japan | 3.6 | % | |
Canada | 3.3 | % | |
United Arab Emirates | 2.8 | % | |
Austria | 2.8 | % | |
Czech Republic | 2.5 | % | |
United States | 2.5 | % | |
China | 2.4 | % | |
Greece | 2.3 | % | |
Qatar | 2.1 | % | |
Australia | 2.0 | % | |
Indonesia | 2.0 | % | |
Turkey | 1.9 | % | |
India | 1.8 | % | |
Finland | 1.7 | % | |
Italy | 1.1 | % | |
Russia | 1.0 | % |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | ||||
COMMON STOCK — 98.61% | |||||
AUTOMOBILES & COMPONENTS — 4.87% | |||||
AUTO COMPONENTS — 1.63% | |||||
Nokian Renkaat Oyj(1) | 54,526 | $ | 1,312,057 | ||
AUTOMOBILES — 3.24% | |||||
Porsche Automobil Holding SE+ (1) | 24,000 | 2,602,567 | |||
| 3,914,624 | |||||
BANKS — 6.26% | |||||
COMMERCIAL BANKS — 6.26% | |||||
Asya Katilim Bankasi AS+ (1) | 1,043,300 | 1,511,468 | |||
Commercial Bank of Qatar | 58,500 | 1,673,930 | |||
EFG Eurobank Ergasias(1) | 100,930 | 1,839,760 | |||
| 5,025,158 | |||||
CAPITAL GOODS — 0.69% | |||||
MACHINERY — 0.69% | |||||
Bolzoni SpA(1) | 176,894 | 557,802 | |||
| 557,802 | |||||
COMMERCIAL & PROFESSIONAL SERVICES — 1.97% | |||||
PROFESSIONAL SERVICES — 1.97% | |||||
Seek Ltd.(1) | 381,665 | 1,579,625 | |||
| 1,579,625 | |||||
CONSUMER DURABLES & APPAREL — 0.38% | |||||
TEXTILES, APPAREL & LUXURY GOODS — 0.38% | |||||
Antichi Pellettieri SpA(1) | 43,600 | 308,999 | |||
| 308,999 | |||||
CONSUMER SERVICES — 2.49% | |||||
HOTELS RESTAURANTS & LEISURE — 2.49% | |||||
Las Vegas Sands Corp.+ | 55,364 | 1,999,194 | |||
| 1,999,194 | |||||
DIVERSIFIED FINANCIALS — 8.03% | |||||
CAPITAL MARKETS — 2.41% | |||||
EFG International(1) | 67,200 | 1,940,142 | |||
DIVERSIFIED FINANCIAL SERVICES — 5.62% | |||||
BM&F Bovespa SA | 481,335 | 2,150,059 | |||
Deutsche Boerse AG(1) | 25,800 | 2,360,969 | |||
| 6,451,170 | |||||
ENERGY — 2.18% | |||||
OIL, GAS & CONSUMABLE FUELS — 2.18% | |||||
OAO Gazprom ADR(1) | 24,500 | 782,932 | |||
Petroleo Brasileiro SA ADR | 22,100 | 971,295 | |||
| 1,754,227 | |||||
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | ||||
FOOD, BEVERAGE & TOBACCO — 11.28% | |||||
BEVERAGES — 7.35% | |||||
Carlsberg A/S Class A(1) | 25,800 | $ | 2,231,825 | ||
Carlsberg A/S Class B+(1) | 21,800 | 1,662,105 | |||
Heineken Holding NV(1) | 51,300 | 2,013,975 | |||
FOOD PRODUCTS — 3.93% | |||||
Nestlé SA-REG(1) | 73,010 | 3,155,310 | |||
| 9,063,215 | |||||
INSURANCE — 1.14% | |||||
INSURANCE — 1.14% | |||||
Swiss Re(1) | 16,500 | 915,840 | |||
| 915,840 | |||||
MATERIALS — 1.31% | |||||
METALS & MINING — 1.31% | |||||
Major Drilling Group International, Inc.+ | 37,700 | 1,051,030 | |||
| 1,051,030 | |||||
MEDIA — 5.33% | |||||
MEDIA — 5.33% | |||||
Airmedia Group, Inc. ADR+ | 253,700 | 1,890,065 | |||
Naspers Ltd.(1) | 49,600 | 979,667 | |||
Zee Entertainment Enterprises, Ltd(1) | 324,100 | 1,409,434 | |||
| 4,279,166 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 9.89% | |||||
PHARMACEUTICALS — 9.89% | |||||
Glaxosmithkline ADR | 26,200 | 1,138,652 | |||
Glaxosmithkline plc(1) | 33,600 | 727,867 | |||
Novo Nordisk A/S(1) | 58,100 | 3,012,035 | |||
Roche Holding AG(1) | 19,600 | 3,068,219 | |||
| 7,946,773 | |||||
REAL ESTATE — 2.78% | |||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 2.78% | |||||
Aldar Properties | 1,030,300 | 2,235,545 | |||
| 2,235,545 | |||||
SOFTWARE & SERVICES — 9.89% | |||||
INTERNET SOFTWARE & SERVICES — 1.99% | |||||
Open Text Corp.+ | 46,200 | 1,597,596 | |||
SOFTWARE — 7.90% | |||||
Amdocs Ltd.+ | 128,000 | 3,504,640 | |||
Nintendo Co. Ltd.(1) | 6,700 | 2,841,964 | |||
| 7,944,200 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 1.53% | |||||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS — 1.53% | |||||
Smartrac NV+(1) | 58,200 | 1,226,240 | |||
| 1,226,240 | |||||
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | ||||
TELECOMMUNICATION SERVICES — 13.22% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 6.44% | |||||
PT Telekomunikasi Indonesia(1) | 2,084,000 | $ | 1,556,602 | ||
Telefónica SA(1) | 152,000 | 3,614,189 | |||
WIRELESS TELECOMMUNICATION SERVICES — 6.78% | |||||
América Móvil SAB de C.V. | 1,272,400 | 2,950,493 | |||
MTN Group Ltd.(1) | 177,100 | 2,498,965 | |||
| 10,620,249 | |||||
TRANSPORTATION — 4.29% | |||||
TRANSPORTATION INFRASTRUCTURE — 4.29% | |||||
HHLA(1) | 58,100 | 3,446,100 | |||
| 3,446,100 | |||||
UTILITIES — 11.08% | |||||
ELECTRIC UTILITIES — 5.29% | |||||
CEZ Group(1) | 32,125 | 2,010,923 | |||
Verbund(1) | 36,300 | 2,233,968 | |||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 3.55% | |||||
PNOC Energy Development Corp.(1) | 32,734,131 | 2,851,180 | |||
MULTI-UTILITIES — 2.24% | |||||
RWE AG(1) | 18,900 | 1,801,861 | |||
| 8,897,932 | |||||
TOTAL COMMON STOCK (Cost $107,798,946) | 79,217,089 | ||||
TOTAL INVESTMENTS — 98.61% (Cost $107,798,946) | $ | 79,217,089 | |||
OTHER ASSETS LESS LIABILITIES — 1.39% | 1,116,194 | ||||
NET ASSETS — 100.00% | $ | 80,333,283 | |||
Footnote Legend
| + | Non-income producing |
| (1) | Security fair valued by independent pricing service on valuation date, September 30, 2008. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ADR | American Depository Receipt |
See notes to financial statements.
30 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, 2008, 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 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 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 audits 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, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
Certified Annual Report 31
| Thornburg International Growth Fund | September 30, 2008 (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, 2008 and held until September 30, 2008.
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 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 770.70 | $ | 6.98 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.12 | $ | 7.95 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 767.30 | $ | 10.30 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.35 | $ | 11.73 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 773.10 | $ | 4.39 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 770.80 | $ | 6.60 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.54 | $ | 7.52 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 770.80 | $ | 6.22 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.98 | $ | 7.09 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 773.10 | $ | 4.23 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.23 | $ | 4.82 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.58%; C: 2.33%; I: 0.99%; R3: 1.49%; R4: 1.40%; R5: 0.95%) multiplied by the average account value over the period, multiplied by 183/366 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.
32 Certified Annual Report
| Thornburg International Growth Fund | September 30, 2008 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2008 (with sales charge)
| 1 Yr | Since Inception | |||||
A Shares (Incep: 2/1/07) | (32.16 | )% | (9.47 | )% | ||
C Shares (Incep: 2/1/07) | (30.22 | )% | (7.64 | )% | ||
I Shares (Incep: 2/1/07) | (28.57 | )% | (6.35 | )% | ||
R3 Shares (Incep: 2/1/08) | — | (25.68 | )%* | |||
R4 Shares (Incep: 2/1/08) | — | (25.68 | )%* | |||
R5 Shares (Incep: 2/1/08) | — | (25.45 | )%* | |||
MSCI All Country World ex-U.S. Growth Index (Since: 2/1/07) | (29.45 | )% | (10.38 | )% |
| * | 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 I, R3, R4 and R5 shares. Class A and 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 33
| Thornburg International Growth Fund | September 30, 2008 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
| Garrett Thornburg, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
| Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
| Susan H. Dubin, 59 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, 54 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, 49 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM since 2004; President and CEO from 1997–2004, and Vice Chairman 2004 to date, Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None | ||
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
| Leigh Moiola, 41 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 | ||
| Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
| Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
| Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
| Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
| Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Certified Annual Report 35
TRUSTEES AND OFFICERS, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
| Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Lei Wang, 37 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. | Not applicable | ||
| Connor Browne, 29 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, 34 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. | Not applicable | ||
| Lewis Kaufman, 32 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 | ||
| Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
| Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
| Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
| Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
36 Certified Annual Report
| Thornburg International Growth Fund | September 30, 2008 (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 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, 2008, the percentage of Investment Company Taxable Income that is eligible as qualifying for the reduced rate under the Jobs and Growth Tax Relief and Reconciliation Act of 2003 for the Thornburg International Growth Fund is 100%.
For the year ended September 30, 2008, foreign taxes paid and foreign source income is $244,942 and $2,229,206, 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, 2008. Complete information will be computed and reported in conjunction with your 2008 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 2008 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 Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by 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 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 returns over different periods of time relative to a category of mutual funds selected by an independent mutual fund analyst firm that invest in small and mid-sized international, growth-oriented stocks, and relative to a broad-based securities index, (iv) the Advisor’s performance in managing other Funds over periods before the Fund’s inception date, and (v) a comparative measure of earnings growth. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to these events in view of the Fund’s investment objectives and policies.
Certified Annual Report 37
OTHER INFORMATION, CONTINUED
| Thornburg International Growth Fund | September 30, 2008 (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.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data), the Fund’s lower performance in the second quarter of the current year and in the year to date relative to the performance of a broad-based securities index and the category of international funds selected by an independent mutual fund analyst firm, but observed that the Fund’s total return since its inception on February 1, 2007 was equivalent to the return of the index and fell within the top quartile of the fund category for the 12 months ended with the second quarter. The Trustees also noted that the cumulative returns of other equity Funds managed by the Advisor had exceeded the cumulative returns of comparative indices over many years.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 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 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 observed that the overall expense ratio of the Fund (net of fee waivers by the Advisor) was comparable to 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 comparable to the average and lower than the median fee rates for the same group of funds. The Trustees noted their previous observations respecting fee rates charged by the Advisor to other types of investment management clients, and their conclusion that the fee rates charged by the Advisor to other 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 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 periods 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses charged to the Fund to fees and expenses charged to other mutual funds.
38 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 ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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Planning Options
Retirement and Education Accounts
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 701/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
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Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to .19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
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Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
Sincerely,
|
 |
Brian McMahon |
CEO and Chief Investment Officer |
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Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
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 | Waste not,
Wait not |  | ||||||||
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This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: Thornburg Investment Management® 800.847.0200
Distributor: Thornburg Securities Corporation® 800.847.0200
|
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Thornburg Strategic Income Fund
September 30, 2008
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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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Important Information
The information presented on the following pages was current as of September 30, 2008. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; they 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. 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 bonds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Investments in structured finance arrangements and other types of derivatives are subject to the risks associated with the securities or other assets underlying the pool of securities including illiquidity and difficulty in valuation, and also may involve risks different or greater than the risks affecting the underlying assets. Investing outside the United States involves additional risks, such as currency fluctuations. Additionally, the Fund may invest a portion of the assets in small capitalization companies and in emerging markets which may increase the risk of greater price fluctuations. Investments in the Fund are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity. There is no guarantee that the Fund will meet its investment objectives.
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.
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.
Class I shares may not be available to all investors. Minimum investments for Class I shares may be higher than those for other classes.
Glossary
Blended Benchmark – The Blended Benchmark is comprised of 80% Barclays Capital Aggregate Bond Index and 20% MSCI World Index. The Barclays Capital 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.
Barclays Capital U.S. Corporate High Yield Index – Index covering the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes Emerging Markets debt.
Barclays Capital U.S. Universal Index – Represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield Index, Investment-Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index, and the non-ERISA eligible portion of the CMBS Index. The index covers USD-denominated, taxable bonds that are rated either investment-grade or below investment-grade.
Barclays Capital U.S. Corporate Investment Grade Index – Index covering USD-denominated, investment-grade, fixed-rate, taxable securities sold by industrial, utility and financial issuers. It includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements.
KOSPI Index – A comprehensive capitalization weighted index that tracks the continuous price performance of all common stocks listed on the Korea Stock Exchange.
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.
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.
Leverage – The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
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 income taxes.
Certified Annual Report 5
George Strickland Co-Portfolio Manager | October 15, 2008
Dear Fellow Shareholder:
| |
Together with this letter you will find the first Annual Report for the Thornburg Strategic Income Fund for the period ended September 30, 2008. The net asset value (NAV) per Class A share of the Fund decreased $1.37 to $10.57 since the inception date of the Fund on December 19, 2007. If you were invested for the entire period, you received dividends of 54.7 cents per share. If you reinvested your dividends, you received 55.8 cents per share. The dividend per share was higher for Class I shares and lower for Class C shares, to account for varying class specific expenses.
| ||
Since the Fund’s inception, we have been navigating an environment of very high volatility in both the global fixed income and equity markets. We believe we are well positioned to continue to pursue the Fund’s primary goal, which is to seek a high level of current income.
| ||
Putting income and price change together, the Class A shares of the Thornburg Strategic Income Fund produced a total return of negative 7.18% (at NAV) since the December 19, 2007 inception. A blended benchmark of 80% Barclays Capital Aggregate Bond Index and 20% MSCI World Index produced a negative 3.92% total return over the same time period. The Barclays Capital U.S. Universal Index and the Barclays Capital U.S. Corporate High Yield Index produced positive 0.03% and negative 10.02% total returns, respectively. These indices reflect no deduction for fees, expenses, or taxes.
| ||
Jason Brady,CFA Co-Portfolio Manager | Given the above figures, it has obviously been a challenging period. Owning many fixed-income assets in 2008 has been a losing proposition relative to credit-risk free assets such as U.S. Treasuries (a major component of both the Barclays Aggregate and Barclays Universal Indices). While recent returns have been unpleasant, opportunities for long-term yield have multiplied. Furthermore, by avoiding one source of income, the Fund has been able to mitigate large downdrafts in equities and speculative grade corporate bonds. Still, with the average investment-grade corporate bond down 8.14% (according to the Barclays Capital U.S. Corporate Investment Grade Index) from December 19, 2007, through September 30, 2008, there have been few safe havens.
| |
| The Fund continues to invest in companies and assets which we believe have the potential to generate a high level of income for our shareholders. We strive to balance the desire to be able to pay a high income with the current precarious state of the marketplace. As such, we are relatively highly weighted towards investment-grade fixed income securities which comprised 57% of the Fund as of September 30, 2008. The Fund’s average bond quality stood at BBB as of the same date. The duration of the Fund’s fixed income component was 4.8 years, which we feel is an appropriate balance between interest rate risk and reinvestment risk at the present time. We are less heavily invested in equity securities than we might otherwise be, given our chosen benchmark has a 20% equity allocation, due to the income opportunities available across the fixed income universe. Equities comprised just 7.2% of the Fund as of September 30, 2008, though the equity portion of the Fund has been an important income contributor with a weighted average dividend yield of 12.47% (annualized current yield). The 30-day SEC yield was 6.91% for Class A shares as of September 30, 2008. |
6 Certified Annual Report
| Going forward, it is likely that the United States, as well as many parts of the global economy, will either enter recession or have already done so. Consumer spending will slow, and troubles in the global financial sector will spill over to broader economic activity. All is not hopeless, however. First, much of the damage of home price declines in this country has been identified and it is possible that recent deceleration in those same declines presages stabilization sometime within the next year. Instability in financial markets is broadly recognized and is being aggressively dealt with by central banks around the globe. These moves will have their effect in the medium term. Remember that though we can draw many parallels to the Great Depression in these times (particularly when looking at price declines in riskier portions of the bond market), it was the lack of policy action in that time period that prolonged the market’s pain. Now the world’s central banks are actively attempting to resuscitate markets through various liquidity plans. It is impossible to know when we will emerge from this economic funk, but certainly the markets for non-Treasury bond assets are pricing in a scenario which is more punitive than any period in the past 100 years. | ||
| Because of this pricing and the opportunities it affords, we believe that remaining invested in income producing assets is crucial. While many market participants have run to the safety of U.S. Treasuries, some front-end maturities have sold at negative yields. This reflects extreme risk aversion which is unlikely to be rewarded over a long period of time. Instead, selectively investing in quality companies and assets while keeping an eye on income production is our goal. | ||
| Thank you very much for investing in the Thornburg Strategic Income Fund. We believe that the Fund continues to be an appropriate investment for those looking for an attractive, sustainable yield from a variety of instruments. While future performance cannot be guaranteed, Thornburg Investment Management will continue to strive to chart a steady course in what continues to be a volatile marketplace. | ||
| Regards, | ||
|  | |||
George Strickland | Jason Brady,CFA | |||
Co-Portfolio Manager | Co-Portfolio Manager | |||
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 7
STATEMENT OF ASSETS AND LIABILITIES
| Thornburg Strategic Income Fund | September��30, 2008 |
ASSETS | ||||
Investments at value (cost $52,529,722) (Note 2) | $ | 46,094,219 | ||
Cash | 1,874,635 | |||
Receivable for fund shares sold | 54,721 | |||
Unrealized gain on forward exchange contracts (Note 7) | 48,439 | |||
Dividends receivable | 46,009 | |||
Interest receivable | 745,098 | |||
Prepaid expenses and other assets | 12,318 | |||
Total assets | 48,875,439 | |||
LIABILITIES | ||||
Payable for securities purchased | 235,731 | |||
Payable for fund shares redeemed | 1,037,777 | |||
Payable to investment advisor and other affiliates (Note 3) | 27,754 | |||
Accounts payable and accrued expenses | 42,255 | |||
Dividends payable | 19,022 | |||
Total Liabilities | 1,362,539 | |||
NET ASSETS | $ | 47,512,900 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 101,777 | ||
Net unrealized depreciation on investments | (6,391,638 | ) | ||
Accumulated net realized gain (loss) | (399,343 | ) | ||
Net capital paid in on shares of beneficial interest | 54,202,104 | |||
| $ | 47,512,900 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($18,538,408 applicable to 1,753,938 shares of beneficial interest outstanding - Note 4) | $ | 10.57 | ||
Maximum sales charge, 4.50% of offering price | 0.50 | |||
Maximum offering price per share | $ | 11.07 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($13,829,492 applicable to 1,308,250 shares of beneficial interest outstanding - Note 4) | $ | 10.57 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($15,145,000 applicable to 1,431,426 shares of beneficial interest outstanding - Note 4) | $ | 10.58 | ||
| * | 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 | For the Period from Commencement of Operations on December 19, 2007 through September 30, 2008 | |
Thornburg Strategic Income Fund |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $16,167) | $ | 443,714 | ||
Interest income (net of premium amortized of $9,685) | 1,823,916 | |||
Total Income | 2,267,630 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 218,776 | |||
Administration fees (Note 3) | ||||
Class A Shares | 14,101 | |||
Class C Shares | 9,344 | |||
Class I Shares | 5,207 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 28,203 | |||
Class C Shares | 74,751 | |||
Transfer agent fees | ||||
Class A Shares | 11,636 | |||
Class C Shares | 11,337 | |||
Class I Shares | 6,175 | |||
Registration and filing fees | ||||
Class A Shares | 19,897 | |||
Class C Shares | 18,857 | |||
Class I Shares | 19,250 | |||
Custodian fees (Note 3) | 33,638 | |||
Professional fees | 45,075 | |||
Accounting fees | 623 | |||
Trustee fees | 648 | |||
Other expenses | 32,493 | |||
Total Expenses | 550,011 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (125,661 | ) | ||
Investment advisory fees waived by investment advisor (Note 3) | (40,279 | ) | ||
Fees paid indirectly (Note 3) | (5,408 | ) | ||
Net Expenses | 378,663 | |||
Net Investment Income | $ | 1,888,967 | ||
Certified Annual Report 9
| STATEMENT OF OPERATIONS CONTINUED | For the Period from Commencement of Operations on December 19, 2007 through September 30, 2008 | |
Thornburg Strategic Income Fund |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments | $ | (380,451 | ) | |
Foreign currency transactions | (17,136 | ) | ||
| (397,587 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (6,435,503 | ) | ||
Foreign currency translation | 43,865 | |||
| (6,391,638 | ) | |||
Net Realized and Unrealized Loss | (6,789,225 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (4,900,258 | ) | |
See notes to financial statements.
10 Certified Annual Report
| STATEMENT OF CHANGES IN NET ASSETS | For the Period from Commencement of Operations on December 19, 2007 through September 30, 2008 | |
Thornburg Strategic Income Fund |
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||
OPERATIONS: | ||||
Net investment income | $ | 1,888,967 | ||
Net realized loss on investments and foreign currency transactions | (397,587 | ) | ||
Increase (Decrease) in unrealized appreciation (depreciation) on investments and foreign currency translation | (6,391,638 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | (4,900,258 | ) | ||
DIVIDENDS TO SHAREHOLDERS: | ||||
From net investment income | ||||
Class A Shares | (697,021 | ) | ||
Class C Shares | (426,979 | ) | ||
Class I Shares | (664,946 | ) | ||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||
Class A Shares | 21,118,332 | |||
Class C Shares | 15,777,216 | |||
Class I Shares | 17,306,556 | |||
Net Increase in Net Assets | 47,512,900 | |||
NET ASSETS: | ||||
Beginning of period | — | |||
End of period | $ | 47,512,900 | ||
Undistributed net investment income | $ | 101,777 | ||
See notes to financial statements.
Certified Annual Report 11
| NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Strategic Income Fund | September 30, 2008 |
NOTE 1 – ORGANIZATION
Thornburg Strategic Income Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on December 19, 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 thirteen 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, 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 seek a high level of current income. The Fund’s secondary investment goal is some long-term capital appreciation.
The Fund currently offers three classes of shares of beneficial interest: Class A, Class C, and Institutional Class (Class I). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year, and bear both a service fee and a distribution fee, (iii) Class I shares are sold at net asset value without a sales charge at the time of purchase, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and administrative and legal expenses. Currently, class specific expenses of the Fund are limited to service and distribution fees, administration fees, and certain registration and transfer agent expenses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of Investments: Any debt obligations 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 obligations at quoted bid prices. When quotations are not available, debt obligations 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 obligations 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.
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 in foreign currencies for foreign portfolio investments are converted to U.S. dollar equivalents using the foreign exchange quotation in effect at the time of valuation.
In any case where a pricing service fails to provide a price for a debt obligation held by the Fund, the valuation and pricing committee determines a fair value for the debt obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation 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 obligation.
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 procedures approved by the Trustees, which may include the use of prices obtained from an independent pricing service. The pricing service ordinarily values equity securities in these instances, using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures and index data and other data. 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.
12 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | September 30, 2008 | |
Thornburg Strategic Income Fund |
In determining fair value for any portfolio security or other investment, the valuation and pricing committee seeks to determine the amount that an owner of the investment might reasonably expect to receive upon a sale of the investment. However, because fair value prices are estimated prices, the valuation and pricing committee’s determination of fair value for an investment may differ from the value that would be realized by the Fund upon a sale of the investment, and that difference could be material to the Fund’s financial statements. The valuation and pricing committee’s determination of fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Foreign currency translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute all taxable income, including any net realized gain on investments of the Fund, to the shareholders. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Trust may engage in when-issued or delayed delivery transactions. To the extent the Trust engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and/or market changes. At the time the Trust makes a commitment to purchase a security on a when-issued basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient 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
Certified Annual Report 13
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2008 |
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, 2008, these fees were payable at annual rates ranging from .75 of 1% to .50 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, 2008, the Advisor voluntarily waived investment advisory fees of $40,279. 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, 2008, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $42,745 for Class A shares, $52,284 for Class C shares, and $30,632 for Class I shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”, an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the period ended September 30, 2008, the Distributor has advised the Fund that it earned commissions aggregating $22,610 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $20,207 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, 2008, 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, 2008, fees paid indirectly were $5,408.
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, 2008, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Period Ended* September 30, 2008 | |||||||
| Shares | Amount | ||||||
Class A Shares | |||||||
Shares sold | 2,036,571 | $ | 24,361,553 | ||||
Shares issued to shareholders in reinvestment of dividends | 48,664 | 551,142 | |||||
Shares repurchased | (331,297 | ) | (3,794,363 | ) | |||
Net Increase (Decrease) | 1,753,938 | $ | 21,118,332 | ||||
Class C Shares | |||||||
Shares sold | 1,944,005 | $ | 23,044,909 | ||||
Shares issued to shareholders in reinvestment of dividends | 23,034 | 258,781 | |||||
Shares repurchased | (658,789 | ) | (7,526,474 | ) | |||
Net Increase (Decrease) | 1,308,250 | $ | 15,777,216 | ||||
Class I Shares | |||||||
Shares sold | 1,608,221 | $ | 19,363,753 | ||||
Shares issued to shareholders in reinvestment of dividends | 40,595 | 461,471 | |||||
Shares repurchased | (217,390 | ) | (2,518,668 | ) | |||
Net Increase (Decrease) | 1,431,426 | $ | 17,306,556 | ||||
| * | The Fund commenced operations on December 19, 2007. |
The advisor, its owners, employees, and affiliated entities of the Advisor have invested amounts in the Fund valued at $7,351,059, representing 15.47% of the net asset value as of September 30, 2008.
14 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | September 30, 2008 | |
Thornburg Strategic Income Fund |
NOTE 5 – SECURITIES TRANSACTIONS
For the period ended September 30, 2008, the Fund had purchase and sale transactions of investment securities (excluding short-term investments and U.S. Government obligations) of $64,641,234 and $12,970,658, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2008, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 52,435,722 | ||
Gross unrealized appreciation on a tax basis | $ | 249,840 | ||
Gross unrealized depreciation on a tax basis | (6,591,343 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (6,341,503 | ) | |
Distributable earnings – ordinary income | $ | 7,777 |
At September 30, 2008, the Fund had deferred tax basis capital losses occurring subsequent to inception date of December 19, 2007, of $350,904. For tax purposes, such losses will be reflected in the year ending September 30, 2009.
In order to account for permanent book/tax differences, the Fund increased undistributed net investment income by $1,756 and increased accumulated net realized investment loss by $1,756. 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 period ended September 30, 2008 was $1,788,946 from ordinary income.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
During the period ended September 30, 2008, 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 BUY OR SELL:
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value (USD) | Unrealized Appreciation | Unrealized (Depreciation) | |||||||||
Euro Dollar | Sell | 173,000 | 11/19/08 | $ | 252,815 | $ | 8,501 | $ | — | ||||||
Euro Dollar | Sell | 185,200 | 11/19/08 | 265,169 | 3,627 | — | |||||||||
Great Britain Pound | Sell | 196,000 | 1/15/09 | 384,752 | 35,506 | — | |||||||||
Great Britain Pound | Buy | 45,000 | 1/15/09 | 79,379 | 805 | — | |||||||||
Total unrealized appreciation (depreciation) from forward exchange contracts | $ | 48,439 | $ | — | |||||||||||
Certified Annual Report 15
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2008 |
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 became effective for the Fund for the financial statement reporting period ended 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. The Fund’s federal tax returns for the applicable prior fiscal years remain subject to examination by the Internal Revenue Service.
Statement of Accounting Standards No. 161:
On March 19, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about any derivative and hedging activities by the Fund, including how such activities are accounted for and any effect on the Fund’s financial position, performance and cash flows. Management is evaluating the impact, if any, that the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.
FASB Staff Position No. FAS 133-1 and FIN 45-4:
In September 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 is effective for any financial report ending after November 15, 2008. FSP 133-1 amends each of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require certain additional disclosures by the sellers of credit derivatives and guarantees. FSP 133-1 also clarifies the effective date of FAS 161. Management is evaluating the impact, if any, that the adoption of FSP 133-1 will have on the Fund’s financial statements and related disclosures.
Statement of Accounting Standards No. 157:
Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”) defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and specifies the required disclosures about fair value measurements in financial statements. “Fair value” is an estimate of the price the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market for the investment. Because of the inherent uncertainties associated with valuation, the values reflected in financial statements may differ materially from the values received upon actual sales of investments.
Various inputs may be used in determining the value of the Fund’s investments. Inputs are observable and unobservable. Observable inputs relate to assumptions used by market participants in pricing investments based upon market data that are obtainable independent of the Fund. Unobservable inputs are based upon the Fund’s own assumptions used to value its investments. These inputs are summarized in three broad levels as follows: (i) Level 1 inputs, which include quoted prices in active markets for identical investments; (ii) Level 2 inputs, which include other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.); and (iii) Level 3 inputs, which include significant unobservable inputs (including the Fund’s own assumptions used to determine the fair value of its investments). In some instances valuation inputs from different levels may be used to determine fair values for specific investments. In any instance when valuation inputs from more than one level are used to determine the fair value of a specific investment, the investment is placed in the level of the table based upon the lowest level input that is significant in determining the fair value of the investment. The inputs or methodologies used for valuing the Fund’s investments are not necessarily an indication of the risk associated with those investments.
The following table displays a summary of the level of inputs used to value the Fund’s investments as of September 30, 2008:
Valuation Inputs | Investments in Securities | Investments in Other Financial Instruments* | ||||
Level 1 – Quoted Prices in Active Markets for Identical Assets | $ | 2,812,324 | $ | — | ||
Level 2 – Significant Other Observable Inputs | 43,281,895 | 48,439 | ||||
Level 3 – Significant Unobservable Inputs | — | — | ||||
Total | $ | 46,094,219 | $ | 48,439 | ||
| * | Other financial instruments include investments not reflected in the Schedule of Investments, such as futures, forwards and swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
16 Certified Annual Report
Thornburg Strategic Income Fund
| Period Ended September 30, 2008(a) | ||||
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 (loss) | 0.59 | |||
Net realized and unrealized gain (loss) on investments | (1.41 | ) | ||
Total from investment operations | (0.82 | ) | ||
Less dividends from: | ||||
Net investment income | (0.55 | ) | ||
Change in net asset value | (1.37 | ) | ||
NET ASSET VALUE, end of period | $ | 10.57 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%) (b) | (7.18 | ) | ||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 6.51 | (c) | ||
Expenses, after expense reductions (%) | 1.27 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 1.25 | (c) | ||
Expenses, before expense reductions (%) | 1.79 | (c) | ||
Portfolio turnover rate (%) | 36.22 | |||
Net assets at end of period (thousands) | $ | 18,538 | ||
| (a) | Fund commenced operations on December 19, 2007. |
| (b) | Sales loads are not reflected in computing total return, which is not annualized for periods less than one year. |
| (c) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 17
| FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Strategic Income Fund |
| Period Ended September 30, 2008 (a) | ||||
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 (loss) | 0.55 | |||
Net realized and unrealized gain (loss) on investments | (1.42 | ) | ||
Total from investment operations | (0.87 | ) | ||
Less dividends from: | ||||
Net investment income | (0.50 | ) | ||
Change in net asset value | (1.37 | ) | ||
NET ASSET VALUE, end of period | $ | 10.57 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%) (b) | (7.57 | ) | ||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 5.96 | (c) | ||
Expenses, after expense reductions (%) | 1.82 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 1.80 | (c) | ||
Expenses, before expense reductions (%) | 2.65 | (c) | ||
Portfolio turnover rate (%) | 36.22 | |||
Net assets at end of period (thousands) | $ | 13,829 | ||
| (a) | Fund commenced operations on December 19, 2007. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
18 Certified Annual Report
| FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Strategic Income Fund |
| Period Ended September 30, 2008 (a) | ||||
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 (loss) | 0.63 | |||
Net realized and unrealized gain (loss) on investments | (1.42 | ) | ||
Total from investment operations | (0.79 | ) | ||
Less dividends from: | ||||
Net investment income | (0.57 | ) | ||
Change in net asset value | (1.36 | ) | ||
NET ASSET VALUE, end of period | $ | 10.58 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%) (b) | (6.90 | ) | ||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 6.81 | (c) | ||
Expenses, after expense reductions (%) | 1.01 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | (c) | ||
Expenses, before expense reductions (%) | 1.44 | (c) | ||
Portfolio turnover rate (%) | 36.22 | |||
Net assets at end of period (thousands) | $ | 15,145 | ||
| (a) | Fund commenced operations on December 19, 2007. |
| (b) | Not annualized for periods less than one year. |
| (c) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 19
Thornburg Strategic Income Fund | September 30, 2008 |
CUSIPS: CLASS A - 885-215-228, CLASS C - 885-215-210, CLASS I - 885-215-194
NASDAQ SYMBOLS: CLASS A - TSIAX, CLASS C - TSICX, CLASS I - TSIIX
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/08
Banks | 10.9 | % | |
Energy | 9.7 | % | |
Telecommunication Services | 6.8 | % | |
Insurance | 5.7 | % | |
Food, Beverage & Tobacco | 5.1 | % | |
Materials | 4.4 | % | |
Diversified Financials | 4.2 | % | |
Utilities | 4.0 | % | |
Retailing | 4.0 | % | |
Semiconductors & Semiconductor Equipment | 4.0 | % | |
Consumer Services | 3.5 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 2.6 | % | |
Transportation | 2.1 | % | |
Capital Goods | 1.7 | % | |
Technology Hardware & Equipment | 1.7 | % | |
Media | 1.7 | % | |
Automobiles & Components | 1.0 | % | |
Food & Staples Retailing | 1.0 | % | |
Health Care Equipment & Services | 0.8 | % | |
Other Non-Classified Securities: | |||
Asset Backed Securities | 8.6 | % | |
Municipal Bonds | 7.6 | % | |
U.S. Treasury Securities | 2.6 | % | |
Other Securities | 1.7 | % | |
Foreign Bonds | 1.6 | % | |
U.S. Government Agencies | 0.0 | % | |
Other Assets & Cash Equivalents | 3.0 | % | |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/08
United States of America | 74.2 | % | |
Bermuda | 3.5 | % | |
Russia | 3.2 | % | |
China | 2.2 | % | |
United Kingdom | 2.2 | % | |
United Arab Emirates | 2.1 | % | |
Italy | 1.5 | % | |
Brazil | 1.2 | % | |
Iceland | 1.1 | % | |
Luxembourg | 1.0 | % | |
Australia | 0.9 | % | |
South Korea | 0.6 | % | |
Greece | 0.5 | % | |
Hong Kong | 0.5 | % | |
Canada | 0.5 | % | |
Switzerland | 0.5 | % | |
Malaysia | 0.5 | % | |
Turkey | 0.4 | % | |
Singapore | 0.4 | % | |
Other Assets & Cash Equivalents | 3.0 | % |
20 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | September 30, 2008 | |
Thornburg Strategic Income Fund |
| Shares/ Principal Amount | Value | ||||
COMMON STOCK — 7.18% | |||||
BANKS — 1.09% | |||||
COMMERCIAL BANKS — 1.09% | |||||
Intesa Sanpaolo(1) | 43,400 | $ | 238,682 | ||
Lloyds TSB Group plc(1) | 69,100 | 277,664 | |||
| 516,346 | |||||
CONSUMER SERVICES — 1.02% | |||||
HOTELS, RESTAURANTS & LEISURE — 1.02% | |||||
Berjaya Sports Toto Berhad(1) | 176,700 | 231,098 | |||
OPAP SA(1) | 8,300 | 254,761 | |||
| 485,859 | |||||
DIVERSIFIED FINANCIALS — 0.98% | |||||
DIVERSIFIED FINANCIAL SERVICES — 0.98% | |||||
KKR Financial Holdings LLC | 73,000 | 464,280 | |||
| 464,280 | |||||
ENERGY — 0.45% | |||||
OIL, GAS & CONSUMABLE FUELS — 0.45% | |||||
Tupras-Turkiye Petrol Rafinerileri A.S.(1) | 12,100 | 211,988 | |||
| 211,988 | |||||
INSURANCE — 0.51% | |||||
INSURANCE — 0.51% | |||||
Swiss Re(1) | 4,400 | 244,224 | |||
| 244,224 | |||||
MATERIALS — 0.71% | |||||
METALS & MINING — 0.71% | |||||
Southern Copper Corp. | 17,800 | 339,624 | |||
| 339,624 | |||||
TELECOMMUNICATION SERVICES — 0.87% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.87% | |||||
Telstra Corp. Ltd.(1) | 123,900 | 415,679 | |||
| 415,679 | |||||
TRANSPORTATION — 0.53% | |||||
TRANSPORTATION INFRASTRUCTURE — 0.53% | |||||
Hopewell Highway Infrastructure Ltd.(1) | 359,000 | 249,812 | |||
| 249,812 | |||||
UTILITIES — 1.02% | |||||
ELECTRIC UTILITIES — 1.02% | |||||
Enel S.p.A.(1) | 57,800 | 482,496 | |||
| 482,496 | |||||
TOTAL COMMON STOCK (Cost $5,176,820) | 3,410,308 | ||||
Certified Annual Report 21
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2008 |
| Shares/ Principal Amount | Value | |||||
PREFERRED STOCK — 1.62% | ||||||
BANKS — 1.62% | ||||||
COMMERCIAL BANKS — 1.62% | ||||||
Huntington Bancshares | 1,000 | $ | 767,990 | |||
| 767,990 | ||||||
TOTAL PREFERRED STOCK (Cost $1,000,000) | 767,990 | |||||
ASSET BACKED SECURITIES — 8.61% | ||||||
BANKS — 2.04% | ||||||
COMMERCIAL BANKS — 1.02% | ||||||
CW Capital Colbalt Series 2007-C2 Class A1, 5.064%, 9/15/2011 | $ | 28,670 | 27,301 | |||
Greenwich Capital Commercial Funding Corp. Series 2007-GG9 Class A1, 5.233%, 3/10/2039 | 29,939 | 28,845 | ||||
Wachovia Bank Commercial Mtg. Trust Series 2007-C30 Class A1, 5.031%, 12/15/2043 | 28,441 | 27,382 | ||||
Wachovia Bank Commercial Mtg. Trust Series 2007-C31 Class A1, 5.14%, 4/15/2047 | 19,740 | 19,023 | ||||
Wells Fargo Asset Securities Corp. Series 2005-AR1 Class B1, 4.543%, 2/25/2035 | 399,655 | 189,312 | ||||
Wells Fargo Asset Securities Corp. Series 2005-AR2 Class B1, 4.686%, 3/25/2035 | 396,363 | 190,104 | ||||
THRIFTS & MORTGAGE FINANCE — 1.02% | ||||||
Providian Master Note Trust Series 2006-A1A Class A, 2.518%, 1/15/2013(2) | 500,000 | 486,454 | ||||
| 968,421 | ||||||
DIVERSIFIED FINANCIALS — 6.57% | ||||||
CAPITAL MARKETS — 3.45% | ||||||
Bear Stearns ARM Mtg. Series 2003-6 Class 2B-1, 4.829%, 8/25/2033 | 1,305,979 | 915,001 | ||||
Bear Stearns Commercial Mtg. Securities Series 2007-PW15 Class A1, 5.016%, 2/11/2044 | 4,257 | 4,044 | ||||
Bear Stearns Commercial Mtg. Securities Series 2007-T26 Class A1, 5.145%, 1/12/2045 | 65,940 | 62,955 | ||||
Bear Stearns Commercial Mtg. Securities Series 2007-T28 Class A1, 5.422%, 9/11/2042 | 28,083 | 26,665 | ||||
Commercial Mtg. Series 2006-C8 Class A1, 5.108%, 12/10/2046 | 41,578 | 40,662 | ||||
Credit Suisse Mtg. Capital Certificates Series 2007-C1 Class A1, 5.227%, 2/15/2040 | 23,245 | 22,533 | ||||
Credit Suisse Mtg. Capital Certificates Series 2007-C2 Class A1, 5.269%, 1/15/2049 | 16,022 | 15,495 | ||||
Credit Suisse Mtg. Capital Certificates Series 2007-C3 Class A1, 5.664%, 6/15/2039 | 21,047 | 20,442 | ||||
GS Mtg. Securities Corp. II Series 2007-GG10 Class A1, 5.69%, 8/10/2045 | 33,900 | 32,074 | ||||
LB-UBS Commercial Mtg. Trust Series 2007-C1 Class A1, 5.391%, 2/15/2040 | 18,835 | 18,258 | ||||
LB-UBS Commercial Mtg. Trust Series 2007-C2 Class A1, 5.226%, 2/17/2040 | 17,013 | 16,435 | ||||
Merrill Lynch Mtg. Investors Trust, 4.233%, 8/25/2034 | 397,147 | 275,390 | ||||
Merrill Lynch/Countrywide Commercial Mtg. Trust Series 2007-5 Class A1, 4.275%, 8/12/2048 | 15,468 | 14,686 | ||||
Merrill Lynch/Countrywide Commercial Mtg. Trust Series 2007-6 Class A1, 5.175%, 3/12/2051 | 19,187 | 18,526 | ||||
Morgan Stanley Capital I Series 2007-HQ11 Class A1, 5.246%, 2/20/2044 | 31,709 | 30,474 | ||||
Morgan Stanley Capital I Series 2007-IQ13 Class A1, 5.05%, 3/15/2044 | 29,846 | 28,303 | ||||
Morgan Stanley Capital I Series 2007-IQ14 Class A1, 5.38%, 4/15/2049 | 60,162 | 57,583 | ||||
Morgan Stanley Capital I Series 2007-T25 Class A1, 5.391%, 11/12/2049 | 43,990 | 42,048 | ||||
DIVERSIFIED FINANCIAL SERVICES — 3.12% | ||||||
Banc of America Commerical Mtg., Inc. Series 2007-2 Class A1, 5.421%, 1/10/2012 | 33,927 | 32,523 | ||||
Banc of America Funding Corp. Series 2006-I Class SB1, 4.738%, 12/20/2036 | 993,382 | 447,022 | ||||
Banc of America Mtg. Services Series 2005-A Class B1, 4.868%, 2/25/2035 | 974,207 | 589,396 | ||||
Citigroup Commercial Mtg. Trust Series 2004-HYB2 Class B1, 5.081%, 3/25/2034 | 315,540 | 221,864 | ||||
Citigroup Commercial Mtg. Trust Series 2007-C6 Class A1, 5.622%, 12/10/2049 | 85,680 | 81,730 | ||||
Citigroup/Deutsche Bank Commercial Mtg. Series 2007-CD4 Class A1, 4.977%, 12/11/2049 | 50,915 | 48,850 | ||||
JPMorgan Chase Commercial Mtg. Securities Corp. Series 2006-LDP9 Class A1, 5.17%, 5/15/2047 | 41,413 | 40,264 | ||||
JPMorgan Chase Commercial Mtg. Securities Corp. Series 2007-LDPX Class A1, 5.122%, 1/15/2049 | 19,216 | 18,478 | ||||
| 3,121,701 | ||||||
TOTAL ASSET BACKED SECURITIES (Cost $5,347,786) | 4,090,122 | |||||
22 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2008 |
| Shares/ | ||||||
| Principal Amount | Value | |||||
CORPORATE BONDS — 58.61% | ||||||
AUTOMOBILES & COMPONENTS — 0.98% | ||||||
AUTOMOBILES — 0.98% | ||||||
Harley Davidson Funding Corp. Series C, 6.80%, 6/15/2018(2) | $ | 500,000 | $ | 468,172 | ||
| 468,172 | ||||||
BANKS — 5.92% | ||||||
COMMERCIAL BANKS — 4.19% | ||||||
Provident Bank MD, 9.50%, 5/1/2018 | 750,000 | 669,889 | ||||
Suntrust Bank, 7.25%, 3/15/2018 | 1,000,000 | 885,760 | ||||
Wells Fargo Capital XIII Preferred Note, 7.70%, 12/29/2049 | 500,000 | 436,005 | ||||
THRIFTS & MORTGAGE FINANCE — 1.73% | ||||||
Sovereign Bancorp, Inc., 3.09%, 3/1/2009 | 500,000 | 408,596 | ||||
Sovereign Bancorp, Inc., 3.44%, 3/23/2010 | 500,000 | 354,883 | ||||
Sovereign Bank, 5.125%, 3/15/2013 | 100,000 | 57,527 | ||||
| 2,812,660 | ||||||
CAPITAL GOODS — 1.74% | ||||||
TRADING COMPANIES & DISTRIBUTORS — 1.74% | ||||||
Noble Group Ltd. Mtg., 8.50%, 5/30/2013(2) | 1,000,000 | 825,000 | ||||
| 825,000 | ||||||
CONSUMER SERVICES — 2.48% | ||||||
HOTELS, RESTAURANTS & LEISURE — 2.48% | ||||||
FUJI Food, 0%, 10/10/2018(1) | 7,000,000 | 766,591 | ||||
NPC International, Inc., 9.50%, 5/1/2014 | 500,000 | 410,000 | ||||
| 1,176,591 | ||||||
DIVERSIFIED FINANCIALS — 2.42% | ||||||
CAPITAL MARKETS — 0.20% | ||||||
Goldman Sachs Group, Inc., 5.625%, 1/15/2017 | 100,000 | 70,979 | ||||
Lehman Brothers Holdings, Inc., 5.625%, 1/24/2013(3) | 200,000 | 25,000 | ||||
CONSUMER FINANCE — 2.22% | ||||||
American Express Credit Corp., 5.875%, 5/2/2013 | 500,000 | 460,824 | ||||
SLM Corp., 4.50%, 7/26/2010 | 780,000 | 592,800 | ||||
| 1,149,603 | ||||||
ENERGY — 7.53% | ||||||
ENERGY EQUIPMENT & SERVICES — 1.05% | ||||||
Calfrac Holdings LP, 7.75%, 2/15/2015(2) | 600,000 | 498,000 | ||||
OIL, GAS & CONSUMABLE FUELS — 6.48% | ||||||
El Paso Corp., 7.75%, 6/15/2010 | 55,000 | 55,633 | ||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 100,000 | 80,623 | ||||
Gaz Capital SA, 7.51%, 7/31/2013(2) | 1,000,000 | 971,059 | ||||
NuStar Logistics, 7.65%, 4/15/2018 | 1,000,000 | 1,005,314 | ||||
Petroleum Development Corp., 12.00%, 2/15/2018 | 500,000 | 480,000 | ||||
Southwestern Energy Co., 7.50%, 2/1/2018(2) | 500,000 | 485,000 | ||||
| 3,575,629 | ||||||
Certified Annual Report 23
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2008 |
| Shares/ | ||||||
| Principal Amount | Value | |||||
FOOD, BEVERAGE & TOBACCO — 5.05% | ||||||
BEVERAGES — 5.05% | ||||||
Anheuser Busch Cos, Inc., 4.70%, 4/15/2012 | $ | 250,000 | $ | 230,545 | ||
Constellation Brands, Inc., 8.375%, 12/15/2014 | 500,000 | 495,000 | ||||
Dr Pepper Snapple Group, Inc., 6.82%, 5/1/2018(2) | 1,000,000 | 965,257 | ||||
Sabmiller PLC, 6.50%, 7/15/2018(2) | 750,000 | 710,465 | ||||
| 2,401,267 | ||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.81% | ||||||
HEALTH CARE PROVIDERS & SERVICES — 0.81% | ||||||
Alliance Imaging, Inc., 7.25%, 12/15/2012 | 175,000 | 159,250 | ||||
Alliance Imaging, Inc., 7.25%, 12/15/2012 | 250,000 | 227,500 | ||||
| 386,750 | ||||||
INSURANCE — 5.24% | ||||||
INSURANCE — 5.24% | ||||||
Berkshire Hathaway Finance Corp., 5.00%, 8/15/2013(2) | 500,000 | 498,684 | ||||
International Lease Finance Corp., 4.875%, 9/1/2010 | 1,000,000 | 723,251 | ||||
Metlife, Inc. Series A, 6.817%, 8/15/2018 | 750,000 | 709,653 | ||||
Prudential Holdings LLC, 8.695%, 12/18/2023(2) | 485,000 | 560,699 | ||||
| 2,492,287 | ||||||
MATERIALS — 3.64% | ||||||
CONSTRUCTION MATERIALS — 1.55% | ||||||
CRH America, Inc., 8.125%, 7/15/2018 | 750,000 | 735,814 | ||||
METALS & MINING — 1.03% | ||||||
Freeport-McMoRan Copper & Gold, Inc., 8.25%, 4/1/2015 | 500,000 | 491,250 | ||||
PAPER & FOREST PRODUCTS — 1.06% | ||||||
International Paper Co., 7.40%, 6/15/2014 | 500,000 | 500,767 | ||||
| 1,727,831 | ||||||
MEDIA — 1.67% | ||||||
MEDIA — 1.67% | ||||||
DIRECTV Holdings, 6.375%, 6/15/2015 | 900,000 | 792,000 | ||||
| 792,000 | ||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 2.60% | ||||||
BIOTECHNOLOGY — 2.08% | ||||||
Biogen Idec, Inc., 6.00%, 3/1/2013 | 1,000,000 | 987,402 | ||||
PHARMACEUTICALS — 0.52% | ||||||
Axcan Intermediate Holdings, Inc., 12.75%, 3/1/2016(2) | 250,000 | 247,500 | ||||
| 1,234,902 | ||||||
RETAILING — 3.40% | ||||||
INTERNET & CATALOG RETAIL — 0.99% | ||||||
Ticketmaster, 10.75%, 8/1/2016(2) | 500,000 | 470,000 | ||||
SPECIALTY RETAIL — 2.41% | ||||||
Ace Hardware Corp., 9.125%, 6/1/2016(2) | 750,000 | 641,250 | ||||
Best Buy Co., Inc., 6.75%, 7/15/2013(2) | 500,000 | 505,376 | ||||
| 1,616,626 | ||||||
24 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2008 |
| Shares/ | ||||||
| Principal Amount | Value | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.98% | ||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.98 % | ||||||
KLA Instruments Corp., 6.90%, 5/1/2018 | $ | 1,000,000 | $ | 929,800 | ||
National Semiconductor, 3.069%, 6/15/2010 | 1,000,000 | 960,568 | ||||
| 1,890,368 | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 1.71% | ||||||
COMMUNICATIONS EQUIPMENT — 1.71% | ||||||
Corning, Inc., 6.05%, 6/15/2015 | 849,000 | 811,357 | ||||
| 811,357 | ||||||
TELECOMMUNICATION SERVICES — 4.84% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.84% | ||||||
Level 3 Financing, Inc., 9.25%, 11/1/2014 | 700,000 | 528,500 | ||||
Telecom Italia Capital, 6.999%, 6/4/2018 | 520,000 | 466,778 | ||||
Vimpelcom, 8.25%, 5/23/2016(2) | 500,000 | 355,000 | ||||
Windstream Corp., 8.125%, 8/1/2013 | 1,000,000 | 950,000 | ||||
| 2,300,278 | ||||||
TRANSPORTATION — 1.59% | ||||||
ROAD & RAIL — 1.59% | ||||||
Hertz Corp., 8.875%, 1/1/2014 | 300,000 | 258,750 | ||||
Ryder System, Inc., 7.20%, 9/1/2015 | 500,000 | 496,324 | ||||
| 755,074 | ||||||
UTILITIES — 3.01% | ||||||
ELECTRIC UTILITIES — 2.86% | ||||||
Reliant Energy, Inc., 7.625%, 6/15/2014 | 500,000 | 375,000 | ||||
Taqa Abu Dhabi National Energy Co., 7.25%, 8/1/2018(2) | 500,000 | 487,456 | ||||
Taqa Abu Dhabi National Energy Co., 6.60%, 8/1/2013(2) | 500,000 | 496,365 | ||||
GAS UTILITIES — 0.15% | ||||||
Southern Union Co., 7.20%, 11/1/2066 | 100,000 | 73,441 | ||||
| 1,432,262 | ||||||
TOTAL CORPORATE BONDS (COST $30,200,796) | 27,848,657 | |||||
CONVERTIBLE BONDS — 2.82% | ||||||
DIVERSIFIED FINANCIALS — 0.78% | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.78% | ||||||
KKR Financial Holdings LLC, 7.00%, 7/15/2012(2) | 500,000 | 371,875 | ||||
| 371,875 | ||||||
FOOD & STAPLES RETAILING — 0.95% | ||||||
FOOD & STAPLES RETAILING — 0.95% | ||||||
Rite Aid Corp., 8.50%, 5/15/2015 | 750,000 | 450,937 | ||||
| 450,937 | ||||||
TELECOMMUNICATION SERVICES — 1.09% | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 1.09% | ||||||
NII Holdings, Inc., 3.125%, 6/15/2012 | 700,000 | 518,000 | ||||
| 518,000 | ||||||
TOTAL CONVERTIBLE BONDS (COST $1,770,748) | 1,340,812 | |||||
Certified Annual Report 25
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2008 |
| Shares/ | ||||||
| Principal Amount | Value | |||||
MUNICIPAL BONDS — 7.58% | ||||||
Hillsborough County Florida Pollution, 5.65%, 5/15/2018 | $ | 1,000,000 | $ | 962,740 | ||
Louisiana Public Facilities Authority Revenue (Black & Gold Facilities Project C), 5.15%, 4/1/2012 | 330,000 | 318,635 | ||||
Missouri State Environment Improvement Energy (KC Power & Light Project), 5.25%, 7/1/2017 | 1,000,000 | 982,540 | ||||
Ohio State Solid Waste (Republic Services Project), 4.25%, 4/1/2033 | 900,000 | 799,515 | ||||
Pennsylvania Economic Development Series A (Waste Management, Inc. Project), 4.70%, 11/1/2021 | 600,000 | 539,592 | ||||
TOTAL MUNICIPAL BONDS (COST $3,712,253) | 3,603,022 | |||||
U.S. GOVERNMENT AGENCIES — 0.04% | ||||||
Federal National Mtg. Association, 6.50%, 3/25/2024 | 17,980 | 18,574 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (COST $18,066) | 18,574 | |||||
U.S. TREASURY SECURITIES — 2.61% | ||||||
United States Treasury Notes, 3.375%, 11/30/2012 | 300,000 | 307,418 | ||||
United States Treasury Notes, 4.25%, 11/15/2017 | 900,000 | 933,012 | ||||
TOTAL U.S. TREASURY SECURITIES (COST $1,204,582) | 1,240,430 | |||||
FOREIGN BONDS — 1.55% | ||||||
ENERGY — 0.37% | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.37% | ||||||
OAO Gazprom, 7.25%, 2/22/2010 (RUB) | 5,000,000 | 175,857 | ||||
| 175,857 | ||||||
MISCELLANEOUS — 1.18% | ||||||
MISCELLANEOUS — 1.18% | ||||||
Republic of Brazil, 12.50%, 1/5/2016 (BRL) | 1,025,000 | 558,851 | ||||
| 558,851 | ||||||
TOTAL FOREIGN BONDS (COST $848,009) | 734,708 | |||||
YANKEE BONDS — 4.69% | ||||||
BANKS — 2.33% | ||||||
COMMERCIAL BANKS — 2.33% | ||||||
Bank of Scotland plc, 5.625%, 7/20/2009(2) | 37,000 | 36,931 | ||||
DBS Bank Ltd./Singapore, 5.125%, 5/16/2017(2) | 200,000 | 199,961 | ||||
Glitnir Banki HF, 3.255%, 1/18/2012(2) | 500,000 | 380,570 | ||||
Glitnir Banki HF, 3.511%, 8/25/2009(2) | 175,000 | 151,041 | ||||
Islandsbanki, 2.951%, 10/15/2008(2) | 60,000 | 59,938 | ||||
Korea Development Bank, 5.30%, 1/17/2013 | 200,000 | 198,653 | ||||
Shinhan Bank, 6.819%, 9/20/2036 | 100,000 | 79,331 | ||||
| 1,106,425 | ||||||
ENERGY — 1.78% | ||||||
OIL, GAS & CONSUMABLE FUELS — 1.78% | ||||||
Petroplus Finance Ltd., 6.75%, 5/1/2014(2) | 1,000,000 | 845,000 | ||||
| 845,000 | ||||||
26 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | September 30, 2008 | |
Thornburg Strategic Income Fund |
| Shares/ | ||||||
| Principal Amount | Value | |||||
RETAILING — 0.58% | ||||||
MULTILINE RETAIL — 0.58% | ||||||
Parkson Retail Group, 7.125%, 5/30/2012 | $ | 300,000 | $ | 279,000 | ||
| 279,000 | ||||||
TOTAL YANKEE BONDS (COST $2,364,126) | 2,230,425 | |||||
OTHER SECURITIES — 1.70% | ||||||
LOAN PARTICIPATIONS — 1.70% | ||||||
Fairpoint Communications, Inc. Term Loan B, 5.75%, 3/8/2015 | 493,197 | 399,081 | ||||
Fairpoint Communications, Inc. Term Loan B, 5.75%, 3/9/2015 | 4,252 | 3,440 | ||||
Fairpoint Communications, Inc. Term Loan B, 5.75%, 3/31/2015 | 30,187 | 24,427 | ||||
Fairpoint Communications, Inc. Term Loan B, 5.75%, 3/31/2015 | 4,677 | 3,784 | ||||
Fairpoint Communications, Inc. Term Loan B, 5.75%, 3/8/2015 | 467,687 | 378,439 | ||||
TOTAL OTHER SECURITIES (COST $886,536) | 809,171 | |||||
TOTAL INVESTMENTS — 97.01% (COST $52,529,722) | $ | 46,094,219 | ||||
OTHER ASSETS LESS LIABILITIES — 2.99% | 1,418,681 | |||||
NET ASSETS — 100.00% | $ | 47,512,900 | ||||
Footnote Legend
| (1) | Foreign equity security fair valued by independent pricing service on valuation date, September 30, 2008, or debt obligation currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
| (2) | Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of September 30, 2008, the aggregate value of these securities in the Fund’s portfolio was $11,717,053, representing 24.66% of the Fund’s net assets. |
| (3) | Bond in default. |
To simplify the listings of securities, abbreviations are used per the table below:
| ARM | Adjustable Rate mortgage | |
| BRL | Denominated in Brazilian Dollars | |
| Mtg | Mortgage | |
| RUB | Denominated in Russian Rubles |
See notes to financial statements.
Certified Annual Report 27
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Strategic Income Fund
To the Trustees and Shareholders of
Thornburg Strategic Income 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 Strategic Income Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2008, and the results of its operations, the changes in its net assets and the financial highlights for the period December 19, 2007 (commencement of operations) through September 30, 2008, 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, 2008 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2008
28 Certified Annual Report
| EXPENSE EXAMPLE | September 30, 2008 (Unaudited) | |
Thornburg Strategic Income Fund |
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including
(a) sales charges (loads) on purchase payments for Class A shares;
(b) a deferred sales charge on redemptions of any part or all of a purchase of $1 million of Class A shares within 12 months of purchase;
(c) a deferred sales charge on redemptions of Class C shares within 12 months of purchase;
(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, 2008 and held until September 30, 2008.
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
| Beginning Account Value 3/31/08 | Ending Account Value 9/30/08 | Expenses Paid During Period† 3/31/08–9/30/08 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 911.50 | $ | 5.97 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.75 | $ | 6.31 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 908.90 | $ | 8.59 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,016.00 | $ | 9.07 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 912.80 | $ | 4.73 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | |||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.25%; C: 1.80%; I: 0.99%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
| * | Hypothetical assumes a rate of return of 5% per year before expenses. |
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 29
| INDEX COMPARISON | ||
Thornburg Strategic Income Fund | September 30, 2008 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Strategic Income Fund versus Barclays Capital U.S. Universal Index
and Blended Benchmark (December 19, 2007 to September 30, 2008)
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 I shares.
TOTAL RETURNS*
For the period ended September 30, 2008
(with sales charge)
| Since Inception | |||
A Shares (Incep: 12/19/07) | (11.33 | )% | |
C Shares (Incep: 12/19/07) | (8.46 | )% | |
I Shares (Incep: 12/19/07) | (6.90 | )% | |
Blended Benchmark (Since: 12/19/07) | (3.92 | )% | |
Barclays Capital U.S. Universal Index (Since: 12/19/07) | 0.03 | % |
| * | Not annualized |
30-DAY YIELDS
AS OF SEPTEMBER 30, 2008
| Annualized Distribution Rate | SEC Yield | |||||
A Shares | 6.94 | % | 6.91 | % | ||
C Shares | 6.37 | % | 6.66 | % | ||
I Shares | 7.21 | % | 7.52 | % |
The Blended Benchmark is comprised of 80% Barclays Capital Aggregate Bond Index and 20% MSCI World Index. The Barclays Capital 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.
Barclays Capital U.S. Universal Index represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield Index, Investment-Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index, and the non-ERISA eligible portion of the CMBS Index. The index covers USD-denominated, taxable bonds that are rated either investment-grade or below investment-grade.
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.
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 a 360-day year. The value is then divided by the ending net asset value (NAV) to arrive at the annualized distribution yield. The yield is calculated on a periodic basis and is subject to change depending on the Fund’s NAV and current distributions.
30 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
Thornburg Strategic Income Fund | September 30, 2008 (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, 62 Chairman of Trustees, Trustee since 1987(3) | 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 to 2007 and Chairman of Thornburg Mortgage, Inc. (real estate investment trust); President and Sole Director of Thornburg Mortgage Advisory Corporation (investment manager to Thornburg Mortgage, Inc.). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Brian J. McMahon, 52 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO, 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, 63 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, 67 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, 62 Chairman of Governance & Nominating Committee, Trustee since 2004 | Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Beijing, China (law firm). | Director of Thornburg Mortgage, Inc. (real estate investment trust) | ||
Susan H. Dubin, 59 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, 54 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, 49 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 Strategic Income Fund | September 30, 2008 (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, 45 Vice President since 1996, Treasurer since 2007(6) | 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, 69 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 41 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 | ||
Alexander Motola, 38 Vice President since 2001 | Portfolio Manager, Co-Portfolio Manager (to 2008), Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 37 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director since 2004, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 45 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, 40 Vice President since 1999 | Co-Portfolio Manager, Managing Director since 2004, Vice President and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 38 Vice President since 2003 | Co-Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc.; Vice President of Thornburg Limited Term Municipal Fund, Inc., 2003–2004. | Not applicable | ||
Leon Sandersfeld, 42 Vice President since 2003 | Managing Director since 2007 and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 34 Vice President since 2003, Secretary since 2007(6) | Managing Director since 2007, Mutual Fund Support Service Department Manager, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 50 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 38 Vice President since 2004 | Co-Portfolio Manager since 2006, Vice President and Managing Director since 2005, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
32 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | September 30, 2008 (Unaudited) | |
Thornburg Strategic Income Fund |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Thomas Garcia, 37 Vice President since 2006 | Vice President and Managing Director since 2004, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 37 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. | Not applicable | ||
Connor Browne, 29 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, 34 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. | Not applicable | ||
Lewis Kaufman, 32 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 | ||
Christopher Ryon, 52 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 33 Vice President since 2008 | Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Senior Analyst, State Farm Insurance to 2008. | Not applicable | ||
Kathleen Brady, 48 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP to 2007. | Not applicable | ||
Jack Gardner, 54 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President, Thornburg Securities Corporation since 2008; National Sales Director, Thornburg Securities Corporation since 2004. | Not applicable | ||
| (1) | Each person’s address is 119 East Marcy Street, Santa Fe, New Mexico 87501. |
| (2) | The Fund is one of fourteen 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. Thornburg Investment Management, Inc. is the investment advisor to, and manages, the fourteen Funds of the Trust. Each Trustee oversees the fourteen 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 fourteen 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 chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
Certified Annual Report 33
Thornburg Strategic Income Fund | September 30, 2008 (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 currently available for the period from the Fund’s commencement of investment operations on December 19, 2007 through June 30, 2008, and will hereafter be 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 period ended September 30, 2008, the Thornburg Strategic Income Fund designates 16.70% (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.
3.53% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the period ended September 30, 2008 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, 2008. Complete information will be computed and reported in conjunction with your 2008 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 APPROVAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Strategic 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 15, 2008.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2008 to plan 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 subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by 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, 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, and (iii) measures of the Fund’s investment returns since the Fund’s inception relative to two categories of multisector fixed income mutual funds assembled by independent mutual fund analyst firms, and relative to broad-based securities indices. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events in view of the Fund’s investment objectives and policies.
34 Certified Annual Report
| OTHER INFORMATION, CONTINUED | September 30, 2008 (Unaudited) | |
Thornburg Strategic Income Fund |
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 Trustees considered the limited quantitative data available respecting the Fund’s investment performance since its inception on December 19, 2007, noting (among other aspects of the data) the Fund’s positive investment performance in the period from the Fund’s inception through the second quarter of the year, and that the Fund’s investment return fell at the midpoint of the performance for the two mutual fund categories considered.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and 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 management fee charged by the Advisor, after fee waivers by the Advisor, was somewhat higher than the median and average fee rates for the group of funds assembled by the independent mutual fund analyst firm, and that the overall expense ratio of the Fund was approximately equal to the median and lower than the average expense ratios for the same group of funds. The Trustees noted their previous observations respecting fee rates charged by the Advisor to other types of investment management clients, and their conclusion that the fee rates charged 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 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 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 and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent 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 expenses 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 ongoing 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 70 1/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
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 |
| • | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 37
Message from the CEO
October 15, 2008
Dear Shareholder:
We have all seen liquidation sales, when a retailer (or any other business) closes its doors and auctions off its assets. Though liquidation sales may be sad for the seller, these events often stir excitement among buyers. Seasoned shoppers – those who are knowledgeable about what the merchandise being liquidated “usually” costs – become particularly excited about finding and buying good-quality items at cut-rate prices. Rarely does someone else’s liquidation sale prompt us as consumers to liquidate our own holdings of clothing, appliances, housing or cars – even if we might have paid more for the same or similar assets in the recent past. On the contrary, consumers usually buy more – to the extent that they can come up with the cash. Liquidation sales are always for cash.
In recent weeks, we have witnessed many investors having exactly the opposite reaction to liquidation sales of financial assets – they are drawn to join the selling frenzy, rather than look for bargains to buy. The liquidation sales have been made by various holders of financial assets – investment banks, banks, hedge funds, investment funds, etc. These holders are either going out of business due to debt-leveraged capital structures, or are forced to shrink the sizes of their portfolios due to customer defections. (NOTE: Thornburg mutual funds have NO leverage. They are 100% funded by equity shares purchased by their shareholders.) It is strange to observe that many investors who hold diversified portfolios of financial assets suddenly feel a need to compete with the forced sellers in a crowded, noisy marketplace – thereby forcing prices even lower! But, that is exactly what has happened in early October of 2008.
We have been asked whether we have EVER seen this kind of environment before, with some questioners reminding that we are too young to have been managing investment portfolios during the 1930s. We were not around for the 1930s, but we HAVE experienced market meltdowns.
Consider the “Asian Debt Crisis” of 1997 and 1998. That environment included many of the same elements as the current macroeconomic environment in the United States:
| • | Over-borrowing by banks and consumers; |
| • | Lenders withdrawing funds from burdened borrowers; |
| • | Clumsy governmental efforts to shore up weakened financial institutions and asset prices; |
| • | Declining stock and bond prices; |
| • | Frantic selling by unnerved owners of financial assets. |
To quantify one financial benchmark, the KOSPI (Korean) Stock Index (see Exhibit 1) declined by more than 85% from .89246 to .19580 (expressed in $US) between June 14th 1997 and June 16th 1998.
EXHIBIT 1: KOSPI Stock Index/Korea, 10/31/88 – 9/30/08 (in USD)
The media reports about the financial problems facing the United States now are most negative. The 1997/98 stories about Asia were even worse. Consider the headlines shown on the following page regarding Korea from that period.
38 This page is not part of the Annual Report.
Sound familiar? Some of the actors are new, but the current financial crisis is really a re-run of a “debt bubble” story we have seen several times in the past.
Investors ask, “Are we at the bottom yet?” Though there are many opinions about this, nobody really knows the answer. What we do know is that risk financial assets in the United States and throughout the world are cheaper than they usually are, because prices have declined sharply during 2008. By virtue of this cheapness, we believe that the probabilities of favorable financial outcomes for today’s buyers of significant financial assets are much improved compared to most times. We have the same belief for current holders of significant financial assets who resist the urge to sell.
Let’s return to the case of Korea and the KOSPI Index of leading Korean stocks from the time of the Asian debt crisis. Measured in $US, the KOSPI traded over the entire period from February 2007 to August 1, 2008 above 1.5 (see preceding Exhibit 1). It traded most of the last half of 2007 above 2! Do you appreciate stories of equity portfolios that increase in value by more than 5 times within a decade? In hindsight, everyone reading these words would probably have been DELIGHTED to have purchased the KOSPI Index at any price near its 1998 $US average of .29101, given the 2007 rise in value of this very same index to more than 1.5, and then more than 2! It wasn’t necessary to catch the absolute bottom (.19580) in order to have a very satisfactory investment outcome. And what company stocks were in the KOSPI Index, then and now? … utilities, banks, manufacturers, retailers, consumer goods producers, etc. These are IMPORTANT assets, not just abstractions. The equities of firms in the major U.S. market indices are also important financial assets, with significant intrinsic value.
In 1998, corrections from equity market bottoms happened VERY QUICKLY. Korea’s KOSPI Index gained 104% (from .22426 to .46515) between October 8th and December 31, 1998. In the U.S., the S&P 500 Index gained more than 28% over the same 84-day period.
Headlines from 1997–1998
“Despite a World Class Economy, A Nation Senses Decline,” The New York Times, 2/4/97
“For Decades, Easy Money Fueled Big Business in Asia. Now, Banks Are Sinking and a Huge Bill is Coming Due,” Business Week, 2/24/97
“Debt and Corruption Cases Take Toll On South Korea as Growth Slows,” The Washington Post, 4/20/97
“Government Extends Rescue Loan To Korea First Bank,” BBC, 9/5/97
“End of the ‘Asian Miracle’,” The Washington Post, 9/10/97
“South Korea’s Economic Crisis is Set to Get Worse,” International Herald Tribune, 11/6/97
“Asian Turmoil Strikes South Korea; Stocks Log Biggest One Day Drop; Tokyo, Hong Kong Also Hit,” The Washington Post, 11/8/97
“South Korea Yields to Bailout; GOP Lawmakers Raising Questions About Extent of U.S. Role in Rescue,” Dallas Morning News, 12/4/97
“Seoul Crisis Worsens As More Banks Close,” The New York Times, 12/11/97
“One Korean Certainty: No More Business as Usual,” The New York Times, 1/4/98
“In Hindsight, Signs of Asian Debt Crisis Appear Clear; Bank Loan Problems In 1996 Exposed Mountains of Debt, Shook Investor Confidence,” The Washington Post, 1/4/98
“Grim Assessment by U.N. of Asia Crisis,” The New York Times, 12/3/98
For investors who are not FORCED to sell financial assets today, it is probably best to avoid liquidating unnecessarily into a marketplace occupied by few buyers, many forced sellers, and rattled everyday investors who have become caught up in the drama. For investors who have a bit of cash, we believe it is wise to buy what the forced sellers (and their sympathizers) are selling today. The forced liquidations will run their course and the bargains associated with these liquidations will vanish.
| Sincerely, |
 |
Brian McMahon |
CEO and Chief Investment Officer |
This page is not part of the Annual Report. 39
40 This page is not part of the Annual Report.
Thornburg Equity Funds
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.
| • | 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 Bond Funds
The majority of Thornburg bond funds are laddered portfolios of 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 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 Strategic Income Fund* |
Carefully consider each fund’s investment objectives, risks, sales charges, and expenses; this information can be found in the prospectus, which is available from your financial advisor or from www.thornburg.com. Read it carefully before you invest or send money. There is no guarantee that any of these funds will meet their investment objectives.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, 119 East Marcy Street, Santa Fe, NM 87501
| * | This fund does not use the laddering strategy. |
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This page is not part of the Annual Report. 43
 | Waste not, |  | ||||
Wait not | ||||||
 |
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: Thornburg Investment Management® 800.847.0200
Distributor: Thornburg Securities Corporation® 800.847.0200
|
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| TH1784 | ||||||
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, 2007 and September 30, 2008 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, 2007 | Year Ended September 30, 2008 | |||
Thornburg Investment Trust | $543,500 | $480,000 |
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 (and that are not reflected in “Audit Fees,” above) are set out below.
| Year Ended September 30, 2007 | Year Ended September 30, 2008 | |||
Thornburg Investment Trust | $18,883 | $19,380 |
The audit-related fees billed to the Trust in the years ended September 30, 2007 and September 30, 2008 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, 2007 and September 30, 2008 for professional services rendered by PWC for tax compliance, tax advice or tax planning are set out below.
| Year Ended September 30, 2007 | Year Ended September 30, 2008 | |||
Thornburg Investment Trust | $121,260 | $182,535 |
All Other Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years ended September 30, 2007 and September 30, 2008 for all other services rendered by PWC to the Trust are set out below.
| Year Ended September 30, 2007 | Year Ended September 30, 2008 | |||
Thornburg Investment Trust | $-0- | $-0- |
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 $76,504 and $91,555 for the fiscal years ended September 30, 2007 and September 30, 2008, 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, 2008, 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
Filed as part of the reports to shareholders filed under item 1 of this Form.
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 Procedures 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 the following Thornburg Funds: Limited Term Municipal Fund, California Limited Term Municipal Fund, Intermediate Municipal Fund, New Mexico Intermediate Municipal Fund, New York Intermediate Municipal Fund, Limited Term U.S. Government Fund, Limited Term Income Fund, Value Fund, International Value Fund, Core Growth Fund, Investment Income Builder Fund, Global Opportunities Fund, International Growth Fund and Strategic Income Fund.
| By: | /s/ Brian J. McMahon | |
| Brian J. McMahon | ||
| President and principal executive officer | ||
| Date: | November 25, 2008 | |
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 25, 2008 | |
| By: | /s/ George T. Strickland | |
| George T. Strickland | ||
| Treasurer and principal financial officer | ||
| Date: | November 25, 2008 | |