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)
c/o Thornburg Investment Management, Inc.
2300 North Ridgetop Road, Santa Fe, New Mexico 87506
(Address of principal executive offices) (Zip code)
Garrett Thornburg, 2300 North Ridgetop Road, Santa Fe, New Mexico 87506
(Name and address of agent for service)
Registrant’s telephone number, including area code: 505-984-0200
Date of fiscal year end: September 30, 2009
Date of reporting period: September 30, 2009
Item 1. | Reports to Stockholders |
The following annual reports are attached hereto, in order:
Thornburg Limited Term Municipal Fund
Thornburg Intermediate Municipal Fund
Thornburg Strategic Municipal Income Fund
Thornburg California Limited Term Municipal Fund
Thornburg New Mexico Intermediate Municipal Fund
Thornburg New York Intermediate Municipal Fund
Thornburg Limited Term Income Funds
Thornburg Strategic Income Fund
Thornburg Value Fund
Thornburg International Value Fund
Thornburg Core Growth Fund
Thornburg International Growth Fund
Thornburg Investment Income Builder Fund
Thornburg Global Opportunities Fund
2 This page is not part of the Annual Report.
Important Information
The information presented on the following pages is current as of September 30, 2009. 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. Bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. 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 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. 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | LTMFX | 885-215-459 | ||
Class C | LTMCX | 885-215-442 | ||
Class I | LTMIX | 885-215-434 |
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.
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.
Annualized 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 maximum offering price per share to arrive at the annualized distribution yield. The yield is calculated on a periodic basis and is subject to change.
Duration – The weighted maturity of a bond’s cash flows. Duration measures the price sensitivity of a bond for a given change in interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
General Obligation (GO) Bonds – A municipal bond secured by the pledge of the issuer’s full faith, credit, and taxing power rather than the revenue from a given project.
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.
Pre-Refunded Bond – A type of municipal bond that has been escrowed or collateralized either by direct obligations guaranteed by the U.S. government, or by other types of securities. The escrow account is structured so that these refunded bonds are to be called at the first possible call date. Such bonds, if escrowed with securities guaranteed by the U.S. government, have little if any credit risk.
Revenue Bond – A bond on which the debt service is payable solely from the revenue generated from the operation of the project being financed or a category of facilities, or from other non-tax sources.
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 Bonds – Obligations, also known as “put bonds” or “puttable securities,” that grant the bondholder the right to require the issuer to purchase the bonds, usually at par, at a certain time or times prior to maturity or upon the occurrence of specified events or conditions. The put option, or tender option, right is typically available to the investor on a periodic (e.g., daily, weekly or monthly) basis.
Lease-Backed Bonds – Bonds issued by a municipality or state that are secured by the payments made on leased assets.
This page is not part of the Annual Report. 3
Thornburg Limited Term Municipal Fund
At Thornburg, our approach to management of the Fund is based on the premise that investors in the Fund 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 in 2008 with the Best Fixed-Income Fund Family Award.
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 shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 0.89%, as disclosed in the most recent Prospectus.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 9/28/84) | |||||||||||||||
Without sales charge | 9.67 | % | 4.74 | % | 3.64 | % | 4.18 | % | 5.65 | % | |||||
With sales charge | 8.04 | % | 4.20 | % | 3.33 | % | 4.02 | % | 5.58 | % |
30-DAY YIELDS, A SHARES
As of September 30, 2009
Annualized | SEC Yield | |
3.16% | 2.15% |
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2009
Average Credit Quality | AA- | |
Number of Bonds | 683 | |
Duration | 3.6 Yrs | |
Average Maturity | 4.6 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 11.
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, 2009
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 summarized 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
Awards & Rankings
Ranked #1 by Morningstar & Lipper for Total Return
Total Return Ranks as of 9/30/09
Fund Rank in Morningstar
Muni National Short Category
Class | 1-Yr | 3-Yr | 5-Yr | 10-Yr | ||||
I | 2 | 1 | 1 | 1 | ||||
A | 3 | 7 | 7 | 4 | ||||
# Funds | 133 | 119 | 117 | 64 |
Fund Rank in Lipper
Short-Intermediate Municipal Debt Category
Class | 1-Yr | 3-Yr | 5-Yr | 10-Yr | ||||
I | 1 | 1 | 1 | 2 | ||||
A | 2 | 3 | 4 | 4 | ||||
# Funds | 42 | 38 | 38 | 25 |
Past performance does not guarantee future results. Class A share total returns are before sales charge. I shares do not have a sales charge.
© 2009 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.
Lipper’s 2008
Best Fixed-Income Fund Family
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income large firm universe for the three-year period ended 12/31/07, based on risk-adjusted returns. Past performance does not guarantee future results.
Lipper’s large firm universe is comprised of fund families with more than $28 billion in total net assets. Only fund families with at least five bond funds were eligible. Risk-adjusted returns were calculated with dividends reinvested and without sales charges. We did not win this award in 2009.
6 This page is not part of the Annual Report.
Thornburg Limited Term Municipal Fund
September 30, 2009
Table of Contents | ||
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11 | ||
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48 |
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
George Strickland Co-Portfolio Manager | October 20, 2009
Dear Fellow Shareholder:
We are pleased to present the Annual Report for the Thornburg Limited Term Municipal Fund. The net asset value (NAV) of the Class A shares increased by 78 cents per share to $14.00 during the twelve months ended September 30, 2009. If you were with us for the entire period, you received dividends of 47.3 cents per share, if you reinvested your dividends, you received 48.0 cents per share. Dividends per share were lower for Class C and higher for Class I to account for varying class-specific expenses. | |
Josh Gonze Co-Portfolio Manager | In last year’s annual report letter, we wrote about the massive deleveraging of the municipal market, evidenced by the unwinding of billions of tender option bond programs and investors’ mass exodus out of high-risk investment strategies employing leverage and other speculative high-yield strategies. The forced liquidation of assets placed inordinate supply into a market already reeling from the effects of the mortgage and banking crisis. Compounding matters was the downgrade of nearly all AAA-rated municipal bond insurers that provided credit enhancement to nearly half of all bonds outstanding, including the two largest insurers AMBAC and MBIA. Investor scrutiny over the ratings agencies led many investors to question whether they should be participating in the municipal market at all; and who could blame them given the deluge of negative headline press directed at the municipal market? These events caused 2008 to be one of the worst performing years on record for municipal bonds, and we were quite pleased to see positive returns in your Fund for 2008 given that many bond funds experienced double-digit negative returns. | |
Christopher Ihlefeld Co-Portfolio Manager | Today’s municipal market reflects an impressive rebound from where we were this time last year. Municipal sectors that were hit the hardest in 2008 – health care, lease-backed bonds, and industrial development revenue bonds – have been among the best performing sectors in 2009. This has helped your Fund’s performance as we have market over-weights in each of these sectors. Revenue bonds in general have outperformed all other broad sectors of the market. State general obligation and government-backed pre-refunded bonds, sectors in which we are under-weighted and that led the pack in 2008, have lagged revenue bonds by a substantial margin in 2009. Your Fund’s comparatively higher exposure to strong middle-tier investment grade credits (single-A rated bonds) has also helped performance this year, as credit spreads have contracted from their recent peak in 2008, and investors have been compensated for in-depth credit research. | |
For years, credit research was overshadowed in our industry by the simplicity and dominance of bond insurance. A prevalent though misguided understanding that the use of municipal insurance could effectively eliminate credit risk led to the diminished value of financial analysis in |
8 Certified Annual Report
favor of financial engineering. Talent was directed to craft complex hedging strategies to generate attractive returns. As bond insurance lost most of its relevance following a string of downgrades, the market understandably has a renewed interest in credit research. While credit research represents a lost art to some in our industry, we have emphasized credit research from the Fund’s inception and will continue our time honored tradition of bottom-up credit research well into the future.
Market liquidity has greatly improved with the passage of the American Reinvestment and Recovery Act, which pledged $144 billion in state and local government fiscal relief. The passage of this act in February 2009 spurred investors back into the municipal bond market as bond investors gained confidence in the federal government’s support of state and local governments. Stabilization among major investment banks has aided the municipal market as well as bank balance sheets have improved, municipal under-writings have gotten back to healthy levels, and retail demand for bonds has picked up substantially. We’ve even seen reasonable appetite for lower-rated, higher-yielding municipal credits as high-yield funds have garnered capital. The municipal market otherwise appears quite orderly with a steady supply of new issuance, strong demand coming from retail investors, and an active secondary market.
Yields of late have trended lower along the yield curve, attributable in large part to a compelling surge in demand for municipal bonds. The months leading up to the current fiscal year end saw a significant migration of investor assets out of oppressively low yielding money market funds into short and intermediate bond funds. For example, municipal money market funds accounted for $495 billion of assets at the end of 2008. As of September 30, 2009, assets in municipal money market funds were $416 billion, a reduction of $79 billion. Municipal bond funds have grown by $52 billion during this period, nearly four times the annual average over the last twenty years. If this disintermediation trend continues, we would expect it to have a positive effect on bond prices in the months ahead.
We continue to maintain a watchful eye on state and local economies. State tax collections have been weak through the middle of 2009 with 48 states reporting budgets gaps totaling $178 billion. The Nelson A. Rockefeller Institute of Government reported that state tax collections are down 16.6% year-over-year through the second quarter of 2009. The biggest drag on state revenues by far has been a significant decline in personal income tax, down nearly 28%. Local government tax revenues look better with tax revenues down only 2.8%, due in large part to local governments’ reliance on stable property tax revenue. We expect income tax revenues to remain weak until the economy starts creating a significant number of new jobs. The worst is yet to come for property tax revenues that typically adjust to real estate values after a significant lag. We are closely watching these trends in recently exuberant real estate markets such as Florida, Nevada, Arizona, and California.
The Class A shares of your Fund produced a total return of 9.67% over the twelve-month period ended September 30, 2009 at NAV, compared to an 11.01% return for the Barclays Capital Five-Year Municipal Bond Index. Over the last year, the yield curve has moved lower in a somewhat parallel fashion. 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 shorter than five years. Since those bonds generally underperformed, the Fund experienced some underperformance relative to the Index.
Certified Annual Report 9
Letter to Shareholders,
Continued
Your Thornburg Limited Term Municipal Fund is a laddered portfolio of over 680 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 reduce interest-rate risk and dampen the Fund’s price volatility. Second, laddering gives the Fund a steady cash flow stream from maturing bonds to reinvest toward the top of the ladder where yields are typically higher. The chart on the right describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
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. 2009 has proven to be another strong year for our municipal bond funds. We are pleased to report that as of September 30, 2009, the Limited Term Municipal Fund, Class I shares, was the top performer in its peer group over several time periods as ranked by both Lipper and Morningstar. It is a rare achievement to receive top honors for each of these time periods by two of the leading mutual fund evaluation services. We believe this reflects our team’s competent approach to managing risk, its disciplined laddering process to bond investing, and its passionate pursuit of quality execution.
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.
10 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
![]() | We have used ratings from Standard & Poor’s (S&P). Where S&P ratings are not available, we have used Moody’s Investors Service. Where neither rating is available, we have used ratings from Fitch Ratings. The category of investments identified as “AAA” in this graph includes investments which are pre-refund- ed 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† | Principal Amount | Value | |||||
ALABAMA — 0.78% | ||||||||
Alabama Public Schools & College Authority, 5.75% due 8/1/2011 | Aa2/AA | $ | 75,000 | $ | 76,421 | |||
Lake Martin Area IDA, 5.00% due 11/1/2011 | NR/BBB+ | 3,000,000 | 3,064,800 | |||||
Mobile GO Warrants, 4.50% due 8/15/2016 | NR/NR | 2,330,000 | 2,475,532 | |||||
Mobile Industrial Development PCR, 5.00% due 6/1/2034 put 3/19/2015 (Alabama Power Co.) | A2/A | 6,000,000 | 6,527,520 | |||||
University of Alabama at Birmingham Hospital Revenue, 5.25% due 9/1/2017 | A1/A+ | 2,500,000 | 2,715,550 | |||||
University of Alabama at Birmingham Hospital Revenue, 5.00% due 9/1/2018 | A1/A+ | 1,500,000 | 1,602,270 | |||||
ALASKA — 0.44% | ||||||||
Alaska Energy Power Authority, 6.00% due 7/1/2011 (Bradley Lake Hydroelectric; Insured: FSA) | Aa3/AAA | 955,000 | 1,033,138 | |||||
Alaska Municipal Bond Bank, 5.00% due 6/1/2014 (Insured: Natl-Re; State Aid Withholding) | A1/A+ | 1,175,000 | 1,316,106 | |||||
Alaska Student Loan Corp., 5.25% due 1/1/2012 (Insured: FSA) | NR/AAA | 3,000,000 | 3,195,840 | |||||
North Slope Boro GO, 5.00% due 6/30/2015 (Insured: Natl-Re) | A2/AA- | 3,250,000 | 3,712,637 | |||||
ARIZONA — 3.49% | ||||||||
Glendale IDA, 5.00% due 5/15/2015 (Midwestern University) | NR/A- | 1,000,000 | 1,072,780 | |||||
Glendale IDA, 5.00% due 5/15/2016 (Midwestern University) | NR/A- | 1,325,000 | 1,424,521 | |||||
Glendale IDA, 5.00% due 5/15/2017 (Midwestern University) | NR/A- | 1,440,000 | 1,539,634 | |||||
Glendale Western Loop 101 Public Facilities Corp., 6.00% due 7/1/2019 | A2/AA | 2,200,000 | 2,381,984 | |||||
Maricopa County IDA Health Facilities Revenue, 5.00% due 7/1/2016 (Catholic Healthcare West) | A2/A | 2,355,000 | 2,368,376 | |||||
Maricopa County IDA Health Facilities Revenue, 5.00% due 7/1/2038 put 7/1/2014 (Catholic Healthcare West) | A2/A | 7,500,000 | 8,022,150 | |||||
Maricopa County Pollution Control Corp. PCR, 5.50% due 5/1/2029 put 5/1/2012 (Arizona Public Services Co.) | Baa2/BBB- | 10,000,000 | 10,387,100 | |||||
Mohave County IDA, 5.00% due 4/1/2014 (Mohave Prison LLC; Insured: Syncora) (ETM) | NR/AAA | 3,135,000 | 3,588,227 | |||||
Mohave County IDA, 7.25% due 5/1/2015 (Mohave Prison LLC) | NR/BBB+ | 12,000,000 | 12,884,280 | |||||
Navajo County PCR, 5.50% due 6/1/2034 put 6/1/2014 (Arizona Public Service Co.) | Baa2/BBB- | 1,200,000 | 1,240,920 | |||||
Navajo County PCR, 5.50% due 6/1/2034 put 6/1/2014 (Arizona Public Service Co.) | Baa2/BBB- | 2,600,000 | 2,710,786 | |||||
Navajo County PCR, 5.75% due 6/1/2034 put 6/1/2016 (Arizona Public Service Co.) | Baa2/BBB- | 5,600,000 | 5,834,640 | |||||
Phoenix Civic Improvement Wastewater Systems, 6.00% due 7/1/2011 (Insured: FGIC) | Aa3/AA+ | 4,105,000 | 4,320,430 | |||||
Pima County IDA, 6.40% due 7/1/2013 (Arizona Charter Schools) | Baa3/NR | 745,000 | 743,927 | |||||
Pima County IDA, 5.00% due 7/1/2016 (Metro Police Facility) | Aa3/AA | 2,500,000 | 2,804,275 | |||||
Pima County IDA, 5.00% due 7/1/2017 (Metro Police Facility) | Aa3/AA | 3,000,000 | 3,370,200 | |||||
Pima County IDA, 5.00% due 7/1/2018 (Metro Police Facility) | Aa3/AA | 2,100,000 | 2,362,584 | |||||
Pima County IDA, 5.00% due 7/1/2019 (Metro Police Facility) | Aa3/AA | 2,000,000 | 2,254,780 | |||||
Pima County IDA Lease Obligation, 7.25% due 7/15/2010 (Insured: FSA) | Aa3/AAA | 135,000 | 135,747 | |||||
Salt River Agricultural Improvement & Power District, 5.00% due 1/1/2020 | Aa1/AA | 1,205,000 | 1,214,941 | |||||
Show Low IDA Hospital, 5.25% due 12/1/2010 (Navapache Regional Medical Center; Insured: ACA) | NR/BBB | 1,000,000 | 1,002,640 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Yuma Property Corp. Utility Systems Revenue, 5.00% due 7/1/2016 (Insured: XCLA) | A3/A+ | $ | 2,000,000 | $ | 2,188,360 | |||
ARKANSAS — 0.10% | ||||||||
Jefferson County Hospital Improvement, 5.50% due 6/1/2010 (Jefferson Hospital Association) | NR/A | 1,000,000 | 1,022,720 | |||||
Jefferson County Hospital Improvement, 5.50% due 6/1/2011 (Jefferson Hospital Association) | NR/A | 1,075,000 | 1,125,256 | |||||
CALIFORNIA — 8.28% | ||||||||
Calexico USD COP, 5.75% due 9/1/2013 | NR/BBB+ | 2,185,000 | 2,268,773 | |||||
California HFA, 5.25% due 10/1/2013 (Kaiser Permanente) (ETM) | NR/AAA | 2,620,000 | 2,642,925 | |||||
California HFA, 5.00% due 7/1/2028 (Catholic Healthcare) | A2/A | 2,000,000 | 2,169,400 | |||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: Natl-Re) | Baa2/A | 1,000,000 | 1,003,290 | |||||
California State Department of Water Resources Power Supply, 5.50% due 5/1/2012 | Aa3/A+ | 2,600,000 | 2,869,100 | |||||
California State Department of Water Resources Power Supply, 6.00% due 5/1/2013 | Aa3/A+ | 2,550,000 | 2,860,131 | |||||
California State Department of Water Resources Power Supply, 0.45% due 5/1/2022 put 10/1/2009 (Insured: FSA) (daily demand notes) | VMIG1/A-1 | 14,700,000 | 14,700,000 | |||||
California State GO, 5.15% due 12/1/2014 (Veterans Bonds) | Baa1/AA- | 1,000,000 | 1,004,500 | |||||
California State Public Works Board, 5.00% due 9/1/2016 (Regents of University of California; Insured: FGIC) | Aa2/AA- | 3,000,000 | 3,419,760 | |||||
California State Public Works Board, 5.00% due 9/1/2017 (Regents of University of California; Insured: FGIC) | Aa2/AA- | 3,000,000 | 3,420,090 | |||||
California Statewide Communities Development Authority, 5.00% due 5/15/2017 (Irvine LLC- UCI East Campus) | Baa2/NR | 2,200,000 | 2,338,798 | |||||
California Statewide Communities Development Authority, 5.00% due 4/1/2019 (Kaiser Permanente) | NR/A+ | 12,000,000 | 13,220,040 | |||||
a Central Valley Financing Authority, 5.00% due 7/1/2017 (Carson Ice) | A1/A+ | 600,000 | 673,602 | |||||
Central Valley Financing Authority, 5.00% due 7/1/2019 (Carson Ice) | A1/A+ | 1,300,000 | 1,464,463 | |||||
Corona Norco USD GO Bond Anticipation Note, 3.50% due 2/1/2010 | NR/SP-1+ | 7,470,000 | 7,515,418 | |||||
Desert Sands USD COP, 5.25% due 3/1/2016 | A2/A+ | 1,500,000 | 1,617,855 | |||||
Escondido USD GO, 5.60% due 11/1/2009 (Insured: Natl-Re) (ETM) | NR/A | 1,250,000 | 1,255,537 | |||||
Golden State Tobacco Securitization Corp., 5.50% due 6/1/2043 pre-refunded 6/1/2013 | Aaa/AAA | 2,000,000 | 2,276,080 | |||||
Inland Valley Development Agency, 5.25% due 4/1/2013 | NR/A | 2,000,000 | 2,093,280 | |||||
Inland Valley Development Agency, 5.50% due 4/1/2014 | NR/A | 2,000,000 | 2,107,340 | |||||
Irvine Ranch Water District, 0.28% due 4/1/2033 put 10/1/2009 (LOC: Bank of America) (daily demand notes) | VMIG1/A-1 | 900,000 | 900,000 | |||||
Irvine Ranch Water District GO, 0.30% due 7/1/2035 put 10/1/2009 (LOC: Landesbank Baden) (daily demand notes) | VMIG1/A-2 | 2,500,000 | 2,500,000 | |||||
Irvine Ranch Water District GO, 0.27% due 10/1/2041 put 10/1/2009 (LOC: Bank of America) (daily demand notes) | VMIG1/A-1 | 5,900,000 | 5,900,000 | |||||
Los Angeles Convention & Exhibition Center Authority, 5.00% due 8/15/2018 | A1/AA- | 2,000,000 | 2,195,880 | |||||
Los Angeles USD GO, 5.00% due 7/1/2018 (Insured: FSA) | Aa3/AAA | 4,000,000 | 4,533,280 | |||||
Modesto Health Facilities, 6.00% due 6/1/2018 (Memorial Hospitals Association; Insured: Natl-Re) | Aa3/A+ | 1,300,000 | 1,302,587 | |||||
Newport Beach Revenue, 5.00% due 12/1/2038 put 2/7/2013 (Hoag Memorial Hospital) | Aa3/AA | 3,000,000 | 3,256,200 | |||||
Orange County Public Financing Authority, 5.00% due 7/1/2017 (Insured: Natl-Re) | A1/A+ | 1,245,000 | 1,374,331 | |||||
Pittsburg Redevelopment Agency, 5.00% due 8/1/2012 (Los Medanos Community Development; Insured: Natl-Re) | Baa1/A+ | 1,255,000 | 1,336,939 | |||||
Riverside County Transportation Commission, 5.00% due 6/1/2029 pre-refunded 12/1/2009 | Aa2/AA+ | 20,000,000 | 20,150,200 | |||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2017 (Procter & Gamble) | A1/A+ | 750,000 | 845,295 | |||||
Sacramento Municipal Utility District, 5.00% due 7/1/2016 (Cosumnes Project; Insured: Natl- Re) | Baa1/A | 4,870,000 | 5,202,962 | |||||
Sacramento Municipal Utility District, 5.00% due 7/1/2019 (Cosumnes Project; Insured: Natl-Re) | Baa1/A | 5,000,000 | 5,286,950 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
San Diego County Regional Transportation, 0.40% due 4/1/2038 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-1 | $ | 15,000,000 | $ | 15,000,000 | |||
San Joaquin County Transportation Authority, 5.00% due 4/1/2011 | NR/AA | 3,000,000 | 3,148,350 | |||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: FSA) | Aa3/AAA | 7,600,000 | 4,987,044 | |||||
San Luis & Delta-Mendota Water Authority, 4.50% due 3/1/2014 (Water Utility Improvements) | NR/A+ | 3,900,000 | 4,121,169 | |||||
Santa Margarita-Dana Point Authority, 5.125% due 8/1/2018 (Insured: AMBAC) | Baa3/NR | 14,000,000 | 14,002,520 | |||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2018 (Tuolumne Co.) | A1/A+ | 2,000,000 | 2,210,300 | |||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2019 (Tuolumne Co.) | A1/A+ | 2,000,000 | 2,203,680 | |||||
Ventura County COP, 5.00% due 8/15/2016 | A1/AA | 1,520,000 | 1,682,458 | |||||
Ventura County COP, 5.25% due 8/15/2017 | A1/AA | 1,635,000 | 1,827,766 | |||||
COLORADO — 2.33% | ||||||||
Adams County Platte Valley Medical Center, 5.00% due 2/1/2015 (Brighton Community Hospital Association; Insured: FHA, Natl-Re) | NR/A | 1,530,000 | 1,653,517 | |||||
a Adams County Platte Valley Medical Center, 5.00% due 8/1/2015 (Brighton Community Hospital Association; Insured: FHA, Natl-Re) | NR/A | 1,565,000 | 1,698,620 | |||||
Beacon Point Metropolitan District, 4.375% due 12/1/2015 (LOC: Compass Bank) | NR/A+ | 2,100,000 | 2,054,157 | |||||
Central Platte Valley Metropolitan District GO, 5.00% due 12/1/2031 put 12/1/2009 (LOC: BNP Paribas) | NR/AAA | 12,400,000 | 12,485,808 | |||||
Colorado Educational & Cultural Facilities, 6.00% due 6/1/2011 | A3/A | 710,000 | 726,216 | |||||
Colorado HFA, 5.25% due 5/15/2017 (Northern Colorado Medical Center; insured: FSA) | NR/AAA | 1,185,000 | 1,300,727 | |||||
Colorado HFA, 5.25% due 5/15/2019 (Northern Colorado Medical Center; insured: FSA) | NR/AAA | 2,225,000 | 2,439,868 | |||||
Colorado HFA, 5.50% due 10/1/2038 put 11/12/2015 (Catholic Health Initiatives) | Aa2/AA | 1,000,000 | 1,126,990 | |||||
Denver City and County Airport System, 5.00% due 11/15/2016 (Insured: Natl-Re) | A1/A+ | 1,515,000 | 1,707,405 | |||||
Denver City and County Airport System, 5.00% due 11/15/2017 (Insured: Natl-Re) | A1/A+ | 1,000,000 | 1,125,190 | |||||
Denver Convention Center Hotel, 5.25% due 12/1/2014 (Insured: Syncora) | Baa3/BBB- | 3,450,000 | 3,553,500 | |||||
E-470 Public Highway Authority Capital Appreciation, 0% due 9/1/2014 (Insured: Natl-Re) | Baa1/A | 1,910,000 | 1,526,377 | |||||
Park Creek Metropolitan District, 5.00% due 12/1/2015 (Insured: Assured Guaranty) | NR/AAA | 1,000,000 | 1,129,690 | |||||
Park Creek Metropolitan District, 5.00% due 12/1/2016 (Insured: Assured Guaranty) | NR/AAA | 1,035,000 | 1,168,877 | |||||
Park Creek Metropolitan District, 5.00% due 12/1/2017 (Insured: Assured Guaranty) | NR/AAA | 1,525,000 | 1,720,658 | |||||
Park Creek Metropolitan District, 5.50% due 12/1/2018 (Insured: Assured Guaranty) | NR/AAA | 1,200,000 | 1,400,940 | |||||
Park Creek Metropolitan District, 5.50% due 12/1/2019 (Insured: Assured Guaranty) | NR/AAA | 1,000,000 | 1,174,990 | |||||
Plaza Metropolitan District, 7.125% due 12/1/2010 (Public Improvement Fee/Tax Increment) | NR/NR | 4,210,000 | 4,211,052 | |||||
Plaza Metropolitan District, 7.60% due 12/1/2016 (Public Improvement Fee/Tax Increment) | NR/NR | 6,000,000 | 5,885,880 | |||||
Southlands Metropolitan District GO, 6.75% due 12/1/2016 pre-refunded 12/1/2014 | NR/AAA | 1,000,000 | 1,175,560 | |||||
CONNECTICUT — 0.10% | ||||||||
Connecticut Development Authority PCR, 5.75% due 6/1/2026 put 2/1/2012 | Baa2/NR | 1,000,000 | 1,055,430 | |||||
Connecticut Health & Educational Facilities, 3.50% due 11/15/2029 put 2/1/2012 (Ascension Health) | Aa1/AA | 1,000,000 | 1,026,570 | |||||
DELAWARE — 0.16% | ||||||||
Delaware EDA, 5.50% due 7/1/2025 put 7/1/2010 (Delmarva Power & Light) | Baa2/BBB | 2,045,000 | 2,105,798 | |||||
Delaware HFA, 5.25% due 6/1/2011 (Beebe Medical Center) | Baa1/BBB+ | 1,275,000 | 1,304,210 | |||||
DISTRICT OF COLUMBIA — 1.75% | ||||||||
District of Columbia Convention Center Authority, 5.00% due 10/1/2013 (Washington Convention Center; Insured: AMBAC) | A2/A | 3,000,000 | 3,305,040 | |||||
District of Columbia COP, 5.25% due 1/1/2013 (Insured: AMBAC) | NR/A | 5,950,000 | 6,345,318 | |||||
District of Columbia COP, 5.25% due 1/1/2015 (Insured: FGIC) | A2/A | 2,875,000 | 3,218,218 | |||||
District of Columbia COP, 5.25% due 1/1/2016 (Insured: FGIC) | A2/A | 4,125,000 | 4,650,360 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
District of Columbia COP, 5.00% due 1/1/2019 (Insured: Natl-Re) | A2/A | $ | 5,000,000 | $ | 5,429,350 | |||
District of Columbia GO, 6.00% due 6/1/2018 (Insured: Natl-Re) | A1/A+ | 5,000,000 | 6,018,750 | |||||
District of Columbia Tax Increment, 0% due 7/1/2011 (Mandarin Oriental; Insured: FSA) | Aa3/AAA | 1,990,000 | 1,931,812 | |||||
District of Columbia Tax Increment, 0% due 7/1/2012 (Mandarin Oriental; Insured: FSA) | Aa3/AAA | 1,480,000 | 1,396,528 | |||||
Metropolitan Washington Airports Authority, 0% due 10/1/2014 (Dulles Toll Road; Insured: Assured Guaranty) | Aa2/AAA | 2,000,000 | 1,677,160 | |||||
Metropolitan Washington Airports Authority, 0% due 10/1/2016 (Dulles Toll Road; Insured: Assured Guaranty) | Aa2/AAA | 4,000,000 | 3,019,120 | |||||
FLORIDA — 9.96% | ||||||||
Broward County Airport Systems, 5.00% due 10/1/2014 (Insured: AMBAC) | A1/A+ | 4,000,000 | 4,479,920 | |||||
Broward County Port Facilities, 5.00% due 9/1/2013 | A2/A- | 2,000,000 | 2,190,000 | |||||
Broward County Port Facilities, 5.50% due 9/1/2018 | A2/A- | 3,500,000 | 3,950,135 | |||||
Broward County Port Facilities, 5.50% due 9/1/2019 | A2/A- | 2,800,000 | 3,145,912 | |||||
Broward County Resource Recovery, 5.375% due 12/1/2009 (Wheelabrator South) | A3/AA | 5,000,000 | 5,036,500 | |||||
Broward County School Board COP, 5.00% due 7/1/2010 (Insured: AMBAC) | A1/NR | 2,000,000 | 2,006,340 | |||||
Broward County School Board COP, 5.25% due 7/1/2016 (Insured: FSA) | Aa3/AAA | 7,630,000 | 8,612,286 | |||||
Broward County School Board COP, 5.00% due 7/1/2017 (Insured: FGIC) | A1/A+ | 1,000,000 | 1,119,030 | |||||
a Capital Projects Finance Authority, 5.50% due 10/1/2012 (Insured: Natl-Re) | Baa1/A | 1,820,000 | 1,888,705 | |||||
Capital Projects Finance Authority, 5.50% due 10/1/2015 (Insured: Natl-Re) | Baa1/A | 3,260,000 | 3,322,853 | |||||
Capital Trust Agency Multi Family Housing, 5.15% due 11/1/2030 put 11/1/2010 (Shadow Run; Collateralized: FNMA) | Aaa/NR | 3,190,000 | 3,316,707 | |||||
Crossings at Fleming Island Community Development, 5.45% due 5/1/2010 (Insured: Natl-Re) | Baa1/A | 825,000 | 833,885 | |||||
Escambia County HFA, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB- | 2,350,000 | 2,362,737 | |||||
Escambia County HFA, 5.00% due 11/1/2028 pre-refunded 11/1/2010 (Charity Obligated Group) | Aaa/NR | 2,540,000 | 2,575,255 | |||||
Flagler County School Board COP, 5.00% due 8/1/2014 (Insured: FSA) | Aa3/AAA | 1,605,000 | 1,783,797 | |||||
Flagler County School Board COP, 5.00% due 8/1/2015 (Insured: FSA) | Aa3/AAA | 1,500,000 | 1,675,290 | |||||
Florida Hurricane Catastrophe, 5.00% due 7/1/2014 | Aa3/AA- | 11,000,000 | 11,951,940 | |||||
Florida State Board of Education Lottery Revenue, 5.00% due 7/1/2016 (Insured: Natl-Re/ FGIC) | A2/AAA | 5,000,000 | 5,007,950 | |||||
Florida State Correctional Privatization Commission COP, 5.00% due 8/1/2015 (Insured: AMBAC) | Aa2/AA+ | 2,000,000 | 2,191,960 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2012 | NR/AA+ | 770,000 | 834,072 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2014 | NR/AA+ | 905,000 | 1,005,156 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2015 | NR/AA+ | 925,000 | 1,028,887 | |||||
Florida State Department of Transportation GO, 5.00% due 7/1/2018 | Aa1/AAA | 3,000,000 | 3,482,280 | |||||
Florida State Division of Bond Finance (Preservation 2000), 5.375% due 7/1/2011 (Insured: Natl-Re/FGIC) | A1/AA- | 2,515,000 | 2,547,796 | |||||
Gainesville Utilities Systems Revenue, 0.45% due 10/1/2026 put 10/1/2009 (SPA: Suntrust Bank) (daily demand notes) | VMIG1/A-1 | 4,500,000 | 4,500,000 | |||||
Gainesville Utilities Systems Revenue, 0.45% due 10/1/2026 put 10/1/2009 (SPA: Suntrust Bank) (daily demand notes) | VMIG1/A-2 | 7,500,000 | 7,500,000 | |||||
Hillsborough County Assessment, 5.00% due 3/1/2015 (Insured: FGIC) | A3/A+ | 5,000,000 | 5,335,900 | |||||
Hillsborough County IDA PCR, 5.10% due 10/1/2013 (Tampa Electric Co.) | Baa1/BBB | 6,410,000 | 6,789,985 | |||||
Hillsborough County IDA PCR, 5.00% due 12/1/2034 put 3/15/2012 (Tampa Electric Co.; Insured: AMBAC) | Baa1/BBB | 3,250,000 | 3,379,935 | |||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2016 (Insured: Syncora) | Baa1/NR | 2,000,000 | 2,036,720 | |||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2017 (Insured: Syncora) | Baa1/NR | 2,000,000 | 2,020,160 | |||||
JEA, 5.25% due 10/1/2012 (St. John’s River Park Systems) | Aa2/AA- | 5,000,000 | 5,364,450 | |||||
JEA, 5.00% due 10/1/2014 (Electric Systems) | Aa3/A+ | 7,165,000 | 7,895,113 | |||||
JEA Water & Sewer Systems Revenue, 5.00% due 10/1/2018 | Aa3/AA- | 1,500,000 | 1,707,615 | |||||
Marion County Hospital District, 5.00% due 10/1/2015 (Munroe Regional Health Systems) | A3/NR | 1,000,000 | 1,020,770 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Miami Dade County Educational Facilities Authority, 5.00% due 4/1/2016 (University of Miami; Insured: AMBAC; GO of University) | A2/A- | $ | 3,000,000 | $ | 3,313,470 | |||
Miami Dade County GO, 5.25% due 7/1/2018 (Building Better Communities) | Aa3/AA- | 4,540,000 | 5,193,170 | |||||
Miami Dade County Professional Sports Franchise Facilities Tax, 0% due 10/1/2015 (Insured: Assured Guaranty) | Aa2/AAA | 3,845,000 | 3,056,852 | |||||
Miami Dade County Professional Sports Franchise Facilities Tax, 0% due 10/1/2016 (Insured: Assured Guaranty) | Aa2/AAA | 3,535,000 | 2,660,830 | |||||
Miami Dade County Professional Sports Franchise Facilities Tax, 0% due 10/1/2017 (Insured: Assured Guaranty) | Aa2/AAA | 2,435,000 | 1,722,592 | |||||
Miami Dade County Professional Sports Franchise Facilities Tax, 0% due 10/1/2018 (Insured: Assured Guaranty) | Aa2/AAA | 5,385,000 | 3,568,532 | |||||
Miami Dade County Professional Sports Franchise Facilities Tax, 0% due 10/1/2019 (Insured: Assured Guaranty) | Aa2/AAA | 2,170,000 | 1,346,919 | |||||
Miami Dade County School Board COP, 5.00% due 5/1/2014 (Insured: Natl-Re) | A3/A | 1,000,000 | 1,104,650 | |||||
Miami Dade County School Board COP, 5.00% due 10/1/2015 (Insured: AMBAC) | A3/A | 1,000,000 | 1,112,720 | |||||
Miami Dade County School Board COP, 5.00% due 5/1/2016 (Insured: Natl-Re) | A3/A | 4,015,000 | 4,447,777 | |||||
Miami Dade County School Board COP, 5.00% due 10/1/2016 (Insured: AMBAC) | A3/A | 1,000,000 | 1,111,130 | |||||
Miami Dade County School Board COP, 5.50% due 5/1/2030 put 5/1/2011 (Insured: Natl-Re) | A3/A | 1,010,000 | 1,048,430 | |||||
Miami Dade County School District GO, 5.375% due 8/1/2015 (Insured: FSA) | Aa3/AAA | 5,000,000 | 5,765,650 | |||||
Miami Dade County Special Housing, 5.80% due 10/1/2012 (HUD Section 8) | Baa3/NR | 1,735,000 | 1,829,106 | |||||
Miami GO, 5.00% due 1/1/2017 (Homeland Defense/Neighborhood Capital Improvements) | A3/A | 1,245,000 | 1,362,814 | |||||
Miami GO, 5.00% due 1/1/2018 (Homeland Defense/Neighborhood Capital Improvements) | A3/A | 2,040,000 | 2,231,576 | |||||
Miami GO, 5.00% due 1/1/2019 (Homeland Defense/Neighborhood Capital Improvements) | A3/A | 1,870,000 | 2,045,107 | |||||
Miami Special Obligation, 5.00% due 1/1/2018 (Insured: Natl-Re) | A3/A | 1,970,000 | 2,213,157 | |||||
Orange County HFA, 5.80% due 11/15/2009 (Adventist Health) (ETM) | A1/NR | 1,395,000 | 1,404,430 | |||||
Palm Beach County Public Improvement, 5.00% due 11/1/2030 put 11/1/2011 (Convention Center; Insured: FGIC) | Aa1/AA+ | 3,000,000 | 3,195,840 | |||||
Palm Beach County School Board COP, 5.00% due 8/1/2025 (Insured: FGIC) | A1/AA- | 1,500,000 | 1,551,240 | |||||
Pelican Marsh Community Development District, 5.00% due 5/1/2011 (Insured: Radian) | NR/AA | 1,110,000 | 1,094,371 | |||||
Port Everglades Authority, 5.00% due 9/1/2016 (Insured: FSA) | Aa3/AAA | 9,990,000 | 10,374,115 | |||||
Putnam County Development Authority PCR, 5.35% due 3/15/2042 put 5/1/2018 (Seminole Project; Insured: AMBAC) | Baa1/A- | 10,000,000 | 10,839,400 | |||||
South Miami HFA, 5.00% due 8/15/2016 (Baptist Health) | Aa3/AA- | 1,560,000 | 1,732,006 | |||||
South Miami HFA, 5.00% due 8/15/2017 (Baptist Health) | Aa3/AA- | 4,610,000 | 5,103,593 | |||||
St. John’s County IDA, 5.50% due 8/1/2014 (Presbyterian Retirement) | NR/NR | 2,755,000 | 2,847,954 | |||||
Tampa Sports Authority Revenue, 5.75% due 10/1/2015 (Tampa Bay Arena; Insured: Natl-Re) | Baa1/A | 1,500,000 | 1,590,345 | |||||
University of Central Florida Athletics Association Inc. COP, 5.00% due 10/1/2016 (Insured: FGIC) | NR/A | 1,640,000 | 1,738,876 | |||||
GEORGIA — 3.12% | ||||||||
Atlanta Tax Allocation, 5.25% due 12/1/2016 (Atlantic Station; Insured: Assured Guaranty) | Aa2/AAA | 3,850,000 | 4,409,713 | |||||
Atlanta Water & Wastewater Revenue, 6.00% due 11/1/2019 | Baa1/A | 5,650,000 | 6,514,111 | |||||
Burke County PCR, 4.375% due 10/1/2032 put 4/1/2010 (Georgia Power Co.) | A2/A | 5,000,000 | 5,071,750 | |||||
Burke County PCR, 4.75% due 1/1/2039 put 4/1/2011 (Oglethorpe Power; Insured: Natl-Re) | A3/A | 10,000,000 | 10,398,300 | |||||
Fulton County Facilities COP, 5.90% due 11/1/2019 pre-refunded 11/1/2010 (Insured: FSA-CR AMBAC) | Aa3/AAA | 16,865,000 | 18,044,707 | |||||
Lagrange Troup County Hospital Authority, 5.00% due 7/1/2018 | A1/A+ | 2,500,000 | 2,724,400 | |||||
Main Street Natural Gas Inc., 5.00% due 3/15/2013 (Merrill Lynch) | A2/A | 1,500,000 | 1,552,965 | |||||
Main Street Natural Gas Inc., 5.00% due 3/15/2014 (JP Morgan) | Aa3/A+ | 3,000,000 | 3,210,570 | |||||
Main Street Natural Gas Inc., 5.00% due 3/15/2014 (Merrill Lynch) | A2/A | 3,590,000 | 3,702,080 | |||||
Main Street Natural Gas Inc., 5.00% due 3/15/2015 (Merrill Lynch) | A2/A | 2,000,000 | 2,052,360 | |||||
Monroe County Development Authority PCR, 6.75% due 1/1/2010 (Oglethorpe Power; Insured: Natl-Re) | A3/A | 2,000,000 | 2,028,060 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
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: Natl-Re) | A3/A | $ | 1,000,000 | $ | 1,104,900 | |||
Monroe County Development Authority PCR, 4.50% due 7/1/2025 put 4/1/2011 (Georgia Power Co.) | A2/A | 5,000,000 | 5,180,750 | |||||
GUAM — 0.62% | ||||||||
Guam Educational Financing Foundation COP, 5.00% due 10/1/2010 (Guam Public Schools) | NR/A- | 1,000,000 | 1,015,980 | |||||
Guam Government Limited Obligation Revenue, 5.25% due 12/1/2016 | NR/BBB- | 5,610,000 | 5,887,807 | |||||
Guam Government Limited Obligation Revenue, 5.25% due 12/1/2017 | NR/BBB- | 2,000,000 | 2,084,240 | |||||
Guam Government Limited Obligation Revenue, 5.50% due 12/1/2018 | NR/BBB- | 3,000,000 | 3,142,530 | |||||
Guam Government Limited Obligation Revenue, 5.50% due 12/1/2019 | NR/BBB- | 1,000,000 | 1,047,120 | |||||
HAWAII — 0.34% | ||||||||
Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Kapiolani Health Care; Insured: Natl-Re) | Baa1/A | 1,150,000 | 1,191,331 | |||||
Hawaii State Department of Budget & Finance, 4.95% due 4/1/2012 (Hawaiian Electric Company; Insured: Natl-Re) | Baa1/A | 5,750,000 | 6,032,613 | |||||
IDAHO — 0.14% | ||||||||
Twin Falls Urban Renewal Agency, 4.95% due 8/1/2014 | NR/NR | 1,640,000 | 1,589,996 | |||||
Twin Falls Urban Renewal Agency, 5.15% due 8/1/2017 | NR/NR | 1,455,000 | 1,348,043 | |||||
ILLINOIS — 8.02% | ||||||||
Bolingbrook GO, 0% due 1/1/2016 (Insured: Natl-Re) | A2/NR | 1,500,000 | 1,201,410 | |||||
Bolingbrook GO, 0% due 1/1/2017 (Insured: Natl-Re) | A2/NR | 2,000,000 | 1,503,160 | |||||
Broadview Tax Increment Revenue, 5.375% due 7/1/2015 | NR/NR | 3,400,000 | 3,400,068 | |||||
Chicago Board of Education GO, 6.00% due 12/1/2009 (Insured: FGIC) | A1/AA- | 2,000,000 | 2,018,240 | |||||
Chicago Board of Education GO, 5.00% due 12/1/2018 (Insured: Natl-Re) | A1/AA- | 1,000,000 | 1,147,160 | |||||
Chicago Gas Supply, 4.75% due 3/1/2030 put 6/30/2014 (Peoples Gas Light & Coke) | A2/A- | 1,500,000 | 1,525,125 | |||||
Chicago GO, 6.125% due 1/1/2012 (Insured: AMBAC) | Aa3/AA- | 1,000,000 | 1,104,400 | |||||
Chicago GO, 5.375% due 1/1/2013 (Insured: Natl-Re) | Aa3/AA- | 2,725,000 | 2,929,266 | |||||
Chicago GO, 0% due 1/1/2016 (City Colleges; Insured: FGIC) | Aa3/AA- | 2,670,000 | 2,167,826 | |||||
Chicago GO, 5.40% due 1/1/2018 (Insured: FSA) | Aa3/AAA | 3,000,000 | 3,019,230 | |||||
Chicago GO, 0.50% due 1/1/2040 put 10/7/2009 (Insured: FSA/SPA-Dexia Credit Local) (weekly demand notes) | VMIG1/A-1 | 27,900,000 | 27,900,000 | |||||
Chicago Housing Authority Capital Program, 5.25% due 7/1/2010 (ETM) | Aaa/NR | 2,300,000 | 2,385,169 | |||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2015 (Insured: FSA) | Aa3/AAA | 8,460,000 | 9,470,885 | |||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2016 (Insured: FSA) | Aa3/AAA | 2,000,000 | 2,237,580 | |||||
Chicago Metropolitan Water Reclamation District, 7.00% due 1/1/2011 (ETM) | Aaa/NR | 735,000 | 769,244 | |||||
Chicago Midway Airport, 5.50% due 1/1/2013 (Insured: Natl-Re) | A2/A | 1,180,000 | 1,292,596 | |||||
Chicago Park District Parking Facility, 5.75% due 1/1/2010 (ETM) | Baa1/NR | 1,000,000 | 1,013,630 | |||||
Cook County Community Consolidated School District GO, 0% due 12/1/2010 (Insured: FSA) | Aa3/NR | 2,000,000 | 1,982,340 | |||||
Cook County Community Consolidated School District GO, 9.00% due 12/1/2016 (Tinley Park; Insured: FGIC) | A1/NR | 2,500,000 | 3,413,825 | |||||
Cook County Community School District GO, 9.00% due 12/1/2013 (Oak Park; Insured: FGIC) | Aa3/NR | 2,250,000 | 2,847,195 | |||||
Cook County GO, 6.25% due 11/15/2013 (Insured: Natl-Re) | Aa3/AA | 3,995,000 | 4,697,401 | |||||
Du Page County Forest Preservation District GO, 0% due 11/1/2009 (Partial ETM) | Aaa/AAA | 5,000,000 | 4,997,450 | |||||
Illinois DFA, 6.00% due 11/15/2009 (Adventist Health; Insured: Natl-Re) | Baa1/AA | 3,635,000 | 3,650,558 | |||||
Illinois DFA, 6.00% due 11/15/2010 (Adventist Health; Insured: Natl-Re) | Baa1/AA | 3,860,000 | 4,002,743 | |||||
Illinois DFA, 6.00% due 11/15/2011 (Adventist Health; Insured: Natl-Re) | Baa1/AA | 1,000,000 | 1,042,860 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Illinois DFA, 0.30% due 5/1/2031 put 10/1/2009 (Evanston Northwestern; SPA: JP Morgan) (daily demand notes) | VMIG1/A-1 | $ | 7,600,000 | $ | 7,600,000 | |||
Illinois DFA Community Rehab Providers, 6.00% due 7/1/2015 | NR/BBB- | 1,000,000 | 1,001,750 | |||||
Illinois Educational Facilities, 4.75% due 3/1/2030 put 3/1/2017 (Art Institute of Chicago) | A1/A+ | 2,625,000 | 2,810,588 | |||||
Illinois Educational Facilities, 5.00% due 3/1/2030 put 3/1/2017 (Art Institute of Chicago) | A1/A+ | 3,000,000 | 3,170,520 | |||||
Illinois Educational Facilities, 5.25% due 3/1/2034 put 3/1/2018 (Art Institute of Chicago) | A1/A+ | 3,500,000 | 3,764,425 | |||||
Illinois Educational Facilities, 4.15% due 11/1/2036 put 11/1/2012 (Field Museum) | A2/A | 5,250,000 | 5,461,050 | |||||
Illinois Educational Facilities, 4.30% due 11/1/2036 put 11/1/2013 (Field Museum) | A2/A | 3,000,000 | 3,126,780 | |||||
a Illinois Finance Authority, 5.00% due 11/1/2017 (Rush University Medical Center; Insured: Natl-Re) | A3/A | 1,000,000 | 1,064,210 | |||||
Illinois Finance Authority, 5.50% due 11/1/2018 (Advocate Health) | Aa3/AA | 1,000,000 | 1,136,140 | |||||
Illinois Finance Authority, 3.875% due 11/1/2030 put 5/1/2012 (Advocate Health) | Aa3/AA | 2,000,000 | 2,045,540 | |||||
Illinois Finance Authority Student Housing, 5.00% due 5/1/2014 | Baa3/NR | 3,895,000 | 3,879,069 | |||||
Illinois HFA, 5.00% due 11/15/2013 (Northwestern Medical Facility; Insured: Natl-Re) | A2/NR | 2,470,000 | 2,484,869 | |||||
Illinois HFA, 0.30% due 7/1/2032 put 10/1/2009 (Northwest Community Hospital) (daily demand notes) | VMIG1/A-1 | 3,300,000 | 3,300,000 | |||||
Illinois HFA, 6.50% due 2/15/2010 (Iowa Health System) (ETM) | Aa3/NR | 1,465,000 | 1,489,949 | |||||
Illinois HFA, 6.00% due 2/15/2011 (Iowa Health System; Insured: AMBAC) (ETM) | Aa3/NR | 1,560,000 | 1,607,065 | |||||
Illinois HFA, 5.50% due 11/15/2011 (Methodist Medical Center; Insured: Natl-Re) | A2/A | 3,000,000 | 3,008,700 | |||||
Illinois HFA, 6.00% due 7/1/2017 (Lake Forest Hospital) | A3/A- | 1,500,000 | 1,553,985 | |||||
Illinois Hospital District GO, 5.50% due 1/1/2010 (Insured: FGIC) | NR/A | 1,040,000 | 1,047,353 | |||||
Kane County Forest Preservation District GO, 5.00% due 12/15/2015 (Insured: FGIC) | NR/AA | 2,780,000 | 3,223,716 | |||||
Kane County Waubonsee Community College District GO, 0% due 12/15/2013 (Insured: FGIC) | Aa3/AA- | 3,000,000 | 2,557,560 | |||||
Lake County Community High School District GO, 0% due 12/1/2011 (Insured: FGIC) | NR/NR | 3,235,000 | 3,059,339 | |||||
Mc Lean & Woodford Counties United School District GO, 6.25% due 12/1/2014 (Insured: FSA) | Aa3/NR | 1,005,000 | 1,112,334 | |||||
McHenry & Kane Counties Community Consolidated School District GO, 0% due 1/1/2010 (Insured: FGIC) | NR/A | 1,000,000 | 995,270 | |||||
McHenry & Kane Counties Community Consolidated School District GO, 0% due 1/1/2012 (Insured: FGIC) | NR/A | 2,200,000 | 2,075,634 | |||||
Melrose Park Water Revenue, 5.20% due 7/1/2018 (Insured: Natl-Re) | Baa1/A | 1,190,000 | 1,200,056 | |||||
Metropolitan Pier & Exposition Authority Dedicated State Tax, 0% due 6/15/2013 (McCormick Place; Insured: Natl-Re) | A2/AAA | 1,045,000 | 939,654 | |||||
Metropolitan Pier & Exposition Authority Dedicated State Tax, 0% due 6/15/2016 (McCormick Place; Insured: FGIC) | A2/A | 11,295,000 | 8,967,778 | |||||
Quincy Illinois, 5.00% due 11/15/2014 (Blessing Hospital) | A3/A- | 1,000,000 | 1,035,000 | |||||
Quincy Illinois, 5.00% due 11/15/2016 (Blessing Hospital) | A3/A- | 1,000,000 | 1,021,150 | |||||
Southwestern Illinois Development Authority, 5.125% due 8/15/2016 (Anderson Hospital) | Baa2/BBB | 1,935,000 | 1,958,684 | |||||
INDIANA — 4.63% | ||||||||
Allen County Economic Development, 5.60% due 12/30/2009 (Indiana Institute of Technology) | NR/NR | 390,000 | 391,716 | |||||
Allen County Economic Development, 5.00% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 1,370,000 | 1,375,603 | |||||
Allen County Jail Building Corp. First Mortgage, 5.75% due 10/1/2010 (ETM) | Aa3/NR | 1,115,000 | 1,175,567 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2014 (Insured: Syncora) | Aa3/NR | 1,000,000 | 1,118,530 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2015 (Insured: Syncora) | Aa3/NR | 1,480,000 | 1,668,345 | |||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2016 (Insured: Syncora) | Aa3/NR | 1,520,000 | 1,706,686 | |||||
Allen County Redevelopment District, 5.00% due 11/15/2016 | A3/NR | 1,000,000 | 1,090,100 | |||||
b Avon Community School Building Corp., 5.00% due 7/15/2017 (Insured: AMBAC/State Aid Withholding) | NR/A | 2,500,000 | 2,829,400 | |||||
Ball State University Student Fee, 5.75% due 7/1/2012 (Insured: FGIC) | A1/A+ | 1,000,000 | 1,088,650 | |||||
Boonville Junior High School Building Corp., 0% due 7/1/2010 (State Aid Withholding) | NR/A | 850,000 | 835,057 | |||||
Boonville Junior High School Building Corp., 0% due 1/1/2011 (State Aid Withholding) | NR/A | 850,000 | 822,222 | |||||
Boonville Junior High School Building Corp., 0% due 7/1/2011 (State Aid Withholding) | NR/A | 950,000 | 905,436 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Brownsburg 1999 School Building Corp., 5.00% due 8/1/2018 (Insured: FSA; State Aid Withholding) | Aa3/AAA | $ | 1,250,000 | $ | 1,373,750 | |||
Carmel Redevelopment Authority, 0% due 2/1/2015 (Performing Arts Center) | Aa2/AA | 1,575,000 | 1,357,745 | |||||
Center Grove Building Corp., 5.00% due 7/15/2010 (Insured: AMBAC) (ETM) | NR/AA+ | 1,135,000 | 1,176,677 | |||||
Evansville Vanderburgh, 5.00% due 7/15/2014 (Insured: AMBAC) | NR/A+ | 1,000,000 | 1,098,440 | |||||
Evansville Vanderburgh, 5.00% due 7/15/2015 (Insured: AMBAC) | NR/A+ | 1,000,000 | 1,103,660 | |||||
Indiana Bond Bank, 4.80% due 2/1/2014 | NR/AAA | 4,060,000 | 4,090,206 | |||||
Indiana Bond Bank, 5.25% due 10/15/2016 (Special Gas Program) | Aa3/NR | 1,545,000 | 1,662,775 | |||||
Indiana Finance Authority, 5.00% due 5/1/2015 (Parkview Health Systems) | A1/A+ | 1,500,000 | 1,603,335 | |||||
Indiana Finance Authority, 5.00% due 5/1/2016 (Parkview Health Systems) | A1/A+ | 3,090,000 | 3,290,634 | |||||
Indiana Finance Authority, 5.00% due 5/1/2017 (Parkview Health Systems) | A1/A+ | 1,000,000 | 1,054,130 | |||||
Indiana Health Facilities, 3.625% due 11/15/2036 put 8/1/2011 (Ascension Health) | Aa1/AA | 3,955,000 | 4,111,578 | |||||
Indiana Multi School Building Corp. First Mortgage, 5.00% due 7/15/2016 (Insured: Natl-Re; State Aid Withholding) | Baa1/AA | 5,000,000 | 5,703,750 | |||||
Indiana State Educational Facilities Authority, 5.75% due 10/1/2009 (University of Indianapolis) | NR/A- | 670,000 | 670,074 | |||||
Indiana State Finance Authority Revenue, 5.00% due 7/1/2011 (Wabash Correctional Facilities) | Aa2/AA+ | 1,390,000 | 1,485,840 | |||||
Indiana State Finance Authority Revenue, 4.90% due 1/1/2016 (Indianapolis Power & Light Co.) | A3/BBB | 11,650,000 | 12,290,284 | |||||
Indiana State Finance Authority Revenue, 5.00% due 7/1/2016 (Forensic & Health Science; Insured: Natl-Re) | Aa2/AA+ | 1,030,000 | 1,186,972 | |||||
Indiana State Finance Authority Revenue, 5.25% due 7/1/2018 (Wabash Correctional Facilities) | Aa2/AA+ | 1,000,000 | 1,177,080 | |||||
Indiana State Finance Authority Revenue, 5.25% due 7/1/2018 (Rockville Correctional Facilities) | Aa2/AA+ | 2,150,000 | 2,530,722 | |||||
Indiana State Finance Authority Revenue, 5.00% due 11/1/2018 | Aa3/AA+ | 2,000,000 | 2,297,140 | |||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 1/1/2015 (Waterworks; Insured: Natl-Re) | A1/AA- | 1,000,000 | 1,134,960 | |||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 7/1/2015 (Waterworks; Insured: Natl-Re) | A1/AA- | 1,000,000 | 1,144,100 | |||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 7/1/2016 (Insured: FGIC) | Aa2/AA | 1,030,000 | 1,160,666 | |||||
Knox Middle School Building Corp. First Mortgage, 0% due 1/15/2020 (Insured: FGIC; State Aid Withholding) | NR/A | 1,295,000 | 774,863 | |||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2014 (Insured: Natl-Re/ FGIC; State Aid Withholding) | NR/AA+ | 1,200,000 | 1,369,692 | |||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2015 (Insured: Natl-Re/ FGIC; State Aid Withholding) | NR/AA+ | 1,250,000 | 1,440,263 | |||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2013 (Insured: Natl-Re; State Aid Withholding) | Baa1/A+ | 1,055,000 | 1,166,324 | |||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2014 (Insured: Natl-Re; State Aid Withholding) | Baa1/A+ | 1,135,000 | 1,267,239 | |||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2015 (Insured: Natl-Re; State Aid Withholding) | Baa1/A+ | 1,140,000 | 1,283,959 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2016 (146th Street Extension A) | NR/AA- | 1,660,000 | 1,847,049 | |||||
Perry Township Multi School Building Corp., 5.00% due 7/10/2014 (Insured: FSA; State Aid Withholding) | Aa3/NR | 2,130,000 | 2,404,685 | |||||
Peru Community School Corp. First Mortgage, 0% due 7/1/2010 (State Aid Withholding) | NR/A | 835,000 | 820,321 | |||||
Plainfield Community High School Building Corp. First Mortgage, 5.00% due 1/15/2015 (Insured: Natl-Re/FGIC) | NR/A | 1,445,000 | 1,617,258 | |||||
Rockport PCR, 6.25% due 6/1/2025 put 6/2/2014 (Indiana Michigan Power Co.) | Baa2/BBB | 4,100,000 | 4,498,479 | |||||
Rockport PCR, 6.25% due 6/1/2025 put 6/2/2014 (Indiana Michigan Power Co.) | Baa2/BBB | 1,000,000 | 1,097,190 | |||||
South Bend Community School Building Corp., 5.00% due 7/15/2016 (Insured: Natl-Re/FGIC; State Aid Withholding) | NR/AA+ | 1,785,000 | 2,052,589 | |||||
Warren Township Vision 2005, 5.00% due 7/10/2015 (Insured: Natl-Re/FGIC; State Aid Withholding) | NR/AA+ | 2,095,000 | 2,387,504 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2010 (State Aid Withholding) (ETM) | NR/AA+ | $ | 995,000 | $ | 1,035,715 | |||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2011 (State Aid Withholding) (ETM) | NR/AA+ | 1,095,000 | 1,189,039 | |||||
West Clark School Building Corp., 5.25% due 1/15/2014 (Insured: Natl-Re) | Baa1/AA+ | 1,335,000 | 1,519,924 | |||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2011 (Insured: Natl-Re/ FGIC; State Aid Withholding) | NR/AA+ | 2,080,000 | 2,254,741 | |||||
IOWA — 1.44% | ||||||||
Ankeny Community School District Sales & Services Tax, 5.00% due 7/1/2010 | NR/AA- | 2,900,000 | 2,988,073 | |||||
Des Moines Limited Obligation, 4.40% due 12/1/2015 put 12/1/2011 (Des Moines Parking Associates; LOC: Wells Fargo Bank) | NR/NR | 2,535,000 | 2,538,245 | |||||
a Dubuque Community School District, 5.00% due 1/1/2013 | A3/NR | 1,600,000 | 1,615,088 | |||||
Dubuque Community School District, 5.00% due 7/1/2013 | A3/NR | 1,640,000 | 1,654,793 | |||||
Iowa Finance Authority, 6.50% due 2/15/2010 (Iowa Health Services) | Aa3/NR | 2,955,000 | 3,005,442 | |||||
Iowa Finance Authority, 5.75% due 12/1/2010 (Trinity Health) | Aa2/AA | 2,260,000 | 2,314,217 | |||||
Iowa Finance Authority, 6.00% due 2/15/2011 pre-refunded 2/15/2010 (Iowa Health Services; Insured: AMBAC) | NR/NR | 3,145,000 | 3,240,954 | |||||
Iowa Health Facilities Revenue, 5.00% due 2/15/2014 (Iowa Health System; Insured: Assured Guaranty) | Aa2/NR | 2,500,000 | 2,730,075 | |||||
Iowa Health Facilities Revenue, 5.00% due 2/15/2015 (Iowa Health System; Insured: Assured Guaranty) | Aa2/NR | 2,300,000 | 2,518,684 | |||||
Iowa Health Facilities Revenue, 5.00% due 2/15/2016 (Iowa Health System; Insured: Assured Guaranty) | Aa2/NR | 1,600,000 | 1,753,232 | |||||
Iowa Health Facilities Revenue, 5.00% due 8/15/2016 (Iowa Health System; Insured: Assured Guaranty) | Aa2/NR | 1,500,000 | 1,662,465 | |||||
Iowa Health Facilities Revenue, 5.00% due 2/15/2017 (Iowa Health System; Insured: Assured Guaranty) | Aa2/NR | 1,600,000 | 1,749,856 | |||||
Iowa Health Facilities Revenue, 5.00% due 8/15/2017 (Iowa Health System; Insured: Assured Guaranty) | Aa2/NR | 990,000 | 1,091,049 | |||||
Iowa Health Facilities Revenue, 5.00% due 2/15/2018 (Iowa Health System; Insured: Assured Guaranty) | Aa2/NR | 1,405,000 | 1,532,279 | |||||
KANSAS — 0.95% | ||||||||
Burlington Environmental Improvement, 5.00% due 12/1/2023 put 4/1/2011 (Kansas City Power & Light; Insured: Syncora) | A3/BBB+ | 1,500,000 | 1,553,955 | |||||
Burlington Environmental Improvement, 5.25% due 12/1/2023 put 4/1/2013 (Kansas City Power & Light; Insured: Syncora) | A3/BBB+ | 5,000,000 | 5,330,250 | |||||
Burlington Environmental Improvement, 5.374% due 9/1/2035 put 4/1/2013 (Kansas City Power & Light; Insured: FGIC) | Baa1/A | 12,400,000 | 13,291,188 | |||||
KENTUCKY — 0.79% | ||||||||
Kentucky Economic DFA, 5.35% due 10/1/2009 (Norton Healthcare; Insured: Natl-Re) (ETM) | NR/A | 2,835,000 | 2,835,369 | |||||
Kentucky Economic DFA, 5.35% due 10/1/2009 (Norton Healthcare; Insured: Natl-Re) | Baa1/A | 4,565,000 | 4,565,365 | |||||
Kentucky Economic DFA, 5.40% due 10/1/2010 (Norton Healthcare; Insured: Natl-Re) (ETM) | NR/A | 3,775,000 | 3,950,802 | |||||
Kentucky Economic DFA, 5.40% due 10/1/2010 (Norton Healthcare; Insured Natl-Re) | Baa1/A | 4,055,000 | 4,165,458 | |||||
a Kentucky Economic DFA, 0% due 10/1/2021 (Norton Healthcare; Insured: Natl-Re) | Baa1/A | 2,100,000 | 1,069,047 | |||||
LOUISIANA — 2.72% | ||||||||
East Baton Rouge Sewer, 5.00% due 2/1/2018 (Insured: FSA) | Aa3/AAA | 3,000,000 | 3,373,230 | |||||
Ernest N. Morial New Orleans Exhibit Hall, 5.00% due 7/15/2013 (Insured: AMBAC) | NR/BBB | 1,875,000 | 1,835,644 | |||||
Jefferson Sales Tax, 5.00% due 12/1/2018 (Insured: Assured Guaranty) | Aa2/AAA | 2,000,000 | 2,265,340 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 9/1/2012 (Bellemont Apartments) | Ba3/NR | $ | 545,000 | $ | 524,802 | |||
b Louisiana Environmental Facilities & Community Development Authority, 4.00% due 10/1/2013 (LCTCS Facilities Corp.) | A3/A | 1,500,000 | 1,603,920 | |||||
b Louisiana Environmental Facilities & Community Development Authority, 4.00% due 10/1/2014 (LCTCS Facilities Corp.) | A3/A | 1,500,000 | 1,606,875 | |||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2015 (Independence Stadium) | NR/A | 1,000,000 | 1,081,130 | |||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2016 (Independence Stadium) | NR/A | 1,000,000 | 1,081,960 | |||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2017 (Independence Stadium) | NR/A | 1,265,000 | 1,364,846 | |||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2018 (Independence Stadium) | NR/A | 1,000,000 | 1,074,550 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2014 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 1,040,850 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2015 (Ochsner Clinic Foundation) | A3/NR | 1,825,000 | 1,885,189 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2016 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 1,028,490 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2017 (Ochsner Clinic Foundation) | A3/NR | 1,035,000 | 1,059,312 | |||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2018 (Ochsner Clinic Foundation) | A3/NR | 1,000,000 | 1,013,230 | |||||
Louisiana Public Facilities Authority Revenue, 7.00% due 12/1/2038 put 12/1/2011 (Cleco Power LLC) | Baa1/BBB | 9,000,000 | 9,673,470 | |||||
Louisiana State Citizens Property Insurance Corp., 5.00% due 6/1/2015 (Insured: AMBAC) | Baa2/A- | 10,265,000 | 10,802,373 | |||||
Louisiana State GO, 5.00% due 8/1/2017 (Insured: Natl-Re) | A1/A+ | 4,000,000 | 4,429,760 | |||||
Louisiana State Office Facilities Corp., 5.50% due 3/1/2013 (Capitol Complex; Insured: Natl-Re) | Baa1/A | 1,000,000 | 1,013,180 | |||||
Louisiana State Offshore Terminal Authority, 4.25% due 10/1/2037 put 10/1/2010 (Deepwater Port Loop LLC) | A3/A | 4,200,000 | 4,267,494 | |||||
Monroe Sales Tax Increment Garrett Road Economic Development Area, 5.00% due 3/1/2017 (Insured: Radian) | NR/BBB- | 1,505,000 | 1,711,486 | |||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | Baa3/BBB | 2,400,000 | 2,467,848 | |||||
Regional Transportation Authority, 8.00% due 12/1/2011 (Insured: FGIC) | NR/A- | 1,250,000 | 1,374,425 | |||||
MARYLAND — 0.75% | ||||||||
Maryland Health & Higher Educational Facilities, 5.00% due 1/1/2017 (Washington County Hospital) | NR/BBB- | 1,000,000 | 1,029,330 | |||||
Maryland Health & Higher Educational Facilities, 5.00% due 1/1/2018 (Washington County Hospital) | NR/BBB- | 1,000,000 | 1,023,690 | |||||
Maryland Health & Higher Educational Facilities, 0.41% due 7/1/2041 put 10/1/2009 (Insured: Suntrust Bank) (daily demand notes) | VMIG1/A-2 | 12,800,000 | 12,800,000 | |||||
Montgomery County, 0.30% due 6/1/2026 put 10/1/2009 (daily demand notes) | VMIG1/A-1 | 1,000,000 | 1,000,000 | |||||
MASSACHUSETTS — 2.73% | ||||||||
Massachusetts DFA Resource Recovery, 5.50% due 1/1/2011 (Seamass Partnership; Insured: Natl-Re) | Baa1/AA- | 3,720,000 | 3,791,387 | |||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2018 | NR/AA | 7,500,000 | 8,356,125 | |||||
Massachusetts Educational Financing Authority, 5.75% due 1/1/2020 | NR/AA | 7,500,000 | 8,506,725 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2011 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 2,345,000 | 2,474,374 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Massachusetts Health & Educational Facilities Authority, 5.375% due 5/15/2012 (New England Medical Center Hospital; Insured: FGIC) (ETM) | NR/NR | $ | 3,415,000 | $ | 3,781,361 | |||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2012 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 2,330,000 | 2,488,090 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2013 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 3,215,000 | 3,466,542 | |||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2019 (Berkshire Health Systems; Insured: Assured Guaranty) | NR/AAA | 1,750,000 | 1,827,385 | |||||
Massachusetts Health & Educational Facilities Authority, 0.27% due 8/15/2034 put 10/1/2009 (Tufts University; SPA: Bank of America N.A.) (daily demand notes) | VMIG1/A-1 | 6,100,000 | 6,100,000 | |||||
Massachusetts Solid Waste Disposal Revenue, 5.75% due 12/1/2042 put 5/1/2019 (Dominion Energy Brayton) | Baa2/A- | 1,800,000 | 1,938,240 | |||||
Massachusetts Western Turnpike Revenue, 5.55% due 1/1/2017 (Insured: Natl-Re) | Aa3/A | 15,000,000 | 15,063,450 | |||||
MICHIGAN — 5.26% | ||||||||
City of Battle Creek, 5.00% due 5/1/2020 (Insured: AMBAC) | A1/AA- | 3,200,000 | 3,462,656 | |||||
City of Detroit Water, 5.40% due 7/1/2011 (Insured: Natl-Re) | A2/A | 1,000,000 | 1,051,400 | |||||
Detroit Sewage Disposal Revenue, 5.00% due 7/1/2014 (Insured: Natl-Re) | A3/A | 2,000,000 | 2,164,800 | |||||
Detroit Sewage Disposal Revenue, 5.25% due 7/1/2019 (Insured: Natl-Re) | A2/A | 3,900,000 | 4,181,658 | |||||
Detroit Sewage Disposal Revenue, 5.50% due 7/1/2032 put 1/1/2012 (Insured: Natl-Re) | A3/A | 5,000,000 | 5,193,600 | |||||
Detroit Water Supply System, 6.00% due 7/1/2015 (Insured: Natl-Re) | A2/A+ | 3,280,000 | 3,692,788 | |||||
Dickinson County Economic Development Corp. Environmental Impact, 5.75% due 6/1/2016 (International Paper Co.) | Baa3/BBB | 3,715,000 | 3,778,898 | |||||
Dickinson County Healthcare Systems, 5.50% due 11/1/2013 (Insured: ACA) | NR/NR | 3,095,000 | 3,128,333 | |||||
a Gull Lake Community School District GO, 0% due 5/1/2013 (Insured: FGIC) | NR/A | 1,980,000 | 1,704,047 | |||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 5.00% due 5/15/2018 (Bronson Hospital; Insured: FSA) | Aa3/AAA | 1,520,000 | 1,633,453 | |||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 5.00% due 5/15/2018 (Bronson Hospital; Insured: FSA) | Aa3/AAA | 2,500,000 | 2,686,600 | |||||
Kent Hospital Finance Authority, 5.25% due 1/15/2047 put 1/15/2014 (Spectrum Health) | Aa3/AA | 2,000,000 | 2,146,480 | |||||
Kentwood Public Schools GO, 5.00% due 5/1/2015 (Insured: Natl-Re) | Aa3/AA- | 4,050,000 | 4,377,362 | |||||
Michigan HFA, 5.375% due 7/1/2012 (Port Huron Hospital; Insured: FSA) | NR/AAA | 1,085,000 | 1,087,897 | |||||
Michigan Housing Development Authority Rental Housing Revenue, 5.00% due 4/1/2016 (GO of Authority) | NR/AA | 5,490,000 | 5,679,734 | |||||
Michigan State Building Authority, 5.00% due 10/15/2015 (Insured: AMBAC) | A1/A+ | 6,000,000 | 6,601,080 | |||||
Michigan State Building Authority, 5.50% due 10/15/2017 | A1/A+ | 4,000,000 | 4,504,200 | |||||
Michigan State COP, 4.25% due 9/1/2031 put 9/1/2011 (Insured: Natl-Re) | Baa1/A | 5,500,000 | 5,492,795 | |||||
Michigan State COP, 5.00% due 9/1/2031 put 9/1/2011 (Insured: Natl-Re) | Baa1/A | 7,530,000 | 7,627,212 | |||||
Michigan State HFA, 5.00% due 11/15/2017 (Sparrow Memorial Hospital) | A1/A+ | 1,000,000 | 1,059,490 | |||||
Michigan State HFA, 5.75% due 12/1/2034 put 12/1/2015 (Trinity Health) | Aa2/AA | 10,000,000 | 11,482,000 | |||||
Michigan State Hospital Finance Authority, 6.00% due 12/1/2020 (Trinity Health) | Aa2/AA | 1,175,000 | 1,216,149 | |||||
Michigan State Strategic Fund, 4.75% due 8/1/2011 (NSF International) | NR/A- | 2,240,000 | 2,303,773 | |||||
Michigan State Strategic Fund, 5.00% due 10/15/2017 (Insured: Assured Guaranty) | Aa2/AAA | 2,000,000 | 2,296,980 | |||||
Michigan State Strategic Fund, 5.25% due 6/1/2018 (Clark Retirement Community) | NR/BBB- | 1,000,000 | 952,380 | |||||
Michigan State Strategic Fund, 5.25% due 8/1/2029 put 8/1/2014 (Detroit Edison Co.) | NR/A- | 2,500,000 | 2,622,575 | |||||
Michigan State Strategic Fund, 5.50% due 8/1/2029 put 8/1/2016 (Detroit Edison Co.) | NR/A- | 2,500,000 | 2,648,875 | |||||
Michigan State Strategic Fund, 4.85% due 9/1/2030 put 9/1/2011 (Detroit Edison Co.; Insured: AMBAC) | Baa1/NR | 4,350,000 | 4,429,605 | |||||
Royal Oak Hospital Finance Authority Hospital Revenue, 6.25% due 9/1/2014 (William Beaumont Hospital) | A1/A | 1,000,000 | 1,104,520 | |||||
b Western Townships Utilities Authority Sewage Disposal GO, 3.00% due 1/1/2011 | NR/AA | 1,000,000 | 1,020,040 | |||||
b Western Townships Utilities Authority Sewage Disposal GO, 3.00% due 1/1/2012 | NR/AA | 655,000 | 673,294 | |||||
b Western Townships Utilities Authority Sewage Disposal GO, 4.00% due 1/1/2013 | NR/AA | 1,000,000 | 1,061,360 | |||||
b Western Townships Utilities Authority Sewage Disposal GO, 4.00% due 1/1/2014 | NR/AA | 1,000,000 | 1,065,960 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
b Western Townships Utilities Authority Sewage Disposal GO, 5.00% due 1/1/2015 | NR/AA | $ | 1,585,000 | $ | 1,768,939 | |||
b Western Townships Utilities Authority Sewage Disposal GO, 5.00% due 1/1/2016 | NR/AA | 1,670,000 | 1,874,241 | |||||
b Western Townships Utilities Authority Sewage Disposal GO, 5.00% due 1/1/2017 | NR/AA | 1,500,000 | 1,690,005 | |||||
b Western Townships Utilities Authority Sewage Disposal GO, 5.00% due 1/1/2018 | NR/AA | 1,500,000 | 1,695,555 | |||||
MINNESOTA — 0.63% | ||||||||
Dakota County Community Development Agency Multi Family Housing, 5.00% due 11/1/2017 (Commons on Marice) | NR/NR | 1,150,000 | 1,084,841 | |||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2012 (Healthpartners Obligated Group) | Baa1/BBB | 1,000,000 | 1,041,890 | |||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2013 (Healthpartners Obligated Group) | Baa1/BBB | 2,200,000 | 2,293,874 | |||||
Minneapolis St. Paul Metropolitan Airports, 5.00% due 1/1/2017 (Insured: AMBAC) | NR/AA- | 8,005,000 | 8,969,202 | |||||
MISSISSIPPI — 0.38% | ||||||||
Gautier Utility District Systems, 5.50% due 3/1/2012 (Insured: FGIC) | NR/NR | 1,020,000 | 1,080,945 | |||||
Mississippi Development Bank Public Improvement GO, 4.75% due 7/1/2017 | NR/NR | 1,565,000 | 1,598,491 | |||||
Mississippi Development Bank Special Obligation, 5.00% due 1/1/2011 (Madison County; Insured: FSA-CR FGIC/County Guaranty) | Aa3/AAA | 5,000,000 | 5,257,300 | |||||
MISSOURI — 0.21% | ||||||||
Missouri Development Finance Board Healthcare Facilities, 4.80% due 11/1/2012 (Lutheran Home Aged; LOC: Commerce Bank) | Aa2/NR | 1,045,000 | 1,076,026 | |||||
Missouri State Health & Educational Facilities Authority, 5.00% due 6/1/2011 (SSM Healthcare Corp.) | NR/AA- | 1,000,000 | 1,054,680 | |||||
Springfield Public Utilities COP, 5.00% due 12/1/2013 (Insured: Natl-Re) | A1/AA- | 2,000,000 | 2,271,880 | |||||
NEBRASKA — 0.38% | ||||||||
Madison County Hospital Authority, 5.25% due 7/1/2010 (Faith Regional Health Services; Insured: Radian) | NR/NR | 750,000 | 771,878 | |||||
a Madison County Hospital Authority, 5.50% due 7/1/2012 (Faith Regional Health Services; Insured: Radian) | NR/NR | 1,625,000 | 1,776,385 | |||||
Omaha Public Power District Electric Systems, 5.00% due 2/1/2013 | Aa1/AA | 5,000,000 | 5,531,500 | |||||
NEVADA — 1.85% | ||||||||
Clark County GO, 5.00% due 11/1/2014 | Aa1/AA+ | 4,000,000 | 4,509,560 | |||||
Clark County GO, 5.00% due 11/1/2017 (insured: AMBAC) | Aa1/AA+ | 1,185,000 | 1,334,440 | |||||
Clark County Improvement District, 5.00% due 12/1/2015 (Insured: AMBAC) | NR/BBB+ | 1,860,000 | 1,894,447 | |||||
Clark County School District GO, 5.00% due 6/15/2015 (Insured: Natl-Re) | Aa2/AA | 1,000,000 | 1,094,040 | |||||
Las Vegas Clark County Library District GO, 5.00% due 1/1/2018 | Aa3/AA | 6,535,000 | 7,246,858 | |||||
Las Vegas Clark County Library District GO, 5.00% due 1/1/2019 | Aa3/AA | 3,000,000 | 3,327,870 | |||||
Las Vegas Convention & Visitors Authority, 5.25% due 7/1/2013 (Insured: AMBAC) | Aa3/A+ | 1,530,000 | 1,670,010 | |||||
Las Vegas Convention & Visitors Authority, 5.25% due 7/1/2014 (Insured: AMBAC) | Aa3/A+ | 2,555,000 | 2,810,142 | |||||
Las Vegas Convention & Visitors Authority, 5.00% due 7/1/2019 (Insured: AMBAC) | Aa3/A+ | 1,000,000 | 1,052,450 | |||||
Las Vegas GO, 7.00% due 4/1/2017 (Performing Arts Center) | Aa2/AA | 1,825,000 | 2,277,418 | |||||
Las Vegas GO, 7.00% due 4/1/2018 (Performing Arts Center) | Aa2/AA | 2,095,000 | 2,647,871 | |||||
Las Vegas Special Local Improvement District, 5.125% due 6/1/2011 (Insured: FSA) | Aa3/AAA | 1,580,000 | 1,601,156 | |||||
Las Vegas Special Local Improvement District, 5.375% due 6/1/2013 (Insured: FSA) | Aa3/AAA | 1,090,000 | 1,102,448 | |||||
Las Vegas Water District GO, 0.38% due 6/1/2036 put 10/1/2009 (SPA: Dexia) (daily demand notes) | VMIG1/A-1 | 900,000 | 900,000 | |||||
Reno Hospital Revenue, 5.25% due 6/1/2014 (Washoe Medical Center; Insured: FSA) | Aa3/AAA | 1,000,000 | 1,092,660 | |||||
Reno Hospital Revenue, 5.25% due 6/1/2016 (Washoe Medical Center; Insured: FSA) | Aa3/AAA | 1,100,000 | 1,202,410 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Reno Hospital Revenue, 5.25% due 6/1/2018 (Washoe Medical Center; Insured: FSA) | Aa3/AAA | $ | 1,000,000 | $ | 1,089,000 | |||
Sparks Redevelopment Agency Tax Allocation, 5.75% due 1/15/2010 (Insured: Radian) | NR/BBB- | 1,000,000 | 1,009,610 | |||||
Sparks Redevelopment Agency Tax Allocation, 5.75% due 1/15/2011 (Insured: Radian) | NR/BBB- | 1,285,000 | 1,314,889 | |||||
NEW HAMPSHIRE — 0.54% | ||||||||
New Hampshire Health & Educational Facilities, 4.50% due 8/1/2014 (Dartmouth-Hitchcock) | NR/A+ | 1,835,000 | 1,943,394 | |||||
New Hampshire Health & Educational Facilities, 5.00% due 10/1/2016 (Southern NH Health Systems) | NR/A- | 1,260,000 | 1,304,755 | |||||
New Hampshire Health & Educational Facilities, 5.00% due 10/1/2017 (Southern NH Health Systems) | NR/A- | 1,000,000 | 1,033,290 | |||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2016 (Insured: Natl-Re; GO of Bond Bank) | Aa3/AA | 2,985,000 | 3,486,450 | |||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2017 (Insured: Natl-Re; GO of Bond Bank) | Aa3/AA | 3,130,000 | 3,672,679 | |||||
NEW JERSEY — 1.56% | ||||||||
Hudson County COP, 7.00% due 12/1/2012 (Insured: Natl-Re) | Baa1/A | 1,000,000 | 1,138,030 | |||||
Hudson County COP, 6.25% due 12/1/2014 (Insured: Natl-Re) | Baa1/A | 1,500,000 | 1,720,380 | |||||
New Jersey EDA, 5.00% due 11/15/2011 (Seabrook Village) | NR/NR | 1,000,000 | 1,027,120 | |||||
New Jersey EDA, 5.00% due 11/15/2014 (Seabrook Village) | NR/NR | 1,000,000 | 1,019,400 | |||||
New Jersey EDA Cigarette Tax Revenue, 5.00% due 6/15/2011 (Insured: FGIC) | Baa2/BBB | 5,000,000 | 5,123,900 | |||||
New Jersey EDA Cigarette Tax Revenue, 5.00% due 6/15/2012 (Insured: FGIC) | Baa2/BBB | 7,375,000 | 7,625,307 | |||||
New Jersey State Transit Corp. COP, 5.25% due 9/15/2013 (Insured: AMBAC) | A1/A | 6,000,000 | 6,726,600 | |||||
New Jersey State Transit Corp. COP, 5.50% due 9/15/2013 (Insured: AMBAC) | A1/A | 7,650,000 | 8,648,784 | |||||
NEW MEXICO — 0.82% | ||||||||
Albuquerque Airport, 5.50% due 7/1/2013 | A1/A | 1,820,000 | 2,006,113 | |||||
Farmington PCR, 0.32% due 5/1/2024 put 10/1/2009 (LOC: Barclays Bank) (daily demand notes) | VMIG1/A-1+ | 2,500,000 | 2,500,000 | |||||
Gallup PCR, 5.00% due 8/15/2016 (Insured: AMBAC) | Baa1/A | 2,300,000 | 2,427,880 | |||||
Los Alamos County Gross Receipts Tax, 5.50% due 6/1/2017 | A1/AA+ | 2,365,000 | 2,720,081 | |||||
Los Alamos County Gross Receipts Tax, 5.50% due 6/1/2018 | A1/AA+ | 2,205,000 | 2,546,467 | |||||
New Mexico Highway Commission Tax, 5.00% due 6/15/2011 (Insured: AMBAC) (ETM) | Aa2/AAA | 4,865,000 | 5,223,453 | |||||
NEW YORK — 5.15% | ||||||||
Monroe County IDA, 5.375% due 6/1/2017 (St. John Fisher College; Insured: Radian) | NR/BBB- | 3,910,000 | 3,984,994 | |||||
New York City GO, 0.28% due 11/1/2026 put 10/1/2009 (Insured: FSA/SPA-Dexia Credit Local) (daily demand notes) | NR/A-1 | 2,000,000 | 2,000,000 | |||||
New York City GO, 0.31% due 8/1/2028 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-1 | 3,160,000 | 3,160,000 | |||||
New York City GO, 0.31% due 4/1/2035 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-1 | 4,200,000 | 4,200,000 | |||||
New York City IDA, 5.00% due 6/1/2010 (Lycee Francais de New York; Insured: ACA) | Baa1/BBB | 1,175,000 | 1,188,301 | |||||
New York City IDA, 5.25% due 6/1/2011 (Lycee Francais de New York; Insured: ACA) | Baa1/BBB | 2,215,000 | 2,273,232 | |||||
New York City IDA, 5.25% due 6/1/2012 (Lycee Francais de New York; Insured: ACA) | Baa1/BBB | 2,330,000 | 2,417,258 | |||||
New York City Municipal Water Finance Authority, 0.35% due 6/15/2032 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-1 | 7,700,000 | 7,700,000 | |||||
New York City Municipal Water Finance Authority, 0.35% due 6/15/2033 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-1 | 10,000,000 | 10,000,000 | |||||
New York City Transitional Finance Authority, 5.00% due 11/1/2012 | Aa1/AAA | 5,000,000 | 5,583,600 | |||||
New York City Transitional Finance Authority, 5.00% due 11/1/2014 | Aa1/AAA | 2,000,000 | 2,314,220 | |||||
New York City Transitional Finance Authority, 5.00% due 1/15/2018 (State Aid Withholding) | A1/AA- | 4,865,000 | 5,611,048 |
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
New York State Dormitory Authority, 5.00% due 8/15/2010 (Mental Health Services; Insured: Natl-Re) | A1/AA- | $ | 1,600,000 | $ | 1,657,552 | |||
New York State Dormitory Authority, 5.50% due 7/1/2012 (South Nassau Community Hospital) | Baa1/NR | 1,820,000 | 1,890,853 | |||||
New York State Dormitory Authority, 5.50% due 7/1/2013 (South Nassau Community Hospital) | Baa1/NR | 1,500,000 | 1,565,355 | |||||
New York State Dormitory Authority, 5.25% due 8/15/2013 (Presbyterian Hospital; Insured: FHA & FSA) | Aa3/AAA | 3,650,000 | 4,047,631 | |||||
New York State Dormitory Authority, 5.25% due 8/15/2015 (New York Presbyterian Hospital; Insured: FSA/FHA) | Aa3/AAA | 4,425,000 | 4,836,082 | |||||
New York State Dormitory Authority, 5.50% due 7/1/2016 (Brooklyn Law School; Insured: Radian) | Baa1/BBB+ | 1,220,000 | 1,287,015 | |||||
New York State Dormitory Authority, 5.50% due 2/15/2017 (Mental Health Services) | NR/AA- | 5,000,000 | 5,758,850 | |||||
New York State Dormitory Authority, 5.50% due 7/1/2017 (Insured: Radian) | Baa1/BBB+ | 2,500,000 | 2,616,000 | |||||
New York State Dormitory Authority, 5.50% due 2/15/2018 (Mental Health Services) | NR/AA- | 5,000,000 | 5,789,100 | |||||
New York State Dormitory Authority, 5.25% due 11/15/2026 put 5/15/2012 (Insured: AMBAC) | A1/AA- | 4,000,000 | 4,315,920 | |||||
New York State Dormitory Authority, 0.28% due 7/1/2037 put 10/1/2009 (Cornell University; SPA: Bank of America N.A.) (daily demand notes) | VMIG1/A-1+ | 4,325,000 | 4,325,000 | |||||
New York State Dormitory Authority, 0.30% due 7/1/2037 put 10/1/2009 (Cornell University) (daily demand notes) | VMIG1/A-1+ | 1,600,000 | 1,600,000 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2012 (Insured: SONYMA) | Aa1/NR | 2,000,000 | 2,076,980 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2013 (Insured: SONYMA) | Aa1/NR | 4,600,000 | 4,777,054 | |||||
New York State Dormitory Authority Aids Long Term Health Facilities, 5.00% due 11/1/2014 (Insured: SONYMA) | Aa1/NR | 1,500,000 | 1,557,735 | |||||
New York State Thruway Authority Service Contract, 5.50% due 4/1/2013 (Local Highway & Bridge; Insured: Syncora) | A1/AA- | 1,000,000 | 1,092,470 | |||||
Port Authority 148th, 5.00% due 8/15/2017 (Insured: FSA/GO of Authority) | Aa3/AAA | 4,725,000 | 5,577,106 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.00% due 6/1/2011 | NR/AA- | 1,695,000 | 1,807,497 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2013 | A1/AA- | 1,145,000 | 1,148,286 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2013 (Insured: Syncora) | A1/AA- | 715,000 | 717,031 | |||||
NORTH CAROLINA — 2.78% | ||||||||
Charlotte Mecklenberg Hospital Authority Health Care Systems, 5.00% due 1/15/2016 (Carolinas Health Network) | Aa3/AA- | 3,420,000 | 3,780,468 | |||||
Charlotte Mecklenberg Hospital Authority Health Care Systems, 5.00% due 1/15/2017 (Carolinas Health Network) | Aa3/AA- | 2,000,000 | 2,206,380 | |||||
Mecklenburg County COP, 5.00% due 2/1/2011 | Aa1/AA+ | 1,000,000 | 1,055,540 | |||||
North Carolina Eastern Municipal Power Agency, 5.375% due 1/1/2011 | Baa1/A- | 3,000,000 | 3,126,840 | |||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2012 | Baa1/A- | 650,000 | 695,097 | |||||
North Carolina Eastern Municipal Power Agency, 5.50% due 1/1/2012 | Baa1/A- | 1,100,000 | 1,180,828 | |||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2013 | Baa1/A- | 1,055,000 | 1,148,156 | |||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2016 (Insured: AMBAC) | Baa1/A- | 1,700,000 | 1,860,990 | |||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: AMBAC) | Baa1/NR | 7,500,000 | 8,699,325 | |||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: BHAC/ AMBAC) | Aa1/AAA | 5,700,000 | 6,895,233 | |||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2019 (Insured: Assured Guaranty) | Aa2/AAA | 3,000,000 | 3,375,630 | |||||
North Carolina Infrastructure Finance Corp. COP, 5.00% due 2/1/2017 (Correctional Facilities) | Aa1/AA+ | 2,400,000 | 2,635,704 | |||||
North Carolina Medical Care Commission, 5.00% due 9/1/2013 (Rowan Regional Medical Center; Insured: FSA & FHA 242) | Aa3/AAA | 1,000,000 | 1,076,100 |
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
North Carolina Municipal Power Agency, 6.00% due 1/1/2010 (Catawba Electric; Insured: Natl-Re) | A2/A | $ | 2,400,000 | $ | 2,431,224 | |||
North Carolina Municipal Power Agency, 5.50% due 1/1/2013 (Catawba Electric) | A2/A | 2,505,000 | 2,778,872 | |||||
North Carolina Municipal Power Agency, 6.375% due 1/1/2013 pre-refunded 1/1/2010 (Catawba Electric) | A2/A | 1,500,000 | 1,537,665 | |||||
North Carolina Municipal Power Agency, 5.25% due 1/1/2017 (Catawba Electric) | A2/A | 3,000,000 | 3,415,920 | |||||
North Carolina State Infrastructure Finance Corp. COP, 5.00% due 2/1/2016 (Correctional Facilities) | Aa1/AA+ | 5,000,000 | 5,540,450 | |||||
University of North Carolina Systems Pool Revenue, 5.00% due 4/1/2012 (Insured: AMBAC) | NR/NR | 1,030,000 | 1,107,817 | |||||
Wake County GO, 5.00% due 3/1/2011 | Aaa/AAA | 4,000,000 | 4,249,560 | |||||
NORTH DAKOTA — 0.12% | ||||||||
a Ward County Health Care Facilities, 5.00% due 7/1/2011 (Trinity Obligated Group) | NR/BBB+ | 1,000,000 | 1,022,840 | |||||
Ward County Health Care Facilities, 5.00% due 7/1/2013 (Trinity Obligated Group) | NR/BBB+ | 1,560,000 | 1,605,536 | |||||
OHIO — 1.78% | ||||||||
Akron COP, 5.00% due 12/1/2013 (Insured: Assured Guaranty) | NR/AAA | 3,000,000 | 3,394,860 | |||||
Akron COP, 5.00% due 12/1/2014 (Insured: Assured Guaranty) | NR/AAA | 2,000,000 | 2,287,520 | |||||
Greater Cleveland Regional Transportation Authority GO, 5.00% due 12/1/2015 (Insured: Natl-Re) | Aa3/NR | 1,000,000 | 1,135,100 | |||||
Hudson City GO, 6.35% due 12/1/2011 pre-refunded 12/1/2010 (Library Improvement) | Aa1/NR | 1,400,000 | 1,523,606 | |||||
Mahoning Valley Sanitary District, 5.90% due 11/15/2009 (Insured: FSA) | Aa3/AAA | 770,000 | 775,321 | |||||
Montgomery County, 6.00% due 12/1/2009 (Catholic Health Initiatives) | Aa2/AA | 2,385,000 | 2,404,271 | |||||
Montgomery County, 6.00% due 12/1/2010 (Catholic Health Initiatives) | Aa2/AA | 1,530,000 | 1,588,201 | |||||
Montgomery County, 5.25% due 10/1/2038 put 11/1/2013 (Catholic Health Initiatives) | Aa2/AA | 1,500,000 | 1,634,040 | |||||
Montgomery County, 4.10% due 10/1/2041 put 11/10/2011 (Catholic Health Initiatives) | Aa2/AA | 2,500,000 | 2,613,575 | |||||
Ohio State Air Quality Development Authority, 5.625% due 6/1/2018 (First Energy Nuclear) | Baa1/BBB | 5,000,000 | 5,429,650 | |||||
Ohio State Air Quality Development Authority, 5.75% due 6/1/2033 put 12/1/2011 (First Energy Nuclear) | Baa2/BBB | 2,350,000 | 2,525,592 | |||||
Ohio State Air Quality Development Authority, 3.875% due 12/1/2038 (Columbus Southern Power Co.) | A3/BBB | 4,800,000 | 4,900,224 | |||||
Ohio State Higher Educational Facilities, 0.30% due 8/1/2033 put 10/1/2009 (Kenyon College; SPA: Bank One Illinois) (daily demand notes) | VMIG1/A-1 | 1,000,000 | 1,000,000 | |||||
Ohio State Higher Educational Facilities, 5.05% due 7/1/2037 put 7/1/2016 (Kenyon College) | A1/A+ | 1,000,000 | 1,085,560 | |||||
Ohio State Water Development Authority PCR, 5.875% due 6/1/2033 put 6/1/2016 (First Energy Nuclear) | Baa1/BBB | 5,000,000 | 5,357,200 | |||||
OKLAHOMA — 1.07% | ||||||||
Comanche County Hospital Authority, 5.00% due 7/1/2011 (Insured: Radian) | NR/BBB- | 1,000,000 | 1,026,260 | |||||
Comanche County Hospital Authority, 5.25% due 7/1/2015 (Insured: Radian) | NR/BBB- | 1,340,000 | 1,394,471 | |||||
Oklahoma County Finance Authority Educational Facilities, 5.00% due 9/1/2016 (Western Heights Public Schools) | NR/A+ | 3,000,000 | 3,255,150 | |||||
Oklahoma County Finance Authority Educational Facilities, 5.00% due 9/1/2017 (Western Heights Public Schools) | NR/A+ | 4,075,000 | 4,400,796 | |||||
Oklahoma County Finance Authority Educational Facilities, 5.00% due 9/1/2018 (Western Heights Public Schools) | NR/A+ | 2,120,000 | 2,279,297 | |||||
Oklahoma DFA, 5.75% due 6/1/2011 pre-refunded 12/1/2010 (Integris Health; Insured: AMBAC) | Aa3/NR | 740,000 | 793,169 | |||||
Oklahoma DFA Health Facilities, 5.00% due 8/15/2017 (Integris Health) | Aa3/AA- | 2,900,000 | 3,217,057 | |||||
Oklahoma DFA Health Systems, 5.25% due 12/1/2011 (Duncan Regional Hospital) | NR/A | 1,215,000 | 1,281,315 | |||||
Oklahoma DFA Health Systems, 5.25% due 12/1/2012 (Duncan Regional Hospital) | NR/A | 1,330,000 | 1,424,270 | |||||
Oklahoma State Capital Improvement Authority, 0.30% due 7/1/2033 put 10/1/2009 (daily demand notes) | VMIG1/A-1 | 1,100,000 | 1,100,000 |
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Oklahoma State Industrial Authority, 5.00% due 7/1/2016 (Medical Research Foundation) | A1/NR | $ | 1,165,000 | $ | 1,248,228 | |||
Oklahoma State Industrial Authority, 5.25% due 7/1/2017 (Medical Research Foundation) | A1/NR | 1,075,000 | 1,170,471 | |||||
OREGON — 0.46% | ||||||||
Clackamas County Oregon Hospital Facilities, 5.00% due 7/15/2037 put 7/15/2014 (Legacy Health Systems) | A2/A+ | 6,000,000 | 6,394,920 | |||||
Clackamas County Oregon Hospital Facilities, 5.00% due 7/15/2039 put 7/15/2012 (Legacy Health Systems) | A2/A+ | 2,000,000 | 2,108,800 | |||||
Oregon State Department of Administrative Services COP, 5.00% due 11/1/2014 (Insured: Natl-Re/FGIC) | Aa3/AA- | 1,000,000 | 1,127,390 | |||||
PENNSYLVANIA — 2.53% | ||||||||
Allegheny County Hospital Development Authority, 5.50% due 12/15/2014 (UPMC Health Systems; Insured: AMBAC) | Aa3/NR | 4,500,000 | 4,553,235 | |||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2017 (UPMC Health Systems) | Aa3/A+ | 3,000,000 | 3,296,250 | |||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2018 (UPMC Health Systems) | Aa3/A+ | 3,000,000 | 3,306,720 | |||||
Allegheny County Redevelopment Authority, 5.10% due 7/1/2014 (Pittsburgh Mills) | NR/NR | 1,740,000 | 1,665,110 | |||||
Chester County School Authority, 5.00% due 4/1/2016 (Intermediate School; Insured: AMBAC) | NR/A | 1,915,000 | 2,120,977 | |||||
Commonwealth of Pennsylvania, 5.00% due 2/15/2011 | Aa2/AA | 5,000,000 | 5,298,300 | |||||
Northampton County IDA, 5.35% due 7/1/2010 (Moravian Hall Square; Insured: Radian) | NR/BBB- | 615,000 | 616,119 | |||||
Pennsylvania EDA, 3.60% due 9/1/2013 (Waste Management Income) | NR/BBB | 2,500,000 | 2,506,125 | |||||
Pennsylvania EDA, 5.00% due 12/1/2042 put 6/1/2012 (Exelon Generation) | A3/BBB | 2,550,000 | 2,684,691 | |||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 6/1/2015 | Baa2/BBB | 1,200,000 | 1,252,140 | |||||
Philadelphia Gas Works, 5.00% due 9/1/2014 (Insured: FSA) | Aa2/AAA | 3,000,000 | 3,373,620 | |||||
Philadelphia Gas Works, 5.00% due 10/1/2014 (Insured: AMBAC) | Baa2/BBB- | 1,825,000 | 1,925,631 | |||||
Philadelphia Gas Works, 5.00% due 9/1/2015 (Insured: FSA) | Aa2/AAA | 3,315,000 | 3,691,451 | |||||
Philadelphia Parking Authority Revenue, 5.00% due 9/1/2016 | A2/A- | 1,500,000 | 1,661,055 | |||||
Philadelphia Parking Authority Revenue, 5.00% due 9/1/2017 | A2/A- | 1,020,000 | 1,128,712 | |||||
Pittsburgh GO, 5.00% due 9/1/2012 (Insured: Natl-Re) | Baa1/A | 3,415,000 | 3,573,593 | |||||
Pittsburgh GO, 5.50% due 9/1/2014 (Insured: AMBAC) | Baa1/BBB | 1,710,000 | 1,857,505 | |||||
Pittsburgh GO, 5.25% due 9/1/2016 (Insured: FSA) | Aa3/AAA | 3,000,000 | 3,321,240 | |||||
Pittsburgh GO, 5.25% due 9/1/2018 (Insured: FSA) | Aa3/AAA | 2,740,000 | 2,970,982 | |||||
Sayre HFA, 5.25% due 7/1/2011 (Latrobe Area Hospital; Insured: AMBAC) (ETM) | NR/NR | 1,400,000 | 1,498,784 | |||||
Sayre HFA, 5.25% due 7/1/2012 (Latrobe Area Hospital; Insured: AMBAC) (ETM) | NR/NR | 1,000,000 | 1,101,020 | |||||
RHODE ISLAND — 0.26% | ||||||||
Providence GO, 5.50% due 1/15/2012 (Insured: FGIC) | A3/A | 1,880,000 | 2,043,541 | |||||
Rhode Island COP, 5.00% due 10/1/2014 (Providence Plantations; Insured Natl-Re) | A1/AA- | 1,000,000 | 1,109,080 | |||||
Rhode Island State Economic Development Corp., 5.75% due 7/1/2010 (Providence Place Mall; Insured: Radian) | NR/BBB- | 535,000 | 542,415 | |||||
Rhode Island State Health & Education Building Corp., 5.25% due 7/1/2014 (Memorial Hospital; LOC: Fleet Bank) | NR/AA+ | 1,565,000 | 1,712,314 | |||||
SOUTH CAROLINA — 1.69% | ||||||||
Georgetown County Environmental Improvement, 5.70% due 4/1/2014 (International Paper Co.) | Baa3/BBB | 7,975,000 | 8,377,737 | |||||
Greenville County School District, 5.25% due 12/1/2015 (Building Equity Sooner Tomorrow) | Aa3/AA | 1,000,000 | 1,096,160 | |||||
Greenwood County Hospital Facilities, 5.00% due 10/1/2013 (Self Regional Healthcare; Insured: FSA) | Aa3/AAA | 2,000,000 | 2,190,520 |
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2015 (Insured: Assured Guaranty) | Aa2/AAA | $ | 1,000,000 | $ | 1,144,540 | |||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2016 (Insured: Assured Guaranty) | Aa2/AAA | 1,000,000 | 1,149,600 | |||||
South Carolina Jobs Economic Development Carealliance, 5.00% due 8/15/2014 | Aa3/AAA | 4,000,000 | 4,382,600 | |||||
South Carolina Jobs Economic Development Carealliance, 5.00% due 8/15/2015 | Aa3/AAA | 3,000,000 | 3,286,680 | |||||
York County PCR, 2.25% due 9/15/2024 (North Carolina Electric) | A2/A | 7,500,000 | 7,506,000 | |||||
York County PCR, 2.25% due 9/15/2024 (North Carolina Electric) | A2/A | 6,500,000 | 6,505,200 | |||||
SOUTH DAKOTA — 0.11% | ||||||||
South Dakota State Health & Educational Facilities Authority, 5.50% due 9/1/2011 (Rapid City Regional Hospital; Insured: Natl-Re) | A1/A | 1,100,000 | 1,154,956 | |||||
South Dakota State Health & Educational Facilities Authority, 5.00% due 11/1/2015 (Sanford Health) | A1/AA- | 1,000,000 | 1,088,010 | |||||
TENNESSEE — 1.43% | ||||||||
Knox County Health, Educational, & Housing Facilities, 5.00% due 4/1/2017 (University Health Systems) | NR/BBB+ | 3,130,000 | 3,206,685 | |||||
Tennessee Energy Acquisition Corp., 5.00% due 9/1/2014 | Ba3/BB+ | 975,000 | 1,030,156 | |||||
Tennessee Energy Acquisition Corp., 5.00% due 9/1/2015 | Ba3/BB+ | 3,000,000 | 3,132,510 | |||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2017 | Baa1/A | 5,000,000 | 5,112,400 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2017 | Ba3/BB+ | 11,000,000 | 11,371,580 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2018 | Ba3/BB+ | 5,000,000 | 5,129,750 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2020 | Ba3/BB+ | 1,190,000 | 1,203,459 | |||||
TEXAS — 10.03% | ||||||||
Amarillo Health Facilities Corp., 5.50% due 1/1/2011 (St. Anthony’s Hospital Corp.; Insured: FSA) | Aa3/NR | 1,350,000 | 1,407,442 | |||||
Austin Community College Public Facilities Corp., 5.25% due 8/1/2017 (Round Rock Campus) | Aa3/AA+ | 1,500,000 | 1,745,445 | |||||
Austin Electrical Utilities Systems, 5.50% due 11/15/2013 (Insured: AMBAC) | A1/A+ | 1,000,000 | 1,130,650 | |||||
Austin Water & Wastewater, 5.00% due 5/15/2014 (Insured: AMBAC) | Aa3/AA | 2,890,000 | 3,296,652 | |||||
Austin Water & Wastewater, 5.00% due 5/15/2015 (Insured: AMBAC) | Aa3/AA | 1,520,000 | 1,752,074 | |||||
Bexar County Housing Finance Corp. Multi Family Housing, 5.00% due 1/1/2011 (American Opportunity Housing; Insured: Natl-Re) | Baa1/NR | 1,230,000 | 1,218,745 | |||||
Brazos River Authority, 4.90% due 10/1/2015 (Center Point Energy; Insured: Natl-Re) | Baa1/A | 2,315,000 | 2,389,034 | |||||
Clint ISD GO, 5.50% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 1,700,000 | 1,813,033 | |||||
Clint ISD GO, 5.50% due 2/15/2012 (Guaranty: PSF) | NR/AAA | 1,155,000 | 1,227,280 | |||||
Collin County Limited Tax Improvement GO, 5.00% due 2/15/2016 | Aaa/AAA | 1,465,000 | 1,717,698 | |||||
Corpus Christi Business & Job Development Corp., 5.00% due 9/1/2012 (Arena Project; Insured: AMBAC) | A3/A | 1,025,000 | 1,117,250 | |||||
Dallas Convention Center Hotel Development Corp., 0% due 1/1/2018 | A2/A+ | 5,240,000 | 3,577,034 | |||||
Dallas Convention Center Hotel Development Corp., 5.00% due 1/1/2019 | A2/A+ | 5,200,000 | 5,623,644 | |||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2017 (Insured: AMBAC) | Baa3/BBB+ | 1,260,000 | 1,337,666 | |||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2017 (Insured: AMBAC) | Baa3/BBB+ | 1,160,000 | 1,231,502 | |||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2018 (Insured: AMBAC) | Baa3/BBB+ | 1,935,000 | 2,033,221 | |||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2018 (Insured: AMBAC) | Baa3/BBB+ | 2,035,000 | 2,138,297 | |||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2019 (Insured: AMBAC) | Baa3/BBB+ | 2,175,000 | 2,268,851 | |||||
Dallas Fort Worth International Airport, 4.00% due 11/1/2012 | A1/A+ | 1,000,000 | 1,067,300 | |||||
Dallas Fort Worth International Airport, 5.00% due 11/1/2013 | A1/A+ | 1,175,000 | 1,306,036 | |||||
Dallas Fort Worth International Airport, 5.00% due 11/1/2014 | A1/A+ | 1,300,000 | 1,457,651 | |||||
Dallas Fort Worth International Airport, 5.00% due 11/1/2015 | A1/A+ | 2,365,000 | 2,668,358 | |||||
Duncanville ISD GO, 0% due 2/15/2011 (Guaranty: PSF) | Aaa/AAA | 4,945,000 | 4,893,028 | |||||
Duncanville ISD GO, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,245,000 | 1,209,692 | |||||
Fort Worth Water & Sewer, 5.25% due 2/15/2011 (Tarrant & Denton County) | Aa2/AA | 1,390,000 | 1,473,914 |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Grapevine Colleyville ISD GO, 0% due 8/15/2011 (Guaranty: PSF) | Aaa/AAA | $ | 7,350,000 | $ | 7,230,636 | |||
Harris County Educational Facilities Finance Corp., 5.00% due 11/15/2015 (Teco Project) | Aa3/AA | 1,450,000 | 1,652,434 | |||||
Harris County Educational Facilities Finance Corp., 5.00% due 11/15/2018 (Teco Project) | Aa3/AA | 1,365,000 | 1,564,454 | |||||
Harris County Educational Facilities Finance Corp., 5.00% due 11/15/2019 (Teco Project) | Aa3/AA | 1,000,000 | 1,150,200 | |||||
Harris County Health Facilities Development Corp. Thermal Utility, 5.00% due 11/15/2015 (Teco; Insured: Natl-Re) | Aa3/AA | 1,500,000 | 1,611,015 | |||||
Harris County Hospital District, 5.75% due 2/15/2011 pre-refunded 8/15/2010 (Insured: Natl-Re) | NR/A | 10,000,000 | 10,451,400 | |||||
Harris County Hospital District Senior Lien, 5.00% due 2/15/2014 (Insured: Natl-Re) | A1/A | 1,275,000 | 1,400,728 | |||||
Harris County Hospital District Senior Lien, 5.00% due 2/15/2017 (Insured: Natl-Re) | A1/A | 1,500,000 | 1,653,075 | |||||
Harris County Sports Authority Senior Lien, 0% due 11/15/2010 (Insured: Natl-Re) | Baa1/A | 3,260,000 | 3,159,429 | |||||
Houston Airport Systems Revenue, 5.00% due 7/1/2015 | Aa3/AA- | 2,600,000 | 2,922,452 | |||||
Houston Airport Systems Revenue, 5.00% due 7/1/2017 | Aa3/AA- | 1,600,000 | 1,797,440 | |||||
Houston Airport Systems Revenue, 5.00% due 7/1/2018 | Aa3/AA- | 1,000,000 | 1,125,040 | |||||
Houston Airport Systems Revenue, 5.00% due 7/1/2019 | Aa3/AA- | 1,500,000 | 1,674,285 | |||||
Houston ISD Public West Side, 0% due 9/15/2014 (Insured: AMBAC) | Aa3/AA | 6,190,000 | 5,533,241 | |||||
Hutto ISD GO, 0% due 8/1/2017 (Guaranty: PSF) | NR/AAA | 2,170,000 | 1,681,902 | |||||
Irving ISD GO, 0% due 2/15/2017 (Guaranty: PSF) | Aaa/AAA | 1,000,000 | 789,370 | |||||
Keller ISD GO, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/AAA | 1,250,000 | 1,203,462 | |||||
Laredo GO, 5.00% due 2/15/2018 (Insured: Natl-Re) | A1/AA- | 2,000,000 | 2,239,640 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2012 (Insured: AMBAC) | A3/A+ | 1,660,000 | 1,786,592 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2013 (Insured: AMBAC) | A3/A+ | 1,745,000 | 1,902,085 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2014 (Insured: AMBAC) | A3/A+ | 1,835,000 | 2,018,757 | |||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2015 (Insured: AMBAC) | A3/A+ | 1,930,000 | 2,129,330 | |||||
Lower Colorado River Authority, 5.875% due 5/15/2016 (Insured: BHAC-CR FSA) | Aa1/AAA | 10,000,000 | 10,141,100 | |||||
Mesquite ISD GO, 0% due 8/15/2011 pre-refunded 8/15/2010 (Guaranty: PSF) | NR/AAA | 1,865,000 | 1,762,817 | |||||
Mesquite ISD GO, 0% due 8/15/2011 (Guaranty: PSF) | NR/AAA | 1,200,000 | 1,130,052 | |||||
Midtown Redevelopment Authority, 6.00% due 1/1/2010 (Insured: Radian) | Baa1/A- | 700,000 | 706,160 | |||||
Midtown Redevelopment Authority, 6.00% due 1/1/2011 (Insured: Radian) | Baa1/A- | 740,000 | 769,289 | |||||
North Central Health Facility Development, 5.00% due 5/15/2017 (Baylor Health Care System) | Aa2/AA- | 5,000,000 | 5,041,300 | |||||
North East ISD GO, 5.00% due 8/1/2016 (PSF Guaranty) | Aaa/AAA | 2,000,000 | 2,347,740 | |||||
North Texas Tollway Authority, 5.50% due 1/1/2038 | A2/A- | 10,000,000 | 10,461,100 | |||||
North Texas Tollway Authority, 5.00% due 1/1/2043 put 1/1/2011 | A2/A- | 2,140,000 | 2,225,472 | |||||
Red River Authority PCR, 5.20% due 7/1/2011 (Southwestern Public Service; Insured: AMBAC) | Baa1/BBB- | 1,205,000 | 1,206,386 | |||||
Richardson Refunding & Improvement GO, 5.00% due 2/15/2014 (Insured: Natl-Re) | Aa1/AAA | 3,000,000 | 3,404,130 | |||||
Sam Rayburn Municipal Power Agency, 5.50% due 10/1/2012 | Baa2/NR | 6,000,000 | 6,483,240 | |||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2021 | Baa2/NR | 2,000,000 | 2,078,260 | |||||
Tarrant County Cultural Educational Facilities, 5.00% due 8/15/2014 (Scott & White Memorial Hospital) | Aa3/A+ | 1,180,000 | 1,293,658 | |||||
Tarrant County Cultural Educational Facilities, 5.00% due 8/15/2016 (Scott & White Memorial Hospital) | Aa3/A+ | 2,280,000 | 2,490,193 | |||||
Tarrant County Cultural Educational Facilities, 5.00% due 8/15/2017 (Scott & White Memorial Hospital) | Aa3/A+ | 2,000,000 | 2,168,180 | |||||
Tarrant County Health Facilities Development Corp., 6.00% due 11/15/2009 (Adventist/ Sunbelt Health System) (ETM) | A1/NR | 650,000 | 654,550 | |||||
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 | 781,991 | |||||
Texas Municipal Power Agency, 0% due 9/1/2013 (Insured: Natl-Re) | A2/A+ | 1,000,000 | 895,360 | |||||
Texas Municipal Power Agency, 5.00% due 9/1/2017 (Insured: Assured Guaranty) | Aa2/AAA | 10,000,000 | 11,575,800 | |||||
Texas State Public Finance Authority, 5.00% due 10/15/2014 (Stephen F. Austin University; Insured: Natl-Re) | A2/NR | 1,305,000 | 1,462,435 |
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Texas State Public Finance Authority, 5.00% due 10/15/2015 (Stephen F. Austin University; Insured: Natl-Re) | A2/NR | $ | 1,450,000 | $ | 1,637,775 | |||
Texas Tax & Revenue, 2.50% due 8/31/2010 | MIG1/SP-1+ | 20,000,000 | 20,380,800 | |||||
Tomball Hospital Authority, 5.00% due 7/1/2013 | Baa3/NR | 1,460,000 | 1,464,336 | |||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2010 (Ascension Health; Insured: Natl-Re) | Aa1/AA | 2,000,000 | 2,030,620 | |||||
Washington County Health Facilities Development Corp., 5.75% due 6/1/2019 (Trinity Medical Center; Insured: ACA) | NR/NR | 3,840,000 | 3,741,158 | |||||
Weslaco GO Waterworks & Sewer System, 5.25% due 2/15/2019 (Insured: Natl-Re) | Baa1/A | 2,835,000 | 3,197,710 | |||||
West Harris County Regional Water, 5.25% due 12/15/2012 (Insured: FSA) | Aa3/AAA | 2,435,000 | 2,677,916 | |||||
U.S. VIRGIN ISLANDS — 0.40% | ||||||||
Virgin Islands Public Finance Authority, 6.75% due 10/1/2019 (Matching Fund Loan Diageo Project) | Baa3/BBB | 7,690,000 | 8,531,978 | |||||
UTAH — 1.34% | ||||||||
a Intermountain Power Agency Supply, 5.00% due 7/1/2012 | A1/A+ | 15,000,000 | 16,376,250 | |||||
Intermountain Power Agency Supply, 5.00% due 7/1/2012 (ETM) | NR/NR | 4,355,000 | 4,368,152 | |||||
Intermountain Power Agency Supply, 5.00% due 7/1/2013 | A1/A+ | 5,000,000 | 5,563,500 | |||||
Salt Lake County Municipal Building Authority, 5.50% due 10/1/2009 | Aa1/AA+ | 1,500,000 | 1,500,210 | |||||
Utah State Board of Regents Auxiliary Systems & Student Fee, 5.00% due 5/1/2010 | NR/AA | 510,000 | 523,719 | |||||
VIRGINIA — 0.48% | ||||||||
Alexandria IDA, 5.75% due 10/1/2009 (Institute for Defense; Insured: AMBAC) (ETM) | NR/NR | 1,130,000 | 1,130,170 | |||||
Alexandria IDA, 5.75% due 10/1/2010 (Institute for Defense; Insured: AMBAC) (ETM) | NR/NR | 1,195,000 | 1,259,912 | |||||
Louisa IDA PCR, 5.00% due 11/1/2035 put 12/1/2011 (Virginia Electric & Power Company) | Baa1/A- | 3,000,000 | 3,152,820 | |||||
Norton IDA Hospital Improvement, 5.75% due 12/1/2012 (Norton Community Hospital; Insured: ACA) | NR/NR | 1,460,000 | 1,503,902 | |||||
Suffolk Redevelopment Housing Authority, 4.85% due 7/1/2031 put 7/1/2011 (Windsor at Potomac; Collateralized: FNMA) | Aaa/NR | 3,000,000 | 3,153,270 | |||||
WASHINGTON — 2.41% | ||||||||
Energy Northwest Washington Electric, 5.00% due 7/1/2017 (Number 3) | Aaa/AA | 5,470,000 | 6,369,487 | |||||
King & Snohomish Counties School District GO, 5.60% due 12/1/2010 (Insured: Natl-Re/ FGIC) | Aa2/AA- | 6,150,000 | 6,340,404 | |||||
Port Seattle Washington Revenue, 5.50% due 9/1/2018 (Insured: Natl-Re/FGIC) | A1/A | 5,000,000 | 5,806,050 | |||||
Snohomish County Public Utilities District, 5.00% due 12/1/2015 (Insured: FSA) | Aa3/AAA | 5,015,000 | 5,657,321 | |||||
Washington State GO, 0% due 1/1/2018 (Insured: Natl-Re/FGIC) | Aa1/AA+ | 4,000,000 | 3,070,560 | |||||
Washington State GO, 0% due 1/1/2019 (Insured: Natl-Re/FGIC) | Aa1/AA+ | 3,000,000 | 2,190,060 | |||||
Washington State HFA, 6.75% due 12/1/2011 (Group Health Co-op of Puget Sound; Insured: Natl-Re) | Baa1/NR | 2,060,000 | 2,063,275 | |||||
Washington State HFA, 5.375% due 12/1/2016 (Group Health Co-op of Puget Sound; Insured: AMBAC) | NR/BBB+ | 2,000,000 | 2,042,620 | |||||
Washington State HFA, 5.50% due 12/1/2009 (Providence Services; Insured: Natl-Re) (ETM) | NR/A | 1,500,000 | 1,513,065 | |||||
Washington State HFA, 5.00% due 7/1/2013 (Overlake Hospital; Credit Support: Assured Guaranty) | Aa2/AAA | 1,000,000 | 1,071,540 | |||||
Washington State HFA, 5.25% due 8/1/2018 (Highline Medical Center; Insured: FSA 242) | NR/A+ | 8,095,000 | 9,020,016 | |||||
Washington State Public Power Supply Systems, 5.40% due 7/1/2012 (Nuclear Number 2; Insured: FSA) | Aaa/AAA | 1,300,000 | 1,445,509 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2013 (Insured: Natl-Re-IBC) | Aaa/AA | 1,760,000 | 1,643,083 | |||||
Washington State Public Power Supply Systems, 0% due 7/1/2015 (Insured: Natl-Re-IBC) | Aaa/AA | 3,000,000 | 2,601,180 |
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
WEST VIRGINIA — 0.42% | ||||||||
Kanawha, Mercer, Nicholas Counties Single Family Mortgage, 0% due 2/1/2015 pre-refunded 2/1/2014 | Aaa/NR | $ | 2,260,000 | $ | 1,848,296 | |||
Monongalia County Community Hospital, 5.25% due 7/1/2020 (Monongalia General Hospital) | NR/BBB+ | 4,750,000 | 4,992,297 | |||||
West Virginia EDA PCR, 4.85% due 5/1/2019 (Appalachian Power Company) | Baa2/BBB | 1,000,000 | 1,042,850 | |||||
West Virginia EDA PCR, 4.85% due 5/1/2019 put 9/4/2013 (Appalachian Power Company) | Baa2/BBB | 1,000,000 | 1,042,850 | |||||
WISCONSIN — 0.91% | ||||||||
Wisconsin State Health & Educational Facilities Authority, 5.40% due 8/15/2013 (Sorrowful Mother Corp.; Insured: Natl-Re) | Baa1/A+ | 2,365,000 | 2,368,500 | |||||
Wisconsin State Health & Educational Facilities Authority, 5.40% due 8/15/2013 (Sorrowful Mother Corp.; Insured: Natl-Re) | Baa1/AA | 1,135,000 | 1,136,680 | |||||
Wisconsin State Health & Educational Facilities Authority, 5.50% due 8/15/2019 (Sorrowful Mother Corp.; Insured: Natl-Re) | Baa1/A+ | 11,000,000 | 11,007,590 | |||||
Wisconsin State Health & Educational Facilities Authority, 5.125% due 8/15/2027 (Aurora Health Care, Inc.) | A3/NR | 4,500,000 | 4,634,460 | |||||
WYOMING — 0.04% | ||||||||
West Park Hospital District, 5.90% due 7/1/2010 (Insured: ACA) | NR/NR | 775,000 | 776,030 | |||||
TOTAL INVESTMENTS — 98.68% (Cost $1,999,801,444) | $ | 2,085,572,650 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.32% | 27,834,914 | |||||||
NET ASSETS — 100.00% | $ | 2,113,407,564 | ||||||
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. |
a | Segregated as collateral for a when-issued security. |
b | 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. | |
BHAC | Insured by Berkshire Hathaway 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 | |
HFA | Health Facilities Authority | |
HUD | Department of Housing & Urban Development | |
IDA | Industrial Development Authority | |
ISD | Independent School District | |
JEA | Jacksonville Electric Authority | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
PSF | Guaranteed by Permanent School Fund | |
Radian | Insured by Radian Asset Assurance | |
SONYMA | State of New York Mortgage Authority | |
Syncora | Insured by Syncora Guarantee Inc. | |
UPMC | University of Pittsburgh Medical Center | |
USD | Unified School District |
See notes to financial statements.
30 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (cost $1,999,801,444) (Note 2) | $ | 2,085,572,650 | ||
Cash | 1,084,812 | |||
Receivable for investments sold | 7,960,544 | |||
Receivable for fund shares sold | 24,495,927 | |||
Interest receivable | 24,119,503 | |||
Prepaid expenses and other assets | 51,690 | |||
Total Assets | 2,143,285,126 | |||
LIABILITIES | ||||
Payable for securities purchased | 23,298,291 | |||
Payable for fund shares redeemed | 4,008,135 | |||
Payable to investment advisor and other affiliates (Note 3) | 1,036,505 | |||
Accounts payable and accrued expenses | 194,893 | |||
Dividends payable | 1,339,738 | |||
Total Liabilities | 29,877,562 | |||
NET ASSETS | $ | 2,113,407,564 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 40,807 | ||
Net unrealized appreciation on investments | 85,771,206 | |||
Accumulated net realized gain (loss) | (4,885,647 | ) | ||
Net capital paid in on shares of beneficial interest | 2,032,481,198 | |||
$ | 2,113,407,564 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($1,040,627,878 applicable to 74,345,950 shares of beneficial interest outstanding - - Note 4) | $ | 14.00 | ||
Maximum sales charge, 1.50% of offering price | 0.21 | |||
Maximum offering price per share | $ | 14.21 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($206,952,441 applicable to 14,758,408 shares of beneficial interest outstanding - Note 4) | $ | 14.02 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($865,827,245 applicable to 61,848,978 shares of beneficial interest outstanding - Note 4) | $ | 14.00 | ||
* | 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 31
STATEMENT OF OPERATIONS | ||
Thornburg Limited Term Municipal Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $7,165,620) | $ | 65,483,120 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 5,964,871 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,000,029 | |||
Class C Shares | 168,512 | |||
Class I Shares | 285,748 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 2,000,059 | |||
Class C Shares | 1,342,973 | |||
Transfer agent fees | ||||
Class A Shares | 318,948 | |||
Class C Shares | 69,858 | |||
Class I Shares | 210,407 | |||
Registration and filing fees | ||||
Class A Shares | 51,179 | |||
Class C Shares | 26,667 | |||
Class I Shares | 65,047 | |||
Custodian fees (Note 3) | 254,561 | |||
Professional fees | 73,567 | |||
Accounting fees | 70,635 | |||
Trustee fees | 55,490 | |||
Other expenses | 134,994 | |||
Total Expenses | 12,093,545 | |||
Less: | ||||
Distribution fees waived (Note 3) | (671,486 | ) | ||
Fees paid indirectly (Note 3) | (1,931 | ) | ||
Net Expenses | 11,420,128 | |||
Net Investment Income | 54,062,992 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 424,567 | |||
Net change in unrealized appreciation (depreciation) of investments | 94,999,972 | |||
Net Realized and Unrealized Gain | 95,424,539 | |||
Net Increase in Net Assets Resulting From Operations | $ | 149,487,531 | ||
See notes to financial statements.
32 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Limited Term Municipal Fund |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 54,062,992 | $ | 41,145,120 | ||||
Net realized gain (loss) on investments | 424,567 | 762,038 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 94,999,972 | (26,391,583 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 149,487,531 | 15,515,575 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (27,978,683 | ) | (24,624,429 | ) | ||||
Class C Shares | (4,327,521 | ) | (2,909,085 | ) | ||||
Class I Shares | (21,756,788 | ) | (13,611,606 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 286,098,982 | 22,835,685 | ||||||
Class C Shares | 98,146,852 | 15,492,880 | ||||||
Class I Shares | 391,133,787 | 142,907,714 | ||||||
Net Increase in Net Assets | 870,804,160 | 155,606,734 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 1,242,603,404 | 1,086,996,670 | ||||||
End of Year | $ | 2,113,407,564 | $ | 1,242,603,404 | ||||
Undistributed net investment income | $ | 40,807 | $ | — |
See notes to financial statements.
Certified Annual Report 33
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
NOTE 1 – ORGANIZATION
Thornburg Limited Term 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 Fund is currently one of fifteen separate series of the Trust. 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 of purchase, 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, and 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
34 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Investments in Securities Municipal Bonds | $ | 2,085,572,650 | $ | — | $ | 2,085,572,650 | $ | — | ||||
Total Investments in Securities | $ | 2,085,572,650 | $ | — | $ | 2,085,572,650 | $ | — |
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 to shareholders substantially all taxable (if any) and tax exempt income of the Fund. Therefore, no provision for federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid monthly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized to call dates or maturity dates of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of 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, 2009, 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
Certified Annual Report 35
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
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, 2009, the Distributor has advised the Fund that it earned commissions aggregating $24,984 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $16,541 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, 2009, are set forth in the Statement of Operations. Distribution fees in the amount of $671,486 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, 2009, fees paid indirectly were $1,931.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 30,849,769 | $ | 417,998,677 | 10,565,297 | $ | 142,941,921 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,454,357 | 19,643,817 | 1,285,615 | 17,344,279 | ||||||||||
Shares repurchased | (11,307,850 | ) | (151,543,512 | ) | (10,153,413 | ) | (137,450,515 | ) | ||||||
Net Increase (Decrease) | 20,996,276 | $ | 286,098,982 | 1,697,499 | $ | 22,835,685 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 8,903,827 | $ | 120,924,995 | 2,274,026 | $ | 30,831,860 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 206,648 | 2,800,254 | 143,526 | 1,939,419 | ||||||||||
Shares repurchased | (1,900,973 | ) | (25,578,397 | ) | (1,274,574 | ) | (17,278,399 | ) | ||||||
Net Increase (Decrease) | 7,209,502 | $ | 98,146,852 | 1,142,978 | $ | 15,492,880 | ||||||||
36 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 43,056,660 | $ | 582,984,830 | 16,181,603 | $ | 218,944,840 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,340,862 | 18,142,630 | 797,599 | 10,754,694 | ||||||||||
Shares repurchased | (15,632,398 | ) | (209,993,673 | ) | (6,409,073 | ) | (86,791,820 | ) | ||||||
Net Increase (Decrease) | 28,765,124 | $ | 391,133,787 | 10,570,129 | $ | 142,907,714 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $838,116,012 and $174,298,865, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 1,998,589,802 | ||
Gross unrealized appreciation on a tax basis | $ | 88,912,684 | ||
Gross unrealized depreciation on a tax basis | (1,929,836 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 86,982,848 | ||
At September 30, 2009, the Fund did not have any undistributed tax-exempt/ordinary income or undistributed capital gains.
At September 30, 2009, the Fund had tax basis capital losses, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryforwards expire as follows:
2014 | $ | 1,882,060 | |
2015 | 2,811,143 | ||
2016 | 192,444 | ||
$ | 4,885,647 | ||
The Fund utilized $424,567 of capital loss carryforwards during the year ended September 30, 2009.
In order to account for permanent book/tax differences, the Fund increased net investment income by $44,701 and decreased net capital paid in on shares of beneficial interest by $44,701. This reclassification has no impact on the net asset value of the Fund. Reclassification resulted primarily from taxable market discount income and other amortization adjustments.
Certified Annual Report 37
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 |
The tax character of distributions paid during the year ended September 30, 2009, and September 30, 2008, was as follows:
2009 | 2008 | |||||
Distributions from: | ||||||
Tax exempt income | $ | 53,956,985 | $ | 41,145,120 | ||
Ordinary income | 106,007 | — | ||||
Total distributions | $ | 54,062,992 | $ | 41,145,120 | ||
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
38 Certified Annual Report
Thornburg Limited Term Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.22 | $ | 13.49 | $ | 13.53 | $ | 13.59 | $ | 13.83 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.47 | 0.48 | 0.46 | 0.44 | 0.40 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.78 | (0.27 | ) | (0.04 | ) | (0.06 | ) | (0.24 | ) | |||||||||||
Total from investment operations | 1.25 | 0.21 | 0.42 | 0.38 | 0.16 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.47 | ) | (0.48 | ) | (0.46 | ) | (0.44 | ) | (0.40 | ) | ||||||||||
Change in net asset value | 0.78 | (0.27 | ) | (0.04 | ) | (0.06 | ) | (0.24 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 14.00 | $ | 13.22 | $ | 13.49 | $ | 13.53 | $ | 13.59 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 9.67 | 1.54 | 3.18 | 2.87 | 1.16 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.50 | 3.54 | 3.43 | 3.28 | 2.91 | |||||||||||||||
Expenses, after expense reductions (%) | 0.86 | 0.89 | 0.90 | 0.91 | 0.90 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.86 | 0.88 | 0.90 | 0.90 | 0.90 | |||||||||||||||
Expenses, before expense reductions (%) | 0.86 | 0.89 | 0.90 | 0.91 | 0.90 | |||||||||||||||
Portfolio turnover rate (%) | 12.18 | 17.78 | 21.35 | 23.02 | 27.80 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,040,628 | $ | 705,238 | $ | 696,717 | $ | 833,189 | $ | 967,650 |
(a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
Certified Annual Report 39
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.24 | $ | 13.51 | $ | 13.55 | $ | 13.62 | $ | 13.86 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.43 | 0.44 | 0.43 | 0.41 | 0.36 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.79 | (0.27 | ) | (0.04 | ) | (0.07 | ) | (0.24 | ) | |||||||||||
Total from investment operations | 1.22 | 0.17 | 0.39 | 0.34 | 0.12 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.44 | ) | (0.44 | ) | (0.43 | ) | (0.41 | ) | (0.36 | ) | ||||||||||
Change in net asset value | 0.78 | (0.27 | ) | (0.04 | ) | (0.07 | ) | (0.24 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 14.02 | $ | 13.24 | $ | 13.51 | $ | 13.55 | $ | 13.62 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 9.37 | 1.26 | 2.90 | 2.52 | 0.89 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.21 | 3.26 | 3.15 | 3.00 | 2.63 | |||||||||||||||
Expenses, after expense reductions (%) | 1.13 | 1.17 | 1.19 | 1.18 | 1.18 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.13 | 1.16 | 1.18 | 1.18 | 1.18 | |||||||||||||||
Expenses, before expense reductions (%) | 1.63 | 1.67 | 1.68 | 1.68 | 1.68 | |||||||||||||||
Portfolio turnover rate (%) | 12.18 | 17.78 | 21.35 | 23.02 | 27.80 | |||||||||||||||
Net assets at end of year (thousands) | $ | 206,952 | $ | 99,972 | $ | 86,564 | $ | 105,436 | $ | 140,606 |
See notes to financial statements.
40 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.22 | $ | 13.49 | $ | 13.53 | $ | 13.59 | $ | 13.83 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.51 | 0.52 | 0.51 | 0.49 | 0.44 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.79 | (0.27 | ) | (0.04 | ) | (0.06 | ) | (0.24 | ) | |||||||||||
Total from investment operations | 1.30 | 0.25 | 0.47 | 0.43 | 0.20 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.52 | ) | (0.52 | ) | (0.51 | ) | (0.49 | ) | (0.44 | ) | ||||||||||
Change in net asset value | 0.78 | (0.27 | ) | (0.04 | ) | (0.06 | ) | (0.24 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 14.00 | $ | 13.22 | $ | 13.49 | $ | 13.53 | $ | 13.59 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 10.03 | 1.88 | 3.53 | 3.22 | 1.50 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.81 | 3.88 | 3.78 | 3.62 | 3.25 | |||||||||||||||
Expenses, after expense reductions (%) | 0.53 | 0.55 | 0.57 | 0.57 | 0.57 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.53 | 0.55 | 0.57 | 0.57 | 0.57 | |||||||||||||||
Expenses, before expense reductions (%) | 0.53 | 0.55 | 0.57 | 0.57 | 0.57 | |||||||||||||||
Portfolio turnover rate (%) | 12.18 | 17.78 | 21.35 | 23.02 | 27.80 | |||||||||||||||
Net assets at end of year (thousands) | $ | 865,827 | $ | 437,393 | $ | 303,716 | $ | 285,878 | $ | 290,369 |
See notes to financial statements.
Certified Annual Report 41
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, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
42 Certified Annual Report
Thornburg Limited Term Municipal Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,062.70 | $ | 4.40 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.80 | $ | 4.31 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,061.10 | $ | 5.80 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,019.44 | $ | 5.68 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,064.30 | $ | 2.75 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,022.40 | $ | 2.70 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.85%; C: 1.12%; I: 0.53%) multiplied by the average account value over the period, multiplied by 183/ 365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 43
Thornburg Limited Term Municipal Fund | September 30, 2009 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Limited Term Municipal Fund versus Barclays Capital Five Year Municipal Bond Index
and Consumer Price Index (September 28, 1984 to September 30, 2009)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 9/28/84) | 8.04 | % | 3.33 | % | 4.02 | % | 5.58 | % | ||||
C Shares (Incep: 9/1/94) | 8.87 | % | 3.34 | % | 3.86 | % | 3.92 | % | ||||
I Shares (Incep: 7/5/96) | 10.03 | % | 3.99 | % | 4.54 | % | 4.59 | % |
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.
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.
44 Certified Annual Report
Thornburg Limited Term Municipal Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 64 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 45
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Limited Term Municipal Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
46 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Limited Term Municipal Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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 47
Thornburg Limited Term Municipal Fund | September 30, 2009 (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 tax year ended September 30, 2009, dividends paid by the Fund of $53,956,985 (or the maximum allowed) 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, 2009. Complete information will be computed and reported in conjunction with your 2009 Form 1099.
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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees voted unanimously 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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit
48 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 (Unaudited) |
of the Fund’s investment objectives. In addition, the Trustees considered information specifically provided to them at their request in anticipation of their annual 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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 observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
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, given the investment objectives of the Fund. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year compared favorably to the average return for the mutual fund category for which calendar year data was presented, that the Fund’s returns had exceeded the average returns of the same category for each of the preceding ten calendar years, and that the Fund’s returns fell within the top quartile of the category for the one-year, three-year and five-year periods ended with the second quarter of the current year and fell within the top quartile of a second mutual fund 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, 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 comparable to 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 slightly lower than the average expense ratio and slightly higher than the median expense ratio for the same fund group. The Trustees considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services provided, respectively, to institutional clients and to mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. In reviewing the extent to which economies of scale
Certified Annual Report 49
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2009 (Unaudited) |
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, compliance and systems capabilities 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 22, 2009
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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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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54 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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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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, 2009. 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. Bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. 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 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. 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | THIMX | 885-215-202 | ||
Class C | THMCX | 885-215-780 | ||
Class I | THMIX | 885-215-673 |
Lipper’s 2008
Best Fixed-Income Fund Family
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income large firm universe for the three-year period ended 12/31/07, based on risk-adjusted returns. Past performance does not guarantee future results.
Lipper’s large firm universe is comprised of fund families with more than $28 billion in total net assets. Only fund families with at least five bond funds were eligible. Risk-adjusted returns were calculated with dividends reinvested and without sales charges. We did not win this award in 2009.
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.
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.
Annualized 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 maximum offering price per share to arrive at the annualized distribution yield. The yield is calculated on a periodic basis and is subject to change.
Duration – The weighted maturity of a bond’s cash flows. Duration measures the price sensitivity of a bond for a given change in interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
General Obligation (GO) Bonds – A municipal bond secured by the pledge of the issuer’s full faith, credit, and taxing power rather than the revenue from a given project.
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.
Pre-Refunded Bond – A type of municipal bond that has been escrowed or collateralized either by direct obligations guaranteed by the U.S. government, or by other types of securities. The escrow account is structured so that these refunded bonds are to be called at the first possible call date. Such bonds, if escrowed with securities guaranteed by the U.S. government, have little if any credit risk.
Revenue Bond – A bond on which the debt service is payable solely from the revenue generated from the operation of the project being financed or a category of facilities, or from other non-tax sources.
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 Bonds – Obligations, also known as “put bonds” or “puttable securities,” that grant the bondholder the right to require the issuer to purchase the bonds, usually at par, at a certain time or times prior to maturity or upon the occurrence of specified events or conditions. The put option, or tender option, right is typically available to the investor on a periodic (e.g., daily, weekly or monthly) basis.
Lease-Backed Bonds – Bonds issued by a municipality or state that are secured by the payments made on leased assets.
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Thornburg Intermediate Municipal Fund
At Thornburg, our approach to management of the Fund is based on the premise that investors in the Fund 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 in 2008 with the Best Fixed-Income Fund Family Award.
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 shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 0.96%, as disclosed in the most recent Prospectus.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 7/22/91) | |||||||||||||||
Without sales charge | 12.12 | % | 4.36 | % | 3.84 | % | 4.50 | % | 5.33 | % | |||||
With sales charge | 9.91 | % | 3.66 | % | 3.42 | % | 4.29 | % | 5.21 | % |
30-DAY YIELDS, A SHARES
As of September 30, 2009
Annualized Distribution Rate | SEC Yield | |
3.81% | 2.75% |
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2009
Average Credit Quality | A+ | |
Number of Bonds | 315 | |
Duration | 4.9 Yrs | |
Average Maturity | 8.6 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 10.
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, 2009
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 summarized 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.
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Thornburg Intermediate Municipal Fund
September 30, 2009
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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 20, 2009
Dear Fellow Shareholder:
We are pleased to present the Annual Report for the Thornburg Intermediate Municipal Fund. The net asset value (NAV) of the Class A shares increased by 93 cents per share to $13.40 during the twelve months ended September 30, 2009. If you were with us for the entire period, you received dividends of 53.6 cents per share. If you reinvested your dividends, you received 54.7 cents per share. Dividends per share were lower for Class C and higher for Class I to account for varying class-specific expenses. | |
Josh Gonze Co-Portfolio Manager | In last year’s annual report letter, we wrote about massive deleveraging of the municipal market, evidenced by the unwinding of tender option bond programs and investors’ mass exodus out of high-risk investment strategies employing leverage and other speculative strategies. The forced liquidation of assets placed inordinate supply into a market already reeling from the effects of the mortgage and banking crisis. Compounding matters was the downgrade of nearly all AAA-rated municipal bond insurers that provided credit enhancement to nearly half of all bonds outstanding, including the two largest insurers AMBAC and MBIA. Investor scrutiny over the ratings agencies led many investors to question whether they should be participating in the municipal market at all; and who could blame them given the deluge of negative headline press directed at the municipal market? These events caused 2008 to be one of the worst performing years on record for municipal bonds. | |
Christopher Ihlefeld Co-Portfolio Manager | Today’s municipal market reflects an impressive rebound from where we were this time last year. Municipal sectors that were hit the hardest in 2008 – health care, lease-backed bonds, and industrial development revenue bonds – have been among the best performing sectors in 2009. This has helped your Fund’s performance as we have market over-weights in each of these sectors. Revenue bonds in general have outperformed all other broad sectors of the market. State general obligation and government-backed pre-refunded bonds, sectors in which we are under-weighted and that led the pack in 2008, have lagged revenue bonds by a substantial margin in 2009. Your Fund’s comparatively higher exposure to strong middle-tier investment grade credits (single-A rated bonds) has also helped performance this year, as credit spreads have contracted from their recent peak in 2008, and investors have been compensated for in-depth credit research. | |
For years, credit research was overshadowed in our industry by the simplicity and dominance of bond insurance. A prevalent though misguided understanding that the use of municipal insurance could effectively eliminate credit risk led to the diminished value of financial analysis in favor of financial engineering. Talent was directed to craft complex hedging strategies to |
Certified Annual Report 7
Letter to Shareholders,
Continued
generate attractive returns. As bond insurance lost most of its relevance following a string of downgrades, the market understandably has a renewed interest in credit research. While credit research represents a lost art to some in our industry, we have emphasized credit research from our inception and will continue our time honored tradition of bottom-up credit research well into the future.
Market liquidity has greatly improved with the passage of the American Reinvestment and Recovery Act, which pledged $144 billion in state and local government fiscal relief. The passage of this act in February 2009 spurred investors back into the municipal bond market as bond investors gained confidence in the federal government’s support of state and local governments. Other supportive factors include stabilization among major investment banks, healthy volume of new issues, and strong retail demand. We’ve even seen reasonable appetite for lower-rated, higher-yielding municipal credits as high-yield funds have garnered capital. The municipal market otherwise appears quite orderly with a steady supply of new issuance, strong demand coming from retail investors, and an active secondary market.
Yields of late have trended lower, attributable in large part to a compelling surge in demand for municipal bonds. The months leading up to the current fiscal year end saw a significant migration of investor assets out of oppressively low yielding money market funds into short and intermediate bond funds. For example, municipal money market funds accounted for $495 billion of assets at the end of 2008. As of September 30, 2009, assets in municipal money market funds were $416 billion, a reduction of $79 billion. Municipal bond funds have grown by $52 billion during this period, nearly four times the annual average over the last twenty years. If this disintermediation trend continues, we would expect it to have a positive effect on bond prices in the months ahead.
We continue to maintain a watchful eye on state and local economies. State tax collections have been weak through the middle of 2009 with 48 states reporting budget gaps totaling $178 billion. The Nelson A. Rockefeller Institute of Government reported that state tax collections are down 16.6% year-over-year through the second quarter of 2009. For many states the biggest drag on tax revenues by far has been a significant decline in personal income tax, down nearly 28%. Local government tax revenues look better with tax revenues down only 2.8%, due in large part to local governments’ reliance on stable property tax revenue. We expect income tax revenues to remain weak until the economy starts creating a significant number of new jobs. The worst is yet to come for property tax revenues that typically adjust to real estate values after a significant lag. We are closely watching these trends in recently exuberant real estate markets such as Florida, Nevada, Arizona, and California.
The Class A shares of your Fund produced a total return of 12.12% over the twelve-month period ended September 30, 2009 at NAV, compared to a 15.41% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Most of the dispersion in the returns can be attributed to your Fund’s underperformance during the fourth quarter of 2008, a period characterized by the investor flight to quality as exhibited by their exclusive preference for short-term, very high-quality bonds. Compared to your Fund, the Merrill Lynch 7-12 Year Municipal Bond Index is more of a high-grade index with heavy concentrations of state general obligation bonds, U.S. Government escrow bonds, and AAA-rated bonds, all of which excelled during the turbulent fourth quarter of 2008. In contrast, your Fund maintains a higher concentration of revenue bonds, A-rated bonds, and bonds with maturities as long as eighteen years. If credit spreads and term spreads continue to contract, as we’ve seen during most of 2009, we would expect to see performance move closer in line with that of the index.
8 Certified Annual Report
Your Thornburg Intermediate Municipal Fund is a laddered portfolio of over 300 municipal obligations from 45 states. We ladder the maturity dates of the bonds in your portfolio so that some of the bonds are scheduled to mature during each of the coming years. Laddering intermediate bonds accomplishes two goals. First, the staggered bond maturities contained in a ladder reduce interest-rate risk and dampen the Fund’s price volatility. Second, laddering gives the Fund a steady cash flow stream from maturing bonds to reinvest toward the top of the ladder where yields are typically higher. The chart on the right describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
Percentages can and do vary. Data as of 9/30/09.
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. 2009 has proven to be another strong year for our municipal bond funds. We believe this reflects our team’s competent approach to managing risk, its disciplined laddering process to bond investing, and its passionate pursuit of quality execution.
Thank you for investing in Thornburg Intermediate Municipal Fund.
Sincerely,
![]() | ![]() | ![]() | ||
George Strickland | Josh Gonze | Christopher Ihlefeld | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager | ||
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 Intermediate Municipal Fund
| September 30, 2009 |
![]() | We have used ratings from Standard & Poor’s (S&P). Where S&P ratings are not available, we have used Moody’s Investors Service. Where neither rating is available, we have used ratings from Fitch 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 — 0.39% | ||||||||
University of Alabama at Birmingham Hospital Revenue, 5.25% due 9/1/2025 | A1/A+ | $ | 2,000,000 | $ | 2,094,160 | |||
ALASKA — 0.57% | ||||||||
Alaska Municipal Bond Bank, 5.00% due 10/1/2017 (Insured: FGIC) | A1/A+ | 2,470,000 | 2,690,102 | |||||
Anchorage GO, 6.00% due 10/1/2012 (Insured: Natl-Re/FGIC) | NR/AA | 365,000 | 389,104 | |||||
ARIZONA — 2.25% | ||||||||
Mohave County IDA, 7.25% due 5/1/2015 (Mohave Prison LLC) | NR/BBB+ | 4,640,000 | 4,981,922 | |||||
Phoenix Civic Improvement Corp., 5.00% due 7/1/2017 (Insured: Natl-Re) | Aa3/AA | 1,000,000 | 1,139,610 | |||||
Pima County IDA, 6.70% due 7/1/2021 (Arizona Charter Schools) | Baa3/NR | 2,615,000 | 2,471,358 | |||||
Salt Verde Financial Corp. Gas Revenue, 5.25% due 12/1/2022 | A3/A | 2,000,000 | 2,007,400 | |||||
Salt Verde Financial Corp. Gas Revenue, 5.25% due 12/1/2028 | A3/A | 500,000 | 502,370 | |||||
Tucson GO, 9.75% due 7/1/2012 (ETM) | NR/AA- | 400,000 | 493,860 | |||||
Tucson GO, 9.75% due 7/1/2013 (ETM) | NR/AA- | 500,000 | 653,705 | |||||
CALIFORNIA — 7.19% | ||||||||
California HFA, 5.125% due 7/1/2022 (Catholic Healthcare West) | A2/A | 1,000,000 | 1,040,550 | |||||
California PCR, 5.35% due 12/1/2016 (Pacific Gas & Electric) (AMT) | A3/A | 2,740,000 | 2,845,380 | |||||
California State Public Works Board Lease, 5.00% due 6/1/2017 (Regents of University of California; Insured: FGIC) | Aa2/AA- | 2,000,000 | 2,276,560 | |||||
California Statewide Community Development Authority, 6.25% due 8/15/2028 (Enloe Medical Center; Insured: CA Mtg Insurance) | NR/A | 1,050,000 | 1,158,108 | |||||
Carson Redevelopment Agency Tax Allocation, 6.25% due 10/1/2022 (Project Area 1) | NR/A- | 1,620,000 | 1,751,236 | |||||
Carson Redevelopment Agency Tax Allocation, 6.375% due 10/1/2024 (Project Area 1) | NR/A- | 1,300,000 | 1,404,910 | |||||
El Camino Hospital District, 6.25% due 8/15/2017 (ETM) | NR/NR | 1,000,000 | 1,168,950 | |||||
a Golden West Schools Financing Authority, 0% due 8/1/2018 (Insured: Natl-Re) | Baa1/A | 2,140,000 | 1,327,528 | |||||
Irvine Ranch Water District GO, 0.27% due 10/1/2041 put 10/1/2009 (LOC: Bank of America) (daily demand notes) | VMIG1/A-1 | 700,000 | 700,000 | |||||
Lee Lake Water District Community Facilities, 5.75% due 9/1/2023 | NR/NR | 3,000,000 | 2,616,570 | |||||
Los Angeles Regional Airport Improvement Corp., 5.00% due 1/1/2017 (LAX Fuel Corp.; Insured: FSA) (AMT) | Aa3/AAA | 1,120,000 | 1,187,771 | |||||
M-S-R Energy Authority, 6.125% due 11/1/2029 | NR/A | 2,500,000 | 2,792,675 | |||||
Merced Redevelopment Agency, 6.25% due 9/1/2029 (Gateways Redevelopment) | NR/A- | 1,500,000 | 1,566,390 | |||||
Mojave USD COP, 0% due 9/1/2021 (Insured: FSA) | NR/AAA | 1,095,000 | 604,418 | |||||
Mojave USD COP, 0% due 9/1/2023 (Insured: FSA) | NR/AAA | 1,100,000 | 532,037 | |||||
Redwood City, 0% due 7/15/2023 (Redevelopment; Insured: AMBAC) | NR/A- | 2,060,000 | 1,016,734 | |||||
San Diego County Regional Transportation, 0.40% due 4/1/2038 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-2 | 5,000,000 | 5,000,000 | |||||
San Francisco City & County Airports, 6.50% due 5/1/2019 (International Airport) | A1/A | 2,000,000 | 2,056,960 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
San Mateo USD GO, 0% due 9/1/2019 (Insured: FGIC) | Aa2/AA | $ | 3,000,000 | $ | 1,994,700 | |||
Tuolumne Wind Project Authority, 5.875% due 1/1/2029 (Tuolumne Co.) | A1/A+ | 3,000,000 | 3,323,520 | |||||
Victor Elementary School District GO, 0% due 8/1/2025 (Insured: FGIC) | A2/A | 1,535,000 | 664,241 | |||||
Washington USD COP, 5.00% due 8/1/2022 (New High School; Insured: AMBAC) | NR/BBB+ | 2,010,000 | 2,047,828 | |||||
COLORADO — 5.84% | ||||||||
Adams County, 5.00% due 8/1/2014 (Brighton Community Hospital Association.; Insured: FHA 242; Natl-Re) | NR/A | 1,000,000 | 1,086,180 | |||||
Adams County Communication Center COP, 5.75% due 12/1/2016 | Baa1/NR | 1,265,000 | 1,300,293 | |||||
Arvada IDRB, 5.60% due 12/1/2012 (Wanco Inc.; LOC: US Bank N.A.) (AMT) | NR/NR | 370,000 | 369,312 | |||||
Central Platte Valley Metropolitan District GO, 5.15% due 12/1/2013 pre-refunded 12/1/2009 | NR/AAA | 1,000,000 | 1,018,200 | |||||
Central Platte Valley Metropolitan District GO, 5.00% due 12/1/2031 put 12/1/2009 (LOC: BNP Paribas) | NR/AAA | 3,995,000 | 4,022,645 | |||||
Colorado Educational & Cultural Facilities, 5.25% due 8/15/2019 (Peak to Peak Charter School; Insured: Syncora) | NR/A | 1,375,000 | 1,434,290 | |||||
Colorado HFA, 5.75% due 1/15/2022 (Vail Valley Medical Center) | NR/BBB+ | 1,380,000 | 1,399,044 | |||||
Denver City & County Airport, 5.50% due 11/15/2015 (Insured: FGIC) (AMT) | A1/A+ | 5,000,000 | 5,248,550 | |||||
Denver City & County Housing Authority, 5.20% due 11/1/2027 (Three Towers Rehabilitation; Insured: FSA) (AMT) | Aa3/NR | 2,555,000 | 2,615,835 | |||||
El Paso County School District GO, 7.10% due 12/1/2013 (State Aid Withholding) | Aa3/AA- | 500,000 | 606,530 | |||||
Madre Metropolitan District GO, 5.375% due 12/1/2026 | NR/NR | 2,215,000 | 1,546,114 | |||||
Murphy Creek Metropolitan District GO, 6.00% due 12/1/2026 | NR/NR | 2,000,000 | 1,096,380 | |||||
North Range Metropolitan District GO, 5.00% due 12/15/2021 (Insured: ACA) | NR/NR | 1,500,000 | 1,233,705 | |||||
Northwest Parkway Public Highway Authority, 0% due 6/15/2014 (Insured: FSA) (ETM) | Aa3/AAA | 1,005,000 | 1,044,255 | |||||
Park Creek Metropolitan District, 5.25% due 12/1/2020 (Insured: Assured Guaranty) | NR/AAA | 1,125,000 | 1,281,544 | |||||
Plaza Metropolitan District Public Improvement Fee/Tax Increment, 7.70% due 12/1/2017 | NR/NR | 2,500,000 | 2,514,350 | |||||
Public Authority For Colorado Energy Gas Revenue, 6.125% due 11/15/2023 (Guaranty: Merrill Lynch) | A2/A | 2,000,000 | 2,172,860 | |||||
Southlands Metropolitan District GO, 7.00% due 12/1/2024 pre-refunded 12/1/2014 | NR/AAA | 1,370,000 | 1,722,419 | |||||
CONNECTICUT — 0.25% | ||||||||
b Connecticut Health & Educational Facility Authority, 5.75% due 7/1/2029 (Ethel Walker School) | NR/BBB- | 1,350,000 | 1,332,612 | |||||
DISTRICT OF COLUMBIA — 2.89% | ||||||||
District of Columbia Association of American Medical Colleges, 5.00% due 2/15/2017 (Insured: AMBAC) | Aa2/AA | 1,000,000 | 1,136,720 | |||||
District of Columbia COP, 5.25% due 1/1/2014 (Insured: FGIC) | A2/A | 2,000,000 | 2,215,400 | |||||
District of Columbia COP, 5.00% due 1/1/2020 (Insured: FGIC) | A2/A | 3,900,000 | 4,198,545 | |||||
District of Columbia GO, 6.00% due 6/1/2015 (Insured: Natl-Re) | A1/A+ | 3,000,000 | 3,517,080 | |||||
Metropolitan Airports Authority, 0% due 10/1/2023 (Dulles Toll Road; Insured: Assured Guaranty) | Aa2/AAA | 4,890,000 | 2,369,058 | |||||
Metropolitan Airports Authority, 0% due 10/1/2024 (Dulles Toll Road; Insured: Assured Guaranty) | Aa2/AAA | 5,000,000 | 2,275,100 | |||||
FLORIDA — 11.19% | ||||||||
Broward County Housing Finance Authority MFR, 5.40% due 10/1/2011 (Pembroke Park Apartments; Guaranty: Florida Housing Finance Corp.) (AMT) | NR/NR | 215,000 | 217,374 | |||||
Broward County School Board COP, 5.00% due 7/1/2020 (Insured: FSA) | Aa3/AAA | 1,000,000 | 1,075,450 | |||||
Collier County Housing Finance Authority MFR, 4.90% due 2/15/2032 put 2/15/2012 (Goodlette Arms; Collateralized: FNMA) | Aaa/NR | 1,000,000 | 1,068,460 | |||||
Crossings at Fleming Island Community Development, 5.60% due 5/1/2012 (Insured: Natl-Re) | Baa1/A | 1,080,000 | 1,100,401 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Enterprise Community Development District Assessment Bonds, 6.00% due 5/1/2010 (Insured: Natl-Re) | Baa1/A | $ | 305,000 | $ | 306,168 | |||
Escambia County HFA, 5.125% due 10/1/2014 (Baptist Hospital/Baptist Manor) | Baa1/BBB- | 850,000 | 854,607 | |||||
Escambia County HFA, 5.95% due 7/1/2020 (Florida Health Care Facility Loan; Insured: AMBAC) | NR/NR | 2,745,000 | 2,829,052 | |||||
Flagler County School Board COP, 5.00% due 8/1/2020 (Insured: FSA) | Aa3/AAA | 2,560,000 | 2,728,832 | |||||
Florida Board of Education GO Capital Outlay, 9.125% due 6/1/2014 | Aa1/AAA | 720,000 | 830,650 | |||||
Florida Board of Education GO Capital Outlay, 5.75% due 6/1/2018 | Aa1/AAA | 1,460,000 | 1,521,773 | |||||
Florida Housing Finance Corp., 5.40% due 4/1/2014 pre-refunded 10/1/2010 (Augustine Club | ||||||||
Apartments; Insured: Natl-Re) | Aaa/NR | 415,000 | 444,361 | |||||
Florida Housing Finance Corp. Homeowner Mtg, 4.80% due 1/1/2016 | Aa1/AA+ | 265,000 | 273,742 | |||||
Florida Municipal Loan Council, 5.00% due 10/1/2024 (Insured: Natl-Re) | Baa1/A | 2,235,000 | 2,313,963 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2018 (South Florida Evaluation Treatment) | NR/AA+ | 2,090,000 | 2,252,539 | |||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2019 (South Florida Evaluation Treatment) | NR/AA+ | 2,255,000 | 2,419,029 | |||||
Florida State Department of Environmental Protection, 5.00% due 7/1/2017 (Florida Forever; Insured: FGIC) | A1/AA- | 1,000,000 | 1,077,160 | |||||
Gainesville Utilities Systems Revenue, 0.45% due 10/1/2026 put 10/1/2009 (SPA: Suntrust Bank) (daily demand notes) | VMIG1/A-1+ | 3,500,000 | 3,500,000 | |||||
Gainesville Utilities Systems Revenue, 0.45% due 10/1/2026 put 10/1/2009 (SPA: Suntrust Bank) (daily demand notes) | VMIG1/A-1+ | 1,100,000 | 1,100,000 | |||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | A1/A+ | 1,100,000 | 1,153,097 | |||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | A1/A+ | 875,000 | 917,236 | |||||
Hillsborough County IDA PCR, 5.10% due 10/1/2013 (Tampa Electric Co.) | Baa1/BBB | 1,000,000 | 1,059,280 | |||||
Hillsborough County Special Assessment, 5.00% due 3/1/2017 (Insured: FGIC) | A3/A+ | 1,000,000 | 1,054,410 | |||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2021 (Insured: Syncora) | Baa1/NR | 3,000,000 | 2,920,740 | |||||
Jacksonville HFA Hospital, 5.75% due 8/15/2014 pre-refunded 8/15/2011 | NR/NR | 1,000,000 | 1,014,280 | |||||
Manatee County, 5.00% due 10/1/2016 (Insured: AMBAC) | Aa3/AA- | 1,000,000 | 1,097,970 | |||||
Marion County Hospital District, 5.00% due 10/1/2022 (Munroe Regional Health) | A3/NR | 1,000,000 | 979,420 | |||||
Miami Dade County GO, 6.25% due 7/1/2026 (Building Better Communities) | Aa3/AA- | 2,130,000 | 2,450,608 | |||||
Miami Dade County School Board COP, 5.00% due 10/1/2021 (Insured: AMBAC) | A3/A | 3,035,000 | 3,339,410 | |||||
Miami Dade County School Board COP, 5.25% due 5/1/2022 (Insured: Assured Guaranty) | Aa2/AAA | 2,600,000 | 2,864,706 | |||||
Miami GO, 5.375% due 9/1/2015 (Insured: Natl-Re) | A2/A+ | 1,000,000 | 1,111,570 | |||||
Orange County HFA, 6.25% due 10/1/2013 (Orlando Regional Hospital; Insured: Natl-Re) | A2/A | 440,000 | 482,244 | |||||
Orange County HFA, 5.125% due 6/1/2014 (Mayflower Retirement; Insured: Radian) | NR/BBB- | 1,000,000 | 1,004,610 | |||||
Orange County HFA, 6.25% due 10/1/2016 (Orlando Regional Hospital; Insured: Natl-Re) | A2/A | 280,000 | 311,909 | |||||
Orange County HFA, 6.375% due 11/15/2020 pre-refunded 11/15/2010 (Adventist Health Systems) | A1/NR | 1,000,000 | 1,075,360 | |||||
South Miami HFA, 5.00% due 8/15/2022 (Baptist Health Group) | Aa3/AA- | 1,500,000 | 1,584,840 | |||||
St. Johns County IDA, 5.85% due 8/1/2024 (Presbyterian Retirement) | NR/NR | 4,885,000 | 4,822,667 | |||||
Tampa Bay Water Utilities System Revenue, 5.50% due 10/1/2022 (Insured: FGIC) | Aa3/AA+ | 2,750,000 | 3,351,205 | |||||
Tampa Health Systems, 5.50% due 11/15/2013 (Catholic Health East Group; Insured: Natl-Re) | Aa3/A | 1,050,000 | 1,126,419 | |||||
University of Central Florida COP Convocation Corp., 5.00% due 10/1/2019 (Insured: FGIC) | NR/A | 1,135,000 | 1,152,218 | |||||
GEORGIA — 0.23% | ||||||||
Atlanta Airport Revenue, 6.00% due 1/1/2018 (Insured: FGIC) (AMT) | A1/A+ | 1,000,000 | 1,013,960 | |||||
Georgia Municipal Electric Power Authority, 10.00% due 1/1/2010 | A1/A+ | 230,000 | 234,908 | |||||
HAWAII — 0.31% | ||||||||
Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Kapiolani Health Care; Insured: Natl-Re) | Baa1/A | 1,645,000 | 1,704,121 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
IDAHO — 0.93% | ||||||||
Boise City IDRB Corp., 5.00% due 5/15/2020 (Western Trailer Co.; LOC: Wells Fargo) (AMT) | Aa2/NR | $ | 2,000,000 | $ | 2,028,800 | |||
Madison County Hospital Revenue, 5.25% due 9/1/2030 | NR/BBB- | 1,000,000 | 898,070 | |||||
Madison County Hospital Revenue, 5.25% due 9/1/2037 | NR/BBB- | 2,500,000 | 2,154,025 | |||||
ILLINOIS — 8.13% | ||||||||
Chicago Midway Airport Second Lien, 5.00% due 1/1/2019 (Insured: AMBAC) (AMT) | A3/A- | 1,210,000 | 1,248,224 | |||||
Chicago O’Hare International Airport Revenue Second Lien, 5.75% due 1/1/2018 (Insured: AMBAC) (AMT) | A1/A | 3,000,000 | 3,082,560 | |||||
Chicago Tax Increment, 6.25% due 11/15/2013 (Near South Redevelopment; Insured: ACA) | NR/NR | 1,400,000 | 1,448,748 | |||||
Chicago Tax Increment, 0% due 11/15/2014 (Near South Redevelopment; Insured: ACA) | NR/NR | 1,340,000 | 995,674 | |||||
Chicago Tax Increment Allocation, 5.30% due 1/1/2014 (Lincoln Belmont; Insured: ACA) | NR/NR | 2,285,000 | 2,270,239 | |||||
Cook County School District GO, 0% due 12/1/2022 (ETM) | NR/NR | 2,000,000 | 1,231,380 | |||||
Illinois DFA, 6.00% due 11/15/2012 (Adventist Health Group; Insured: Natl-Re) | Baa1/AA | 2,860,000 | 2,974,600 | |||||
Illinois Educational Facilities Authority, 5.00% due 11/1/2016 (Rush University Medical Center) | A3/A | 1,000,000 | 1,068,520 | |||||
Illinois Educational Facilities Authority, 5.625% due 10/1/2022 (Augustana College) | Baa1/NR | 1,000,000 | 1,022,530 | |||||
Illinois Educational Facilities Authority, 5.75% due 11/1/2028 (Rush University Medical Center) | A3/A | 1,000,000 | 1,049,710 | |||||
Illinois Finance Authority, 5.00% due 8/1/2022 (Bradley University; Insured: Syncora) | NR/A | 1,000,000 | 1,070,190 | |||||
Illinois Finance Authority, 6.125% due 11/1/2023 (Advocate Health) | Aa3/AA | 5,000,000 | 5,648,000 | |||||
Illinois Finance Authority, 5.00% due 2/1/2027 (Newman Foundation; Insured: Radian) | NR/BBB- | 1,220,000 | 1,071,587 | |||||
Illinois HFA, 6.00% due 7/1/2011 (Loyola University Health Systems; Insured: Natl-Re) | Baa1/A | 1,370,000 | 1,437,678 | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola University Health Systems; Insured: Natl-Re) (ETM) | NR/A | 230,000 | 261,413 | |||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola University Health Systems; Insured: Natl-Re) | Baa1/A | 1,080,000 | 1,154,747 | |||||
Illinois HFA, 6.25% due 11/15/2019 pre-refunded 11/15/2009 (OSF Healthcare) | A2/A | 1,250,000 | 1,271,475 | |||||
Illinois HFA, 5.70% due 2/20/2021 (Midwest Care Center; Collateralized: GNMA) | Aaa/NR | 855,000 | 891,697 | |||||
Melrose Park Tax Increment, 6.50% due 12/15/2015 (Insured: FSA) | Aa3/AAA | 1,015,000 | 1,079,493 | |||||
Sangamon County School District COP, 5.875% due 8/15/2018 (Hay Edwards; Insured: ACA) | NR/NR | 2,300,000 | 2,205,493 | |||||
Sherman Mtg, 6.10% due 10/1/2014 (Villa Vianney Health Care; Collateralized: FHA/GNMA) | NR/AAA | 1,170,000 | 1,196,407 | |||||
Sherman Mtg, 6.20% due 10/1/2019 (Villa Vianney Health Care; Collateralized: FHA/GNMA) | NR/AAA | 1,600,000 | 1,634,896 | |||||
Southern Illinois University, 0% due 4/1/2014 (Insured: Natl-Re) | A1/A | 1,425,000 | 1,248,400 | |||||
Southwestern Illinois Development Authority, 0% due 12/1/2024 (Insured: FSA) | NR/AAA | 2,975,000 | 1,450,699 | |||||
Tazewell County School District GO, 9.00% due 12/1/2024 (Insured: FGIC) | A3/NR | 1,205,000 | 1,854,314 | |||||
University of Illinois, 0% due 4/1/2014 (Insured: Natl-Re) | Aa3/A | 1,590,000 | 1,434,419 | |||||
Will County Community School District GO, 0% due 11/1/2011 (Insured: FSA) | Aa3/AAA | 2,965,000 | 2,859,742 | |||||
INDIANA — 5.30% | ||||||||
Allen County Economic Development, 5.80% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 895,000 | 908,577 | |||||
Allen County Economic Development, 5.75% due 12/30/2015 (Indiana Institute of Technology) | NR/NR | 1,355,000 | 1,362,453 | |||||
Allen County Jail Building Corp., 5.00% due 4/1/2018 (Insured: Syncora) | Aa3/NR | 2,495,000 | 2,756,775 | |||||
Allen County Redevelopment District, 5.00% due 11/15/2018 | A3/NR | 1,560,000 | 1,665,815 | |||||
Boone County Hospital Association, 5.625% due 1/15/2015 pre-refunded 7/15/2011 (Insured: FGIC) | NR/A+ | 1,000,000 | 1,087,540 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2016 (Performing Arts Center) | Aa2/AA | 1,730,000 | 1,426,212 | |||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2021 (Performing Arts Center) | Aa2/AA | 2,000,000 | 1,257,560 | |||||
Fort Wayne Redevelopment Authority, 5.00% due 8/1/2023 (Harrison Square; Insured: Assured Guaranty) | Aa2/NR | 2,290,000 | 2,529,626 | |||||
Goshen Chandler School Building, 0% due 1/15/2011 (Insured: Natl-Re/State Aid Withholding) | Baa1/A | 1,020,000 | 994,633 | |||||
Indiana Bond Bank, 5.25% due 4/1/2023 (Hendricks Regional; Insured: AMBAC) | NR/AA | 2,000,000 | 2,254,420 | |||||
Indiana Bond Bank Gas Program Revenue, 5.25% due 10/15/2020 | Aa3/NR | 5,000,000 | 5,409,850 | |||||
Indiana HFA, 5.75% due 9/1/2015 (Methodist Hospital) (ETM) | A3/AAA | 575,000 | 588,380 | |||||
Lawrence MFR Redevelopment Authority, 5.40% due 6/1/2024 put 1/1/2018 (Pinnacle Apartments; Collateralized: FNMA) (AMT) | NR/AAA | 1,500,000 | 1,501,320 | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2017 (146th Street Extension) | NR/AA- | 1,000,000 | 1,100,020 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2020 (146th Street Extension) | NR/AA- | $ | 1,000,000 | $ | 1,079,850 | |||
Vanderburgh County Redevelopment District Tax Increment, 5.00% due 2/1/2020 | NR/A | 1,000,000 | 1,032,050 | |||||
West Clark School Building Corp. First Mtg, 5.75% due 7/15/2017 (Insured: FGIC/State Aid Withholding) | NR/AA+ | 1,685,000 | 1,845,041 | |||||
IOWA — 1.69% | ||||||||
Coralville COP, 5.25% due 6/1/2022 | A3/NR | 2,980,000 | 3,083,048 | |||||
Iowa Finance Authority, 6.00% due 7/1/2012 (Trinity Regional Hospital; Insured: FSA) | Aa3/AAA | 635,000 | 683,597 | |||||
Iowa Finance Authority, 6.00% due 7/1/2013 (Genesis Medical Center) | A1/NR | 1,000,000 | 1,018,280 | |||||
Iowa Finance Authority, 5.75% due 12/1/2015 (Trinity Health) | Aa2/AA | 1,250,000 | 1,299,137 | |||||
Iowa Finance Authority, 6.75% due 2/15/2016 pre-refunded 2/15/2010 (Iowa Health Services) | Aa3/NR | 1,000,000 | 1,033,320 | |||||
Iowa Finance Authority, 6.00% due 12/1/2018 (Catholic Health Initiatives) | Aa2/AA | 2,000,000 | 2,051,960 | |||||
KANSAS — 1.16% | ||||||||
Olathe Tax Increment Special Obligation, 5.45% due 9/1/2022 (West Village Center) | NR/NR | 1,155,000 | 907,819 | |||||
Wichita Hospital Revenue, 6.75% due 11/15/2019 (Via Christi Health System) | NR/A+ | 4,200,000 | 4,255,482 | |||||
Wyandotte County School District GO, 5.00% due 9/1/2014 (Insured: FGIC) | A3/NR | 1,030,000 | 1,152,683 | |||||
KENTUCKY — 1.06% | ||||||||
Kentucky EDA, 5.85% due 10/1/2015 (Norton Healthcare; Insured: Natl-Re) | Baa1/A | 2,665,000 | 2,848,032 | |||||
Kentucky EDA, 0% due 10/1/2024 (Norton Healthcare; Insured: Natl-Re) | Baa1/A | 3,000,000 | 1,237,920 | |||||
Kentucky EDA, 5.75% due 12/1/2028 (Louisville Arena; Insured: Assured Guaranty) | Aa2/AAA | 1,500,000 | 1,655,925 | |||||
LOUISIANA — 2.12% | ||||||||
Louisiana Local Government Environment Facilities Authority, 5.00% due 3/1/2014 (Independence Stadium) | NR/A | 1,000,000 | 1,077,880 | |||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2022 (Black & Gold Facilities; Insured: CIFG) | Baa3/BBB- | 1,500,000 | 1,506,105 | |||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | Baa3/BBB | 3,000,000 | 3,084,810 | |||||
New Orleans Aviation Board, 5.25% due 1/1/2018 (Insured: FSA) (AMT) | Aa3/AAA | 1,000,000 | 1,084,870 | |||||
New Orleans Aviation Board, 5.25% due 1/1/2020 (Insured: FSA) | Aa3/AAA | 2,000,000 | 2,267,280 | |||||
St. Tammany Parish Sales Tax Revenue, 5.00% due 6/1/2019 (Insured: CIFG) | NR/A+ | 1,300,000 | 1,414,413 | |||||
St. Tammany Parish Sales Tax Revenue, 5.00% due 6/1/2020 (Insured: CIFG) | NR/A+ | 1,000,000 | 1,078,880 | |||||
MARYLAND — 0.61% | ||||||||
Maryland Health & Higher Educational Facilities Authority, 0.41% due 7/1/2041 put 10/1/2009 (University of Maryland Medical Systems; LOC: Suntrust Bank) (daily demand notes) | VMIG1/A-2 | 3,300,000 | 3,300,000 | |||||
MASSACHUSETTS — 1.36% | ||||||||
Massachusetts Health & Educational Facilities Authority, 0.27% due 8/15/2034 put 10/1/2009 (Tufts University; SPA: Bank of America N.A.) (daily demand notes) | VMIG1/A-1 | 5,300,000 | 5,300,000 | |||||
Massachusetts Health & Educational Facilities Authority, 0.27% due 12/1/2037 put 10/1/2009 (Museum of Fine Arts; SPA: Bank of America N.A.) (daily demand notes) | VMIG1/A-1+ | 700,000 | 700,000 | |||||
Massachusetts Health & Educational Facilities Authority, 0.27% due 8/15/2040 put 10/1/2009 (Tufts University; SPA: JP Morgan Chase Bank) (daily demand notes) | VMIG1/A-1+ | 125,000 | 125,000 | |||||
Massachusetts Housing Finance Agency, 5.05% due 6/1/2010 (Insured: Natl-Re) (AMT) | Baa1/A | 290,000 | 291,853 | |||||
Massachusetts Housing Finance Agency, 6.125% due 12/1/2011 (Insured: Natl-Re) (AMT) | Aa2/NR | 950,000 | 951,834 | |||||
MICHIGAN — 3.89% | ||||||||
Kalamazoo Hospital Finance Authority, 6.25% due 6/1/2014 (Borgess Medical Center) (ETM) | Aaa/AAA | 650,000 | 784,082 | |||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2019 (Bronson Hospital; Insured: FSA) | �� | Aa3/AAA | 1,500,000 | 1,601,790 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Kent Hospital Finance Authority, 7.25% due 1/15/2013 (Butterworth Hospital; Insured: Natl- Re) | A2/AA | $ | 670,000 | $ | 728,759 | |||
Michigan Higher Education Student Loan Authority, 3.95% due 3/1/2011 (AMT) | A1/AA | 750,000 | 724,365 | |||||
Michigan Public Educational Facilities Authority, 5.50% due 9/1/2022 (Black River School) | NR/NR | 1,110,000 | 928,260 | |||||
Michigan Public Educational Facilities Authority, 8.50% due 9/1/2029 (Bradford Academy) | NR/BBB- | 1,500,000 | 1,632,255 | |||||
Michigan State Building Authority, 5.25% due 10/15/2017 (Insured: FSA) | Aa3/AAA | 2,450,000 | 2,656,682 | |||||
Michigan State Building Authority, 0% due 10/15/2025 (Insured: FGIC) | A1/A+ | 6,000,000 | 2,466,540 | |||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2024 (Sparrow Obligated Group) | A1/A+ | 2,140,000 | 2,172,720 | |||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Obligated Group) | A2/A | 3,000,000 | 2,864,130 | |||||
Michigan Strategic Fund, 5.25% due 10/15/2023 (Michigan House of Representatives Facilities; Insured: Assured Guaranty) | Aa2/AAA | 1,000,000 | 1,132,630 | |||||
Royal Oak Hospital Finance Authority, 8.00% due 9/1/2029 (William Beaumont Hospital) | A1/A | 2,500,000 | 2,959,050 | |||||
Southfield Economic Development Corp., 7.25% due 12/1/2010 (N.W. 12 LP Transcon Builders) | NR/NR | 520,000 | 506,418 | |||||
MINNESOTA — 0.56% | ||||||||
Minneapolis St. Paul Health, 6.00% due 12/1/2018 (Healthpartners Obligated Group) | Baa1/BBB | 1,000,000 | 1,039,800 | |||||
St. Paul Housing & Redevelopment Authority, 5.25% due 5/15/2020 (Healthpartners Obligated Group) | Baa1/BBB | 1,965,000 | 1,988,148 | |||||
MISSISSIPPI — 1.39% | ||||||||
Mississippi Development Bank Special Obligation, 5.00% due 7/1/2022 (Canton Public Improvement) | NR/NR | 1,935,000 | 1,921,339 | |||||
Mississippi Development Bank Special Obligation, 5.00% due 7/1/2027 (Lowndes County Industrial Development; Insured: FSA) | Aa3/AAA | 2,500,000 | 2,699,675 | |||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply, 5.00% due 3/1/2018 (Insured: Syncora) | Baa2/NR | 1,920,000 | 1,949,395 | |||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply, 5.00% due 3/1/2020 (Insured: Syncora) | Baa2/NR | 1,000,000 | 998,350 | |||||
MISSOURI — 1.12% | ||||||||
Kansas City Tax Increment Financing Commission, 5.00% due 3/1/2012 (Maincor) | NR/NR | 905,000 | 912,756 | |||||
Missouri Development Finance Board, 5.00% due 4/1/2019 (Eastland Center) | NR/A+ | 1,000,000 | 1,060,270 | |||||
Missouri Development Finance Board, 5.00% due 4/1/2021 (Eastland Center) | NR/A+ | 2,000,000 | 2,096,820 | |||||
Missouri Development Finance Board, 5.125% due 4/1/2022 (Eastland Center) | NR/A+ | 2,000,000 | 2,018,520 | |||||
NEBRASKA — 0.38% | ||||||||
Adams County Hospital Authority, 5.00% due 12/15/2023 (Mary Lanning Memorial Hospital; Insured: Radian) | NR/A- | 2,000,000 | 2,049,520 | |||||
NEVADA — 0.66% | ||||||||
Reno Sparks Indian Colony, 5.00% due 6/1/2021 (LOC: U.S. Bank NA) | NR/NR | 1,000,000 | 1,019,240 | |||||
Washoe County GO, 0% due 7/1/2011 (Reno Sparks Convention Center; Insured: FSA) | Aa2/AAA | 2,600,000 | 2,552,264 | |||||
NEW HAMPSHIRE — 1.93% | ||||||||
Manchester Housing & Redevelopment Authority, 0% due 1/1/2016 (Insured: Radian ACA) | Baa3/BBB- | 4,990,000 | 3,617,700 | |||||
New Hampshire Business Finance Authority, 7.125% due 7/1/2027 (United Illuminating Co.) (AMT) | Baa2/NR | 1,000,000 | 1,076,370 | |||||
New Hampshire Health & Education Facilities, 5.25% due 10/1/2023 (Southern New Hampshire Medical Center) | NR/A- | 1,000,000 | 1,017,640 | |||||
New Hampshire IDA PCR, 5.90% due 8/1/2018 (CT Light & Power) (AMT) | Baa1/BBB | 1,000,000 | 1,015,610 | |||||
New Hampshire PCR, 5.375% due 5/1/2014 (Central Maine Power Co.) | A3/BBB+ | 3,500,000 | 3,766,490 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
NEW JERSEY — 0.03% | ||||||||
New Jersey EDA, 7.50% due 12/1/2019 (Spectrum for Living Development) | NR/NR | $ | 160,000 | $ | 160,843 | |||
NEW MEXICO — 0.26% | ||||||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation) | NR/NR | 1,515,000 | 1,411,283 | |||||
NEW YORK — 1.87% | ||||||||
New York City GO, 0.31% due 8/1/2028 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-1 | 600,000 | 600,000 | |||||
New York City GO, 0.31% due 4/1/2035 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/AA | 1,600,000 | 1,600,000 | |||||
New York City Municipal Water Finance Authority, 0.35% due 6/15/2032 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-1 | 2,000,000 | 2,000,000 | |||||
New York City Trust Cultural Resources, 5.75% due 7/1/2015 (Museum of American Folk Art; Insured: ACA) | NR/NR | 875,000 | 851,979 | |||||
New York State Dormitory Authority, 5.00% due 7/1/2017 (Bishop Henry B. Hucles Nursing; Insured: SONYMA) | Aa1/NR | 850,000 | 949,875 | |||||
New York State Dormitory Authority, 5.25% due 5/15/2021 (State University Educational Facilities) | A1/AA- | 500,000 | 567,705 | |||||
New York State Dormitory Authority, 0.28% due 7/1/2037 put 10/1/2009 (Cornell University; SPA: Bank of America N.A.) (daily demand notes) | VMIG1/A-1+ | 3,600,000 | 3,600,000 | |||||
NORTH CAROLINA — 0.14% | ||||||||
North Carolina Housing Finance Agency SFMR, 6.50% due 9/1/2026 (AMT) | Aa2/AA | 725,000 | 735,368 | |||||
NORTH DAKOTA — 0.18% | ||||||||
Ward County Health Care Facilities, 5.125% due 7/1/2021 (Trinity Obligated Group) | NR/BBB+ | 1,000,000 | 989,920 | |||||
OHIO — 3.19% | ||||||||
Cleveland Cuyahoga County Port Authority, 6.25% due 5/15/2016 (LOC: FifthThird Bank) | NR/NR | 1,655,000 | 1,639,857 | |||||
Deerfield Township Tax Increment, 5.00% due 12/1/2025 | A3/NR | 1,000,000 | 1,008,810 | |||||
Franklin County Health Care, 6.00% due 11/1/2010 (Heinzerling Foundation; LOC: Banc One) | Aa1/NR | 415,000 | 416,527 | |||||
Hamilton Wastewater Systems, 5.25% due 10/1/2017 (Insured: FSA) | Aa3/NR | 1,500,000 | 1,713,765 | |||||
Lorain County Hospital Revenue, 5.625% due 10/1/2016 (Catholic Healthcare) | A1/AA- | 1,435,000 | 1,509,448 | |||||
North Ridgeville Economic Development, 0% due 2/1/2015 (Lake Ridge Nursing Home; Collateralized: FHA) | NR/AAA | 165,000 | 110,921 | |||||
Ohio State Air Quality Development Authority, 5.70% due 8/1/2020 (First Energy Generation) | Baa2/BBB | 3,000,000 | 3,252,240 | |||||
Ohio State Air Quality Development Authority, 4.85% due 8/1/2040 (Columbus Southern Power; Insured: Natl-Re) (AMT) | A3/BBB | 1,500,000 | 1,556,655 | |||||
Ohio State Air Quality Development Authority, 5.10% due 11/1/2042 (Columbus Southern Power; Insured: Natl-Re) (AMT) | A3/BBB | 3,000,000 | 3,128,160 | |||||
Ohio State Higher Educational Facilities, 0.30% due 8/1/2033 put 10/1/2009 (Kenyon College; SPA: Bank One Illinois) (daily demand notes) | VMIG1/A-1 | 1,700,000 | 1,700,000 | |||||
Ohio State Higher Educational Facilities, 5.05% due 7/1/2037 put 7/1/2016 (Kenyon College) | A1/A+ | 1,200,000 | 1,302,672 | |||||
OKLAHOMA — 1.56% | ||||||||
Oklahoma City Municipal Water & Sewer, 0% due 7/1/2011 (Insured: AMBAC) | NR/NR | 1,125,000 | 1,085,873 | |||||
Oklahoma City Municipal Water & Sewer, 0% due 7/1/2013 (Insured: AMBAC) | NR/NR | 1,485,000 | 1,339,841 | |||||
Oklahoma State DFA, 5.40% due 6/1/2013 pre-refunded 12/1/2010 (Oklahoma Hospital Association; Insured: AMBAC) | Aa3/NR | 825,000 | 880,910 | |||||
Oklahoma State Industries Authority, 5.50% due 7/1/2023 (OK Medical Research Foundation) | A1/NR | 3,730,000 | 4,016,688 | |||||
Tulsa IDA, 5.00% due 12/15/2024 (St. Francis Health Systems) | Aa2/AA | 1,130,000 | 1,174,251 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
OREGON — 0.22% | ||||||||
Forest Grove Campus Improvement, 6.00% due 5/1/2015 pre-refunded 5/1/2010 (Pacific University; Insured: Radian) | NR/BBB | $ | 800,000 | $ | 826,584 | |||
Oregon State Housing & Community Services Department SFMR, 5.35% due 7/1/2018 (AMT) | Aa2/NR | 375,000 | 383,381 | |||||
PENNSYLVANIA — 1.01% | ||||||||
Allegheny County Hospital Development, 6.50% due 5/1/2012 pre-refunded 5/1/2010 (South Hills Health Systems) | Baa2/NR | 1,400,000 | 1,442,350 | |||||
Carbon County IDA, 6.65% due 5/1/2010 (Panther Creek Partners) (AMT) | NR/BBB- | 1,000,000 | 1,000,130 | |||||
Chartiers Valley Industrial & Community Development Authority, 5.75% due 12/1/2022 (Asbury Health Center) | NR/NR | 900,000 | 802,350 | |||||
Lancaster County, 0% due 5/1/2014 (Insured: FGIC) | Aa3/NR | 795,000 | 676,672 | |||||
Lancaster County, 0% due 5/1/2015 (Insured: FGIC) | Aa3/NR | 800,000 | 640,336 | |||||
Pennsylvania Higher Education Facilities Authority, 0% due 7/1/2020 (Insured: AMBAC) | NR/NR | 2,032,839 | 920,897 | |||||
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 | 1,109,006 | |||||
Rhode Island Health & Education Building Corp., 6.00% due 8/1/2014 (Roger Williams Realty; Credit Support: FHA) | NR/A- | 915,000 | 936,557 | |||||
Rhode Island Health & Education Building Corp., 5.25% due 7/1/2015 (Memorial Hospital; LOC: Fleet Bank) | NR/AA+ | 1,325,000 | 1,430,497 | |||||
SOUTH CAROLINA — 3.96% | ||||||||
Berkeley County School District Installment Lease, 5.00% due 12/1/2019 | A3/A- | 2,000,000 | 2,155,520 | |||||
Charleston Educational Excellence Financing Corp., 5.25% due 12/1/2020 (Charleston County School District) | A1/AA- | 1,855,000 | 2,037,532 | |||||
Greenwood School Facilities, Inc., 5.00% due 12/1/2025 (Greenwood School District 50; Insured: Assured Guaranty) | Aa2/AAA | 2,400,000 | 2,607,552 | |||||
Lexington One School Facilities Corp. School District 1, 5.00% due 12/1/2019 | A1/NR | 1,000,000 | 1,070,560 | |||||
Lexington One School Facilities Corp. School District 1, 5.25% due 12/1/2021 | A1/NR | 1,700,000 | 1,816,399 | |||||
Scago Educational Facilities Corp., 5.00% due 12/1/2017 (Colleton School District; Insured: Assured Guaranty) | Aa2/AAA | 1,000,000 | 1,117,720 | |||||
Scago Educational Facilities Corp., 5.00% due 4/1/2019 (Spartanburg School District; Insured: FSA) | Aa3/AAA | 2,740,000 | 3,034,221 | |||||
Scago Educational Facilities Corp., 5.00% due 4/1/2021 (Spartanburg School District; Insured: FSA) | Aa3/AAA | 1,000,000 | 1,095,480 | |||||
South Carolina Housing Finance & Development Authority, 5.875% due 7/1/2022 (AMT) | Aa1/NR | 2,255,000 | 2,386,895 | |||||
South Carolina Housing Finance & Development Authority, 5.30% due 7/1/2023 (AMT) | Aa1/NR | 1,000,000 | 1,038,530 | |||||
Sumter School Facilities Inc. School District 2, 5.00% due 12/1/2021 (Insured: Assured Guaranty) | Aa2/AAA | 2,855,000 | 3,166,709 | |||||
SOUTH DAKOTA — 0.32% | ||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 11/1/2024 (Sanford Health) | A1/AA- | 1,700,000 | 1,757,086 | |||||
TENNESSEE — 2.12% | ||||||||
Knox County Health, 4.90% due 6/1/2031 put 6/1/2011 (Eastowne Partners II Ltd.; Collateralized: FNMA) | NR/AAA | 1,915,000 | 2,018,257 | |||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2023 | Baa1/A | 2,500,000 | 2,454,525 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2023 | Ba3/BB+ | 7,000,000 | 7,040,950 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
TEXAS — 11.93% | ||||||||
Austin Community College District, 5.50% due 8/1/2023 (Round Rock Campus) | Aa3/AA+ | $ | 2,180,000 | $ | 2,503,992 | |||
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 | 1,418,387 | |||||
Bexar County Health Facilities Development Corp., 5.00% due 7/1/2027 (Army Retirement Residence) | NR/BBB | 2,000,000 | 1,751,460 | |||||
Bexar County Housing Finance Corp., 5.40% due 8/1/2012 (Dymaxion & Marrach Park Apartments; Insured: Natl-Re) | Baa1/NR | 475,000 | 455,705 | |||||
Bexar County Housing Finance Corp., 5.875% due 4/1/2014 (Honey Creek Apartments; Insured: Natl-Re) | Baa1/NR | 775,000 | 722,866 | |||||
Bexar County Housing Finance Corp., 5.50% due 1/1/2016 (American Opportunity Housing & Colinas; Insured: Natl-Re) | Baa1/NR | 600,000 | 569,208 | |||||
Bexar County Housing Finance Corp., 6.125% due 4/1/2020 (Honey Creek Apartments; Insured: Natl-Re) | Baa1/NR | 1,000,000 | 857,010 | |||||
Bexar County Housing Finance Corp., 5.95% due 8/1/2020 (Dymaxion & Marrach Park Apartments; Insured: Natl-Re) | Baa1/NR | 1,270,000 | 1,093,406 | |||||
Bexar County Housing Finance Corp., 6.50% due 12/1/2021 (American Opportunity Housing- Waterford) | Baa3/NR | 2,000,000 | 1,752,160 | |||||
Bexar County Housing Finance Corp. MFR, 5.70% due 1/1/2021 (American Opportunity Housing; Insured: Natl-Re) | Baa1/NR | 1,035,000 | 926,087 | |||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2021 (Insured: Syncora) | A3/A | 1,300,000 | 1,407,016 | |||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2022 (Insured: Syncora) | A3/A | 2,300,000 | 2,468,429 | |||||
Birdville ISD GO, 0% due 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 2,800,000 | 2,720,592 | |||||
Cedar Park Improvement District GO, 5.00% due 2/15/2016 (Insured: Natl-Re) | A1/AA- | 1,000,000 | 1,107,610 | |||||
Dallas County Utilities & Reclamation District, 5.15% due 2/15/2022 (Insured: AMBAC) | Baa3/BBB+ | 3,000,000 | 3,082,020 | |||||
Dallas Fort Worth International Airport, 5.00% due 11/1/2015 | A1/A+ | 1,000,000 | 1,128,270 | |||||
Duncanville ISD GO, 0% due 2/15/2016 pre-refunded 2/15/2012 (Guaranty: PSF) | Aaa/AAA | 2,985,000 | 2,303,823 | |||||
Duncanville ISD GO, 0% due 2/15/2016 (Guaranty: PSF) | Aaa/AAA | 15,000 | 11,349 | |||||
Ennis ISD GO, 0% due 8/15/2012 pre-refunded 8/15/2010 (Guaranty: PSF) | Aaa/NR | 1,625,000 | 1,464,466 | |||||
Ennis ISD GO, 0% due 8/15/2012 (Guaranty: PSF) | Aaa/NR | 835,000 | 748,018 | |||||
Ennis ISD GO, 0% due 8/15/2013 (Guaranty: PSF) | Aaa/NR | 845,000 | 710,417 | |||||
Ennis ISD GO, 0% due 8/15/2014 (Guaranty: PSF) | Aaa/NR | 855,000 | 673,954 | |||||
Gulf Coast Center, 6.75% due 9/1/2020 (Mental Health Retardation Center) | NR/BBB | 1,320,000 | 1,367,824 | |||||
Harris County Hospital District, 5.00% due 2/15/2015 (Insured: Natl Re) | A1/A | 1,075,000 | 1,184,833 | |||||
Hays Consolidated ISD GO, 0% due 8/15/2013 pre-refunded 8/15/2011 (Guaranty: PSF) | Aaa/AAA | 4,000,000 | 3,531,880 | |||||
Laredo Sports Venue Sales Tax, 5.00% due 3/15/2018 (Insured: AMBAC) | A3/A+ | 2,040,000 | 2,181,392 | |||||
Lewisville Combination Contract Special Assessment District, 4.75% due 9/1/2012 (Insured: ACA) | NR/NR | 1,530,000 | 1,558,320 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2012 (Insured: Radian) | Baa1/A- | 735,000 | 761,872 | |||||
Midtown Redevelopment Authority Tax, 6.00% due 1/1/2013 (Insured: Radian) | Baa1/A- | 500,000 | 517,215 | |||||
Mission EDA, 6.00% due 8/1/2020 (Waste Management, Inc.) (AMT) | NR/BBB | 3,000,000 | 3,213,450 | |||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2016 | Baa2/NR | 3,000,000 | 3,179,520 | |||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2021 | Baa2/NR | 2,575,000 | 2,675,760 | |||||
Stafford Economic Development, 6.00% due 9/1/2017 (Insured: FGIC) | A2/A+ | 1,775,000 | 2,116,971 | |||||
Tarrant County Health Facilities, 6.625% due 11/15/2020 pre-refunded 11/15/2010 (Adventist/ Sunbelt) | A1/NR | 3,500,000 | 3,769,815 | |||||
Texas City Industrial Development Corp., 7.375% due 10/1/2020 (Arco Pipe Line Company) | Aa1/AA | 2,450,000 | 3,222,828 | |||||
Texas State Public Finance Authority, 5.00% due 8/15/2023 (Idea Public School; Insured: ACA) | NR/BBB- | 3,000,000 | 2,460,990 | |||||
Travis County GO, 5.25% due 3/1/2021 | Aaa/AAA | 1,000,000 | 1,150,800 | |||||
Travis County Health Facilities Development Corp., 5.75% due 11/15/2010 (Ascension Health; Insured: Natl-Re) | Aa1/AA | 2,000,000 | 2,030,620 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
U.S. VIRGIN ISLANDS — 0.98% | ||||||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 | Baa3/BBB | $ | 5,000,000 | $ | 5,347,350 | |||
UTAH — 0.47% | ||||||||
Salt Lake Valley Fire Services, 5.25% due 4/1/2020 | Aa3/NR | 1,250,000 | 1,428,437 | |||||
Utah County Municipal Building Authority, 5.50% due 11/1/2016 pre-refunded 11/1/2011 (Insured: AMBAC) | Aa3/NR | 1,000,000 | 1,098,200 | |||||
Utah Housing Finance Authority SFMR, 5.85% due 7/1/2015 (Credit Support: FHA) (AMT) | Aaa/AA | 10,000 | 10,012 | |||||
VIRGINIA — 0.53% | ||||||||
Fauquier County IDRB, 5.50% due 10/1/2016 (Insured: Radian) | NR/BBB+ | 1,000,000 | 1,048,030 | |||||
Hanover County IDRB Medical Facilities, 6.00% due 10/1/2021 (ETM) | NR/A | 795,000 | 798,426 | |||||
Norton IDA, 6.00% due 12/1/2014 (Norton Community Hospital; Insured: ACA) | NR/NR | 1,000,000 | 1,029,010 | |||||
WASHINGTON — 4.43% | ||||||||
King County Housing Authority, 5.20% due 5/1/2028 (Birch Creek Apts.) | NR/AAA | 2,400,000 | 2,520,408 | |||||
Skagit County Public Hospital District GO, 5.125% due 12/1/2015 (Insured: Natl-Re) | A3/NR | 1,900,000 | 2,098,740 | |||||
Washington Health Care Facilities, 5.50% due 12/1/2010 pre-refunded 12/1/2009 (Providence Services; Insured: Natl-Re) | NR/A | 2,690,000 | 2,740,303 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2014 (Catholic Health Services; Insured: Natl-Re) | Aa2/AA | 1,735,000 | 1,789,930 | |||||
Washington Health Care Facilities, 6.00% due 12/1/2015 (Catholic Health Services; Insured: Natl-Re) | Aa2/AA | 1,945,000 | 2,000,491 | |||||
Washington Health Care Facilities, 6.25% due 12/1/2021 (Group Health Co-op Puget Sound; Insured: Natl-Re) | Baa1/AA | 3,775,000 | 3,778,511 | |||||
Washington Health Care Facilities, 5.25% due 8/15/2024 (Multicare Health Systems; Insured: FSA) | Aa3/AAA | 1,000,000 | 1,091,780 | |||||
Washington Health Care Facilities, 6.25% due 8/1/2028 (Highline Medical Centers; Insured: FHA 242) | NR/A+ | 4,000,000 | 4,536,640 | |||||
Washington Housing Finance Commission, 5.60% due 7/1/2011 (Kline Galland Center; Insured: Radian) | NR/BBB- | 500,000 | 505,675 | |||||
Washington Housing Finance Commission, 6.10% due 1/1/2016 (Seattle Academy; Insured: ACA) | NR/NR | 1,040,000 | 1,043,505 | |||||
Washington Housing Finance Commission, 5.875% due 7/1/2019 (Kline Galland Center; Insured: Radian) | NR/BBB- | 1,000,000 | 1,010,410 | |||||
Washington Public Power Supply, 0% due 7/1/2011 | Aaa/AA | 1,000,000 | 980,270 | |||||
WEST VIRGINIA — 0.30% | ||||||||
West Virginia Hospital Finance Authority, 5.00% due 6/1/2020 (United Hospital Center; Insured: AMBAC) | A2/A+ | 1,530,000 | 1,617,791 | |||||
WISCONSIN — 0.49% | ||||||||
Wisconsin Health & Educational Facilities, 5.75% due 8/15/2020 (Eagle River Memorial Hospital Inc.; Insured: Radian) | NR/BBB- | 1,000,000 | 1,013,380 | |||||
Wisconsin Housing & Economic Development, 5.875% due 11/1/2016 (Insured: AMBAC/GO of Authority) | Aa3/AA | 1,635,000 | 1,654,047 | |||||
TOTAL INVESTMENTS — 98.03% (Cost $513,046,900) | $ | 532,621,963 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.97% | 10,694,835 | |||||||
NET ASSETS — 100.00% | $ | 543,316,798 | ||||||
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. |
a | Segregated as collateral for a when-issued security. |
b | When-issued security. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
AMT | Alternative Minimum Tax | |
CIFG | CIFG Assurance North America Inc. | |
COP | Certificates of Participation | |
DFA | Development Finance Authority | |
EDA | Economic Development Authority | |
ETM | Escrowed to Maturity | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FHA | Insured by Federal Housing Administration | |
FNMA | Collateralized by Federal National Mortgage Association | |
FSA | Insured by Financial Security Assurance Co. | |
GNMA | Insured by Government National Mortgage Co. | |
GO | General Obligation | |
HFA | Health Facilities Authority | |
IDA | Industrial Development Authority | |
IDRB | Industrial Development Revenue Bond | |
ISD | Independent School District | |
LOC | Letter of Credit | |
Mtg | Mortgage | |
MFR | Multi Family Revenue | |
OSF | Order of St. Francis | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
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 | |
SPA | Stand-by Purchase Agreement | |
Syncora | Insured by Syncora Guarantee Inc. | |
USD | Unified School District |
See notes to financial statements.
20 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES
Thornburg Intermediate Municipal Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (cost $513,046,900) (Note 2) | $ | 532,621,963 | ||
Cash | 294,226 | |||
Receivable for investments sold | 6,806,063 | |||
Receivable for fund shares sold | 1,953,809 | |||
Interest receivable | 7,185,218 | |||
Prepaid expenses and other assets | 32,369 | |||
Total Assets | 548,893,648 | |||
LIABILITIES | ||||
Payable for securities purchased | 2,502,030 | |||
Payable for fund shares redeemed | 2,075,940 | |||
Payable to investment advisor and other affiliates (Note 3) | 352,382 | |||
Accounts payable and accrued expenses | 84,950 | |||
Dividends payable | 561,548 | |||
Total Liabilities | 5,576,850 | |||
NET ASSETS | $ | 543,316,798 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (5,236 | ) | |
Net unrealized appreciation on investments | 19,575,063 | |||
Accumulated net realized gain (loss) | (5,277,097 | ) | ||
Net capital paid in on shares of beneficial interest | 529,024,068 | |||
$ | 543,316,798 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($337,036,717 applicable to 25,147,982 shares of beneficial interest outstanding - Note 4) | $ | 13.40 |
| |
Maximum sales charge, 2.00% of offering price | 0.27 | |||
Maximum offering price per share | $ | 13.67 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($80,570,690 applicable to 6,004,078 shares of beneficial interest outstanding - Note 4) | $ | 13.42 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($125,709,391 applicable to 9,391,792 shares of beneficial interest outstanding - Note 4) | $ | 13.39 | ||
* | 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 21
Thornburg Intermediate Municipal Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $1,415,879) | $ | 26,507,138 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 2,524,967 | |||
Administration fees (Note 3) | ||||
Class A Shares | 381,108 | |||
Class C Shares | 81,171 | |||
Class I Shares | 67,987 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 762,216 | |||
Class C Shares | 650,409 | |||
Transfer agent fees | ||||
Class A Shares | 125,358 | |||
Class C Shares | 33,451 | |||
Class I Shares | 74,033 | |||
Registration and filing fees | ||||
Class A Shares | 30,164 | |||
Class C Shares | 22,085 | |||
Class I Shares | 29,210 | |||
Custodian fees (Note 3) | 122,506 | |||
Professional fees | 43,978 | |||
Accounting fees | 28,456 | |||
Trustee fees | 17,620 | |||
Other expenses | 40,842 | |||
Total Expenses | 5,035,561 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (95,670 | ) | ||
Distribution fees waived (Note 3) | (260,164 | ) | ||
Fees paid indirectly (Note 3) | (976 | ) | ||
Net Expenses | 4,678,751 | |||
Net Investment Income | 21,828,387 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (927,942 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | 37,279,718 | |||
Net Realized and Unrealized Gain | 36,351,776 | |||
Net Increase in Net Assets Resulting From Operations | $ | 58,180,163 | ||
See notes to financial statements.
22 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Intermediate Municipal Fund
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 21,828,387 | $ | 21,863,322 | ||||
Net realized gain (loss) on investments | (927,942 | ) | 1,598,830 | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 37,279,718 | (31,001,380 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 58,180,163 | (7,539,228 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (12,998,383 | ) | (13,036,059 | ) | ||||
Class C Shares | (2,592,017 | ) | (2,065,179 | ) | ||||
Class I Shares | (6,237,987 | ) | (6,762,084 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 2,986,741 | (5,176,838 | ) | |||||
Class C Shares | 16,101,754 | 8,496,598 | ||||||
Class I Shares | (54,649,369 | ) | 55,028,894 | |||||
Net Increase in Net Assets | 790,902 | 28,946,104 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 542,525,896 | 513,579,792 | ||||||
End of Year | $ | 543,316,798 | $ | 542,525,896 | ||||
See notes to financial statements.
Certified Annual Report 23
Thornburg Intermediate Municipal Fund | September 30, 2009 |
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 Fund is currently one of fifteen separate series of the Trust. 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 of purchase, 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, and 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Investments in Securities Municipal Bonds | $ | 532,621,963 | $ | — | $ | 532,621,963 | $ | — | ||||
Total Investments in Securities | $ | 532,621,963 | $ | — | $ | 532,621,963 | $ | — |
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 to shareholders substantially all taxable (if any) and tax exempt income of the Fund. Therefore, no provision for federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid monthly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized to call dates or maturity dates of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of 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, 2009, 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
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
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, 2009, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $78,521 for Class C shares and $17,149 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, 2009, the Distributor has advised the Fund that it earned net commissions aggregating $1,464 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $6,703 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, 2009, are set forth in the Statement of Operations. Distribution fees in the amount of $260,164 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, 2009, fees paid indirectly were $976.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 5,285,883 | $ | 66,600,182 | 4,450,931 | $ | 58,138,441 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 648,398 | 8,176,580 | 626,634 | 8,132,456 | ||||||||||
Shares repurchased | (5,770,790 | ) | (71,790,021 | ) | (5,480,272 | ) | (71,447,735 | ) | ||||||
Net Increase (Decrease) | 163,491 | $ | 2,986,741 | (402,707 | ) | $ | (5,176,838 | ) | ||||||
Class C Shares | ||||||||||||||
Shares sold | 2,555,789 | $ | 32,283,723 | 1,148,857 | $ | 14,986,114 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 132,970 | 1,681,843 | 104,215 | 1,353,476 | ||||||||||
Shares repurchased | (1,431,411 | ) | (17,863,812 | ) | (599,797 | ) | (7,842,992 | ) | ||||||
Net Increase (Decrease) | 1,257,348 | $ | 16,101,754 | 653,275 | $ | 8,496,598 | ||||||||
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 4,442,308 | $ | 55,720,365 | 8,563,318 | $ | 111,626,302 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 367,683 | 4,621,413 | 339,488 | 4,395,192 | ||||||||||
Shares repurchased | (9,222,969 | ) | (114,991,147 | ) | (4,686,010 | ) | (60,992,600 | ) | ||||||
Net Increase (Decrease) | (4,412,978 | ) | $ | (54,649,369 | ) | 4,216,796 | $ | 55,028,894 | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $74,423,003 and $123,550,635, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 513,063,946 | ||
Gross unrealized appreciation on a tax basis | $ | 25,017,676 | ||
Gross unrealized depreciation on a tax basis | (5,459,659 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 19,558,017 | ||
At September 30, 2009, the Fund did not have any undistributed tax-exempt/ordinary income or undistributed capital gains.
At September 30, 2009, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2008 of $519,133. For tax purposes, such losses will be recognized in the year ending September 30, 2010.
At September 30, 2009 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. Utilization of these losses may be subject to limitations from the IRS regulations. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryforwards expire as follows:
2011 | $ | 11,597 | |
2012 | 4,297,982 | ||
2013 | 39,577 | ||
2017 | 391,762 | ||
$ | 4,740,918 | ||
During the year ended September 30, 2009, $2,374,508 capital loss carryforwards from prior years expired.
In order to account for book/tax differences, the Fund decreased accumulated net realized investment loss by $2,374,508, decreased net capital paid in on shares of beneficial interest by $2,374,136 and increased distribution in excess of net investment income by $372. This reclassification has no impact on the net asset value of the Fund. Reclassification resulted from the expiration of capital loss carryforwards and taxable market discount income.
Certified Annual Report 27
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 |
The tax character of distributions paid during the year ended September 30, 2009, and September 30, 2008, was as follows:
2009 | 2008 | |||||
Distributions from: | ||||||
Tax exempt income | $ | 21,748,297 | $ | 21,863,322 | ||
Ordinary income | 80,090 | — | ||||
Total distributions | $ | 21,828,387 | $ | 21,863,322 | ||
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
28 Certified Annual Report
Thornburg Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.47 | $ | 13.15 | $ | 13.30 | $ | 13.33 | $ | 13.48 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.54 | 0.52 | 0.51 | 0.49 | 0.49 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.93 | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.15 | ) | |||||||||||
Total from investment operations | 1.47 | (0.16 | ) | 0.36 | 0.46 | 0.34 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.54 | ) | (0.52 | ) | (0.51 | ) | (0.49 | ) | (0.49 | ) | ||||||||||
Change in net asset value | 0.93 | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.15 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 13.40 | $ | 12.47 | $ | 13.15 | $ | 13.30 | $ | 13.33 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 12.12 | (1.33 | ) | 2.74 | 3.57 | 2.57 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 4.26 | 3.95 | 3.84 | 3.74 | 3.66 | |||||||||||||||
Expenses, after expense reductions (%) | 0.98 | 0.96 | 0.99 | 0.99 | 0.99 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.98 | 0.95 | 0.98 | 0.99 | 0.99 | |||||||||||||||
Expenses, before expense reductions (%) | 0.98 | 0.96 | 0.99 | 1.00 | 1.01 | |||||||||||||||
Portfolio turnover rate (%) | 15.15 | 22.00 | 22.55 | 18.95 | 20.06 | |||||||||||||||
Net assets at end of year (thousands) | $ | 337,037 | $ | 311,435 | $ | 333,800 | $ | 366,702 | $ | 362,783 |
(a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
Certified Annual Report 29
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Intermediate Municipal Fund |
Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.48 | $ | 13.16 | $ | 13.31 | $ | 13.34 | $ | 13.50 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.50 | 0.48 | 0.47 | 0.46 | 0.46 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.94 | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.16 | ) | |||||||||||
Total from investment operations | 1.44 | (0.20 | ) | 0.32 | 0.43 | 0.30 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.50 | ) | (0.48 | ) | (0.47 | ) | (0.46 | ) | (0.46 | ) | ||||||||||
Change in net asset value | 0.94 | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.16 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 13.42 | $ | 12.48 | $ | 13.16 | $ | 13.31 | $ | 13.34 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 11.90 | (1.61 | ) | 2.48 | 3.31 | 2.24 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.99 | 3.67 | 3.59 | 3.49 | 3.41 | |||||||||||||||
Expenses, after expense reductions (%) | 1.24 | 1.25 | 1.24 | 1.24 | 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 (%) | 1.76 | 1.75 | 1.78 | 1.78 | 1.80 | |||||||||||||||
Portfolio turnover rate (%) | 15.15 | 22.00 | 22.55 | 18.95 | 20.06 | |||||||||||||||
Net assets at end of year (thousands) | $ | 80,571 | $ | 59,243 | $ | 53,890 | $ | 55,497 | $ | 55,382 |
See notes to financial statements.
30 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.45 | $ | 13.13 | $ | 13.28 | $ | 13.31 | $ | 13.46 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.57 | 0.56 | 0.55 | 0.54 | 0.53 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.94 | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.15 | ) | |||||||||||
Total from investment operations | 1.51 | (0.12 | ) | 0.40 | 0.51 | 0.38 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.57 | ) | (0.56 | ) | (0.55 | ) | (0.54 | ) | (0.53 | ) | ||||||||||
Change in net asset value | 0.94 | (0.68 | ) | (0.15 | ) | (0.03 | ) | (0.15 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 13.39 | $ | 12.45 | $ | 13.13 | $ | 13.28 | $ | 13.31 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 12.56 | (1.02 | ) | 3.06 | 3.90 | 2.90 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 4.59 | 4.28 | 4.16 | 4.07 | 3.98 | |||||||||||||||
Expenses, after expense reductions (%) | 0.66 | 0.64 | 0.67 | 0.67 | 0.67 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.66 | 0.63 | 0.67 | 0.67 | 0.67 | |||||||||||||||
Expenses, before expense reductions (%) | 0.68 | 0.64 | 0.73 | 0.75 | 0.77 | |||||||||||||||
Portfolio turnover rate (%) | 15.15 | 22.00 | 22.55 | 18.95 | 20.06 | |||||||||||||||
Net assets at end of year (thousands) | $ | 125,709 | $ | 171,848 | $ | 125,890 | $ | 89,589 | $ | 52,037 |
See notes to financial statements.
Certified Annual Report 31
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, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
32 Certified Annual Report
Thornburg Intermediate Municipal Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,097.10 | $ | 5.15 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.16 | $ | 4.96 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,096.40 | $ | 6.52 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.85 | $ | 6.28 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,099.70 | $ | 3.51 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.72 | $ | 3.38 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.98%; C: 1.24%; I: 0.67%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 33
Thornburg Intermediate Municipal Fund | September 30, 2009 (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, 2009)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 7/22/91) | 9.91 | % | 3.42 | % | 4.29 | % | 5.21 | % | ||||
C Shares (Incep: 9/1/94) | 11.30 | % | 3.57 | % | 4.18 | % | 4.37 | % | ||||
I Shares (Incep: 7/5/96) | 12.56 | % | 4.19 | % | 4.83 | % | 4.91 | % |
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.
34 Certified Annual Report
Thornburg Intermediate Municipal Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 35
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
36 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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
Thornburg Intermediate Municipal Fund | September 30, 2009 (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 tax year ended September 30, 2009, dividends paid by the Fund of $21,748,297 (or the maximum allowed) 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, 2009. Complete information will be computed and reported in conjunction with your 2009 Form 1099.
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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees voted unanimously 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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the
38 Certified Annual Report
OTHER INFORMATION, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 (Unaudited) |
Fund’s investment objectives. In addition, the Trustees considered the information provided to them at their request in anticipation of their annual 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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 observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In considering the quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns in most periods and performance in accordance with expectations, given the investment objectives of the Fund. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year was lower than the average investment return for the category of municipal debt mutual funds for which calendar year returns were presented, but that the Fund’s investment returns had exceeded the average returns of the same category in most of the preceding ten calendar years, and that the Fund’s returns fell at or near the midpoint of the same category’s performance for the one-year, three-year, and five-year periods ended with the second quarter of the current year and similarly fell at or near the midpoint of performance 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. 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 for the Fund was slightly higher than the median and average management fee levels for the group of municipal debt funds assembled by the analyst firm, and that the Fund’s expense ratio was slightly higher than the median and slightly lower than the average expense ratio of the same group of funds, but that the differences were not significant in view of their degree and the other factors considered. The Trustees considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and
Certified Annual Report 39
OTHER INFORMATION, CONTINUED
Thornburg Intermediate Municipal Fund | September 30, 2009 (Unaudited) |
the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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, compliance and systems capabilities 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 22, 2009
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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42 This page is not part of the Annual Report.
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
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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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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. | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources. | |||||||||
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Thornburg Securities Corporation® 800.847.0200
TH079 | You invest in the future, without spending a dime. |
2 This page is not part of the Annual Report.
Important Information
The information presented on the following pages is current as of September 30, 2009. 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. Bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The principal value of bonds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. This effect is more pronounced for longer term bonds. Unlike bonds, bond funds have ongoing fees and expenses. Investments in lower rated and unrated bonds may be more sensitive to default, downgrades, and market volatility; these investments may also be less liquid than higher rated bonds. Investments in derivatives are subject to the risks associated with the securities or other assets underlying the pool of securities, including illiquidity and difficulty in valuation. 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 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 shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit thornburg.com.
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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | TSSAX | 885-216-101 | ||
Class C | TSSCX | 885-216-200 | ||
Class I | TSSIX | 885-216-309 |
Glossary
Merrill Lynch Municipal Master Index – This index tracks the performance of the investment-grade U.S. tax-exempt bond market. Qualifying bonds must have at least one year remaining term to maturity, a fixed coupon schedule, and an investment grade rating (based on average of Moody’s, S&P, and Fitch).
Morningstar High Yield Municipal Fund Category – High-yield muni portfolios invest at least 50% of assets in high-income municipal securities that are not rated or that are rated by a major agency such as Standard & Poor’s or Moody’s at the level of BBB and below.
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.
General Obligation (GO) Bonds – A municipal bond secured by the pledge of the issuer’s full faith, credit, and taxing power rather than the revenue from a given project.
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.
This page is not part of the Annual Report. 3
Thornburg Strategic Municipal Income Fund
September 30, 2009
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
4 Certified Annual Report
George Strickland Co-Portfolio Manager | October 21, 2009
Dear Fellow Shareholder:
We are happy to present the Annual Report for the Thornburg Strategic Municipal Income Fund for the period ended September 30, 2009. The net asset value per Class A share of the Fund increased $1.92 to $13.86 since April 1, 2009, the Fund’s inception date. If you were invested for the entire period, you received dividends of 28.3 cents per share. If you reinvested your dividends, you received 28.5 cents per share. The dividend per share was lower for Class C shares and higher for Class I shares due to the varying class-specific expenses. | |
Josh Gonze Co-Portfolio Manager | The municipal bond market, like most other fixed income markets, has regained some sense of normalcy since the massive dislocations of 2008. This market turbulence was brought about by the collapse or sale of several major Wall Street investment banks, forced selling of municipal bonds by hedge funds who lost their access to funding (deleveraging), and continued issuance of municipal debt by issuers who were trying to reverse ill-conceived financing structures that were draining cash from their institutions at an alarming rate. The shareholders of the Thornburg Strategic Municipal Income Fund have benefitted from their decision to invest in a fund structured to exploit these turbulent times. We believe we are well positioned to continue to pursue the Fund’s primary goal, which is a high level of current income exempt from federal, state, and local income taxes (although a portion of the Fund’s income may be subject to the alternative minimum tax, ordinary income tax, or capital gains tax). | |
Christopher Ryon, CFA Co-Portfolio Manager | The Class A shares of the Thornburg Strategic Municipal Income Fund generated a total return of 18.65% (at NAV) from the Fund inception of April 1, 2009 through September 30, 2009. The Merrill Lynch Municipal Master Index, a broad measure of the municipal bond market, produced a total return of 10.83%. The total return of the Morningstar High Yield Municipal Fund category, a broad measure of lower credit quality mutual funds, produced an average total return of 23.81%.
At the end of 2008, the municipal bond market was undergoing some very painful fundamental changes. The financial meltdown started by the housing crisis and exacerbated by the degree of leverage that had built up in the financial system had begun to spread to other segments of the financial markets long thought isolated from these forces. Once, approximately 50% of the new issue municipal market carried an Aaa/AAA credit rating due to municipal bond insurance. As these companies collapsed under the weight of investments in mortgage-backed securities and the liabilities of new insurance policies written on mortgage-backed securities, the value of the municipal bond insurance evaporated along with their Aaa/AAA ratings. Municipal issuers who had financed long-term capital projects through issuing money market eligible securities |
Certified Annual Report 5
Letter to Shareholders,
Continued
(yes, through the use of a municipal bond insurance policy wrapper) could no longer access this funding vehicle and were forced to pay onerous penalty rates on their debt. Their only solution was to refinance their old debt with new municipal debt of a maturity structure that fit the life of the underlying project.
Municipal issuers were not the only market participants who sought a competitive advantage by borrowing from municipal money market funds. Hedge funds, some mutual funds, and proprietary trading desks in Wall Street investment banks purchased long-term municipal bonds with borrowed money. This was accomplished through the magic of financial engineering and the use of a municipal bond insurance policy wrapper. As the short-term market froze up, these market participants were forced to liquidate the positions at any price. At their peak, these participants controlled approximately 10% of the outstanding long-term municipal debt in the market.
Finally, state and local economies began to deteriorate and large budget deficits began to open up. The states that were impacted first were the ones that enjoyed the largest impact of the real estate boom; including California, Florida, Arizona, and Nevada. As the real estate crisis spread, the Federal Reserve Bank of Philadelphia reported in August 2009 that 49 states had declining economies as measured by the number posting lower state-coincident economic index indicators versus three months earlier. Income and sales taxes are declining at a 15% and 6% rate, respectively, on a four quarter average percent change.
By the end of 2008, the stage was set for a classic “flight to quality” in the municipal market. The bonds bearing the least credit risk performed the best and the prices of the out-of-favor segments of the market reflected the worst fears of market participants. At the end of 2008, we estimated the implied default rate of investment-grade municipal bonds, given current market prices, to be around 25%. The actual default rate for investment-grade municipal bonds for the period between 1986–2008 as calculated by Standard and Poor’s, Inc. is 0.09%. For those of you who are asking yourselves if it is different this time, the March 12, 2009 issue of The Wall Street Journal provided some insight when it reported in “Municipals Reflect the State We’re In” by Liam Denning:
“In any case, a study by Prof. George Hempel found the default rate on muni bonds across the period of 1929–37 was 16.2% of outstanding debt. The estimated loss rate, however, was a mere 0.5%. Bondholders involved in the Orange County, Calif., default of 1994 – the largest ever – recovered 100% of principal and interest.”
So what has changed? Market participants seemed to become more comfortable with taking risk. The economy, although stressed, seemed to have backed away from the abyss. The yield of a ten-year Treasury bond rose from the nearly 2.00% level it achieved at year end 2008. Yields on 10-year AAA General Obligation municipal bonds began a long move lower to a more normal relationship. The AAA General Obligation municipal bond yielded almost 200% of a maturity-equivalent Treasury bond at the end of 2008, and as of September 2009 that relationship stood at 88.6%.
The Federal Reserve, through extremely low short-term interest rates, has nudged market participants to take more risk in their investing. Municipal money market funds accounted for $495 billion of assets at the end of 2008. As of September 30, 2009, assets in municipal money market funds were $416 billion, a reduction of $79 billion. Where did that money go? Much of it appears to have moved into municipal bond funds; assets in municipal bond funds increased by almost $52 billion since the end of 2008.
6 Certified Annual Report
The supply of newly issued tax-exempt municipal bonds has been reduced through the Federal Government’s “Build America Bond” program which provides municipal bond issuers a direct 35% subsidy of their interest cost if they issue taxable bonds versus municipal bonds. This has been a very successful program, draining approximately $34.9 billion of tax-exempt municipal supply into the taxable market from April 15 through September 30, 2009. The reduced supply has further supported municipal bond prices lately.
This was the environment in which the Thornburg Strategic Municipal Income Fund began its existence, when we launched it on April 1, 2009. It has been an environment in which investors were well rewarded for their willingness to accept risk. Thank you very much for investing in the Thornburg Strategic Municipal Fund. We believe that the Thornburg Strategic Municipal Income Fund continues to be an appropriate investment for those looking for an attractive yield from a variety of instruments. While future performance cannot be guaranteed, Thornburg Investment Management, Inc. will continue to strive to chart a steady course in what continues to be a volatile marketplace.
Sincerely,
![]() | ![]() | ![]() | ||
George Strickland | Josh Gonze | Christopher Ryon,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 7
Thornburg Strategic Municipal Income Fund | September 30, 2009 |
![]() | We have used ratings from Standard & Poor’s (S&P). Where S&P ratings are not available, we have used Moody’s Investors Service. Where neither rating is available, we have used ratings from Fitch 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 | |||||
ARIZONA — 3.73% | ||||||||
Maricopa County PCR, 6.00% due 5/1/2029 put 5/1/2014 (Arizona Public Service Co.) | Baa2/BBB- | $ | 500,000 | $ | 522,675 | |||
Mohave County IDA, 7.25% due 5/1/2015 (Mohave Prison LLC) | NR/BBB+ | 100,000 | 107,369 | |||||
Pima County IDA, 6.40% due 7/1/2013 (Arizona Charter Schools) | Baa3/NR | 80,000 | 79,885 | |||||
Salt Verde Financial Corp., 5.25% due 12/1/2028 | A3/A | 235,000 | 236,114 | |||||
University Medical Center Corp., 6.25% due 7/1/2029 | Baa1/BBB+ | 100,000 | 107,784 | |||||
University Medical Center Corp., 6.50% due 7/1/2039 | Baa1/BBB+ | 200,000 | 215,232 | |||||
CALIFORNIA — 14.63% | ||||||||
California State Public Works Board, 6.25% due 4/1/2034 | Baa2/A- | 100,000 | 108,474 | |||||
Carson Redevelopment Agency Tax Allocation, 7.00% due 10/1/2036 (Project Area 1) | NR/A- | 500,000 | 541,110 | |||||
Daly County Housing Development Finance Agency, 5.25% due 12/15/2023 (Franciscan Mobile Park) | NR/A- | 650,000 | 617,591 | |||||
Irvine Ranch Water District GO, 0.27% due 10/1/2041 put 10/1/2009 (Community Facilities District; LOC: Bank of America) (daily demand notes) | VMIG1/A-1 | 200,000 | 200,000 | |||||
Lee Lake Water District, 5.875% due 9/1/2027 | NR/NR | 500,000 | 424,945 | |||||
Los Angeles COP, 5.70% due 2/1/2018 | Baa2/NR | 850,000 | 850,756 | |||||
M-S-R Energy Authority, 6.50% due 11/1/2039 | NR/A | 1,000,000 | 1,159,330 | |||||
Merced Redevelopment Agency Tax Allocation, 6.50% due 9/1/2039 (Merced Gateways) | NR/A- | 300,000 | 311,595 | |||||
Oak Park USD GO, 0% due 8/1/2030 (Insured: FSA) | Aa3/AAA | 500,000 | 144,420 | |||||
Riverside County Asset Leasing Corp., 0% due 6/1/2021 (Riverside County Hospital; Insured: Natl-Re) | A2/A | 435,000 | 245,997 | |||||
San Francisco City & County Redevelopment Financing Authority Tax Allocation, 6.50% due 8/1/2039 (Mission Bay North Redevelopment) | NR/A- | 250,000 | 261,618 | |||||
Sonoma County Community Redevelopment Agency Tax Allocation, 6.50% due 8/1/2034 (The Springs; Insured: Assured Guaranty) | NR/AAA | 100,000 | 107,477 | |||||
COLORADO — 5.17% | ||||||||
Colorado Educational & Cultural Facilities, 5.25% due 8/15/2019 (Peak to Peak Charter School; Insured: Syncora) | NR/A | 100,000 | 104,312 | |||||
Denver Convention Center, 5.00% due 12/1/2030 (Insured: Syncora) | Baa3/BBB- | 250,000 | 219,688 | |||||
Eagle Bend Metropolitan District GO, 5.00% due 12/1/2020 (Insured: Radian) | NR/BBB | 1,100,000 | 1,055,351 | |||||
Park Creek Metropolitan District, 6.375% due 12/1/2037 (Senior Property Tax Support; Insured: Assured Guaranty) | NR/AAA | 100,000 | 113,324 | |||||
Public Authority For Colorado Energy, 5.75% due 11/15/2018 (Natural Gas Purchase Revenue; Guaranty Agreement: Merrill Lynch & Co.) | A2/A | 250,000 | 265,827 | |||||
CONNECTICUT — 2.91% | ||||||||
a Connecticut Health & Educational Facilities Authority, 6.00% due 7/1/2039 (Ethel Walker School) | NR/BBB- | 1,000,000 | 988,940 |
8 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
DISTRICT OF COLUMBIA — 1.62% | ||||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2027 (Dulles Toll Road; Insured: Assured Guaranty) | Aa2/AAA | $ | 1,500,000 | $ | 549,180 | |||
FLORIDA — 2.13% | ||||||||
Capital Trust Agency MFR, 5.875% due 6/1/2038 (American Opportunity Housing) | B2/NR | 380,000 | 206,822 | |||||
Hollywood Community Redevelopment Agency, 5.625% due 3/1/2024 | Baa1/NR | 340,000 | 326,526 | |||||
Santa Rosa Bay Bridge Authority, 0% due 7/1/2013 (Insured: Radian-IBCC) | B3/BBB- | 100,000 | 55,100 | |||||
St. Johns County IDA, 5.625% due 8/1/2034 (Presbyterian Retirement) | NR/NR | 150,000 | 137,007 | |||||
GEORGIA — 2.68% | ||||||||
Atlanta Water & Waste Water Revenue, 6.25% due 11/1/2034 | Baa1/A | 500,000 | 551,095 | |||||
Main Street Natural Gas, Inc., 5.50% due 9/15/2023 (Georgia Gas) | A2/A | 350,000 | 358,571 | |||||
GUAM — 3.22% | ||||||||
Guam Government, 5.75% due 12/1/2034 (Section 30) | NR/BBB- | 500,000 | 523,075 | |||||
Guam Government GO, 7.00% due 11/15/2039 | NR/B+ | 520,000 | 572,676 | |||||
HAWAII — 0.88% | ||||||||
Hawaii State Department of Budget & Finance, 5.45% due 11/1/2023 (Hawaiian Electric Co.; Insured: Natl-Re) (AMT) | Baa1/AA | 300,000 | 300,090 | |||||
IDAHO — 0.51% | ||||||||
Madison County Hospital Revenue COP, 5.25% due 9/1/2037 | NR/BBB- | 200,000 | 172,322 | |||||
ILLINOIS — 3.45% | ||||||||
Chicago Tax Increment, 6.25% due 11/15/2013 (Near South Redevelopment; Insured: ACA) | NR/NR | 100,000 | 103,482 | |||||
Illinois Educational Facilities Authority, 5.625% due 10/1/2022 (Augustana College) | Baa1/NR | 625,000 | 639,081 | |||||
Illinois Finance Authority, 5.75% due 11/15/2037 (OSF Healthcare Systems) | A2/A | 330,000 | 335,109 | |||||
Sangamon County School District COP, 5.875% due 8/15/2018 (Hay Edwards; Insured: ACA) | NR/NR | 100,000 | 95,891 | |||||
INDIANA — 0.29% | ||||||||
Indiana Bond Bank, 5.25% due 10/15/2020 (Gas Revenue Program) | Aa3/NR | 90,000 | 97,377 | |||||
KENTUCKY — 5.61% | ||||||||
Kentucky EDA, 0% due 10/1/2021 (Norton Healthcare, Inc.; Insured: Natl-Re) | Baa1/A | 365,000 | 185,811 | |||||
Kentucky EDA, 0% due 10/1/2022 (Norton Healthcare, Inc.; Insured: Natl-Re) | Baa1/A | 2,490,000 | 1,186,933 | |||||
Owen County Waterworks Systems, 6.25% due 6/1/2039 (American Water Co.) | Baa2/BBB+ | 500,000 | 534,750 | |||||
LOUISIANA — 1.57% | ||||||||
Ernest N. Morial-New Orleans Exhibit Hall, 5.00% due 7/15/2013 (Insured: AMBAC) | NR/BBB | 200,000 | 195,802 | |||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2032 (Black & Gold Facilities; Insured: CIFG) | Baa3/BBB- | 120,000 | 110,214 | |||||
Orleans Parish School Board GO, 0% due 2/1/2015 (Insured: FGIC) | NR/NR | 320,000 | 228,950 | |||||
MAINE — 1.15% | ||||||||
Bucksport Solid Waste Disposal, 4.00% due 3/1/2014 (International Paper) | Baa3/BBB | 400,000 | 390,784 |
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
MARYLAND — 0.59% | ||||||||
Maryland Health & Higher Educational Facilities, 0.41% due 7/1/2041 put 10/1/2009 (University of Maryland Medical Services; LOC: Suntrust Bank) (daily demand notes) | VMIG1/A-2 | $ | 200,000 | $ | 200,000 | |||
MASSACHUSETTS — 2.52% | ||||||||
Massachusetts Development Finance Agency, 5.75% due 12/1/2042 put 5/1/2019 (Dominion Energy Brayton) | Baa2/A- | 200,000 | 215,360 | |||||
Massachusetts Educational Financing Authority, 6.00% due 1/1/2028 | NR/AA | 500,000 | 542,610 | |||||
Massachusetts Health & Educational Facilities Authority, 0.27% due 8/15/2034 put 10/1/2009 (Tufts University; SPA: Bank of America N.A.) (daily demand notes) | VMIG1/A-1 | 100,000 | 100,000 | |||||
MICHIGAN — 10.78% | ||||||||
Dickinson County Healthcare Systems, 5.80% due 11/1/2024 (Insured: ACA-CBI) | NR/NR | 90,000 | 87,442 | |||||
Michigan Public Educational Facilities Authority, 8.75% due 9/1/2039 (Bradford Academy) | NR/BBB- | 500,000 | 546,350 | |||||
Michigan State Hospital Finance Authority, 5.10% due 6/1/2013 (McLaren Heatlhcare Corp.) | A1/NR | 1,000,000 | 1,006,180 | |||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Obligated Group) | A2/A | 650,000 | 620,562 | |||||
Michigan State Hospital Finance Authority, 5.75% due 4/1/2032 (Oakwood Obligated Group) | A2/A | 150,000 | 150,093 | |||||
Michigan State Strategic Fund, 5.00% due 8/1/2013 (NSF International) | NR/A- | 300,000 | 317,889 | |||||
Michigan State Strategic Fund, 5.25% due 6/1/2018 (Clark Retirement Community) | NR/BBB- | 985,000 | 938,094 | |||||
MINNESOTA — 1.29% | ||||||||
St. Paul Housing & Redevelopment Authority, 5.25% due 5/15/2023 (Healthpartners Obligated Group) | Baa1/BBB | 100,000 | 99,705 | |||||
Washington County Housing Redevelopment Authority, 5.625% due 6/1/2037 (Birchwood & Woodbury) | NR/NR | 390,000 | 339,464 | |||||
NEVADA — 1.50% | ||||||||
Mesquite Redevelopment Agency Tax Allocation, 7.375% due 6/1/2024 | NR/A- | 500,000 | 511,310 | |||||
NEW MEXICO — 1.29% | ||||||||
Santa Fe County Charter School Foundation, 6.625% due 1/15/2036 (ATC Foundation) | NR/NR | 485,000 | 438,658 | |||||
NEW YORK — 6.36% | ||||||||
b Hempstead Industrial Development Agency, 5.00% due 12/1/2010 put 6/1/2010 (American Ref-Fuel) | Baa2/BB+ | 1,000,000 | 997,280 | |||||
New York City GO, 0.31% due 8/1/2028 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-1 | 700,000 | 700,000 | |||||
New York State Dormitory Authority, 0.28% due 7/1/2037 put 10/1/2009 (Cornell University; SPA: Bank of America N.A.) (daily demand notes) | VMIG1/A-1+ | 465,000 | 465,000 | |||||
OHIO — 4.96% | ||||||||
Buckeye Tobacco Settlement Financing Authority, 6.50% due 6/1/2047 | Baa3/BBB | 1,000,000 | 889,550 | |||||
Cleveland Cuyahoga County Port Authority, 6.25% due 5/15/2016 (LOC: FifthThird Bank) | NR/NR | 100,000 | 99,085 | |||||
Ohio State Air Quality Development Authority, 5.75% due 6/1/2033 put 6/1/2016 (FirstEnergy Nuclear) | Baa2/BBB | 150,000 | 161,208 | |||||
Ohio State Water Development Authority PCR, 5.875% due 6/1/2033 put 6/1/2016 (FirstEnergy Nuclear) | Baa1/BBB | 500,000 | 535,720 | |||||
OREGON — 2.81% | ||||||||
Western Generation Agency, 5.00% due 1/1/2016 (Wauna Cogeneration; Insured: ACA) | NR/NR | 1,000,000 | 955,470 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | ||||||
PENNSYLVANIA — 3.53% | |||||||||
Allegheny County Redevelopment Authority, 5.10% due 7/1/2014 (Pittsburgh Mills) | NR/NR | $ | 220,000 | $ | 210,531 | ||||
Carbon County IDA, 6.65% due 5/1/2010 (Panther Creek Partners) (AMT) | NR/BBB- | 540,000 | 540,070 | ||||||
Pennsylvania EDA, 5.00% due 12/1/2014 (Colver Project; Insured: AMBAC) (AMT) | Ba1/BBB- | 450,000 | 448,349 | ||||||
RHODE ISLAND — 0.30% | |||||||||
Rhode Island Economic Development Corp., 5.75% due 7/1/2010 (Providence Place Mall; Insured: Radian) | NR/BBB- | 100,000 | 101,386 | ||||||
SOUTH DAKOTA — 2.29% | |||||||||
South Dakota Health & Educational Facilities Authority, 5.50% due 11/1/2040 (Sanford Health) | A1/AA- | 750,000 | 778,185 | ||||||
TENNESSEE — 1.77% | |||||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2015 | Baa1/A | 100,000 | 104,366 | ||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2024 | Ba3/BB+ | 500,000 | 498,440 | ||||||
TEXAS — 2.68% | |||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2034 (Austin Convention Center; Insured: Syncora) | Baa3/BB+ | 300,000 | 234,765 | ||||||
Bexar County Housing Finance Corp. MFR, 5.70% due 1/1/2021 (American Opportunity Housing; Insured: Natl-Re) | Baa1/NR | 100,000 | 89,477 | ||||||
Bexar County Housing Finance Corp. MFR, 5.80% due 1/1/2031 (American Opportunity Housing; Insured: Natl Re) | Baa1/NR | 150,000 | 126,158 | ||||||
Gulf Coast Waste Disposal Authority, 6.10% due 8/1/2024 (International Paper Co.) (AMT) | Baa3/BBB | 100,000 | 100,973 | ||||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2021 | Baa2/NR | 100,000 | 103,913 | ||||||
San Antonio Energy Acquisition Public Facilities Corp., 5.50% due 8/1/2021 | A2/A | 40,000 | 41,804 | ||||||
Texas Public Finance Authority Charter School Finance Corp., 4.15% due 8/15/2016 (Idea Public School; Insured: ACA) | NR/BBB- | 100,000 | 87,687 | ||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2023 (Idea Public School; Insured: ACA) | NR/BBB- | 155,000 | 127,151 | ||||||
U.S. VIRGIN ISLANDS — 2.01% | |||||||||
Virgin Islands Public Finance Authority, 6.75% due 10/1/2037 | Baa3/BBB | 500,000 | 533,750 | ||||||
Virgin Islands Water & Power Authority, 5.50% due 7/1/2017 | Baa2/NR | 150,000 | 151,108 | ||||||
VIRGINIA — 4.93% | |||||||||
Norton IDA, 6.00% due 12/1/2014 (Norton Community Hospital; Insured: ACA) | NR/NR | 635,000 | 653,421 | ||||||
Virginia College Building Authority, 5.00% due 9/1/2016 (Hampden-Sydney College) | NR/A | 500,000 | 503,110 | ||||||
Virginia Small Business Financing Authority, 9.00% due 7/1/2039 (Hampton RDS Proton) | NR/NR | 500,000 | 521,365 | ||||||
WISCONSIN — 2.06% | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.40% due 8/15/2013 (Sorrowful Mother Corp.; Insured: Natl-Re) | Baa1/A+ | 700,000 | 701,037 | ||||||
TOTAL INVESTMENTS — 101.22% (Cost $31,507,928) | $ | 34,420,538 | |||||||
LIABILITIES NET OF OTHER ASSETS — (1.22)% | (414,094 | ) | |||||||
NET ASSETS — 100.00% | $ | 34,006,444 | |||||||
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. |
a | When-issued security. |
b | Segregated as collateral for a when-issued security. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
AMT | Alternative Minimum Tax | |
CIFG | CIFG Assurance North America Inc. | |
COP | Certificates of Participation | |
EDA | Economic Development Authority | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FSA | Insured by Financial Security Assurance Co. | |
GO | General Obligation | |
IDA | Industrial Development Authority | |
LOC | Letter of Credit | |
MFR | Multi Family Revenue | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
Radian | Insured by Radian Asset Assurance | |
SPA | Standby Purchase Agreement | |
Syncora | Insured by Syncora Guarantee Inc. | |
USD | Unified School District |
See notes to financial statements.
12 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES
Thornburg Strategic Municipal Income Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (cost $31,507,928) (Note 2) | $ | 34,420,538 | ||
Cash | 284,394 | |||
Receivable for investments sold | 400,035 | |||
Receivable for fund shares sold | 474,211 | |||
Receivable from investment advisor | 4,770 | |||
Interest receivable | 416,494 | |||
Prepaid expenses and other assets | 13,926 | |||
Total Assets | 36,014,368 | |||
LIABILITIES | ||||
Payable for securities purchased | 1,940,939 | |||
Payable for fund shares redeemed | 977 | |||
Accounts payable and accrued expenses | 36,450 | |||
Dividends payable | 29,558 | |||
Total Liabilities | 2,007,924 | |||
NET ASSETS | $ | 34,006,444 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (3,026 | ) | |
Net unrealized appreciation on investments | 2,912,610 | |||
Accumulated net realized gain (loss) | 80,474 | |||
Net capital paid in on shares of beneficial interest | 31,016,386 | |||
$ | 34,006,444 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($11,761,325 applicable to 848,713 shares of beneficial interest outstanding - Note 4) | $ | 13.86 | ||
Maximum sales charge, 2.00% of offering price | 0.28 | |||
Maximum offering price per share | $ | 14.14 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($3,683,584 applicable to 265,531 shares of beneficial interest outstanding - Note 4) | $ | 13.87 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($18,561,535 applicable to 1,338,400 shares of beneficial interest outstanding - Note 4) | $ | 13.87 | ||
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 13
| ||
Thornburg Strategic Municipal Income Fund | For the period from commencement of operations on | |
April 1, 2009 through September 30, 2009 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $2,720) | $ | 488,983 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 61,980 | |||
Administration fees (Note 3) | ||||
Class A Shares | 2,986 | |||
Class C Shares | 818 | |||
Class I Shares | 2,610 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 5,972 | |||
Class C Shares | 6,585 | |||
Transfer agent fees | ||||
Class A Shares | 4,235 | |||
Class C Shares | 3,840 | |||
Class I Shares | 4,205 | |||
Registration and filing fees | ||||
Class A Shares | 21,376 | |||
Class C Shares | 21,143 | |||
Class I Shares | 21,570 | |||
Custodian fees (Note 3) | 17,792 | |||
Professional fees | 20,719 | |||
Accounting fees | 306 | |||
Trustee fees | 381 | |||
Other expenses | 26,118 | |||
Total Expenses | 222,636 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (77,135 | ) | ||
Investment advisory fees waived by investment advisor (Note 3) | (51,215 | ) | ||
Distribution fees waived (Note 3) | (2,634 | ) | ||
Net Expenses | 91,652 | |||
Net Investment Income | 397,331 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 80,474 | |||
Net change in unrealized appreciation (depreciation) of investments | 2,912,610 | |||
Net Realized and Unrealized Gain | 2,993,084 | |||
Net Increase in Net Assets Resulting From Operations | $ | 3,390,415 | ||
See notes to financial statements.
14 Certified Annual Report
STATEMENT OF CHANGES IN NET ASSETS
Thornburg Strategic Municipal Income Fund
For the period from commencement of operations on April 1, 2009 through September 30, 2009 | ||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||
OPERATIONS: | ||||
Net investment income | $ | 397,331 | ||
Net realized gain (loss) on investments | 80,474 | |||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 2,912,610 | |||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,390,415 | |||
DIVIDENDS TO SHAREHOLDERS: | ||||
From net investment income | ||||
Class A Shares | (113,802 | ) | ||
Class C Shares | (29,017 | ) | ||
Class I Shares | (257,538 | ) | ||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||
Class A Shares | 10,808,011 | |||
Class C Shares | 3,417,545 | |||
Class I Shares | 16,790,830 | |||
Net Increase in Net Assets | 34,006,444 | |||
NET ASSETS: | ||||
Beginning of Period | — | |||
End of Period | $ | 34,006,444 | ||
See notes to financial statements.
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Strategic Municipal Income Fund | September 30, 2009 |
NOTE 1 – ORGANIZATION
Thornburg Strategic Municipal Income 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 Fund is currently one of fifteen separate series of the Trust. 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 seek a high level of current income exempt from federal individual income tax.
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 of purchase, 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, and 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 |
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Investments in Securities Municipal Bonds | $ | 34,420,538 | $ | — | $ | 34,420,538 | $ | — | ||||
Total Investments in Securities | $ | 34,420,538 | $ | — | $ | 34,420,538 | $ | — |
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 to shareholders substantially all taxable (if any) and tax exempt income of the Fund. Therefore, no provision for federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid monthly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized to call dates or maturity dates of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of 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 period ended September 30, 2009, 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, 2009 the Advisor voluntarily waived investment advisory fees
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 |
of $51,215. 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, 2009, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $25,225 for Class A shares, $25,061 for Class C shares and $26,849 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, 2009, the Distributor has advised the Fund that it earned net commissions aggregating $823 from the sale of Class A shares, and collected no contingent deferred sales charges 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, 2009, are set forth in the Statement of Operations. Distribution fees in the amount of $2,634 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.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Period Ended* September 30, 2009 | |||||||
Shares | Amount | ||||||
Class A Shares | |||||||
Shares sold | 850,895 | $ | 10,837,932 | ||||
Shares issued to shareholders in reinvestment of dividends | 7,045 | 92,971 | |||||
Shares repurchased | (9,227 | ) | (122,892 | ) | |||
Net Increase (Decrease) | 848,713 | $ | 10,808,011 | ||||
Class C Shares | |||||||
Shares sold | 264,135 | $ | 3,399,093 | ||||
Shares issued to shareholders in reinvestment of dividends | 1,396 | 18,452 | |||||
Shares repurchased | — | — | |||||
Net Increase (Decrease) | 265,531 | $ | 3,417,545 | ||||
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 |
Period Ended* September 30, 2009 | |||||||
Shares | Amount | ||||||
Class I Shares | |||||||
Shares sold | 1,383,622 | $ | 17,417,043 | ||||
Shares issued to shareholders in reinvestment of dividends | 13,885 | 181,497 | |||||
Shares repurchased | (59,107 | ) | (807,710 | ) | |||
Net Increase (Decrease) | 1,338,400 | $ | 16,790,830 | ||||
* | Fund commenced operations on April 1, 2009. |
NOTE 5 – SECURITIES TRANSACTIONS
For the period ended September 30, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $32,321,797 and $2,618,162, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 31,507,928 | ||
Gross unrealized appreciation on a tax basis | $ | 2,917,948 | ||
Gross unrealized depreciation on a tax basis | (5,338 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 2,912,610 | ||
Distributable earnings – ordinary income | $ | 80,474 |
At September 30, 2009, the Fund did not have any undistributed tax-exempt income.
The tax character of distributions paid during the period ended September 30, 2009, was as follows:
2009 | |||
Distributions from: | |||
Tax exempt income | $ | 377,011 | |
Ordinary income | 23,346 | ||
Total distributions | $ | 400,357 | |
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
Certified Annual Report 19
Thornburg Strategic Municipal Income Fund
Period Ended September 30, 2009(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) | 0.29 | |||
Net realized and unrealized gain (loss) on investments | 1.91 | |||
Total from investment operations | 2.20 | |||
Less dividends from: | ||||
Net investment income | (0.28 | ) | ||
Change in net asset value | 1.92 | |||
NET ASSET VALUE, end of period | $ | 13.86 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%)(b) | 18.65 | |||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 4.71 | (c) | ||
Expenses, after expense reductions (%) | 1.25 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 1.25 | (c) | ||
Expenses, before expense reductions (%) | 2.92 | (c) | ||
Portfolio turnover rate (%) | 14.37 | |||
Net assets at end of period (thousands) | $ | 11,761 |
(a) | Fund commenced operations on April 1, 2009. |
(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.
20 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Strategic Municipal Income Fund |
Period Ended September 30, 2009(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) | 0.27 | |||
Net realized and unrealized gain (loss) on investments | 1.93 | |||
Total from investment operations | 2.20 | |||
Less dividends from: | ||||
Net investment income | (0.27 | ) | ||
Change in net asset value | 1.93 | |||
NET ASSET VALUE, end of period | $ | 13.87 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%)(b) | 18.58 | |||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 4.40 | (c) | ||
Expenses, after expense reductions (%) | 1.55 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 1.55 | (c) | ||
Expenses, before expense reductions (%) | 6.40 | (c)(d) | ||
Portfolio turnover rate (%) | 14.37 | |||
Net assets at end of period (thousands) | $ | 3,684 |
(a) | Fund commenced operations on April 1, 2009. |
(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. |
See notes to financial statements.
Certified Annual Report 21
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Strategic Municipal Income Fund
Class I Shares: | Period Ended September 30, 2009(a) | |||
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) | 0.31 | |||
Net realized and unrealized gain (loss) on investments | 1.92 | |||
Total from investment operations | 2.23 | |||
Less dividends from: | ||||
Net investment income | (0.30 | ) | ||
Change in net asset value | 1.93 | |||
NET ASSET VALUE, end of period | $ | 13.87 | ||
RATIOS/SUPPLEMENTAL DATA | ||||
Total return (%)(b) | 18.87 | |||
Ratios to average net assets: | ||||
Net investment income (loss) (%) | 4.90 | (c) | ||
Expenses, after expense reductions (%) | 0.99 | (c) | ||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | (c) | ||
Expenses, before expense reductions (%) | 2.12 | (c) | ||
Portfolio turnover rate (%) | 14.37 | |||
Net assets at end of period (thousands) | $ | 18,561 |
(a) | Fund commenced operations on April 1, 2009. |
(b) | Not annualized for periods less than one year. |
(c) | Annualized. |
See notes to financial statements.
22 Certified Annual Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Strategic Municipal Income Fund
To the Trustees and Shareholders of
Thornburg Strategic Municipal 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 Municipal Income Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2009, and the results of its operations, the changes in its net assets, and the financial highlights for the period April 1, 2009 (commencement of operations) through September 30, 2009, 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, 2009 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
Certified Annual Report 23
Thornburg Strategic Municipal Income Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,186.50 | $ | 6.85 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,185.80 | $ | 8.49 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.30 | $ | 7.84 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,188.70 | $ | 5.43 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.25%; C: 1.55%; I: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
24 Certified Annual Report
Thornburg Strategic Municipal Income Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 25
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
26 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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 27
Thornburg Strategic Municipal Income Fund | September 30, 2009 (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 April 1, 2009 through June 30, 2009, 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 website at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.
TAX INFORMATION
For the tax year ended September 30, 2009 dividends paid by the Fund of $377,011 (or the maximum allowed) 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, 2009. Complete information will be computed and reported in conjunction with your 2009 Form 1099.
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 APPROVAL AND RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Strategic Municipal Income Fund pursuant to an investment advisory agreement. The advisory agreement for the Fund was initially approved for the Fund by the Trustees at their meeting on December 17, 2008. The Trustees reviewed and approved the continuance of the agreement again on September 14, 2009.
In considering their initial approval of the advisory agreement for the Fund, the Trustees noted their observations and findings in the annual evaluation they had conducted at their previous meeting respecting the Advisor’s services for the other Funds of the Trust and fee levels for those services, and evaluated the Advisor’s proposed management of the Fund, the experience and expertise of the Advisor’s personnel, the Advisor’s successful pursuit of the objectives of other Funds of Thornburg Investment Trust and the quality of the service provided to those Funds by the Advisor, the proposed investment approach and policies for the Fund, the proposed fees and expenses for the Fund, and other factors, and unanimously approved the advisory agreement for the Fund. In accordance with their established practice, the Trustees determined (with the Advisor’s concurrence) to place the annual review of the Fund’s advisory agreement on the same cycle for review applicable to the other Funds of the Trust. Accordingly, and in accordance with their established practice, the independent Trustees met in July 2009 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. The independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 14, 2009 the Trustees met to consider a renewal of the advisory agreement, and the independent Trustees voted unanimously at that meeting to renew the agreement for an additional term of one year.
28 Certified Annual Report
OTHER INFORMATION, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 (Unaudited) |
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 period since the Fund’s commencement of investment operations in April of 2009. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the Fund’s investment objective. In addition, the Trustees considered information specifically provided to them at their request in anticipation of their annual 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) the Fund’s investment performance since inception relative to two categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to broad-based securities indices.
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 observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
The matters considered demonstrated to the Trustees that the Advisor had pursued the Fund’s stated objective since the commencement of the Fund’s investment operations. Respecting the Fund’s investment performance, the Trustees observed (among other matters) that the Fund’s investment return since its inception in April had exceeded the average returns for the two municipal debt mutual fund categories selected by independent mutual fund analyst firms. The Trustees also observed that the Fund’s investment returns had met or exceeded reasonable expectations, given the investment objective of the Fund.
The Trustees concluded, based upon these and other observations, that the Advisor had satisfactorily pursued the Fund’s stated investment objective. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objective and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees considered the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, the Advisor’s waiver of a substantial portion of its management fee, and 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. The Trustees observed that the overall expense ratio of the Fund (net of fee waivers by the Advisor) was higher than the median and average expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, that the Fund was in the first period of its operations and the Advisor had waived virtually all of its management fee, but that the differences between the expense ratios were not significant in view of the Advisor’s fee waivers and the other factors considered. The Trustees considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services provided, respectively, to institutional clients and to mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
Certified Annual Report 29
OTHER INFORMATION, CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2009 (Unaudited) |
In reviewing the profitability of the Advisor, the Trustees considered a report comparing the profitability of the Advisor to other investment management firms. The Trustees recognized that the Fund’s profitability to the Advisor was likely to be limited in the initial periods of the Fund’s operations. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
30 Certified Annual Report
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Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 22, 2009
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.
32 This page is not part of the Annual Report.
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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34 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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
This page is not part of the Annual Report. 35
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2 This page is not part of the Annual Report
Important Information
The information presented on the following pages is current as of September 30, 2009. 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. Bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. 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 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. 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | LTCAX | 885-215-426 | ||
Class C | LTCCX | 885-215-418 | ||
Class I | LTCIX | 885-215-392 |
Lipper’s 2008
Best Fixed-Income Fund Family
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income large firm universe for the three-year period ended 12/31/07, based on risk-adjusted returns. Past performance does not guarantee future results.
Lipper’s large firm universe is comprised of fund families with more than $28 billion in total net assets. Only fund families with at least five bond funds were eligible. Risk-adjusted returns were calculated with dividends reinvested and without sales charges. We did not win this award in 2009.
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.
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.
Annualized 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 maximum offering price per share to arrive at the annualized distribution yield. The yield is calculated on a periodic basis and is subject to change.
Duration – The weighted maturity of a bond’s cash flows. Duration measures the price sensitivity of a bond for a given change in interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
General Obligation (GO) Bonds – A municipal bond secured by the pledge of the issuer’s full faith, credit, and taxing power rather than the revenue from a given project.
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.
Pre-Refunded Bond – A type of municipal bond that has been escrowed or collateralized either by direct obligations guaranteed by the U.S. government, or by other types of securities. The escrow account is structured so that these refunded bonds are to be called at the first possible call date. Such bonds, if escrowed with securities guaranteed by the U.S. government, have little if any credit risk.
Revenue Bond – A bond on which the debt service is payable solely from the revenue generated from the operation of the project being financed or a category of facilities, or from other non-tax sources.
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 Bonds – Obligations, also known as “put bonds” or “puttable securities,” that grant the bondholder the right to require the issuer to purchase the bonds, usually at par, at a certain time or times prior to maturity or upon the occurrence of specified events or conditions. The put option, or tender option, right is typically available to the investor on a periodic (e.g., daily, weekly or monthly) basis.
Lease-Backed Bonds – Bonds issued by a municipality or state that are secured by the payments made on leased assets.
This page is not part of the Annual Report. 3
Thornburg California Limited Term Municipal Fund
At Thornburg, our approach to management of the Fund is based on the premise that investors in the Fund 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 in 2008 with the Best Fixed-Income Fund Family Award.
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 shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 1.00%, 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, 2009
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 2/19/87) | |||||||||||||||
Without sales charge | 8.50 | % | 4.30 | % | 3.38 | % | 3.70 | % | 4.83 | % | |||||
With sales charge | 6.88 | % | 3.79 | % | 3.07 | % | 3.55 | % | 4.76 | % |
30-DAY YIELDS, A SHARES
As of September 30, 2009
Annualized Distribution Rate | SEC Yield | |
3.26% | 2.15% |
Without fee waivers and expense reimbursements, the 30-day SEC yield would have been 2.13% and the Annualized Distribution Rate would have been 3.24%.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2009
Average Credit Quality | A+ | |
Number of Bonds | 111 | |
Duration | 3.5 Yrs | |
Average Maturity | 4.5 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 10.
4 This page is not part of the Annual Report.
THORNBURG CALIFORNIA LIMITED TERM MUNICIPAL FUND VERSUS
LIPPER CALIFORNIA TAX-EXEMPT MONEY MARKET FUNDS AVERAGE
Class A Shares as of September 30, 2009
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 summarized 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 money market mutual funds. You cannot invest in a category average.
This page is not part of the Annual Report. 5
Thornburg California Limited Term Municipal Fund
September 30, 2009
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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 20, 2009
Dear Shareholder:
We are pleased to present the Annual Report for the Thornburg California Limited Term Municipal Fund. The net asset value (NAV) of the Class A shares increased by 60 cents per share to $13.09 during the twelve months ended September 30, 2009. If you were with us for the entire period, you received dividends of 44.0 cents per share; if you reinvested your dividends, you received 44.7 cents per share. Dividends per share were lower for Class C and higher for Class I to account for varying class-specific expenses. | |
Josh Gonze Co-Portfolio Manager | In last year’s annual report letter, we wrote about the massive deleveraging of the municipal market, evidenced by the unwinding of tender option bond programs and investors’ mass exodus out of high-risk investment strategies employing leverage and other speculative strategies. The forced liquidation of assets placed inordinate supply into a market already reeling from the effects of the mortgage and banking crisis. Compounding matters was the downgrade of nearly all AAA-rated municipal bond insurers that provided credit enhancement to nearly half of all bonds outstanding, including the two largest insurers AMBAC and MBIA. Investor scrutiny over the ratings agencies led many investors to question whether they should be participating in the municipal market at all; and who could blame them given the deluge of negative headline press directed at the municipal market? These events caused 2008 to be one of the worst performing years on record for the municipal market, and we were quite pleased to see positive returns in your Fund for 2008 given that many bond funds experienced double-digit negative returns. | |
Christopher Ihlefeld Co-Portfolio Manager | Today’s municipal market reflects an impressive rebound from where we were this time last year. Municipal sectors that were hit the hardest in 2008 – health care, lease-backed bonds, and industrial development revenue bonds – have been among the best performing sectors in 2009. This has helped your Fund’s performance, as we have market over-weights in each of these sectors. Revenue bonds in general have outperformed all other broad sectors of the market. State general obligation and government-backed pre-refunded bonds, sectors in which we are under-weighted and that led the pack in 2008, have lagged revenue bonds by a substantial margin in 2009. Your Fund’s comparatively higher exposure to strong middle-tier investment grade credits (single-A rated bonds) has also helped your Fund’s performance this year, as credit spreads have contracted from their recent peak in 2008, and investors have been compensated for in-depth credit research.
For years, credit research was overshadowed in our industry by the simplicity and dominance of bond insurance. A prevalent, though misguided, understanding that the use of municipal | |
Certified Annual Report 7
Letter to Shareholders,
Continued
insurance could effectively eliminate credit risk led to the diminished value of financial analysis in favor of financial engineering. Talent was directed to craft complex hedging strategies to generate attractive returns. As bond insurance lost most of its relevance following a string of downgrades, the market understandably has a renewed interest in credit research. While credit research represents a lost art to some in our industry, we have emphasized credit research from the Fund’s inception and will continue our time honored tradition of bottom-up credit research well into the future.
Market liquidity has greatly improved with the passage of the American Reinvestment and Recovery Act, which pledged $144 billion in state and local government fiscal relief. The passage of this act in February 2009 spurred investors back into the municipal bond market as bond investors gained confidence in the federal government’s support of state and local governments. Other supportive factors include stabilization among major investment banks, healthy volume of new issues, and strong retail demand. We’ve even seen reasonable appetite for lower-rated, higher-yielding municipal credits as high-yield funds have garnered capital. The municipal market otherwise appears quite orderly with a steady supply of new issuance, strong demand coming from retail investors, and an active secondary market.
Yields of late have trended lower, attributable in large part to a compelling surge in demand for municipal bonds. The months leading up to the current fiscal year end saw a significant migration of investor assets out of oppressively low yielding money market funds into short and intermediate bond funds. For example, municipal money market funds accounted for $495 billion of assets at the end of 2008. As of September 30, 2009, assets in municipal money market funds were $416 billion, a reduction of $79 billion. Municipal bond funds have grown by $52 billion during this period, nearly four times the annual average over the last twenty years. If this disintermediation trend continues we would expect it to have a positive effect on bond prices in the months ahead.
The State of California continues to face uncertainty over its economic future. With unemployment above 12%, state tax revenues down nearly 14%, and a budget deficit projected to reach $56 billion over the next three years, we do expect to see more challenges in the years ahead. Despite these challenges, we believe the state will continue to meet its obligation to bondholders. State borrowing seems to go on unimpeded despite its having the lowest investment rating among all fifty states. Local governments within the state are faring much better as property taxes, the mainstay revenue source for cities and counties, have been reasonably stable. At this time, your Fund is substantially under-weighted in California State general obligation bonds, favoring a diverse mix of revenue and general obligation bonds from cities, counties, and other municipalities throughout the State.
The Class A shares of your Fund produced a total return of 8.50% over the twelve-month period ended September 30, 2009 at NAV, compared to a 11.01% return for the Barclays Capital Five-Year Municipal Bond Index. Over the last year, the yield curve has moved lower in a somewhat parallel fashion. 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 shorter than five years. Since shorter maturity bonds generally underperformed, the Fund experienced some underperformance relative to the index.
Your Thornburg California Limited Term Municipal Fund is a laddered portfolio of over 100 municipal obligations from various municipal sectors and geographic regions within the State of California. We ladder the maturity dates of the
8 Certified Annual Report
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 reduce 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 shown here describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
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. 2009 has proven to be another strong year for our municipal bond funds. We believe this reflects our team’s competent approach to managing risk, its disciplined laddering process to bond investing, and its passionate pursuit of quality execution.
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
Thornburg California Limited Term Municipal Fund | September 30, 2009 |
![]() | We have used ratings from Standard & Poor’s (S&P). Where S&P ratings are not available, we have used Moody’s Investors Service. Where neither rating is available, we have used ratings from Fitch 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 | $ | 454,266 | |||
ABAG Finance Authority, 4.75% due 10/1/2012 (California School of Mechanical Arts) | A3/NR | 455,000 | 478,009 | |||||
Alameda County COP, 5.375% due 12/1/2010 (Insured: Natl-Re) | A2/NR | 2,000,000 | 2,070,640 | |||||
Alameda County COP, 5.625% due 12/1/2016 (Santa Rita Jail; Insured: AMBAC) | NR/AA- | 1,830,000 | 2,118,426 | |||||
Alvord USD GO, 5.25% due 2/1/2014 (Insured: Natl-Re) | Baa1/A+ | 1,150,000 | 1,295,739 | |||||
Bay Area Toll Authority, 5.00% due 4/1/2016 (San Francisco Bay Area) | Aa3/AA | 2,075,000 | 2,421,815 | |||||
Calexico USD GO, 6.75% due 9/1/2017 | NR/BBB+ | 3,060,000 | 3,266,305 | |||||
California HFA, 5.00% due 11/15/2011 (Cedars Sinai Medical Center) | A2/NR | 1,500,000 | 1,572,960 | |||||
California HFA, 5.25% due 10/1/2013 (Providence Health) | Aa2/AA | 650,000 | 726,356 | |||||
California HFA, 6.00% due 10/1/2018 (Providence Health) | Aa2/AA | 500,000 | 595,815 | |||||
California Housing Finance Agency, 4.85% due 8/1/2016 (Insured: FSA) (AMT) | Aa2/AAA | 1,000,000 | 1,008,100 | |||||
California Housing Finance Agency, 9.875% due 2/1/2017 | Aa3/AA- | 1,345,000 | 1,370,151 | |||||
California Housing Finance Agency, 5.00% due 8/1/2017 (Insured: FSA) (AMT) | Aa2/AAA | 980,000 | 995,425 | |||||
California Housing Finance Agency, 5.125% due 8/1/2018 (Insured: FSA) (AMT) | Aa2/AAA | 1,000,000 | 984,320 | |||||
California Mobile Home Park Financing Authority, 4.75% due 11/15/2010 (Rancho Vallecitos; Insured: ACA) | NR/NR | 500,000 | 504,340 | |||||
California Mobile Home Park Financing Authority, 5.00% due 11/15/2013 (Rancho Vallecitos; Insured: ACA) | NR/NR | 570,000 | 572,075 | |||||
California Municipal Finance Authority, 3.45% due 9/1/2014 (Waste Management, Inc.) | NR/BBB | 1,250,000 | 1,251,125 | |||||
California PCR, 5.90% due 6/1/2014 (San Diego Gas & Electric) | A2/A | 2,500,000 | 2,809,525 | |||||
California PCR, 5.35% due 12/1/2016 (Pacific Gas & Electric) (AMT) | A3/A | 2,000,000 | 2,076,920 | |||||
California PCR Solid Waste Disposal, 6.75% due 7/1/2011 (North County Recycling Center) (ETM) | Aaa/NR | 980,000 | 1,047,346 | |||||
California PCR Solid Waste Disposal, 5.25% due 6/1/2023 put 12/1/2017 (Republic Services, Inc.) (AMT) | Baa3/BBB | 1,620,000 | 1,629,493 | |||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: Natl-Re) | Baa2/A | 2,000,000 | 2,006,580 | |||||
California State GO, 5.75% due 10/1/2010 (Insured: FSA) | Aa3/AAA | 1,000,000 | 1,044,390 | |||||
California State GO, 5.50% due 3/1/2012 (School Improvements; Insured: FGIC-TCRS) | Baa1/A | 230,000 | 233,657 | |||||
California State Public Works Board Lease, 5.50% due 6/1/2010 (Various Universities) | Aa2/AA- | 360,000 | 371,095 | |||||
California State Public Works Board Lease, 5.25% due 10/1/2013 (California State University) | A1/A- | 500,000 | 500,950 | |||||
California State Public Works Board Lease, 5.25% due 12/1/2014 | Baa2/A- | 1,525,000 | 1,542,659 | |||||
California State Public Works Board Lease, 5.00% due 1/1/2015 (Department of Corrections; Insured: AMBAC) | Baa3/A- | 2,000,000 | 2,154,640 | |||||
California State Public Works Board Lease, 5.00% due 11/1/2015 (Various Universities) | Aa2/AA- | 1,000,000 | 1,091,200 | |||||
California Statewide Community Development Authority, 5.00% due 7/1/2010 (Huntington Memorial Hospital) | NR/A+ | 1,000,000 | 1,020,450 | |||||
California Statewide Community Development Authority, 5.25% due 8/1/2014 (EAH-East Campus Apartments; Insured: ACA) | Baa1/NR | 1,215,000 | 1,261,219 | |||||
California Statewide Community Development Authority, 5.50% due 8/15/2014 (Enloe Medical Center; Insured: CA Mtg Insurance) | NR/A | 750,000 | 825,592 | |||||
California Statewide Community Development Authority COP, 6.50% due 8/1/2012 (Cedars Sinai Center Hospital; Insured: Natl-Re) | A2/A | 430,000 | 463,587 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
California Statewide Community Development Authority PCR, 4.10% due 4/1/2028 put 4/1/2013 (Southern California Edison Co.; Insured: Syncora) | A1/A | $ | 2,125,000 | $ | 2,186,476 | |||
Carson Redevelopment Agency Tax Allocation, 6.00% due 10/1/2019 (Project Area 1) | NR/A- | 1,050,000 | 1,151,094 | |||||
Central Union High School District Imperial County, 5.00% due 8/1/2012 (Insured: FGIC) | NR/A | 830,000 | 890,416 | |||||
Central Valley Financing Authority, 5.00% due 7/1/2015 (Carson Ice) | A1/A+ | 1,000,000 | 1,118,360 | |||||
Cerritos Public Financing Authority Tax Allocation, 5.00% due 11/1/2014 (Insured: AMBAC) | NR/A- | 1,260,000 | 1,350,544 | |||||
City of Woodland GO, 2.50% due 6/30/2010 (Anticipation Notes) | NR/SP-1+ | 1,900,000 | 1,919,779 | |||||
Corona Norco USD GO, 0% due 9/1/2017 (Insured: FSA) | Aa3/AAA | 1,595,000 | 1,188,163 | |||||
Daly City Housing Development Financing Agency, 5.00% due 12/15/2019 (Franciscan Mobile Home Park) | NR/A- | 1,815,000 | 1,772,638 | |||||
Desert Sands USD COP, 5.25% due 3/1/2014 (School Improvements) | A2/A+ | 1,745,000 | 1,876,905 | |||||
Desert Sands USD COP, 5.00% due 3/1/2017 (School Improvements) | A2/A+ | 1,500,000 | 1,592,565 | |||||
Escondido USD GO, 6.10% due 11/1/2011 (Insured: Natl-Re) | Baa1/A | 500,000 | 502,330 | |||||
Fillmore Public Financing Authority, 5.00% due 5/1/2016 (Water Recycling; Insured: CIFG) | Baa2/A | 735,000 | 805,075 | |||||
High Desert California Memorial Health Care, 5.40% due 10/1/2011 | NR/NR | 1,315,000 | 1,316,617 | |||||
Inland Valley Development Agency, 5.25% due 4/1/2012 | NR/A | 1,490,000 | 1,557,899 | |||||
Irvine Ranch Water District, 0.028% due 4/1/2033 put 10/1/2009 (LOC: Bank of America) (daily demand notes) | VMIG1/A-1 | 675,000 | 675,000 | |||||
Irvine Ranch Water District GO, 0.30% due 7/1/2035 put 10/1/2009 (LOC: Landesbank Baden) (daily demand notes) | VMIG1/A-2 | 3,250,000 | 3,250,000 | |||||
Irvine Ranch Water District GO, 0.027% due 10/1/2041 put 10/1/2009 (LOC: Bank of America) (daily demand notes) | VMIG1/A-1 | 6,000,000 | 6,000,000 | |||||
Kern High School District GO, 7.00% due 8/1/2010 (ETM) | Baa1/NR | 165,000 | 174,065 | |||||
Lindsay USD COP, 5.75% due 10/1/2017 (Insured: Assured Guaranty) | NR/AAA | 1,160,000 | 1,219,926 | |||||
Lindsay USD COP, 6.00% due 10/1/2018 (Insured: Assured Guaranty) | NR/AAA | 680,000 | 720,718 | |||||
Los Angeles Community Redevelopment Agency, 5.75% due 7/1/2010 (Cinerama Dome Public Parking; Insured: ACA) | NR/NR | 435,000 | 428,632 | |||||
Los Angeles Convention & Exhibition Center Authority, 5.00% due 8/15/2016 | A1/AA- | 2,000,000 | 2,202,620 | |||||
Los Angeles COP, 5.00% due 2/1/2012 (Insured: Natl-Re) | A1/AA- | 1,400,000 | 1,497,846 | |||||
Los Angeles County Schools, 5.00% due 6/1/2016 (Pooled Financing; Insured: Natl-Re) | Baa1/A | 1,000,000 | 1,065,090 | |||||
Los Angeles County Schools, 5.00% due 6/1/2017 (Pooled Financing; Insured: Natl-Re) | Baa1/A | 1,010,000 | 1,071,974 | |||||
Los Angeles Department of Airports, 5.50% due 5/15/2018 (Los Angeles Intl.) | Aa3/AA | 2,000,000 | 2,231,760 | |||||
Los Angeles Department of Water & Power, 5.25% due 7/1/2011 (Insured: Natl-Re) | Aa3/AA- | 3,000,000 | 3,231,870 | |||||
Los Angeles USD GO, 5.50% due 7/1/2012 (Insured: Natl-Re) | Aa3/AA- | 2,500,000 | 2,775,775 | |||||
Merced Redevelopment Agency Tax Allocation, 5.25% due 9/1/2020 | NR/A- | 1,190,000 | 1,242,039 | |||||
Milpitas Redevelopment Agency Tax Allocation, 5.00% due 9/1/2015 (Insured: Natl-Re) | Baa1/A | 2,000,000 | 2,101,220 | |||||
Mojave USD COP, 0% due 9/1/2017 (Insured: FSA) | NR/AAA | 1,045,000 | 766,455 | |||||
Mojave USD COP, 0% due 9/1/2018 (Insured: FSA) | NR/AAA | 1,095,000 | 740,581 | |||||
Moorpark Mobile Home Park, 5.80% due 5/15/2010 (Villa Del Arroyo; Insured: ACA) | NR/NR | 270,000 | 272,438 | |||||
Norwalk Redevelopment Agency Tax Allocation, 5.00% due 10/1/2014 (Insured: Natl-Re) | Baa1/A | 625,000 | 659,463 | |||||
Oxnard Financing Authority Solid Waste, 5.25% due 6/1/2014 (Insured: FGIC) | NR/A+ | 1,000,000 | 1,100,460 | |||||
Oxnard Financing Authority Waste Water, 5.00% due 5/1/2013 (Insured: AMBAC) (AMT) | NR/A | 2,115,000 | 2,245,178 | |||||
Palomar Pomerado Health GO, 0% due 8/1/2019 (Insured: Assured Guaranty) | Aa2/AAA | 2,000,000 | 1,271,540 | |||||
Pomona USD GO, 6.10% due 2/1/2010 (Insured: Natl-Re) | Baa1/A | 320,000 | 324,093 | |||||
Port Oakland California, 5.75% due 11/1/2012 pre-refunded 5/1/2010 (Port, Airport & Marina Improvements; Insured: FGIC) (AMT) | A1/AA- | 15,000 | 15,405 | |||||
Port Oakland California, 5.75% due 11/1/2012 (Port, Airport & Marina Improvements; Insured: FGIC) (AMT) | A1/AA- | 2,160,000 | 2,195,791 | |||||
Richmond Joint Powers Financing Authority, 5.25% due 5/15/2013 (Lease & Gas Tax) | NR/A | 390,000 | 390,842 | |||||
Riverside County Palm Desert Financing Authority, 5.00% due 5/1/2013 | A2/AA- | 1,000,000 | 1,080,610 | |||||
Roseville Natural Gas Financing Authority, 5.00% due 2/15/2017 | A2/A | 1,000,000 | 1,036,820 | |||||
Sacramento City Financing Authority, 0% due 11/1/2014 (Insured: Natl-Re) | Baa1/A | 3,310,000 | 2,630,391 | |||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2015 (Proctor & Gamble) | A1/A+ | 1,100,000 | 1,233,925 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2019 (Proctor & Gamble) | A1/A+ | $ | 625,000 | $ | 707,381 | |||
Sacramento County Sanitation District Financing Authority, 5.75% due 12/1/2009 | Aa3/AA | 560,000 | 564,973 | |||||
San Bernardino County Community Facilities District, 5.10% due 9/1/2011 | NR/NR | 190,000 | 191,262 | |||||
San Bernardino County Community Facilities District, 5.20% due 9/1/2012 | NR/NR | 205,000 | 206,978 | |||||
San Bernardino County Community Facilities District, 5.30% due 9/1/2013 | NR/NR | 300,000 | 301,968 | |||||
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 | 3,308,258 | |||||
San Bernardino County Transportation Authority Sales Tax, 6.00% due 3/1/2010 (Insured: FGIC) (ETM) | NR/NR | 195,000 | 199,501 | |||||
San Diego County COP, 5.625% due 9/1/2012 (Insured: AMBAC) | NR/NR | 350,000 | 360,756 | |||||
San Diego County COP, 5.50% due 9/1/2017 (Developmental Services Foundation) | Ba1/NR | 2,000,000 | 1,929,040 | |||||
San Francisco City & County Airports, 6.50% due 5/1/2019 (International Airport) | A1/A | 1,480,000 | 1,522,150 | |||||
San Francisco City & County Redevelopment Agency, 0% due 7/1/2010 (George R Moscone Convention Center) | Aa3/AA- | 1,380,000 | 1,360,901 | |||||
San Francisco City & County Redevelopment Agency, 0% due 7/1/2011 (George R Moscone MBIA-IB; Insured: Natl Re) | Aa3/AA- | 1,200,000 | 1,184,352 | |||||
San Joaquin County COP, 5.50% due 11/15/2013 (Capital Facilities; Insured: | Baa1/A | 1,000,000 | 1,027,920 | |||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: FSA) | Aa3/AAA | 5,000,000 | 3,280,950 | |||||
San Jose Evergreen Community College District GO, 0% due 9/1/2011 crossover refunded 9/1/2010 (Insured: AMBAC) | Aa2/AA- | 2,200,000 | 2,055,548 | |||||
San Jose Redevelopment Agency Tax Allocation, 5.25% due 8/1/2012 (Merged Area Redevelopment; Insured: Natl-Re) | A3/A | 1,000,000 | 1,074,640 | |||||
San Luis & Delta-Mendota Water Authority, 4.50% due 3/1/2014 (Water Utility Improvements) | NR/A+ | 2,000,000 | 2,113,420 | |||||
San Mateo Flood Control District COP, 5.25% due 8/1/2017 (Colma Creek; Insured: Natl-Re) | Baa1/A | 1,000,000 | 1,002,950 | |||||
San Mateo USD GO, 0% due 9/1/2019 (Insured: FGIC) | Aa2/AA | 2,000,000 | 1,329,800 | |||||
Santa Margarita-Dana Point Authority, 5.125% due 8/1/2018 (Insured: AMBAC) | Baa3/NR | 2,000,000 | 2,000,360 | |||||
Seal Beach Redevelopment Agency Mobile Home Park, 5.20% due 12/15/2013 (Insured: ACA) | NR/NR | 575,000 | 585,994 | |||||
Southeast Resource Recovery Facilities Authority, 5.375% due 12/1/2013 (Insured: AMBAC) (AMT) | A2/A+ | 1,060,000 | 1,149,061 | |||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Insured: AMBAC) | Aa3/NR | 350,000 | 405,167 | |||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Insured: AMBAC) | Aa3/NR | 250,000 | 289,405 | |||||
Tracy Area Public Facilities Financing Agency Special Tax, 5.875% due 10/1/2019 (Community Facilities District No. 87) | Baa1/A | 835,000 | 843,150 | |||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2015 (Tuolumne Co.) | A1/A+ | 500,000 | 554,140 | |||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2018 (Tuolumne Co.) | A1/A+ | 1,460,000 | 1,613,519 | |||||
Val Verde USD COP, 5.00% due 1/1/2014 (Insured: FGIC) (ETM) | NR/NR | 445,000 | 510,709 | |||||
Victorville Redevelopment Agency, 5.00% due 12/1/2014 (Bear Valley Road Redevelopment; Insured: FSA) | Aa3/AAA | 300,000 | 322,947 | |||||
Walnut Valley USD GO, 8.75% due 8/1/2010 (Insured: Natl-Re) (ETM) | NR/AA- | 1,000,000 | 1,069,240 | |||||
Washington USD COP, 5.00% due 8/1/2017 (New High School; Insured: AMBAC) | NR/BBB+ | 725,000 | 769,312 | |||||
Whittier Solid Waste, 5.375% due 8/1/2014 (Insured: AMBAC) | NR/NR | 855,000 | 856,010 | |||||
TOTAL INVESTMENTS — 96.52% (COST $136,668,748) | $ | 141,538,320 | ||||||
OTHER ASSETS LESS LIABILITIES — 3.48% | 5,106,670 | |||||||
NET ASSETS — 100.00% | $ | 146,644,990 | ||||||
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2009 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ABAG | Association of Bay Area Governments | |
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 | |
Mtg | Mortgage | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
Syncora | Insured by Syncora Guarantee Inc. | |
USD | Unified School District |
See notes to financial statements.
Certified Annual Report 13
STATEMENT OF ASSETS AND LIABILITIES
Thornburg California Limited Term Municipal Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (cost $136,668,748) (Note 2) | $ | 141,538,320 | ||
Cash | 1,000,198 | |||
Receivable for investments sold | 1,795,000 | |||
Receivable for fund shares sold | 1,182,567 | |||
Interest receivable | 1,606,509 | |||
Prepaid expenses and other assets | 125 | |||
Total Assets | 147,122,719 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 204,708 | |||
Payable to investment advisor and other affiliates (Note 3) | 92,009 | |||
Accounts payable and accrued expenses | 43,579 | |||
Dividends payable | 137,433 | |||
Total Liabilities | 477,729 | |||
NET ASSETS | $ | 146,644,990 | ||
NET ASSETS CONSIST OF: | ||||
Net unrealized appreciation on investments | $ | 4,869,572 | ||
Accumulated net realized gain (loss) | (292,430 | ) | ||
Net capital paid in on shares of beneficial interest | 142,067,848 | |||
$ | 146,644,990 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($79,455,397 applicable to 6,071,379 shares of beneficial interest outstanding - Note 4) | $ | 13.09 | ||
Maximum sales charge, 1.50% of offering price | 0.20 | |||
Maximum offering price per share | $ | 13.29 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($26,003,916 applicable to 1,985,348 shares of beneficial interest outstanding - Note 4) | $ | 13.10 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($41,185,677 applicable to 3,144,050 shares of beneficial interest outstanding - Note 4) | $ | 13.10 | ||
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
14 Certified Annual Report
Thornburg California Limited Term Municipal Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $677,327) | $ | 5,790,016 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 648,569 | |||
Administration fees (Note 3) | ||||
Class A Shares | 88,526 | |||
Class C Shares | 24,269 | |||
Class I Shares | 19,739 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 177,051 | |||
Class C Shares | 194,878 | |||
Transfer agent fees | ||||
Class A Shares | 25,685 | |||
Class C Shares | 9,960 | |||
Class I Shares | 11,266 | |||
Registration and filing fees | ||||
Class A Shares | 43 | |||
Class C Shares | 43 | |||
Class I Shares | 43 | |||
Custodian fees (Note 3) | 46,120 | |||
Professional fees | 26,500 | |||
Accounting fees | 8,490 | |||
Trustee fees | 4,767 | |||
Other expenses | 11,797 | |||
Total Expenses | 1,297,746 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (8,062 | ) | ||
Distribution fees waived (Note 3) | (97,439 | ) | ||
Fees paid indirectly (Note 3) | (1,013 | ) | ||
Net Expenses | 1,191,232 | |||
Net Investment Income | 4,598,784 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 361,086 | |||
Net change in unrealized appreciation (depreciation) of investments | 5,790,621 | |||
Net Realized and unrealized Gain | 6,151,707 | |||
Net Increase in Net Assets Resulting From Operations | $ | 10,750,491 | ||
See notes to financial statements.
Certified Annual Report 15
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg California Limited Term Municipal Fund |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,598,784 | $ | 3,888,722 | ||||
Net realized gain (loss) on investments | 361,086 | 186,069 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 5,790,621 | (2,621,401 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 10,750,491 | 1,453,390 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,466,623 | ) | (2,220,961 | ) | ||||
Class C Shares | (626,833 | ) | (437,867 | ) | ||||
Class I Shares | (1,505,328 | ) | (1,229,894 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 10,028,096 | 137,530 | ||||||
Class C Shares | 9,046,521 | 1,822,538 | ||||||
Class I Shares | (2,380,406 | ) | 10,723,886 | |||||
Net Increase in Net Assets | 22,845,918 | 10,248,622 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 123,799,072 | 113,550,450 | ||||||
End of Year | $ | 146,644,990 | $ | 123,799,072 | ||||
See notes to financial statements.
16 Certified Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2009 |
NOTE 1 – ORGANIZATION
Thornburg California Limited Term 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 Fund is currently one of fifteen separate series of the Trust. 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 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 of purchase, 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, and 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2009 |
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Investments in Securities Municipal Bonds | $ | 141,538,320 | $ | — | $ | 141,538,320 | $ | — | ||||
Total Investments in Securities | $ | 141,538,320 | $ | — | $ | 141,538,320 | $ | — |
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 to shareholders substantially all taxable (if any) and tax exempt income of the Fund. Therefore, no provision for federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid monthly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized to call dates or maturity dates of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of 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, 2009, 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
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2009 |
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, 2009, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $3,012 for Class A shares, $2,938 for Class C shares, and $2,112 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, 2009, the Distributor has advised the Fund that it earned commissions aggregating $1,368 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $3,638 from redemptions of Class C shares of the Fund.
Pursuant to a service plan under Rule 12b-1 of the Investment Company Act of 1940, the Fund may reimburse to the Advisor an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to each class of shares of the Fund for payments made by the Advisor to securities dealers and other financial institutions to obtain various shareholder and distribution related services. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares.
The Trust has also adopted 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, 2009, are set forth in the Statement of Operations. Distribution fees in the amount of $97,439 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, 2009, fees paid indirectly were $1,013.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 2,070,439 | $ | 26,212,377 | 1,256,600 | $ | 16,038,976 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 131,040 | 1,660,161 | 114,676 | 1,458,516 | ||||||||||
Shares repurchased | (1,417,806 | ) | (17,844,442 | ) | (1,362,378 | ) | (17,359,962 | ) | ||||||
Net Increase (Decrease) | 783,673 | $ | 10,028,096 | 8,898 | $ | 137,530 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 968,746 | $ | 12,324,994 | 349,863 | $ | 4,463,176 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 34,750 | 441,022 | 26,389 | 335,881 | ||||||||||
Shares repurchased | (295,558 | ) | (3,719,495 | ) | (233,249 | ) | (2,976,519 | ) | ||||||
Net Increase (Decrease) | 707,938 | $ | 9,046,521 | 143,003 | $ | 1,822,538 | ||||||||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 2,296,396 | $ | 29,206,706 | 1,606,761 | $ | 20,521,258 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 86,889 | 1,099,647 | 73,325 | 933,060 | ||||||||||
Shares repurchased | (2,584,811 | ) | (32,686,759 | ) | (840,081 | ) | (10,730,432 | ) | ||||||
Net Increase (Decrease) | (201,526 | ) | $ | (2,380,406 | ) | 840,005 | $ | 10,723,886 | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $63,534,738 and $54,493,535, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 136,668,748 | ||
Gross unrealized appreciation on a tax basis | $ | 5,189,910 | ||
Gross unrealized depreciation on a tax basis | (320,338 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 4,869,572 | ||
At September 30, 2009, the Fund did not have any undistributed tax-exempt/ordinary net income or undistributed capital gains.
At September 30, 2009, the Fund had tax basis capital losses of $292,430, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards expire September 30, 2015.
The Fund utilized $361,086 of capital loss carryforwards during the year ended September 30, 2009.
The tax character of distributions paid during the years ended September 30, 2009, and September 30, 2008, was as follows:
2009 | 2008 | |||||
Distributions from: | ||||||
Tax exempt income | $ | 4,595,240 | $ | 3,888,722 | ||
Ordinary income | 3,544 | — | ||||
Total distributions | $ | 4,598,784 | $ | 3,888,722 | ||
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
20 Certified Annual Report
Thornburg California Limited Term Municipal Fund
Class A Shares: | Year Ended September 30, | |||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.49 | $ | 12.73 | $ | 12.77 | $ | 12.79 | $ | 13.02 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.44 | 0.42 | 0.43 | 0.40 | 0.36 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.60 | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | |||||||||||
Total from investment operations | 1.04 | 0.18 | 0.39 | 0.38 | 0.13 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.44 | ) | (0.42 | ) | (0.43 | ) | (0.40 | ) | (0.36 | ) | ||||||||||
Change in net asset value | 0.60 | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 13.09 | $ | 12.49 | $ | 12.73 | $ | 12.77 | $ | 12.79 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 8.50 | 1.42 | 3.10 | 3.06 | 0.98 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.48 | 3.32 | 3.37 | 3.17 | 2.75 | |||||||||||||||
Expenses, after expense reductions (%) | 0.98 | 1.00 | 0.99 | 0.92 | 1.00 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.98 | 0.98 | 0.99 | 0.87 | 0.99 | |||||||||||||||
Expenses, before expense reductions (%) | 0.99 | 1.00 | 1.01 | 1.01 | 1.02 | |||||||||||||||
Portfolio turnover rate (%) | 44.06 | 34.88 | 22.71 | 25.77 | 26.33 | |||||||||||||||
Net assets at end of year (thousands) | $ | 79,455 | $ | 66,023 | $ | 67,183 | $ | 80,589 | $ | 111,102 |
(a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
Certified Annual Report 21
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg California Limited Term Municipal Fund |
Class C Shares: | Year Ended September 30, | |||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.50 | $ | 12.74 | $ | 12.78 | $ | 12.80 | $ | 13.03 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.41 | 0.39 | 0.40 | 0.37 | 0.32 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.60 | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | |||||||||||
Total from investment operations | 1.01 | 0.15 | 0.36 | 0.35 | 0.09 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.41 | ) | (0.39 | ) | (0.40 | ) | (0.37 | ) | (0.32 | ) | ||||||||||
Change in net asset value | 0.60 | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 13.10 | $ | 12.50 | $ | 12.74 | $ | 12.78 | $ | 12.80 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 8.22 | 1.16 | 2.85 | 2.80 | 0.73 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.23 | 3.06 | 3.13 | 2.92 | 2.50 | |||||||||||||||
Expenses, after expense reductions (%) | 1.24 | 1.26 | 1.24 | 1.18 | 1.25 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.24 | 1.24 | 1.23 | 1.13 | 1.24 | |||||||||||||||
Expenses, before expense reductions (%) | 1.76 | 1.78 | 1.79 | 1.83 | 1.82 | |||||||||||||||
Portfolio turnover rate (%) | 44.06 | 34.88 | 22.71 | 25.77 | 26.33 | |||||||||||||||
Net assets at end of year (thousands) | $ | 26,004 | $ | 15,963 | $ | 14,449 | $ | 16,801 | $ | 20,021 |
See notes to financial statements.
22 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg California Limited Term Municipal Fund |
Class I Shares: | Year Ended September 30, | |||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.50 | $ | 12.74 | $ | 12.78 | $ | 12.80 | $ | 13.03 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.48 | 0.47 | 0.47 | 0.44 | 0.40 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.60 | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | |||||||||||
Total from investment operations | 1.08 | 0.23 | 0.43 | 0.42 | 0.17 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.48 | ) | (0.47 | ) | (0.47 | ) | (0.44 | ) | (0.40 | ) | ||||||||||
Change in net asset value | 0.60 | (0.24 | ) | (0.04 | ) | (0.02 | ) | (0.23 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 13.10 | $ | 12.50 | $ | 12.74 | $ | 12.78 | $ | 12.80 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 8.86 | 1.77 | 3.44 | 3.39 | 1.31 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.81 | 3.66 | 3.71 | 3.50 | 3.09 | |||||||||||||||
Expenses, after expense reductions (%) | 0.65 | 0.65 | 0.66 | 0.66 | 0.68 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.65 | 0.63 | 0.65 | 0.55 | 0.67 | |||||||||||||||
Expenses, before expense reductions (%) | 0.65 | 0.65 | 0.68 | 0.71 | 0.73 | |||||||||||||||
Portfolio turnover rate (%) | 44.06 | 34.88 | 22.71 | 25.77 | 26.33 | |||||||||||||||
Net assets at end of year (thousands) | $ | 41,186 | $ | 41,814 | $ | 31,918 | $ | 28,334 | $ | 30,843 |
See notes to financial statements.
Certified Annual Report 23
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, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
24 Certified Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,056.60 | $ | 5.09 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.12 | $ | 5.00 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,055.20 | $ | 6.39 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.85 | $ | 6.28 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,058.30 | $ | 3.40 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.77 | $ | 3.34 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.99%; C: 1.24%; I: 0.66%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table 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
Thornburg California Limited Term Municipal Fund | September 30, 2009 (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, 2009)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 2/19/87) | 6.88 | % | 3.07 | % | 3.55 | % | 4.76 | % | ||||
C Shares (Incep: 9/1/94) | 7.70 | % | 3.12 | % | 3.38 | % | 3.69 | % | ||||
I Shares (Incep: 4/1/97) | 8.86 | % | 3.72 | % | 4.05 | % | 4.22 | % |
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.
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.
26 Certified Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 27
TRUSTEES AND OFFICERS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
28 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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
Thornburg California Limited Term Municipal Fund | September 30, 2009 (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 tax year ended September 30, 2009, dividends paid by the Fund of $4,595,240 (or the maximum allowed) 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, 2009. Complete information will be computed and reported in conjunction with your 2009 Form 1099.
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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees unanimously voted 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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit
30 Certified Annual Report
OTHER INFORMATION, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2009 (Unaudited) |
of the Fund’s investment objectives. In addition, the Trustees considered information specifically provided to them at their request in anticipation of their annual 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 California 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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 observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
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, given the investment objectives of the Fund. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year compared favorably to the average return for the California municipal debt mutual fund category for which calendar year returns were presented, the Fund’s returns had been lower than the average returns of the same category for the majority of the preceding ten calendar years, and that the Fund’s returns fell within or near the top quartile of the category for the one-year, three-year and five-year periods ended with the second quarter of the current year and within the top quartile of the 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.
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 considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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
Certified Annual Report 31
OTHER INFORMATION, CONTINUED
Thornburg California Limited Term Municipal Fund | September 30, 2009 (Unaudited) |
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, compliance and systems capabilities 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.
32 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 22, 2009
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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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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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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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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. | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources. | |||||||
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Investment Advisor: Thornburg Investment Management® 800.847.0200
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Thornburg Securities Corporation® 800.847.0200
TH859 | You invest in the future, without spending a dime. |
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, 2009. 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. Bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. 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 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. 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.
Share Class | NASDAQ Symbol | Cusip | ||||||
Class A | THNMX | 885-215-301 | ||||||
Class D | THNDX | 885-215-624 | ||||||
Class I | THNIX | 885-215-285 |
Lipper’s 2008
Best Fixed-Income Fund Family
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income large firm universe for the three-year period ended 12/31/07, based on risk-adjusted returns. Past performance does not guarantee future results.
Lipper’s large firm universe is comprised of fund families with more than $28 billion in total net assets. Only fund families with at least five bond funds were eligible. Risk-adjusted returns were calculated with dividends reinvested and without sales charges. We did not win this award in 2009.
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.
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.
Annualized 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 maximum offering price per share to arrive at the annualized distribution yield. The yield is calculated on a periodic basis and is subject to change.
Duration ��� The weighted maturity of a bond’s cash flows. Duration measures the price sensitivity of a bond for a given change in interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
General Obligation (GO) Bonds – A municipal bond secured by the pledge of the issuer’s full faith, credit, and taxing power rather than the revenue from a given project.
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.
Pre-Refunded Bond – A type of municipal bond that has been escrowed or collateralized either by direct obligations guaranteed by the U.S. government, or by other types of securities. The escrow account is structured so that these refunded bonds are to be called at the first possible call date. Such bonds, if escrowed with securities guaranteed by the U.S. government, have little if any credit risk.
Revenue Bond – A bond on which the debt service is payable solely from the revenue generated from the operation of the project being financed or a category of facilities, or from other non-tax sources.
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 Bonds – Obligations, also known as “put bonds” or “puttable securities,” that grant the bondholder the right to require the issuer to purchase the bonds, usually at par, at a certain time or times prior to maturity or upon the occurrence of specified events or conditions. The put option, or tender option, right is typically available to the investor on a periodic (e.g., daily, weekly or monthly) basis.
Lease-Backed Bonds – Bonds issued by a municipality or state that are secured by the payments made on leased assets.
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Thornburg New Mexico Intermediate Municipal Fund
At Thornburg, our approach to management of the Fund is based on the premise that investors in the Fund 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 in 2008 with the Best Fixed-Income Fund Family Award.
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 shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 0.97%, as disclosed in the most recent Prospectus.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 6/18/91) | |||||||||||||||
Without sales charge | 11.79 | % | 4.75 | % | 3.88 | % | 4.39 | % | 5.10 | % | |||||
With sales charge | 9.54 | % | 4.05 | % | 3.47 | % | 4.18 | % | 4.98 | % |
30-DAY YIELDS, A SHARES
As of September 30, 2009
Annualized Distribution Rate | SEC | |
3.36% | 2.31% |
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2009
Average Credit Quality | AA | |
Number of Bonds | 129 | |
Duration | 4.8 Yrs | |
Average Maturity | 8.7 Yrs |
See the entire portfolio in the Schedule of Investments on page 10.
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THORNBURG NEW MEXICO INTERMEDIATE MUNICIPAL FUND VERSUS
LIPPER OTHER STATES TAX-EXEMPT MONEY MARKET FUNDS AVERAGE
Class A shares as of September 30, 2009
We are often asked to compare Thornburg New Mexico 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 summarized 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.
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 tax-exempt money market mutual funds. You cannot invest in a category average.
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Thornburg New Mexico Intermediate Municipal Fund
September 30, 2009
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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 20, 2009
Dear Fellow Shareholder:
We are pleased to present the Annual Report for the Thornburg New Mexico Intermediate Municipal Fund. The net asset value (NAV) of the Class A shares increased by 99 cents per share to $13.63 during the twelve months ended September 30, 2009. If you were with us for the entire period, you received dividends of 47.2 cents per share, if you reinvested your dividends, you received 48.0 cents per share. Dividends per share were lower for Class D and higher for Class I to account for varying class-specific expenses. | |
Josh Gonze Co-Portfolio Manager | In last year’s annual report letter, we wrote about the massive deleveraging of the municipal market, evidenced by the unwinding of tender option bond programs and investors’ mass exodus out of high-risk investment strategies employing leverage and other speculative strategies. The forced liquidation of assets placed inordinate supply into a market already reeling from the effects of the mortgage and banking crisis. Compounding matters was the downgrade of nearly all AAA-rated municipal bond insurers that provided credit enhancement to nearly half of all bonds outstanding, including the two largest insurers AMBAC and MBIA. Investor scrutiny over the ratings agencies led many investors to question whether they should be participating in the municipal market at all; and who could blame them given the deluge of negative headline press directed at the municipal market? These events caused 2008 to be one of the worst performing years on record for municipal bonds, and we were quite pleased to see positive returns in your Fund for 2008 given that many bond funds experienced double-digit negative returns. | |
Christopher Ihlefeld Co-Portfolio Manager | Today’s municipal market reflects an impressive rebound from where we were this time last year. Municipal sectors that were hit the hardest in 2008 – health care, lease-backed bonds, and industrial development revenue bonds – have been among the best performing sectors in 2009. This has helped your Fund’s performance as we have market over-weights in each of these sectors. Revenue bonds in general have outperformed all other broad sectors of the market. State general obligation and government-backed pre-refunded bonds, sectors in which we are under-weighted and that led the pack in 2008, have lagged revenue bonds by a substantial margin in 2009. Your Fund’s comparatively higher exposure to strong middle-tier investment grade credits (single-A rated bonds) has also helped performance this year, as credit spreads have contracted from their recent peak in 2008, and investors have been compensated for in-depth credit research. | |
For years, credit research was overshadowed in our industry by the simplicity and dominance of bond insurance. A prevalent though misguided understanding that the use of municipal insurance could effectively eliminate credit risk led to the diminished value of financial analysis in |
Certified Annual Report 7
Letter to Shareholders,
Continued
favor of financial engineering. Talent was directed to craft complex hedging strategies to generate attractive returns. As bond insurance lost most of its relevance following a string of downgrades, the market understandably has a renewed interest in credit research. While credit research represents a lost art to some in our industry, we have emphasized credit research from the Fund’s inception and will continue our time honored tradition of bottom-up credit research well into the future.
Market liquidity has greatly improved with the passage of the American Reinvestment and Recovery Act, which pledged $144 billion in state and local government fiscal relief. The passage of this act in February 2009 spurred investors back into the municipal bond market as bond investors gained confidence in the federal government’s support of state and local governments. Other supportive factors include stabilization among major investment banks, healthy volume of new issues, and strong retail demand. We’ve even seen reasonable appetite for lower-rated, higher-yielding municipal credits as high-yield funds have garnered capital. The municipal market otherwise appears quite orderly with a steady supply of new issuance, strong demand coming from retail investors, and an active secondary market.
Yields of late have trended lower, attributable in large part to a compelling surge in demand for municipal bonds. The months leading up to the current fiscal year end saw a significant migration of investor assets out of oppressively low yielding money market funds into short and intermediate bond funds. For example, municipal money market funds accounted for $495 billion of assets at the end of 2008. As of September 30, 2009, assets in municipal money market funds were $416 billion, a reduction of $79 billion. Municipal bond funds have grown by $52 billion during this period, nearly four times the annual average over the last twenty years. If this disintermediation trend continues, we would expect it to have a positive effect on bond prices in the months ahead.
The State of New Mexico faces some uncertainty as we look ahead into 2010. While the state was perhaps better prepared to handle the economic downturn by having maintained a sizeable general fund balance leading up to the recession, this balance has eroded by 30% during the last year. Total tax revenues to the state are down nearly 10%, with marked declines in personal income taxes and tax revenues derived from oil and gas production. On average, the State of New Mexico derives between 20–25% of its general fund revenues from oil and gas revenues. During the early part of 2009, we saw a considerable drop from these levels as energy prices fell and production slowed significantly. Energy prices have since rebounded and there is reason to believe that tax revenues from oil and gas should improve in the months ahead. We are otherwise encouraged to see reasonably stable gross receipts revenue and unemployment comfortably below national levels.
The Class A shares of your Fund produced a total return of 11.79% over the twelve-month period ended September 30, 2009 at NAV, compared to a 15.41% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Most of the dispersion in the returns can be attributed to your Fund’s underperformance during the fourth quarter of 2008, a period characterized by the investor flight to quality as exhibited by their exclusive preference for short-term, very high-quality bonds. Compared to your Fund, the Merrill Lynch 7-12 Year Municipal Bond Index is more of a high-grade index with heavy concentrations of state general obligation bonds, U.S. Government escrow bonds, and AAA-rated bonds, all of which excelled during the turbulent fourth quarter of 2008. In contrast, your Fund maintains a higher concentration of revenue bonds, A-rated bonds, and bonds with maturities as long as eighteen years. If credit spreads
8 Certified Annual Report
and term spreads continue to contract, as we’ve seen during most of 2009, we would expect to see performance move closer in line with that of the index.
Your Thornburg New Mexico Intermediate Municipal Fund is a laddered portfolio of over 125 municipal obligations from various municipal sectors and geographic regions within the State of 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 reduce interest-rate risk and dampen the Fund’s price volatility. Second, laddering gives the Fund a steady cash flow stream from maturing bonds to reinvest toward the top of the ladder where yields are typically higher. The chart on the right describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
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. 2009 has proven to be another strong year for our municipal bond funds. We believe this reflects our team’s competent approach to managing risk, its disciplined laddering process to bond investing, and its passionate pursuit of quality execution.
Thank you for investing in the 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
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Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 |
![]() | We have used ratings from Standard & Poor’s (S&P). Where S&P ratings are not available, we have used Moody’s Investors Service. Where neither rating is available, we have used ratings from Fitch 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 | |||||
a Albuquerque Airport, 5.50% due 7/1/2013 | A1/A | $ | 4,000,000 | $ | 4,409,040 | |||
Albuquerque GRT, 0% due 7/1/2012 pre-refunded 7/1/2011 | Aa3/AAA | 1,775,000 | 1,681,812 | |||||
Albuquerque GRT, 0% due 7/1/2012 (Insured: FSA) | Aa3/AAA | 225,000 | 207,695 | |||||
Albuquerque GRT, 5.00% due 7/1/2021 | Aa3/AAA | 1,340,000 | 1,542,461 | |||||
Albuquerque GRT, 5.00% due 7/1/2021 | Aa3/AAA | 3,000,000 | 3,453,270 | |||||
Albuquerque IDRB, 5.15% due 4/1/2016 (MCT Industries Inc.; LOC: Bank of the West) (AMT) | Aa3/NR | 1,170,000 | 1,221,269 | |||||
Albuquerque IDRB, 5.25% due 4/1/2017 (MCT Industries Inc.; LOC: Bank of the West) (AMT) | Aa3/NR | 2,140,000 | 2,226,135 | |||||
Albuquerque Municipal School District GO, 5.00% due 8/1/2015 | Aa2/AA | 1,175,000 | 1,214,503 | |||||
Albuquerque Refuse Removal & Disposal, 5.00% due 7/1/2010 (Insured: FSA) | Aa3/AAA | 415,000 | 429,268 | |||||
Belen Gasoline Tax Improvement, 5.40% due 1/1/2011 | NR/NR | 260,000 | 260,112 | |||||
Bernalillo County GRT, 5.25% due 10/1/2012 | Aa3/AAA | 1,000,000 | 1,117,050 | |||||
Bernalillo County GRT, 5.00% due 4/1/2021 (Insured: Natl-Re) | Aa3/AA | 3,000,000 | 3,468,990 | |||||
Bernalillo County GRT, 5.25% due 10/1/2022 (Insured: AMBAC) | Aa3/AAA | 3,170,000 | 3,896,722 | |||||
Bernalillo County GRT, 5.25% due 10/1/2023 (Insured: AMBAC) | Aa3/AAA | 1,275,000 | 1,574,153 | |||||
Bernalillo County GRT, 5.25% due 10/1/2025 (Insured: AMBAC) | Aa3/AAA | 3,850,000 | 4,783,009 | |||||
Bernalillo County Water Utility Authority, 5.00% due 7/1/2021 | Aa2/AAA | 1,520,000 | 1,769,052 | |||||
Bernalillo County Water Utility Authority, 5.50% due 7/1/2025 | Aa2/AAA | 1,000,000 | 1,177,110 | |||||
Bernalillo County Water Utility Authority, 5.00% due 7/1/2026 | Aa2/AAA | 1,420,000 | 1,589,548 | |||||
Chaves County GRT, 5.00% due 7/1/2017 pre-refunded 7/1/2010 (Insured: FGIC) | A3/NR | 1,000,000 | 1,035,150 | |||||
Chaves County GRT, 5.05% due 7/1/2019 pre-refunded 7/1/2010 (Insured: FGIC) | A3/NR | 735,000 | 761,115 | |||||
Cibola County GRT, 6.00% due 11/1/2010 (Insured: AMBAC) (ETM) | NR/NR | 555,000 | 588,872 | |||||
Colfax County GRT, 5.00% due 9/1/2019 | NR/A- | 1,000,000 | 1,032,570 | |||||
Colfax County GRT, 5.50% due 9/1/2029 | NR/A- | 2,510,000 | 2,586,429 | |||||
Farmington Hospital, 5.00% due 6/1/2017 (San Juan Regional Medical Center) | A3/NR | 1,035,000 | 1,101,312 | |||||
Farmington Hospital, 5.125% due 6/1/2018 (San Juan Regional Medical Center) | A3/NR | 570,000 | 593,832 | |||||
Farmington Hospital, 5.125% due 6/1/2019 (San Juan Regional Medical Center) | A3/NR | 645,000 | 668,362 | |||||
Farmington Hospital, 5.00% due 6/1/2022 (San Juan Regional Medical Center) | A3/NR | 2,325,000 | 2,419,441 | |||||
Farmington PCR, 0.32% due 5/1/2024 put 10/1/2009 (LOC: Barclays Bank) (daily demand notes) | VMIGI/A-1+ | 4,500,000 | 4,500,000 | |||||
Farmington Utility Systems, 5.00% due 5/15/2012 (Insured: FSA) | Aa3/AAA | 6,095,000 | 6,454,117 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2012 (Insured: AMBAC) | Baa1/A | 3,345,000 | 3,532,588 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2013 (Insured: AMBAC) | Baa1/A | 2,110,000 | 2,249,682 | |||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2017 (Insured: AMBAC) | Baa1/A | 3,540,000 | 3,702,805 | |||||
Grant County Department of Health, 5.50% due 7/1/2020 (Ft. Bayard) | Aa2/AA | 1,565,000 | 1,767,652 | |||||
Grant County Department of Health, 5.50% due 7/1/2021 (Ft. Bayard) | Aa2/AA | 1,655,000 | 1,850,307 | |||||
Grant County Department of Health, 5.50% due 7/1/2022 (Ft. Bayard) | Aa2/AA | 1,745,000 | 1,933,861 | |||||
Grant County Hospital Facility, 5.50% due 8/1/2010 (Gila Regional Medical Center; Insured: Radian) | NR/BBB | 1,385,000 | 1,411,786 | |||||
Guam Government, 5.375% due 12/1/2024 | NR/BBB- | 2,000,000 | 2,076,860 | |||||
Los Alamos County GRT Improvement, 5.75% due 6/1/2016 | A1/AA+ | 1,000,000 | 1,158,770 | |||||
Los Alamos County GRT Improvement, 5.625% due 6/1/2023 | A1/AA+ | 1,000,000 | 1,115,670 | |||||
Los Alamos County GRT Improvement, 5.75% due 6/1/2024 | A1/AA+ | 3,000,000 | 3,353,280 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Los Alamos County GRT Improvement, 5.75% due 6/1/2025 | A1/AA+ | $ | 1,000,000 | $ | 1,110,830 | |||
Los Alamos County Utility Systems, 5.00% due 7/1/2013 (Insured: FSA) | Aa3/AAA | 1,265,000 | 1,419,545 | |||||
New Mexico Educational Assistance Foundation, 4.10% due 9/1/2015 (AMT) | Aaa/NR | 1,000,000 | 1,013,250 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2013 (Insured: AMBAC) | Aa3/NR | 2,280,000 | 2,526,856 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2014 (Insured: Natl-Re) | Aa2/AA+ | 2,660,000 | 2,945,897 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2014 (Insured: Natl-Re) | Aa2/AA+ | 2,100,000 | 2,414,811 | |||||
New Mexico Finance Authority, 5.25% due 6/1/2015 (Insured: AMBAC) | Aa2/AA+ | 1,000,000 | 1,133,090 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2015 (Insured: AMBAC) | Aa3/NR | 2,360,000 | 2,671,426 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2018 (Insured: AMBAC) | Aa3/NR | 2,915,000 | 3,200,349 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2019 (Insured: Natl-Re) | Aa3/NR | 1,215,000 | 1,326,561 | |||||
New Mexico Finance Authority, 5.00% due 6/1/2020 (Insured: AMBAC) | Aa2/AA+ | 365,000 | 405,573 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2022 (Insured: Natl-Re) | Aa3/AA- | 1,300,000 | 1,418,469 | |||||
New Mexico Finance Authority, 5.00% due 6/15/2024 (Insured: Natl-Re) | Aa3/AA- | 7,000,000 | 7,551,530 | |||||
New Mexico Highway Commission Senior Sub Lien Tax, 5.00% due 6/15/2010 (ETM) | Aa2/AAA | 255,000 | 263,305 | |||||
New Mexico Highway Commission Senior Sub Lien Tax, 5.00% due 6/15/2010 | Aa2/AAA | 245,000 | 253,095 | |||||
New Mexico Highway Commission Senior Sub Lien Tax, 5.50% due 6/15/2014 | Aa2/AAA | 2,000,000 | 2,149,120 | |||||
New Mexico Hospital Equipment Loan Council, 4.80% due 8/1/2010 (Presbyterian Healthcare) | Aa3/AA- | 500,000 | 512,435 | |||||
New Mexico Hospital Equipment Loan Council, 5.75% due 8/1/2016 pre-refunded 8/1/2011 (Presbyterian Healthcare) | Aa3/AA- | 3,205,000 | 3,497,873 | |||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2017 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | Baa1/NR | 1,730,000 | 1,980,296 | |||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2019 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | Baa1/NR | 1,000,000 | 1,144,680 | |||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2021 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | Baa1/NR | 1,185,000 | 1,356,446 | |||||
New Mexico Hospital Equipment Loan Council, 6.00% due 8/1/2023 (Presbyterian Healthcare Services) | Aa3/AA- | 6,000,000 | 6,728,820 | |||||
New Mexico Hospital Equipment Loan Council, 5.25% due 7/1/2025 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | Baa1/NR | 1,000,000 | 1,158,070 | |||||
New Mexico Housing Authority MFR, 5.30% due 12/1/2022 (El Paseo Apartments; Insured: AMBAC) (AMT) | NR/NR | 1,010,000 | 1,006,132 | |||||
New Mexico MFA Forward Mtg., 6.50% due 7/1/2025 (Collateralized: FNMA/GNMA) | NR/AAA | 120,000 | 125,147 | |||||
New Mexico MFA MFR, 5.05% due 9/1/2027 (St. Anthony; Insured: FHA) (AMT) | NR/AAA | 890,000 | 892,554 | |||||
New Mexico MFA MFR, 6.05% due 7/1/2028 (Sandpiper Apartments; Insured: FHA) (AMT) | NR/AA- | 2,335,000 | 2,448,714 | |||||
New Mexico MFA MFR, 5.00% due 7/1/2031 put 7/1/2011 (Sombra Del Oso Apartments; Collateralized: FNMA) | Aaa/NR | 2,000,000 | 2,106,500 | |||||
New Mexico MFA MFR, 5.00% due 7/1/2031 put 7/1/2011 (Riverwalk Apartments; Collateralized: FNMA) | Aaa/NR | 1,910,000 | 2,011,707 | |||||
New Mexico MFA MFR, 5.00% due 7/1/2031 put 7/1/2011 (Tierra Pointe I Apartments; Collateralized: FNMA) | Aaa/NR | 2,785,000 | 2,933,301 | |||||
New Mexico MFA SFMR, 5.70% due 9/1/2014 (Collateralized: FNMA/GNMA) (AMT) | NR/AAA | 65,000 | 67,036 | |||||
New Mexico MFA SFMR, 5.80% due 9/1/2016 (Collateralized: FNMA/GNMA) | NR/AAA | 105,000 | 105,188 | |||||
New Mexico MFA SFMR, 5.75% due 3/1/2017 (Collateralized: FNMA/GNMA) | NR/AAA | 165,000 | 166,711 | |||||
New Mexico MFA SFMR, 6.15% due 9/1/2017 (Collateralized: FNMA/GNMA) | NR/AAA | 55,000 | 55,643 | |||||
New Mexico MFA SFMR, 5.875% due 9/1/2020 (AMT) | NR/AAA | 160,000 | 165,941 | |||||
New Mexico MFA SFMR, 5.875% due 9/1/2021 (Collateralized: FNMA/GNMA) (AMT) | NR/AAA | 285,000 | 292,715 | |||||
New Mexico MFA SFMR, 6.05% due 9/1/2021 (Collateralized: FNMA/GNMA) (AMT) | NR/AAA | 190,000 | 196,753 | |||||
New Mexico MFA SFMR, 5.25% due 7/1/2023 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | NR/AAA | 1,485,000 | 1,542,291 | |||||
New Mexico MFA SFMR, 5.375% due 7/1/2023 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | NR/AAA | 2,170,000 | 2,279,672 | |||||
New Mexico MFA SFMR, 5.50% due 7/1/2028 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | NR/AAA | 3,230,000 | 3,333,425 | |||||
New Mexico MFA SFMR, 5.60% due 7/1/2028 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | NR/AAA | 1,955,000 | 2,044,109 | |||||
New Mexico MFA SFMR, 5.40% due 9/1/2029 (Collateralized: GNMA/FNMA/FHLMC) | NR/AAA | 1,000,000 | 1,066,070 | |||||
New Mexico State University, 5.00% due 4/1/2013 (Insured: FSA) | Aa3/AAA | 1,000,000 | 1,120,090 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Rio Rancho GRT, 5.00% due 6/1/2014 (Insured: FGIC) | A1/AA- | $ | 955,000 | $ | 1,069,686 | |||
Rio Rancho GRT, 5.00% due 6/1/2016 (Insured: FGIC) | A1/AA- | 555,000 | 620,862 | |||||
Rio Rancho GRT, 5.00% due 6/1/2022 (Insured: FGIC) | A1/AA- | 1,000,000 | 1,069,530 | |||||
San Juan County Gasoline Tax/Motor Vehicle Improvement, 5.25% due 5/15/2014 | A1/NR | 400,000 | 430,804 | |||||
San Juan County Gasoline Tax/Motor Vehicle Improvement, 5.25% due 5/15/2022 | A1/NR | 1,725,000 | 1,803,884 | |||||
San Juan County GRT, 5.00% due 6/15/2014 (Insured: Natl-Re) | A1/A+ | 1,225,000 | 1,366,010 | |||||
Sandoval County Incentive Payment, 5.00% due 6/1/2020 (Intel Corp.) | NR/A+ | 6,390,000 | 6,833,977 | |||||
Sandoval County Landfill Improvement, 5.50% due 8/15/2015 | Baa2/NR | 1,420,000 | 1,478,944 | |||||
Sandoval County Landfill Improvement, 5.75% due 8/15/2018 | Baa2/NR | 1,335,000 | 1,376,599 | |||||
b Santa Fe Community College GO, 1.00% due 8/1/2010 | Aa2/NR | 4,100,000 | 4,114,104 | |||||
Santa Fe County, 5.50% due 5/15/2015 (El Castillo Retirement) | NR/BBB- | 1,099,000 | 1,100,934 | |||||
Santa Fe County, 5.80% due 5/15/2018 (El Castillo Retirement) | NR/BBB- | 1,835,000 | 1,835,294 | |||||
Santa Fe County, 7.25% due 7/1/2029 (Rancho Viejo Improvement District) | NR/NR | 1,705,000 | 1,600,432 | |||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation) | NR/NR | 1,000,000 | 931,540 | |||||
Santa Fe County Charter School Foundation, 6.625% due 1/15/2036 (ATC Foundation) | NR/NR | 1,030,000 | 931,583 | |||||
Santa Fe County Correctional Systems, 5.00% due 2/1/2018 (Insured: FSA) | Aa3/AAA | 1,000,000 | 1,154,480 | |||||
Santa Fe County Correctional Systems, 6.00% due 2/1/2027 (Insured: FSA) | Aa3/AAA | 1,520,000 | 1,809,378 | |||||
Santa Fe County GRT, 5.00% due 6/1/2025 | Aa2/AA+ | 1,400,000 | 1,559,782 | |||||
Santa Fe County GRT, 5.00% due 6/1/2026 | Aa2/AA+ | 1,535,000 | 1,698,570 | |||||
Santa Fe Educational Facilities, 5.40% due 3/1/2017 (St. John’s College) | NR/BBB+ | 1,105,000 | 1,105,751 | |||||
Santa Fe SFMR, 6.00% due 11/1/2010 (Collateralized: FNMA/GNMA) (AMT) | Aaa/NR | 45,000 | 45,106 | |||||
Santa Fe SFMR, 6.10% due 11/1/2011 (Collateralized: FNMA/GNMA) (AMT) | Aaa/NR | 65,000 | 65,133 | |||||
Santa Fe SFMR, 6.20% due 11/1/2016 (Collateralized: FNMA/GNMA) (AMT) | Aaa/NR | 90,000 | 90,115 | |||||
Taos County GRT, 4.25% due 10/1/2009 (Insured: Radian) | Baa1/NR | 500,000 | 500,020 | |||||
Taos County GRT, 4.25% due 10/1/2010 (Insured: Radian) | Baa1/NR | 1,000,000 | 1,014,840 | |||||
Taos County GRT, 4.75% due 10/1/2012 (ETM) | Baa1/NR | 1,500,000 | 1,660,335 | |||||
University of New Mexico, 5.25% due 6/1/2013 | Aa3/AA | 665,000 | 730,975 | |||||
University of New Mexico, 5.25% due 6/1/2014 | Aa3/AA | 335,000 | 367,311 | |||||
University of New Mexico, 5.00% due 6/1/2015 (Insured: AMBAC) | Aa3/AA | 1,590,000 | 1,825,845 | |||||
University of New Mexico, 5.25% due 6/1/2015 | Aa3/AA | 1,195,000 | 1,340,551 | |||||
University of New Mexico, 5.25% due 6/1/2016 | Aa3/AA | 645,000 | 707,210 | |||||
University of New Mexico, 5.25% due 6/1/2017 | Aa3/AA | 1,730,000 | 1,896,858 | |||||
University of New Mexico, 5.25% due 6/1/2018 | Aa3/AA | 1,825,000 | 1,993,995 | |||||
University of New Mexico, 5.25% due 6/1/2018 | Aa3/AA | 1,200,000 | 1,334,856 | |||||
University of New Mexico, 5.25% due 6/1/2021 | Aa3/AA | 1,000,000 | 1,081,820 | |||||
University of New Mexico, 6.00% due 6/1/2021 | Aa3/AA | 610,000 | 724,302 | |||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 1/1/2016 (Insured: FSA/FHA) | Aa3/AAA | 2,920,000 | 3,143,205 | |||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 1/1/2017 (Insured: FSA/FHA) | Aa3/AAA | 2,000,000 | 2,136,520 | |||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 1/1/2018 (Insured: FSA/FHA) | Aa3/AAA | 2,000,000 | 2,120,300 | |||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 1/1/2019 (Insured: FSA/FHA) | Aa3/AAA | 3,000,000 | 3,168,390 | |||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 7/1/2019 (Insured: FSA/FHA) | Aa3/AAA | 3,000,000 | 3,163,020 | |||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 1/1/2020 (Insured: FSA/FHA) | Aa3/AAA | 2,310,000 | 2,430,397 | |||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 7/1/2020 (Insured FSA/FHA) | Aa3/AAA | 500,000 | 525,725 | |||||
Ventana West Public Improvement District Special Tax, 6.625% due 8/1/2023 | NR/NR | 2,000,000 | 1,792,060 | |||||
Villa Hermosa Multi Family Housing, 5.85% due 11/20/2016 (Villa Hermosa Apartments; Collateralized: GNMA) (AMT) | NR/CC | 1,105,000 | 1,027,396 | |||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 | Baa3/BBB | 5,000,000 | 5,347,350 | |||||
TOTAL INVESTMENTS — 98.04% (Cost $215,853,969) | $ | 228,183,466 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.96% | 4,565,559 | |||||||
NET ASSETS — 100.00% | $ | 232,749,025 | ||||||
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. |
a | Segregated as collateral for a when-issued security. |
b | When-issued security. |
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 | |
IDRB | Industrial Development Revenue Bond | |
LOC | Letter of Credit | |
MFA | Mortgage Finance Authority | |
Mtg | Mortgage | |
MFR | Multi Family Revenue | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
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 13
STATEMENT OF ASSETS AND LIABILITIES
| ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (cost $215,853,969) (Note 2) | $ | 228,183,466 | ||
Cash | 2,541,771 | |||
Receivable for investments sold | 2,495,000 | |||
Receivable for fund shares sold | 1,073,264 | |||
Interest receivable | 3,078,249 | |||
Prepaid expenses and other assets | 612 | |||
Total Assets | 237,372,362 | |||
LIABILITIES | ||||
Payable for securities purchased | 4,117,138 | |||
Payable for fund shares redeemed | 59,865 | |||
Payable to investment advisor and other affiliates (Note 3) | 160,004 | |||
Accounts payable and accrued expenses | 47,507 | |||
Dividends payable | 238,823 | |||
Total Liabilities | 4,623,337 | |||
NET ASSETS | $ | 232,749,025 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (25,824 | ) | |
Net unrealized appreciation on investments | 12,329,496 | |||
Accumulated net realized gain (loss) | (307,164 | ) | ||
Net capital paid in on shares of beneficial interest | 220,752,517 | |||
$ | 232,749,025 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($187,940,404 applicable to 13,792,340 shares of beneficial interest outstanding - Note 4) | $ | 13.63 | ||
Maximum sales charge, 2.00% of offering price | 0.28 | |||
Maximum offering price per share | $ | 13.91 | ||
Class D Shares: | ||||
Net asset value, offering and redemption price per share ($17,300,548 applicable to 1,269,038 shares of beneficial interest outstanding - Note 4) | $ | 13.63 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($27,508,073 applicable to 2,019,663 shares of beneficial interest outstanding - Note 4) | $ | 13.62 | ||
See notes to financial statements.
14 Certified Annual Report
| ||
Thornburg New Mexico Intermediate Municipal Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $801,779) | $ | 9,669,819 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,054,337 | |||
Administration fees (Note 3) | ||||
Class A Shares | 210,603 | |||
Class D Shares | 20,556 | |||
Class I Shares | 12,970 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 421,207 | |||
Class D Shares | 164,742 | |||
Transfer agent fees | ||||
Class A Shares | 53,377 | |||
Class D Shares | 7,391 | |||
Class I Shares | 3,899 | |||
Registration and filing fees | ||||
Class A Shares | 535 | |||
Class D Shares | 699 | |||
Class I Shares | 574 | |||
Custodian fees (Note 3) | 61,382 | |||
Professional fees | 26,560 | |||
Accounting fees | 11,368 | |||
Trustee fees | 7,681 | |||
Other expenses | 13,985 | |||
Total Expenses | 2,071,866 | |||
Less: | ||||
Distribution fees waived (Note 3) | (82,371 | ) | ||
Fees paid indirectly (Note 3) | (1,166 | ) | ||
Net Expenses | 1,988,329 | |||
Net Investment Income | 7,681,490 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 112,309 | |||
Net change in unrealized appreciation (depreciation) of investments | 16,000,619 | |||
Net Realized and Unrealized Gain | 16,112,928 | |||
Net Increase in Net Assets Resulting From Operations | $ | 23,794,418 | ||
See notes to financial statements.
Certified Annual Report 15
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg New Mexico Intermediate Municipal Fund
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 7,681,490 | $ | 7,304,597 | ||||
Net realized gain (loss) on investments | 112,309 | 306,833 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 16,000,619 | (7,873,236 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 23,794,418 | (261,806 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (6,101,848 | ) | (5,987,083 | ) | ||||
Class D Shares | (551,422 | ) | (495,075 | ) | ||||
Class I Shares | (1,028,220 | ) | (822,439 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 11,158,658 | 863,745 | ||||||
Class D Shares | 545,907 | 2,599,577 | ||||||
Class I Shares | 1,750,212 | 5,203,704 | ||||||
Net Increase in Net Assets | 29,567,705 | 1,100,623 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 203,181,320 | 202,080,697 | ||||||
End of Year | $ | 232,749,025 | $ | 203,181,320 | ||||
See notes to financial statements.
16 Certified Annual Report
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 |
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 Fund is currently one of fifteen separate series of the Trust. 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 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, and 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 |
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Investments in Securities | ||||||||||||
Municipal Bonds | $ | 228,183,466 | $ | — | $ | 228,183,466 | $ | — | ||||
Total Investments in Securities | $ | 228,183,466 | $ | — | $ | 228,183,466 | $ | — |
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 to shareholders substantially all taxable (if any) and tax exempt income of the Fund. Therefore, no provision for federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid monthly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized to call dates or maturity dates of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of 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, 2009, 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.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 |
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, 2009, the Distributor has advised the Fund that it earned net commissions aggregating $2,089 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, 2009, are set forth in the Statement of Operations. Distribution fees in the amount of $82,371 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, 2009, fees paid indirectly were $1,166.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 2,378,616 | $ | 31,086,102 | 1,962,932 | $ | 25,829,862 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 282,925 | 3,693,096 | 281,958 | 3,685,132 | ||||||||||
Shares repurchased | (1,840,942 | ) | (23,620,540 | ) | (2,179,867 | ) | (28,651,249 | ) | ||||||
Net Increase (Decrease) | 820,599 | $ | 11,158,658 | 65,023 | $ | 863,745 | ||||||||
Class D Shares | ||||||||||||||
Shares sold | 391,536 | $ | 5,149,917 | 334,108 | $ | 4,407,249 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 33,869 | 442,320 | 29,797 | 389,455 | ||||||||||
Shares repurchased | (384,329 | ) | (5,046,330 | ) | (167,471 | ) | (2,197,127 | ) | ||||||
Net Increase (Decrease) | 41,076 | $ | 545,907 | 196,434 | $ | 2,599,577 | ||||||||
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 194,089 | $ | 2,427,879 | 730,390 | $ | 9,604,681 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 59,290 | 773,319 | 49,543 | 647,263 | ||||||||||
Shares repurchased | (112,173 | ) | (1,450,986 | ) | (384,441 | ) | (5,048,240 | ) | ||||||
Net Increase (Decrease) | 141,206 | $ | 1,750,212 | 395,492 | $ | 5,203,704 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $41,323,126 and $28,977,076, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 215,853,969 | ||
Gross unrealized appreciation on a tax basis | $ | 12,893,386 | ||
Gross unrealized depreciation on a tax basis | (563,890 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 12,329,496 | ||
At September 30, 2009, the Fund did not have any undistributed tax-exempt/ordinary income or undistributed capital gains.
At September 30, 2009, the Fund had tax basis capital losses, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gains distributions may be reduced to the extent provided by regulations.
Such capital loss carryforwards expire as follows:
2011 | $ | 145,437 | |
2013 | 255 | ||
2014 | 49,136 | ||
2015 | 112,336 | ||
$ | 307,164 | ||
The Fund utilized $112,309 of capital loss carryforwards during the year ended September 30, 2009.
During the year ended September 30, 2009, $208,357 of capital loss carryforwards from prior years expired.
In order to account for book/tax differences, the Fund decreased accumulated net realized loss by $208,357, increased net investment loss by $1,133 and decreased net capital paid in on shares of beneficial interest by $207,224. Reclassifications result primarily from expired capital loss carryforwards.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 |
The tax character of distributions paid during the year ended September 30, 2009, and September 30, 2008, was as follows:
2009 | 2008 | |||||
Distributions from: | ||||||
Tax exempt income | $ | 7,677,759 | $ | 7,304,597 | ||
Ordinary income | 3,731 | — | ||||
Total distributions | $ | 7,681,490 | $ | 7,304,597 | ||
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
Certified Annual Report 21
Thornburg New Mexico Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.64 | $ | 13.10 | $ | 13.20 | $ | 13.22 | $ | 13.40 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.47 | 0.47 | 0.47 | 0.45 | 0.43 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.99 | (0.46 | ) | (0.10 | ) | (0.02 | ) | (0.18 | ) | |||||||||||
Total from investment operations | 1.46 | 0.01 | 0.37 | 0.43 | 0.25 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.47 | ) | (0.47 | ) | (0.47 | ) | (0.45 | ) | (0.43 | ) | ||||||||||
Change in net asset value | 0.99 | (0.46 | ) | (0.10 | ) | (0.02 | ) | (0.18 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 13.63 | $ | 12.64 | $ | 13.10 | $ | 13.20 | $ | 13.22 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 11.79 | 0.00 | (b) | 2.82 | 3.31 | 1.88 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.62 | 3.56 | 3.55 | 3.41 | 3.22 | |||||||||||||||
Expenses, after expense reductions (%) | 0.96 | 0.97 | 0.98 | 0.99 | 0.99 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.96 | 0.95 | 0.97 | 0.98 | 0.98 | |||||||||||||||
Expenses, before expense reductions (%) | 0.96 | 0.97 | 0.98 | 0.99 | 0.99 | |||||||||||||||
Portfolio turnover rate (%) | 14.12 | 13.48 | 17.38 | 11.59 | 16.63 | |||||||||||||||
Net assets at end of year (thousands) | $ | 187,940 | $ | 163,928 | $ | 169,130 | $ | 196,163 | $ | 212,335 |
(a) | Sales loads are not reflected in computing total return. |
(b) | Total return figure was less than 0.01%. |
See notes to financial statements.
22 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund |
Year Ended September 30, | ||||||||||||||||||||
Class D Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.64 | $ | 13.11 | $ | 13.21 | $ | 13.23 | $ | 13.41 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.44 | 0.43 | 0.43 | 0.41 | 0.39 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.99 | (0.47 | ) | (0.10 | ) | (0.02 | ) | (0.18 | ) | |||||||||||
Total from investment operations | 1.43 | (0.04 | ) | 0.33 | 0.39 | 0.21 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.44 | ) | (0.43 | ) | (0.43 | ) | (0.41 | ) | (0.39 | ) | ||||||||||
Change in net asset value | 0.99 | (0.47 | ) | (0.10 | ) | (0.02 | ) | (0.18 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 13.63 | $ | 12.64 | $ | 13.11 | $ | 13.21 | $ | 13.23 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 11.50 | (0.35 | ) | 2.57 | 3.04 | 1.62 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.35 | 3.29 | 3.30 | 3.15 | 2.96 | |||||||||||||||
Expenses, after expense reductions (%) | 1.23 | 1.24 | 1.23 | 1.24 | 1.25 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.23 | 1.22 | 1.23 | 1.24 | 1.24 | |||||||||||||||
Expenses, before expense reductions (%) | 1.73 | 1.74 | 1.77 | 1.82 | 1.83 | |||||||||||||||
Portfolio turnover rate (%) | 14.12 | 13.48 | 17.38 | 11.59 | 16.63 | |||||||||||||||
Net assets at end of year (thousands) | $ | 17,301 | $ | 15,525 | $ | 13,524 | $ | 14,113 | $ | 18,577 |
See notes to financial statements.
Certified Annual Report 23
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund |
Year Ended September 30, | Period Ended September 30, | |||||||||||
Class I Shares: | 2009 | 2008 | 2007(a) | |||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period) | ||||||||||||
Net asset value, beginning of period | $ | 12.63 | $ | 13.10 | $ | 13.10 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.52 | 0.51 | 0.34 | |||||||||
Net realized and unrealized gain (loss) on investments | 0.99 | (0.47 | ) | — | ||||||||
Total from investment operations | 1.51 | 0.04 | 0.34 | |||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.52 | ) | (0.51 | ) | (0.34 | ) | ||||||
Change in net asset value | 0.99 | (0.47 | ) | — | ||||||||
NET ASSET VALUE, end of period | $ | 13.62 | $ | 12.63 | $ | 13.10 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | 12.18 | 0.26 | 2.64 | |||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | 3.96 | 3.90 | 3.95 | (c) | ||||||||
Expenses, after expense reductions (%) | 0.62 | 0.63 | 0.63 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.62 | 0.61 | 0.62 | (c) | ||||||||
Expenses, before expense reductions (%) | 0.62 | 0.63 | 0.63 | (c) | ||||||||
Portfolio turnover rate (%) | 14.12 | 13.48 | 17.38 | |||||||||
Net assets at end of period (thousands) | $ | 27,508 | $ | 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.
24 Certified Annual Report
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, 2009, 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
Certified Annual Report 25
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,066.20 | $ | 5.04 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.19 | $ | 4.93 | |||
Class D Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,064.80 | $ | 6.42 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.85 | $ | 6.28 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,068.00 | $ | 3.30 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.88 | $ | 3.23 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.97%; D: 1.24%; I: 0.64%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
26 Certified Annual Report
INDEX COMPARISON | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 (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, 2009)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 6/18/91) | 9.54 | % | 3.47 | % | 4.18 | % | 4.98 | % | ||||
D Shares (Incep: 6/1/99) | 11.50 | % | 3.60 | % | 4.10 | % | 3.91 | % | ||||
I Shares (Incep: 2/1/07) | 12.18 | % | — | — | 5.55 | % |
Performance data reflect past performance, which is no guarantee of future results. The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares. Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 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.
Certified Annual Report 27
TRUSTEES AND OFFICERS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
28 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report 29
TRUSTEES AND OFFICERS, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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.
30 Certified Annual Report
OTHER INFORMATION | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 (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 tax year ended September 30, 2009, dividends paid by the Fund of $7,677,759 (or the maximum allowed) 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, 2009. Complete information will be computed and reported in conjunction with your 2009 Form 1099.
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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the advisor. In addition and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the specified information with the Trustees and addressed questions by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees voted unanimously 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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit
Certified Annual Report 31
OTHER INFORMATION, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 (Unaudited) |
of the Fund’s investment objectives. In addition, the Trustees considered information specifically provided to them at their request in anticipation of their annual 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 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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 observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns in most periods and performance in accordance with expectations, given the investment objectives of the Fund. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year compared favorably to the mutual fund category for which calendar year data was presented, that the Fund’s total return had exceeded or approached the average return of the same fund category in most of the preceding ten calendar years, that the Fund’s relative investment performance fell within the top half of the same category for the one-year and the five-year periods ended with the second quarter of the current year and within the top quartile in the three-year period, and that the Fund’s performance fell within the top half of a second category for the same one-year, three-year 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 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 specific mutual funds. The Trustees observed that the overall expense ratio of the Fund was somewhat higher than the median and slightly higher than the average expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, that the management fee was slightly higher than the median and average 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 considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services provided, respectively, to institutional clients and to mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the differences in the circumstances in which the respective fees originate.
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to these events. The information provided did not indicate that the Advisor’s profitability was unusual, and the
32 Certified Annual Report
OTHER INFORMATION, CONTINUED
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2009 (Unaudited) |
Trustees noted no impairment of the Advisor’s resources or service capabilities. 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, compliance and systems capabilities 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 33
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 22, 2009
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.
34 This page is not part of the Annual Report.
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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36 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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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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. | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources. | |||||
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2 This page is not part of the Annual Report.
Important Information
The information presented on the following pages is current as of September 30, 2009. 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. Bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. 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 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. 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | 885-215-665 | THNYX |
Lipper’s 2008
Best Fixed-Income Fund Family
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income large firm universe for the three-year period ended 12/31/07, based on risk-adjusted returns. Past performance does not guarantee future results.
Lipper’s large firm universe is comprised of fund families with more than $28 billion in total net assets. Only fund families with at least five bond funds were eligible. Risk-adjusted returns were calculated with dividends reinvested and without sales charges. We did not win this award in 2009.
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.
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.
Annualized 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 maximum offering price per share to arrive at the annualized distribution yield. The yield is calculated on a periodic basis and is subject to change.
Duration – The weighted maturity of a bond’s cash flows. Duration measures the price sensitivity of a bond for a given change in interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
General Obligation (GO) Bonds – A municipal bond secured by the pledge of the issuer’s full faith, credit, and taxing power rather than the revenue from a given project.
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.
Pre-Refunded Bond – A type of municipal bond that has been escrowed or collateralized either by direct obligations guaranteed by the U.S. government, or by other types of securities. The escrow account is structured so that these refunded bonds are to be called at the first possible call date. Such bonds, if escrowed with securities guaranteed by the U.S. government, have little if any credit risk.
Revenue Bond – A bond on which the debt service is payable solely from the revenue generated from the operation of the project being financed or a category of facilities, or from other non-tax sources.
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 Bonds – Obligations, also known as “put bonds” or “puttable securities,” that grant the bondholder the right to require the issuer to purchase the bonds, usually at par, at a certain time or times prior to maturity or upon the occurrence of specified events or conditions. The put option, or tender option, right is typically available to the investor on a periodic (e.g., daily, weekly or monthly) basis.
Lease-Backed Bonds – Bonds issued by a municipality or state that are secured by the payments made on leased assets.
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Thornburg New York Intermediate Municipal Fund
At Thornburg, our approach to management of the Fund is based on the premise that investors in the Fund 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 in 2008 with the Best Fixed-Income Fund Family Award.
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 shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 1.08%, 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, 2009
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 9/5/97) | |||||||||||||||
Without sales charge | 11.77 | % | 4.87 | % | 3.91 | % | 4.49 | % | 4.44 | % | |||||
With sales charge | 9.55 | % | 4.18 | % | 3.49 | % | 4.28 | % | 4.26 | % |
30-DAY YIELDS, A SHARES
As of September 30, 2009
Annualized Distribution Rate | SEC Yield | |
3.44% | 2.33% |
Without fee waivers and expense reimbursements, the 30-day SEC yield would have been 2.19% and the Annualized Distribution Rate would have been 3.30%.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2009
Average Credit Quality | AA- | |
Number of Bonds | 44 | |
Duration | 4.3 Yrs | |
Average Maturity | 8.6 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 10.
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, 2009
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 summarized below. Investors in the Thornburg New York 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 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 and New York City, state, and local 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 tax-exempt 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 money market mutual funds. You cannot invest in a category average.
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Thornburg New York Intermediate Municipal Fund
September 30, 2009
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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 20, 2009
Dear Shareholder:
We are pleased to present the Annual Report for the Thornburg New York Intermediate Municipal Fund. The net asset value of the Class A shares increased by 92 cents per share to $12.79 during the twelve months ended September 30, 2009. If you were with us for the entire period, you received dividends of 45.0 cents per share, if you reinvested your dividends, you received 45.7 cents per share. | |
Josh Gonze Co-Portfolio Manager | In last year’s annual report letter, we wrote about the massive deleveraging of the municipal market, evidenced by the unwinding of tender option bond programs and investors’ mass exodus out of high-risk investment strategies employing leverage and other speculative strategies. The forced liquidation of assets placed inordinate supply into a market already reeling from the effects of the mortgage and banking crisis. Compounding matters was the downgrade of nearly all AAA-rated municipal bond insurers that provided credit enhancement to nearly half of all bonds outstanding, including the two largest insurers AMBAC and MBIA. Investor scrutiny over the ratings agencies led many investors to question whether they should be participating in the municipal market at all; and who could blame them given the deluge of negative headline press directed at the municipal market? These events caused 2008 to be one of the worst performing years on record for municipal bonds, and we were quite pleased to see positive returns in your Fund for 2008 given that many bond funds experienced double-digit negative returns. | |
Christopher Ihlefeld Co-Portfolio Manager | Today’s municipal market reflects an impressive rebound from where we were this time last year. Municipal sectors that were hit the hardest in 2008 – health care, lease-backed bonds, and industrial development revenue bonds – have been among the best performing sectors in 2009. This has helped your Fund’s performance as we have market over-weights in each of these sectors. Revenue bonds in general have outperformed all other broad sectors of the market. State general obligation and government-backed pre-refunded bonds, sectors in which we are under-weighted and that led the pack in 2008, have lagged revenue bonds by a substantial margin in 2009. Your Fund’s comparatively higher exposure to strong middle-tier investment grade credits (single-A rated bonds) has also helped performance this year, as credit spreads have contracted from their recent peak in 2008, and investors have been compensated for in-depth credit research. | |
For years, credit research was overshadowed in our industry by the simplicity and dominance of bond insurance. A prevalent though misguided understanding that the use of municipal insurance could effectively eliminate credit risk led to the diminished value of financial analysis in favor of financial engineering. Talent was directed to craft complex hedging strategies to |
Certified Annual Report 7
Letter to Shareholders,
Continued
generate attractive returns. As bond insurance lost most of its relevance following a string of downgrades, the market understandably has a renewed interest in credit research. While credit research represents a lost art to some in our industry, we have emphasized credit research from the Fund’s inception and will continue our time honored tradition of bottom-up credit research well into the future.
Market liquidity has greatly improved with the passage of the American Reinvestment and Recovery Act, which pledged $144 billion in state and local government fiscal relief. The passage of this act in February 2009 spurred investors back into the municipal bond market as bond investors gained confidence in the federal government’s support of state and local governments. Other supportive factors include stabilization among major investment banks, healthy volume of new issues, and strong retail demand. We’ve even seen reasonable appetite for lower-rated, higher-yielding municipal credits as high-yield funds have garnered capital. The municipal market otherwise appears quite orderly with a steady supply of new issuance, strong demand coming from retail investors, and an active secondary market.
Yields of late have trended lower, attributable in large part to a compelling surge in demand for municipal bonds. The months leading up to the current fiscal year end saw a significant migration of investor assets out of oppressively low yielding money market funds into short and intermediate bond funds. For example, municipal money market funds accounted for $495 billion of assets at the end of 2008. As of September 30, 2009, assets in municipal money market funds were $416 billion, a reduction of $79 billion. Municipal bond funds have grown by $52 billion during this period, nearly four times the annual average over the last twenty years. If this disintermediation trend continues, we would expect it to have a positive effect on bond prices in the months ahead.
The State of New York has been among the states hit hardest by the economic recession, with substantial financial losses and layoffs on Wall Street. It is anticipated that the state will lag the national recovery due to significant losses in the financial service sector. Personal income tax revenue is down by 35%, and the current budget deficit is near $3 billion. The state’s comptroller Thomas DiNapoli has given indications that next year’s deficit may reach $9 billion. New York is facing some similar challenges to what the state of California has faced: a growing budget deficit, depleted cash reserves, probable furloughs and possible layoffs of government employees. We will maintain a watchful eye on economic developments within the state. Your Fund remains broadly diversified within the state and over 76% of the portfolio is invested in bonds rated A or above by at least one of the major rating agencies.
The Class A shares of your Fund produced a total return of 11.77% over the twelve-month period ended September 30, 2009 at NAV, compared to a 15.41% return for the Merrill Lynch 7-12 Year Municipal Bond Index. Most of the dispersion in the returns can be attributed to your Fund’s underperformance during the fourth quarter of 2008, a period characterized by the investor flight to quality as exhibited by their exclusive preference for short-term, very high-quality bonds. Compared to your Fund, the Merrill Lynch 7-12 Year Municipal Bond Index is more of a high-grade index with heavy concentrations of state general obligation bonds, U.S. Government escrow bonds, and AAA-rated bonds, all of which excelled during the turbulent fourth quarter of 2008. In contrast, your Fund maintains a higher concentration of revenue bonds, A-rated bonds, and bonds with maturities as long as eighteen years. If credit spreads and term spreads continue to contract, as we’ve seen during most of 2009, we would expect to see performance move closer in line with that of the index.
8 Certified Annual Report
Your Thornburg New York Intermediate Municipal Fund is a laddered portfolio of over 40 municipal obligations from various municipal sectors and geographic regions within the State of 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 reduce interest-rate risk and dampen the Fund’s price volatility. Second, laddering gives the Fund a steady cash flow stream from maturing bonds to reinvest toward the top of the ladder where yields are typically higher. The chart on the right describes the percentages of your Fund’s bond portfolio maturing in each of the coming years. |
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. 2009 has proven to be another strong year for our municipal bond funds. We believe this reflects our team’s competent approach to managing risk, its disciplined laddering process to bond investing, and its passionate pursuit of quality execution.
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
Thornburg New York Intermediate Municipal Fund
| September 30, 2009
| |
![]() | We have used ratings from Standard & Poor’s (S&P). Where S&P ratings are not available, we have used Moody’s Investors Service. Where neither rating is available, we have used ratings from Fitch 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 | $ | 461,764 | |||
Dutchess County IDA, 5.00% due 8/1/2021 (Bard College) | Baa1/NR | 1,100,000 | 1,158,179 | |||||
Guam Government, 5.375% due 12/1/2024 | NR/BBB- | 1,000,000 | 1,038,430 | |||||
Hempstead IDA, 5.00% due 12/1/2010 put 6/1/2010 (American Ref-Fuel) | Baa2/BB+ | 1,200,000 | 1,196,736 | |||||
Monroe County IDA, 6.45% due 2/1/2014 (DePaul Community Facility; Insured: SONYMA) | Aa1/NR | 545,000 | 555,050 | |||||
Monroe County IDA, 5.375% due 6/1/2017 (St. John Fisher College; Insured: Radian) | NR/BBB- | 495,000 | 504,494 | |||||
New York City GO, 5.00% due 8/1/2025 | Aa3/AA | 400,000 | 435,356 | |||||
New York City GO, 0.31% due 8/1/2028 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-1 | 500,000 | 500,000 | |||||
New York City GO, 0.31% due 4/1/2035 put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes) | VMIG1/A-1 | 200,000 | 200,000 | |||||
New York City Metropolitan Transportation Authority, 6.25% due 11/15/2023 | A2/A | 1,000,000 | 1,175,990 | |||||
New York City Municipal Water Finance Authority, 5.75% due 6/15/2013 (ETM) | A2/AAA | 1,000,000 | 1,077,560 | |||||
New York City Transitional Finance Authority, 5.25% due 8/1/2016 (Insured: AMBAC) | Aa1/AAA | 1,000,000 | 1,108,940 | |||||
New York City Transitional Finance Authority, 5.00% due 1/15/2020 (State Aid Withholding) | A1/AA- | 1,000,000 | 1,151,190 | |||||
New York City Transitional Finance Authority, 5.00% due 11/1/2020 | Aa1/AAA | 1,000,000 | 1,132,880 | |||||
New York City Trust Cultural Resources, 5.75% due 7/1/2014 (Museum of American Folk Art; Insured: ACA) | NR/NR | 920,000 | 908,647 | |||||
New York Convention Center Development Corp. Hotel Unit Fee, 5.00% due 11/15/2017 (Insured: AMBAC) | A2/NR | 1,000,000 | 1,082,180 | |||||
New York Dormitory Authority, 5.25% due 7/1/2010 (D’Youville College; Insured: Radian) | NR/BBB- | 350,000 | 357,172 | |||||
New York Dormitory Authority, 5.25% due 7/1/2011 (D’Youville College; Insured: Radian) | NR/BBB- | 370,000 | 385,126 | |||||
New York Dormitory Authority, 5.25% due 8/15/2013 (Master Boces; Insured: FSA) | Aa3/AAA | 1,000,000 | 1,072,860 | |||||
New York Dormitory Authority, 5.00% due 2/15/2015 (Mental Health Services; Insured: AMBAC) | NR/AA- | 1,000,000 | 1,124,340 | |||||
New York Dormitory Authority, 5.25% due 8/15/2015 (New York Presbyterian Hospital; Insured: FSA/FHA) | Aa3/AAA | 1,000,000 | 1,092,900 | |||||
New York Dormitory Authority, 5.00% due 7/1/2016 (Bishop Henry B Hucles Nursing Home; Insured: SONYMA) | Aa1/NR | 400,000 | 452,996 | |||||
New York Dormitory Authority, 5.00% due 10/1/2018 (School District Revenue; Insured: Assured Guaranty) | Aa2/AAA | 1,000,000 | 1,139,830 | |||||
New York Dormitory Authority, 5.50% due 2/15/2019 pre-refunded 8/15/2011 (Mental Health Services; Insured: Natl-Re) | NR/AA- | 585,000 | 638,200 | |||||
New York Dormitory Authority, 5.50% due 7/1/2019 (Brooklyn Law School; Insured: Radian) | Baa1/BBB+ | 1,400,000 | 1,449,700 | |||||
New York Dormitory Authority, 6.10% due 7/1/2019 (Ryan Clinton Community Health Center; Insured: SONYMA) | Aa1/NR | 1,000,000 | 1,015,820 | |||||
New York Dormitory Authority, 5.00% due 1/15/2023 (Municipal Health Facilities) | A1/AA- | 1,000,000 | 1,083,130 | |||||
New York Dormitory Authority, 5.00% due 7/1/2024 (Bishop Henry B Hucles Nursing Home; Insured: SONYMA) | Aa1/NR | 1,000,000 | 1,068,370 | |||||
New York Dormitory Authority, 5.25% due 7/1/2027 (Health Quest Systems; Insured: Assured Guaranty) | Aa2/AAA | 500,000 | 545,805 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
New York Dormitory Authority, 5.25% due 5/1/2030 (North Shore Long Island Jewish Medical) | Baa1/A- | $ | 1,000,000 | $ | 1,032,660 | |||
New York Dormitory Authority Personal Income Tax, 5.50% due 3/15/2012 | Aa3/AAA | 1,000,000 | 1,108,020 | |||||
New York Dormitory Authority Personal Income Tax, 5.00% due 3/15/2019 (Insured: FSA) | Aa3/AAA | 1,000,000 | 1,111,160 | |||||
New York Environmental Facilities Corp. PCR Water, 6.875% due 6/15/2014 (State Revolving Fund) | Aaa/AAA | 400,000 | 402,072 | |||||
New York State Thruway Authority General, 5.00% due 1/1/2018 (Insured: AMBAC) | A1/A+ | 1,000,000 | 1,095,460 | |||||
New York State Thruway Authority Highway & Bridge Trust Fund, 5.00% due 4/1/2022 | NR/AA | 1,000,000 | 1,116,330 | |||||
New York State Urban Development Corp., 5.25% due 1/1/2021 | NR/AA- | 1,000,000 | 1,144,050 | |||||
Oneida County IDA, 6.00% due 1/1/2010 (Faxton Hospital; Insured: Radian) | NR/BBB- | 375,000 | 377,434 | |||||
Oneida County IDA, 6.10% due 6/1/2020 (Presbyterian Home for Central NY; LOC: HSBC Bank USA) | Aa3/NR | 450,000 | 462,128 | |||||
Port Authority New York & New Jersey, 5.00% due 8/15/2022 (Insured: FSA) | Aa3/AAA | 1,000,000 | 1,128,320 | |||||
Port Chester IDA, 4.75% due 7/1/2031 put 7/1/2011 (American Foundation; Collateralized: FNMA) | NR/AAA | 750,000 | 779,692 | |||||
Tobacco Settlement Funding Corp., 5.50% due 6/1/2021 | A1/AA- | 1,000,000 | 1,073,640 | |||||
Triborough Bridge & Tunnel Authority, 5.00% due 11/15/2025 | Aa2/AA- | 1,410,000 | 1,569,034 | |||||
Utica IDA Civic Facility, 5.25% due 7/15/2016 (Munson Williams Proctor Institute) | A1/NR | 210,000 | 221,117 | |||||
Virgin Islands Water & Power Authority, 5.50% due 7/1/2017 | Baa2/NR | 1,350,000 | 1,359,975 | |||||
TOTAL INVESTMENTS — 97.46% (Cost $36,830,003) | $ | 39,094,737 | ||||||
OTHER ASSETS LESS LIABILITIES — 2.54% | 1,020,343 | |||||||
NET ASSETS — 100.00% | $ | 40,115,080 | ||||||
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred 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 | |
FHA | Insured by Federal Housing Administration | |
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 | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
Radian | Insured by Radian Asset Assurance | |
SONYMA | State of New York Mortgage Authority | |
SPA | Standby Purchase Agreement |
See notes to financial statements.
Certified Annual Report 11
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (cost $36,830,003) (Note 2) | $ | 39,094,737 | ||
Cash | 92,430 | |||
Receivable for fund shares sold | 540,295 | |||
Interest receivable | 492,896 | |||
Prepaid expenses and other assets | 1,185 | |||
Total Assets | 40,221,543 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 18,532 | |||
Payable to investment advisor and other affiliates (Note 3) | 23,541 | |||
Accounts payable and accrued expenses | 29,881 | |||
Dividends payable | 34,509 | |||
Total Liabilities | 106,463 | |||
NET ASSETS | $ | 40,115,080 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (16,847 | ) | |
Net unrealized appreciation on investments | 2,264,734 | |||
Accumulated net realized gain (loss) | (38,879 | ) | ||
Net capital paid in on shares of beneficial interest | 37,906,072 | |||
$ | 40,115,080 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($40,115,080 applicable to 3,136,261 shares of beneficial interest outstanding - Note 4) | $ | 12.79 | ||
Maximum sales charge, 2.00% of offering price | 0.26 | |||
Maximum offering price per share | $ | 13.05 | ||
See notes to financial statements.
12 Certified Annual Report
Thornburg New York Intermediate Municipal Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $100,660) | $ | 1,632,683 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 175,027 | |||
Administration fees (Note 3) | 43,757 | |||
Distribution and service fees (Note 3) | 87,514 | |||
Transfer agent fees | 18,950 | |||
Registration and filing fees | 292 | |||
Custodian fees (Note 3) | 17,054 | |||
Professional fees | 23,791 | |||
Accounting fees | 1,578 | |||
Trustee fees | 1,233 | |||
Other expenses | 6,386 | |||
Total Expenses | 375,582 | |||
Less: | ||||
Investment advisory fees waived by investment advisor (Note 3) | (28,606 | ) | ||
Fees paid indirectly (Note 3) | (423 | ) | ||
Net Expenses | 346,553 | |||
Net Investment Income | 1,286,130 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 40,909 | |||
Net change in unrealized appreciation (depreciation) of investments | 2,647,069 | |||
Net Realized and Unrealized Gain | 2,687,978 | |||
Net Increase in Net Assets Resulting From Operations | $ | 3,974,108 | ||
See notes to financial statements.
Certified Annual Report 13
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg New York Intermediate Municipal Fund |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,286,130 | $ | 1,149,262 | ||||
Net realized gain (loss) on investments | 40,909 | (30,533 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 2,647,069 | (1,056,739 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,974,108 | 61,990 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (1,286,130 | ) | (1,149,262 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 6,741,948 | (1,243,777 | ) | |||||
Net Increase (Decrease) in Net Assets | 9,429,926 | (2,331,049 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 30,685,154 | 33,016,203 | ||||||
End of Year | $ | 40,115,080 | $ | 30,685,154 | ||||
See notes to financial statements.
14 Certified Annual Report
Thornburg New York Intermediate Municipal Fund | September 30, 2009 |
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 Fund is currently one of fifteen separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary investment objective is to obtain as high a level of current income exempt from federal, New York State, and New York City individual income tax as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary objective is to reduce expected changes in its share price compared to long-term bond portfolios. The Fund will invest primarily in municipal obligations within the state of New York. The Fund currently offers only one class of shares of beneficial interest, Class A shares.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Trust are as follows:
Valuation of 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, and 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||
Assets | Total | Level 1 | Level 2 | Level 3 | ||||||||
Investments in Securities Municipal Bonds | $ | 39,094,737 | $ | — | $ | 39,094,737 | $ | — | ||||
Total Investments in Securities | $ | 39,094,737 | $ | — | $ | 39,094,737 | $ | — |
Certified Annual Report 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2009 |
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 to shareholders substantially all taxable (if any) and tax exempt income of the Fund. Therefore, no provision for federal income tax is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid monthly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized to call dates or maturity dates of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Expenses common to all funds are allocated among the funds comprising the Trust based upon their relative net asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain 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, 2009, 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, 2009, the Advisor voluntarily waived investment advisory fees of $28,606. 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, 2009, the Distributor has advised the Fund that it earned commissions aggregating $185 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, 2009, fees paid indirectly were $423.
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2009 |
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 957,975 | $ | 11,722,549 | 411,254 | $ | 5,063,258 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 75,315 | 924,154 | 65,938 | 806,929 | ||||||||||
Shares repurchased | (481,247 | ) | (5,904,755 | ) | (577,748 | ) | (7,113,964 | ) | ||||||
Net Increase (Decrease) | 552,043 | $ | 6,741,948 | (100,556 | ) | $ | (1,243,777 | ) | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $9,926,143 and $4,343,762, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 36,830,003 | ||
Gross unrealized appreciation on a tax basis | $ | 2,284,944 | ||
Gross unrealized depreciation on a tax basis | (20,210 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 2,264,734 | ||
At September 30, 2009, the Fund did not have any undistributed tax-exempt/ordinary income or undistributed capital gains.
The Fund utilized $10,376 of capital loss carryforwards during the year ended September 30, 2009.
At September 30, 2009, the Fund had tax basis capital losses of $38,879, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards will expire September 30, 2014.
In order to account for permanent book/tax differences, the Fund increased net capital paid in on shares of beneficial interest by $312 and increased distributions in excess of net investment income by $312. Reclassifications result primarily from taxable market discount amortization.
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2009 |
The tax character of distributions paid during the year ended September 30, 2009, and September 30, 2008, was as follows:
2009 | 2008 | |||||
Distributions from: | ||||||
Tax exempt income | $ | 1,284,314 | $ | 1,149,262 | ||
Ordinary income | 1,816 | — | ||||
Total distributions | $ | 1,286,130 | $ | 1,149,262 | ||
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
18 Certified Annual Report
Thornburg New York Intermediate Municipal Fund
Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.87 | $ | 12.30 | $ | 12.38 | $ | 12.44 | $ | 12.64 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.45 | 0.44 | 0.46 | 0.45 | 0.42 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.92 | (0.43 | ) | (0.08 | ) | (0.06 | ) | (0.20 | ) | |||||||||||
Total from investment operations | 1.37 | 0.01 | 0.38 | 0.39 | 0.22 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.45 | ) | (0.44 | ) | (0.46 | ) | (0.45 | ) | (0.42 | ) | ||||||||||
Change in net asset value | 0.92 | (0.43 | ) | (0.08 | ) | (0.06 | ) | (0.20 | ) | |||||||||||
NET ASSET VALUE, end of year | $ | 12.79 | $ | 11.87 | $ | 12.30 | $ | 12.38 | $ | 12.44 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 11.77 | 0.07 | 3.13 | 3.23 | 1.73 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.67 | 3.61 | 3.74 | 3.66 | 3.31 | |||||||||||||||
Expenses, after expense reductions (%) | 0.99 | 1.01 | 1.01 | 1.01 | 1.00 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.99 | 0.99 | 0.99 | |||||||||||||||
Expenses, before expense reductions (%) | 1.07 | 1.08 | 1.11 | 1.11 | 1.12 | |||||||||||||||
Portfolio turnover rate (%) | 13.00 | 13.42 | 14.91 | 15.38 | 28.70 | |||||||||||||||
Net assets at end of year (thousands) | $ | 40,115 | $ | 30,685 | $ | 33,016 | $ | 34,849 | $ | 41,375 |
(a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
Certified Annual Report 19
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, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with 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, 2009 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
20 Certified Annual Report
Thornburg New York Intermediate Municipal Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,065.60 | $ | 5.13 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for Class A shares (0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 21
Thornburg New York Intermediate Municipal Fund | September 30, 2009 (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, 2009)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 9/5/97) | 9.55 | % | 3.49 | % | 4.28 | % | 4.26 | % |
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.
22 Certified Annual Report
Thornburg New York Intermediate Municipal Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 23
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
24 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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 25
OTHER INFORMATION | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2009 (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 tax year ended September 30, 2009 dividends paid by the Fund of $1,284,314 (or the maximum allowed) 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, 2009. Complete information will be computed and reported in conjunction with your 2009 Form 1099.
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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided such information, reviewed portions of the information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees voted unanimously 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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the
26 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2009 (Unaudited) |
Fund’s investment objectives. In addition, The Trustees considered the information specifically provided to them at their request in anticipation of their annual 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 New York 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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 observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
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, given the investment objective of the Fund. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year compared favorably to the average return for the New York municipal debt mutual fund category for which calendar year returns were presented, the Fund’s returns had been lower than the average returns of the same category for the majority of the preceding eight calendar years, and that the Fund’s returns fell within the top quartile of the category for the one-year, three-year and five-year periods ended with the second quarter of the current year and just below the top quartile of the 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 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 comparable to 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 higher than the median and comparable to the average expense ratio for the same fund group. The Trustees considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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
Certified Annual Report 27
OTHER INFORMATION, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2009 (Unaudited) |
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, compliance and systems capabilities 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.
28 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 22, 2009
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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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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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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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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. | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources. | |||||
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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, 2009. The managers’ views, portfolio holdings, and sector 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. Bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The principal value of a bond will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Funds invested in mortgage backed securities may bear additional risk. Please see each Fund’s Prospectus for a discussion of the risks associated with an investment in either Fund. Investments in the Funds are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity. 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.
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 |
Lipper’s 2008
Best Fixed-Income Fund Family
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income large firm universe for the three-year period ended 12/31/07, based on risk-adjusted returns. Past performance does not guarantee future results.
Lipper’s large firm universe is comprised of fund families with more than $28 billion in total net assets. Only fund families with at least five bond funds were eligible. Risk-adjusted returns were calculated with dividends reinvested and without sales charges. We did not win this award in 2009.
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.
Barclays Capital U.S. Corporate Index – The U.S. Corporate Index covers 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.
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.
Annualized 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 maximum offering price per share to arrive at the annualized distribution yield. The yield is calculated on a periodic basis and is subject to change.
Duration – The weighted maturity of a bond’s cash flows. Duration measures the price sensitivity of a bond for a given change in interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
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.
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.
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Thornburg Limited Term U.S. Government Fund
At Thornburg, our approach to management of the Fund is based on the premise that investors in the Fund 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 shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 0.95%, as disclosed in the most recent Prospectus.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 11/16/87) | |||||||||||||||
Without sales charge | 7.21 | % | 5.99 | % | 4.28 | % | 5.17 | % | 6.04 | % | |||||
With sales charge | 5.62 | % | 5.47 | % | 3.96 | % | 5.01 | % | 5.97 | % |
See page 48 of the Annual Report for all share class total returns.
30-DAY YIELDS
As of September 30, 2009
Annualized Distribution Rate | SEC Yield | |||||
A Shares | 3.19 | % | 2.59 | % |
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2009
Average Credit Quality | AAA | |
Number of Bonds | 121 | |
Duration | 2.8 Yrs | |
Average Maturity | 3.1 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 11.
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, 2009
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 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.
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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. Our 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 shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 1.03%, 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, 2009
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 10/1/92) | |||||||||||||||
Without sales charge | 13.05 | % | 5.84 | % | 4.38 | % | 5.43 | % | 5.61 | % | |||||
With sales charge | 11.37 | % | 5.31 | % | 4.07 | % | 5.27 | % | 5.52 | % |
See page 49 of the Annual Report for all share class total returns.
30-DAY YIELDS
As of September 30, 2009
Annualized Distribution Rate | SEC Yield | |||
A Shares | 4.62% | 3.25% |
Without fee waivers and expense reimbursements, the 30-day SEC yield would have been 3.11% and the Annualized Distribution Rate would have been 4.48%.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2009
Average Credit Quality | A | |
Number of Bonds | 299 | |
Duration | 3.8 Yrs | |
Average Maturity | 4.5 Yrs |
See the entire portfolio in the Schedule of Investments on page 14.
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THORNBURG LIMITED TERM INCOME FUND VERSUS
LIPPER MONEY MARKET FUNDS (TAXABLE) AVERAGE
Class A shares as of September 30, 2009
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 that income from U.S. Government Securities may be exempt from state income tax). 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.
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Thornburg Limited Term Income Funds
September 30, 2009
Table of Contents | ||
9 | ||
Schedule of Investments | ||
11 | ||
14 | ||
24 | ||
26 | ||
Statements of Changes in Net Assets | ||
28 | ||
29 | ||
30 | ||
Financial Highlights | ||
37 | ||
42 | ||
46 | ||
47 | ||
Index comparison | ||
48 | ||
49 | ||
50 | ||
53 |
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 17, 2009
| |
Dear Fellow Shareholder:
| ||
I am very pleased to present the Annual Reports for the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund for the period ended September 30, 2009. The net asset value of a Class A share of the Thornburg Limited Term U.S. Government Fund increased 52 cents in the period to $13.78. If you were invested for the entire period, you received dividends of 42.5 cents per share. If you reinvested your dividends, you received 43.1 cents per share. Dividends per share were lower for Class B, C, and R3 shares and higher for Class I due to varying class-specific expenses. The net asset value of a Class A share of the Thornburg Limited Term Income Fund increased 89 cents in the period to $12.81. If you were invested for the entire period, you received dividends of 60.6 cents per share. If you reinvested your dividends, you received 62.0 cents per share. Dividends per share were lower for Class C and R3 shares and higher for Class I due to varying class-specific expenses. |
The yields on U.S. Treasuries were volatile over the course of the past year, with a 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, however, was a considerable tightening 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. This was the opposite move from what the market experienced over the course of the previous year. The two-year U.S. Treasury moved from a 1.97% yield to a 0.95% yield over the course of the past year, while the ten-year U.S. Treasury moved from a 3.83% yield to a 3.31% yield. As you can see, relatively, front-end securities moved 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 belief by the market that the Federal Reserve would remain “on hold” with a front-end rate of effectively zero.
The aforementioned policy actions were largely due to a significant dislocation of global credit markets. Credit spreads initially widened dramatically in September through November of 2008. After the beginning of March 2009, however, spreads of nearly all non-Treasury fixed income asset classes moved dramatically tighter through the end of September of 2009. The Barclays Corporate Bond Index, as an example, gained 21.77% over the course of the one year ended on September 30, 2009 with 14.23% of that due to price return alone. The additional spread that investors were paid in yield to invest in the average corporate bond moved from 4.40% on September 30, 2008 to a high of over 6% in early December down to 2.18% on September 30, 2009. By many measures, fixed income securities have had their best year in history; I wrote the exact opposite statement one year ago. One year ago, I spoke of opportunity in the spread asset classes for investors with a long term time horizon, and I’m happy to report that your Funds took advantage of the historic dislocation we saw in fixed income marketplaces at the end of 2008.
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 7.21% over the twelve-month period ended September 30, 2009, assuming a beginning-of-period investment at the net asset value. The Barclays Intermediate Government Index produced a 6.26% total return over the same time period. The average return for the Lipper Short-Intermediate U.S. Government Bond mutual fund category was 6.50% . The Class A shares of the Thornburg Limited Term Income Fund produced a total return of 13.05% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Barclays Intermediate Government/Credit Index produced a 10.01% total return over the same time period. The average return for the Lipper Short-Intermediate Investment Grade Debt mutual fund category was 10.32% . 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 prudent credit selection and corporate bond overweight (within the Income Fund) clearly benefited the Income Fund. That overweight (which we increased over the course of the 4th quarter of 2008 and most especially over the first quarter of 2009 when opportunities were good) was the biggest contributor to fund outperformance over the course of the year. In a time of tightening credit spreads, U.S. Treasuries under-perform any other fixed income security. Similarly, while the Thornburg Limited Term U.S. Government Fund continues to hold
Certified Annual Report 9
Letter to Shareholders,
Continued
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 (which we increased at the start of 2009) outperformed 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 solid returns.
Looking forward, I believe that the scope for further price appreciation in fixed income is limited. Though the economic environment appears to have stabilized, I have some significant misgivings. Consumer credit is contracting for the first time in more than 60 years. Unemployment continues to increase and is already at rates not seen since the early eighties. Though the financial system has survived due to significant government intervention, the distance between mere survival and significant growth is large. Furthermore, price appreciation in the fixed income universe has been quite significant. Though many of the gains have merely reversed outsized and unprecedented losses within non-Treasury asset classes, those same gains leave little room for further price upside. This is not to say that fixed income is a bad asset class without any place in investors’ portfolios. In fact, I believe that there is a growing need for income and that the income produced by these and other portfolios will remain an important part of many individuals’ asset allocation. In addition, given that I am worried about the ability of the U.S. economy to grow significantly going forward, income may turn out to be a large part of the total return available in many markets. As such, the importance of investing in these portfolios remains undiminished.
In this, as in any 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. 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 the Funds are well positioned to achieve their longer-term goals of principal stability and reasonable income. The Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund are laddered portfolios of short-to-intermediate bonds. This strategy balances duration and yield in a way which is designed to provide the best risk-adjusted bond returns over time. The Funds seek to provide stability to the underlying principal and they can provide income for your portfolio.
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 vehicles 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
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2009 |
Issuer-Description | Principal Amount | Value | ||||
U.S. TREASURY SECURITIES — 20.04% | ||||||
United States Treasury Notes, 3.625%, 1/15/2010 | $ | 16,000,000 | $ | 16,161,875 | ||
United States Treasury Notes, 2.125%, 4/30/2010 | 5,000,000 | 5,055,274 | ||||
United States Treasury Notes, 4.625%, 10/31/2011 | 2,000,000 | 2,149,531 | ||||
United States Treasury Notes, 4.875%, 6/30/2012 | 4,000,000 | 4,387,812 | ||||
United States Treasury Notes, 2.625%, 2/29/2016 | 2,000,000 | 1,979,141 | ||||
United States Treasury Notes, 4.875%, 8/15/2016 | 5,000,000 | 5,626,367 | ||||
United States Treasury Notes, 4.625%, 2/15/2017 | 4,000,000 | 4,429,375 | ||||
United States Treasury Notes Inflationary Index, 2.00%, 7/15/2014 | 2,285,060 | 2,376,677 | ||||
United States Treasury Notes Inflationary Index, 1.875%, 7/15/2015 | 4,428,840 | 4,583,849 | ||||
United States Treasury Notes Inflationary Index, 2.00%, 1/15/2016 | 5,425,350 | 5,633,853 | ||||
TOTAL U.S. TREASURY SECURITIES (Cost $50,550,310) | 52,383,754 | |||||
U.S. GOVERNMENT AGENCIES — 17.96% | ||||||
Federal Agricultural Mtg Corp., 6.71%, 7/28/2014 | 200,000 | 236,902 | ||||
Federal Farm Credit Bank, 6.06%, 5/28/2013 | 240,000 | 272,876 | ||||
Federal Farm Credit Bank, 3.98%, 1/22/2015 | 1,000,000 | 1,049,597 | ||||
Federal Home Loan Bank, 4.125%, 8/13/2010 | 3,000,000 | 3,090,944 | ||||
Federal Home Loan Bank, 5.375%, 6/13/2014 | 2,000,000 | 2,241,163 | ||||
Federal Home Loan Bank, 5.00%, 12/8/2017 | 3,000,000 | 3,284,619 | ||||
Federal Home Loan Mtg Corp., 2.375%, 2/24/2012 | 2,000,000 | 2,014,132 | ||||
Federal Home Loan Mtg Corp., 4.50%, 1/15/2015 | 5,000,000 | 5,426,371 | ||||
Federal Home Loan Mtg Corp., 5.50%, 3/28/2016 | 1,190,000 | 1,261,129 | ||||
Federal Home Loan Mtg Corp., 4.875%, 6/13/2018 | 3,000,000 | 3,274,926 | ||||
Federal Home Loan Mtg Corp., 5.50%, 7/15/2019 | 4,625,689 | 4,947,580 | ||||
Federal National Mtg Assoc., 2.00%, 3/2/2011 | 2,000,000 | 2,012,907 | ||||
Federal National Mtg Assoc., 4.40%, 2/19/2015 | 1,585,000 | 1,704,098 | ||||
Overseas Private Investment Corp., 4.10%, 11/15/2014 | 1,377,600 | 1,418,928 | ||||
Private Export Funding Corp., 5.685%, 5/15/2012 | 5,000,000 | 5,545,080 | ||||
Private Export Funding Corp., 4.974%, 8/15/2013 | 2,700,000 | 2,965,737 | ||||
Tennessee Valley Authority, 4.75%, 8/1/2013 | 3,000,000 | 3,270,958 | ||||
a,b U.S. Department of Transportation Headquarters, Series 2004 Class A-2, 5.594%, 12/7/2021 | 2,787,556 | 2,926,933 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $44,188,249) | 46,944,880 | |||||
MORTGAGE BACKED — 56.38% | ||||||
Federal Home Loan Mtg Corp., CMO Series 1321 Class TE, 7.00%, 8/15/2022 | 674,831 | 730,276 | ||||
Federal Home Loan Mtg Corp., CMO Series 2420 Class MC, 6.00%, 2/15/2017 | 1,281,865 | 1,365,776 | ||||
Federal Home Loan Mtg Corp., CMO Series 2509 Class TV, 5.50%, 4/15/2022 | 2,500,000 | 2,649,628 | ||||
Federal Home Loan Mtg Corp., CMO Series 2553 Class GB, 5.00%, 1/15/2018 | 1,000,000 | 1,069,705 | ||||
Federal Home Loan Mtg Corp., CMO Series 2628 Class DQ, 3.00%, 11/15/2017 | 613,393 | 623,263 | ||||
Federal Home Loan Mtg Corp., CMO Series 2649 Class QH, 4.50%, 7/15/2018 | 1,000,000 | 1,051,791 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2009 |
Issuer-Description | Principal Amount | Value | ||||
Federal Home Loan Mtg Corp., CMO Series 26925 Class QD, 5.00%, 12/15/2022 | $ | 2,575,000 | $ | 2,711,295 | ||
Federal Home Loan Mtg Corp., CMO Series 2731 Class Vl, 5.50%, 12/15/2014 | 2,442,676 | 2,599,635 | ||||
Federal Home Loan Mtg Corp., CMO Series 2744 Class JG, 5.00%, 8/15/2032 | 1,500,000 | 1,564,574 | ||||
Federal Home Loan Mtg Corp., CMO Series 2764 Class UE, 5.00%, 10/15/2032 | 2,000,000 | 2,099,528 | ||||
Federal Home Loan Mtg Corp., CMO Series 2770 Class UD, 4.50%, 5/15/2017 | 2,400,000 | 2,505,366 | ||||
Federal Home Loan Mtg Corp., CMO Series 2802 Class NE, 5.00%, 2/15/2033 | 1,470,000 | 1,543,141 | ||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00%, 6/15/2019 | 1,056,247 | 1,091,965 | ||||
Federal Home Loan Mtg Corp., CMO Series 2825 Class VP, 5.50%, 6/15/2015 | 4,718,995 | 5,026,793 | ||||
Federal Home Loan Mtg Corp., CMO Series 2834 Class VE, 5.50%, 7/15/2015 | 2,124,564 | 2,206,487 | ||||
Federal Home Loan Mtg Corp., CMO Series 2901 Class UB, 5.00%, 3/15/2033 | 2,400,000 | 2,513,909 | ||||
Federal Home Loan Mtg Corp., CMO Series 2943 Class HE, 5.00%, 3/15/2033 | 1,965,000 | 2,058,609 | ||||
Federal Home Loan Mtg Corp., CMO Series 3020 Class VA, 5.50%, 11/15/2014 | 1,236,576 | 1,308,091 | ||||
Federal Home Loan Mtg Corp., CMO Series 3054 Class DW, 5.50%, 5/15/2034 | 1,800,250 | 1,907,045 | ||||
Federal Home Loan Mtg Corp., CMO Series 3067 Class PJ, 5.50%, 7/15/2031 | 3,000,000 | 3,174,645 | ||||
Federal Home Loan Mtg Corp., CMO Series 3068 Class VA, 5.50%, 10/15/2016 | 1,428,075 | 1,503,241 | ||||
Federal Home Loan Mtg Corp., CMO Series 3078 Class PC, 5.50%, 11/15/2030 | 2,250,000 | 2,382,000 | ||||
Federal Home Loan Mtg Corp., CMO Series 3178 Class MC, 6.00%, 4/15/2032 | 5,275,000 | 5,542,730 | ||||
Federal Home Loan Mtg Corp., CMO Series 3184 Class PC, 5.50%, 8/15/2032 | 5,535,000 | 5,828,445 | ||||
Federal Home Loan Mtg Corp., CMO Series 3187 Class LA, 5.50%, 4/15/2031 | 2,326,470 | 2,415,580 | ||||
Federal Home Loan Mtg Corp., CMO Series 3192 Class GB, 6.00%, 1/15/2031 | 1,000,000 | 1,041,612 | ||||
Federal Home Loan Mtg Corp., CMO Series 3216 Class NA, 6.00%, 5/15/2028 | 1,164,532 | 1,185,399 | ||||
Federal Home Loan Mtg Corp., CMO Series 3219 Class PD, 6.00%, 11/15/2035 | 3,000,000 | 3,220,998 | ||||
Federal Home Loan Mtg Corp., CMO Series 3228 Class PC, 5.50%, 7/15/2030 | 5,000,000 | 5,117,331 | ||||
Federal Home Loan Mtg Corp., CMO Series 3271 Class LU, 5.50%, 1/15/2018 | 2,658,810 | 2,830,314 | ||||
Federal Home Loan Mtg Corp., CMO Series 3319 Class PA, 5.50%, 8/15/2030 | 669,053 | 696,399 | ||||
Federal Home Loan Mtg Corp., CMO Series 3320 Class TC, 5.50%, 10/15/2032 | 2,000,000 | 2,115,987 | ||||
Federal Home Loan Mtg Corp., CMO Series 3331 Class PB, 6.00%, 1/15/2031 | 2,000,000 | 2,107,874 | ||||
Federal Home Loan Mtg Corp., CMO Series 3351 Class PK, 5.50%, 1/15/2032 | 3,000,000 | 3,174,598 | ||||
Federal Home Loan Mtg Corp., CMO Series 3456 Class KV, 5.50%, 9/15/2017 | 2,676,900 | 2,853,364 | ||||
Federal Home Loan Mtg Corp., CMO Series 3480 Class VA, 6.00%, 6/15/2019 | 2,779,266 | 2,996,964 | ||||
Federal Home Loan Mtg Corp., CMO Series 3541 Class PA, 5.00%, 5/15/2039 | 1,940,942 | 2,046,178 | ||||
Federal Home Loan Mtg Corp., CMO Series R003 Class VA, 5.50%, 8/15/2016 | 1,246,089 | 1,323,411 | ||||
Federal Home Loan Mtg Corp., CMO Series R012 Class AB, 5.50%, 12/15/2020 | 2,285,882 | 2,377,342 | ||||
Federal Home Loan Mtg Corp., Pool # 1N1736, 5.24%, 4/1/2037 | 1,275,662 | 1,341,840 | ||||
Federal Home Loan Mtg Corp., Pool # 252986, 10.75%, 4/1/2010 | 1,179 | 1,183 | ||||
Federal Home Loan Mtg Corp., Pool # 298107, 10.25%, 8/1/2017 | 21,271 | 24,495 | ||||
Federal Home Loan Mtg Corp., Pool # C90041, 6.50%, 11/1/2013 | 14,087 | 14,809 | ||||
Federal Home Loan Mtg Corp., Pool # D37120, 7.00%, 7/1/2023 | 26,482 | 28,815 | ||||
Federal National Mtg Assoc., CMO Series 1993-122 Class D, 6.50%, 6/25/2023 | 6,257 | 6,256 | ||||
Federal National Mtg Assoc., CMO Series 1993-32 Class H, 6.00%, 3/25/2023 | 77,609 | 82,454 | ||||
Federal National Mtg Assoc., CMO Series 2002-18 Class PC, 5.50%, 4/25/2017 | 1,597,138 | 1,682,145 | ||||
Federal National Mtg Assoc., CMO Series 2003-15 Class CY, 5.00%, 3/25/2018 | 1,017,000 | 1,080,452 | ||||
Federal National Mtg Assoc., CMO Series 2003-44 Class CB, 4.25%, 3/25/2033 | 2,352,530 | 2,413,554 | ||||
Federal National Mtg Assoc., CMO Series 2003-9 Class DB, 5.00%, 2/25/2018 | 1,000,000 | 1,059,781 | ||||
Federal National Mtg Assoc., CMO Series 2003-92 Class KH, 5.00%, 3/25/2032 | 2,000,000 | 2,087,948 | ||||
Federal National Mtg Assoc., CMO Series 2004-2 Class QL, 4.00%, 2/25/2019 | 2,000,000 | 2,020,896 | ||||
Federal National Mtg Assoc., CMO Series 2004-33 Class MW, 4.50%, 1/25/2030 | 2,897,000 | 3,042,168 | ||||
Federal National Mtg Assoc., CMO Series 2004-35 Class CA, 4.00%, 12/25/2017 | 1,329,682 | 1,373,665 | ||||
Federal National Mtg Assoc., CMO Series 2006-57 Class PC, 5.50%, 10/25/2032 | 1,780,000 | 1,891,552 | ||||
Federal National Mtg Assoc., CMO Series 2006-78 Class MB, 5.50%, 7/25/2034 | 3,000,000 | 3,204,283 | ||||
Federal National Mtg Assoc., CMO Series 2007-60 Class VA, 6.00%, 12/25/2017 | 4,159,071 | 4,432,772 | ||||
Federal National Mtg Assoc., CMO Series 2007-65 Class PB, 6.00%, 10/25/2032 | 2,916,000 | 3,090,565 | ||||
Federal National Mtg Assoc., CMO Series 2007-79 Class MB, 5.50%, 12/25/2030 | 1,000,000 | 1,055,567 | ||||
Federal National Mtg Assoc., CMO Series 2007-83 Class PA, 6.00%, 3/25/2029 | 1,416,520 | 1,466,071 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2009 |
Issuer-Description | Principal Amount | Value | ||||
Federal National Mtg Assoc., CMO Series 2008-77 Class VA, 6.00%, 7/25/2019 | $ | 3,749,468 | $ | 4,038,038 | ||
Federal National Mtg Assoc., Pool # 044003, 8.00%, 6/1/2017 | 16,687 | 18,234 | ||||
Federal National Mtg Assoc., Pool # 050811, 7.50%, 12/1/2012 | 14,314 | 15,043 | ||||
Federal National Mtg Assoc., Pool # 050832, 7.50%, 6/1/2013 | 16,811 | 17,646 | ||||
Federal National Mtg Assoc., Pool # 076388, 9.25%, 9/1/2018 | 57,121 | 63,958 | ||||
Federal National Mtg Assoc., Pool # 190555, 7.00%, 1/1/2014 | 14,444 | 15,326 | ||||
Federal National Mtg Assoc., Pool # 250387, 7.00%, 11/1/2010 | 6,929 | 7,109 | ||||
Federal National Mtg Assoc., Pool # 251759, 6.00%, 5/1/2013 | 26,362 | 28,152 | ||||
Federal National Mtg Assoc., Pool # 252648, 6.50%, 5/1/2022 | 95,967 | 103,652 | ||||
Federal National Mtg Assoc., Pool # 303383, 7.00%, 12/1/2009 | 191 | 192 | ||||
Federal National Mtg Assoc., Pool # 312663, 7.50%, 6/1/2010 | 2,109 | 2,148 | ||||
Federal National Mtg Assoc., Pool # 334996, 7.00%, 2/1/2011 | 6,802 | 7,001 | ||||
Federal National Mtg Assoc., Pool # 342947, 7.25%, 4/1/2024 | 210,436 | 230,728 | ||||
Federal National Mtg Assoc., Pool # 384243, 6.10%, 10/1/2011 | 583,284 | 602,745 | ||||
Federal National Mtg Assoc., Pool # 406384, 8.25%, 12/1/2024 | 107,957 | 118,481 | ||||
Federal National Mtg Assoc., Pool # 443909, 6.50%, 9/1/2018 | 69,629 | 74,705 | ||||
Federal National Mtg Assoc., Pool # 516363, 5.00%, 3/1/2014 | 50,096 | 52,638 | ||||
Federal National Mtg Assoc., Pool # 555207, 7.00%, 11/1/2017 | 38,093 | 41,712 | ||||
Federal National Mtg Assoc., Pool # 895572, 5.698%, 6/1/2036 | 2,184,811 | 2,292,759 | ||||
Federal National Mtg Assoc., REMIC Series 2002-59 Class B, 5.50%, 9/25/2017 | 1,689,183 | 1,790,675 | ||||
Federal National Mtg Assoc., REMIC Series 2006-B1 Class AB, 6.00%, 6/25/2016 | 2,016,289 | 2,109,619 | ||||
Federal National Mtg Assoc., REMIC Series 2008-3 Class VB, 5.00%, 10/25/2022 | 1,000,000 | 1,042,176 | ||||
Federal National Mtg Assoc., REMIC Series 2008-86 Class PC, 5.00%, 3/25/2034 | 5,000,000 | 5,231,322 | ||||
Federal National Mtg Assoc., CMO Series 2007-42 Class YA, 5.50%, 1/25/2036 | 2,073,206 | 2,158,544 | ||||
Government National Mtg Assoc., CMO Series 2008-56 Class CH, 5.00%, 5/20/2035 | 5,000,000 | 5,187,421 | ||||
Government National Mtg Assoc., Pool # 000623, 8.00%, 9/20/2016 | 27,068 | 29,322 | ||||
Government National Mtg Assoc., Pool # 409921, 7.50%, 8/15/2010 | 2,957 | 3,019 | ||||
Government National Mtg Assoc., Pool # 410240, 7.00%, 12/15/2010 | 6,665 | 6,854 | ||||
Government National Mtg Assoc., Pool # 410271, 7.50%, 8/15/2010 | 7,476 | 7,655 | ||||
Government National Mtg Assoc., Pool # 410846, 7.00%, 12/15/2010 | 12,174 | 12,520 | ||||
Government National Mtg Assoc., Pool # 430150, 7.25%, 12/15/2026 | 28,990 | 31,668 | ||||
Government National Mtg Assoc., Pool # 453928, 7.00%, 7/15/2017 | 34,563 | 37,693 | ||||
Government National Mtg Assoc., Pool # 780448, 6.50%, 8/15/2011 | 19,955 | 20,626 | ||||
TOTAL MORTGAGE BACKED (Cost $142,825,647) | 147,361,941 | |||||
TOTAL INVESTMENTS — 94.38% (Cost $237,564,206) | $ | 246,690,575 | ||||
OTHER ASSETS LESS LIABILITIES — 5.62% | 14,682,734 | |||||
NET ASSETS — 100.00% | $ | 261,373,309 | ||||
Footnote Legend
a | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
b | 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, 2009, the aggregate value of these securities in the Fund’s portfolio was $2,926,933, representing 1.12% 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 | |
Mtg | Mortgage | |
REMIC | Real Estate Mortgage Investment Conduit |
See notes to financial statements.
Certified Annual Report 13
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
![]() | 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† Moody’s/S&P | Principal Amount | Value | |||||
U.S. TREASURY SECURITIES — 0.66% | ||||||||
United States Treasury Notes, 5.125% due 5/15/2016 | AAA/Aaa | $ | 1,000,000 | $ | 1,140,781 | |||
United States Treasury Notes, 4.875% due 8/15/2016 | AAA/Aaa | 2,000,000 | 2,250,547 | |||||
TOTAL U.S. TREASURY SECURITIES (Cost $3,085,759) | 3,391,328 | |||||||
U.S. GOVERNMENT AGENCIES — 2.03% | ||||||||
a Agribank FCB, 9.125% due 7/15/2019 | ANR | 3,500,000 | 3,785,299 | |||||
Federal National Mtg Assoc., 7.00% due 3/1/2011 | AAA/Aaa | 4,186 | 4,295 | |||||
Federal National Mtg Assoc., 6.42% due 4/1/2011 | AAA/Aaa | 2,237,362 | 2,375,623 | |||||
Federal National Mtg Assoc., 5.095% due 12/1/2011 | AAA/Aaa | 118,294 | 125,146 | |||||
Federal National Mtg Assoc., 7.491% due 8/1/2014 | AAA/Aaa | 23,759 | 23,759 | |||||
Small Business Administration, 4.638% due 2/10/2015 | NR/NR | 1,453,937 | 1,495,521 | |||||
a,b U.S. Department of Transportation Headquarters, Series 2004 Class A-2, 5.594% due 12/7/2021 | A-/NR | 2,555,259 | 2,683,022 | |||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $9,867,858) | 10,492,665 | |||||||
OTHER GOVERNMENT — 1.13% | ||||||||
a,c Emirate of Abu Dhabi, 5.50% due 4/8/2014 | AA/Aa2 | 1,000,000 | 1,064,285 | |||||
c Nova Scotia Province Canada, 5.75% due 2/27/2012 | A+/Aa2 | 500,000 | 534,695 | |||||
c Province of Ontario Canada, 4.10% due 6/16/2014 | AA/Aa1 | 4,000,000 | 4,227,701 | |||||
TOTAL OTHER GOVERNMENT (Cost $5,490,314) | 5,826,681 | |||||||
MORTGAGE BACkED — 13.13% | ||||||||
Federal Home Loan Mtg Corp., CMO Series 2640 Class G, 4.50% due 7/15/2018 | AAA/Aaa | 3,388,791 | 3,517,543 | |||||
Federal Home Loan Mtg Corp., CMO Series 2682 Class JG, 4.50% due 10/15/2023 | AAA/Aaa | 5,000,000 | 5,135,975 | |||||
Federal Home Loan Mtg Corp., CMO Series 2738 Class QE, 5.00% due 7/15/2032 | AAA/Aaa | 3,000,000 | 3,163,942 | |||||
Federal Home Loan Mtg Corp., CMO Series 2778 Class JD, 5.00% due 12/15/2032 | AAA/Aaa | 4,000,000 | 4,170,308 | |||||
Federal Home Loan Mtg Corp., CMO Series 2802 Class NE, 5.00% due 2/15/2033 | AAA/Aaa | 1,042,000 | 1,093,846 | |||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | AAA/Aaa | 1,056,247 | 1,091,965 | |||||
Federal Home Loan Mtg Corp., CMO Series 2902 Class QE, 5.50% due 6/15/2033 | AAA/Aaa | 1,400,000 | 1,487,468 | |||||
Federal Home Loan Mtg Corp., CMO Series 2915 Class KD, 5.00% due 9/15/2033 | AAA/Aaa | 4,046,000 | 4,245,187 | |||||
Federal Home Loan Mtg Corp., CMO Series 3054 Class DW, 5.50% due 5/15/2034 | AAA/Aaa | 1,150,319 | 1,218,559 | |||||
Federal Home Loan Mtg Corp., CMO Series 3138 Class PC, 5.50% due 6/15/2032 | AAA/Aaa | 5,000,000 | 5,291,586 | |||||
Federal Home Loan Mtg Corp., CMO Series 3192 Class GB, 6.00% due 1/15/2031 | AAA/Aaa | 2,000,000 | 2,083,225 | |||||
Federal Home Loan Mtg Corp., CMO Series 3195 Class PD, 6.50% due 7/15/2036 | NR/NR | 5,300,000 | 5,759,465 | |||||
Federal Home Loan Mtg Corp., CMO Series 3255 Class QB, 5.50% due 5/15/2029 | AAA/Aaa | 3,000,000 | 3,106,729 | |||||
Federal Home Loan Mtg Corp., CMO Series 3541 Class PA, 5.00% due 5/15/2039 | AAA/Aaa | 2,911,413 | 3,069,267 | |||||
Federal National Mtg Assoc., CMO Series 2003-64 Class EC, 5.50% due 5/25/2030 | AAA/Aaa | 211,172 | 214,281 | |||||
Federal National Mtg Assoc., CMO Series 2005-35 VG, 5.00% due 4/25/2016 | AAA/Aaa | 1,413,942 | 1,495,423 | |||||
Federal National Mtg Assoc., CMO Series 2005-48 Class AR, 5.50% due 2/25/2035 | AAA/Aaa | 2,634,780 | 2,806,420 | |||||
Federal National Mtg Assoc., CMO Series 2006-51 Class PB, 5.50% due 8/25/2033 | AAA/Aaa | 3,000,000 | 3,149,071 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Federal National Mtg Assoc., CMO Series 2007-26 Class VH, 5.50% due 2/25/2018 | AAA/Aaa | $ | 2,875,134 | $ | 3,082,183 | |||
Federal National Mtg Assoc., CMO Series 2007-42 Class PA, 5.50% due 4/25/2037 | AAA/Aaa | 4,243,399 | 4,443,386 | |||||
Federal National Mtg Assoc., CMO Series 2007-65 Class PB, 6.00% due 10/25/2032 | AAA/Aaa | 3,000,000 | 3,179,594 | |||||
Government National Mtg Assoc., CMO Series 2009-68 Class DP, 4.50% due 11/16/2038 | AAA/Aaa | 4,901,520 | 5,079,327 | |||||
Government National Mtg Assoc., Pool # 003007, 8.50% due 11/20/2015 | AAA/Aaa | 19,603 | 21,056 | |||||
Government National Mtg Assoc., Pool # 827148, 4.375% due 2/20/2024 | AAA/Aaa | 34,891 | 36,237 | |||||
TOTAL MORTGAGE BACKED (Cost $67,420,144) | 67,942,045 | |||||||
ASSET BACKED SECURITIES — 4.65% | ||||||||
BANKS — 1.17% | ||||||||
COMMERCIAL BANKS — 1.01% | ||||||||
Wachovia Bank Commercial Mtg Trust, Series 2005-C21 Class A-4, 5.384% due 10/15/2044 | AAA/Aaa | 5,000,000 | 4,939,841 | |||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 4.531% due 2/25/2035 | A/B3 | 998,765 | 165,767 | |||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 4.669% due 3/25/2035 | NR/NR | 1,066,963 | 140,033 | |||||
THRIFTS & MORTGAGE FINANCE — 0.16% | ||||||||
Washington Mutual, Series 05-AR4 Class-A4B, 4.653% due 4/25/2035 | AAA/Baa3 | 830,000 | 819,368 | |||||
6,065,009 | ||||||||
CONSUMER SERVICES — 0.73% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.73% | ||||||||
d Dunkin 2006-1 Class A2, 5.779% due 6/20/2031 | NR/NR | 4,000,000 | 3,772,840 | |||||
3,772,840 | ||||||||
DIVERSIFIED FINANCIALS — 2.75% | ||||||||
CAPITAL MARKETS — 1.39% | ||||||||
Bear Stearns Mtg., Series 2004-3 Class 1-A2, 4.171% due 7/25/2034 | AAA/Aa3 | 431,851 | 351,676 | |||||
d Commercial Mortgage Pass-Through Certificates, Series 2001-J1A Class C, 6.83% due 2/14/2034 | NR/Aaa | 3,500,000 | 3,652,933 | |||||
GS Mtg Securities Corp., 2001-Rock Class C, 6.878% due 5/3/2018 | AAA/Aaa | 545,000 | 586,569 | |||||
GSR Mtg Loan Trust, Series 2004-3F Class 2-A10, 17.198% due 2/25/2034 | AAA/NR | 144,654 | 155,458 | |||||
Merrill Lynch Mtg Investors, Series 2003 E Class B3, 1.746% due 10/25/2028 | A+/A2 | 1,341,890 | 587,326 | |||||
Merrill Lynch Mtg Investors, Series 2004 A4 Class M1, 3.12% due 8/25/2034 | AA/NR | 957,533 | 411,161 | |||||
d Morgan Stanley Dean Witter Capital Trust, Series 2000 Xl-1345 Class C, 7.846% due 9/3/2015 | NR/Aaa | 545,000 | 577,532 | |||||
d Morgan Stanley Dean Witter Capital Trust, Series 2001 Xl-280 Class C, 6.756% due 2/3/2016 | NR/Aaa | 825,000 | 883,005 | |||||
DIVERSIFIED FINANCIAL SERVICES — 1.36% | ||||||||
Banc America Mtg Securities, Inc., Series 2005 A Class B1 Floating Rate Note, 4.705% due 2/25/2035 | NR/NR | 2,892,487 | 411,366 | |||||
Citigroup Commercial Mtg Trust, Series 2004-HYB2 Class B1, 4.842% due 3/25/2034 | AA/A1 | 542,101 | 182,526 | |||||
Countrywide Home Loan, Series 2004 Class 1-A, 3.748% due 7/20/2034 | AAA/Aa3 | 675,389 | 499,274 | |||||
FNBC Trust, Series 1993 A, 8.08% due 1/5/2018 | AA-/Aa3 | 1,040,163 | 1,089,076 | |||||
JPMorgan Chase Commercial Mtg., Series 2004-C3 Class A-5, 4.878% due 1/15/2042 | NR/Aaa | 5,000,000 | 4,848,901 | |||||
14,236,803 | ||||||||
TOTAL ASSET BACKED SECURITIES (Cost $29,654,609) | 24,074,652 | |||||||
CORPORATE BONDS — 61.84% | ||||||||
AUTOMOBILES & COMPONENTS — 1.60% | ||||||||
AUTOMOBILES — 1.60% | ||||||||
a American Honda Finance, 2.633% due 6/29/2011 | A+/A1 | 3,500,000 | 3,491,086 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
a American Honda Finance Corp., 5.125% due 12/15/2010 | A+/A1 | $ | 1,500,000 | $ | 1,541,667 | |||
a Harley Davidson Funding Corp., Series C, 6.80% due 6/15/2018 | BBB/A2 | 2,500,000 | 2,434,430 | |||||
Toyota Motor Credit Corp., 4.35% due 12/15/2010 | AA/Aa1 | 800,000 | 817,018 | |||||
8,284,201 | ||||||||
BANKS — 4.05% | ||||||||
COMMERCIAL BANKS — 4.05% | ||||||||
a,c ANZ National International, 6.20% due 7/19/2013 | AA/Aa2 | 1,000,000 | 1,094,223 | |||||
Charter One Bank NA, 5.50% due 4/26/2011 | A-/A1 | 1,750,000 | 1,781,315 | |||||
National City Bank, 7.25% due 7/15/2010 | A/NR | 2,000,000 | 2,059,148 | |||||
National City Bank Floating Rate Note, 0.684% due 6/7/2017 | A/A2 | 4,000,000 | �� | 3,205,248 | ||||
c National Westminster Bank, 7.375% due 10/1/2009 | BBB/Baa3 | 715,000 | 715,000 | |||||
Nations Bank Corp., 7.23% due 8/15/2012 | A/A2 | 250,000 | 269,052 | |||||
North Fork Bancorp, Inc., 5.875% due 8/15/2012 | BBB-/Baa2 | 2,000,000 | 2,030,942 | |||||
Silicon Valley Bank, 5.70% due 6/1/2012 | BBB+/A2 | 3,500,000 | 3,523,219 | |||||
Silicon Valley Bank, 6.05% due 6/1/2017 | BBB/A3 | 1,000,000 | 932,687 | |||||
Sovereign Bancorp, Inc., 0.519% due 3/23/2010 | A/Baa1 | 2,000,000 | 1,997,470 | |||||
Sovereign Bank, 5.125% due 3/15/2013 | A-/Baa1 | 400,000 | 400,000 | |||||
Suntrust Bank, 5.20% due 1/17/2017 | BBB+/A3 | 400,000 | 373,266 | |||||
Whitney National Bank, 5.875% due 4/1/2017 | BB+/Baa1 | 2,000,000 | 1,684,100 | |||||
Zions Bancorp, 7.75% due 9/23/2014 | BBB-/B3 | 1,000,000 | 895,000 | |||||
20,960,670 | ||||||||
CAPITAL GOODS — 5.64% | ||||||||
AEROSPACE & DEFENSE — 0.32% | ||||||||
Boeing Co., 5.00% due 3/15/2014 | A/A2 | 1,500,000 | 1,635,674 | |||||
ELECTRICAL EQUIPMENT — 0.48% | ||||||||
Emerson Electric Co., 4.125% due 4/15/2015 | A/A2 | 500,000 | 525,826 | |||||
Emerson Electric Co., 5.75% due 11/1/2011 | A/A2 | 800,000 | 868,604 | |||||
Hubbell, Inc., 6.375% due 5/15/2012 | A/A3 | 1,000,000 | 1,060,984 | |||||
INDUSTRIAL CONGLOMERATES — 2.27% | ||||||||
General Electric Capital Corp., 4.875% due 10/21/2010 | AA+/Aa2 | 2,500,000 | 2,577,963 | |||||
General Electric Capital Corp., 7.375% due 1/19/2010 | AA+/Aa2 | 400,000 | 407,604 | |||||
General Electric Capital Corp. Floating Rate Note, 0.432% due 6/20/2014 | AA+/Aa2 | 4,000,000 | 3,535,424 | |||||
General Electric Capital Corp. Floating Rate Note, 0.419% due 12/15/2009 | AA+/Aa2 | 1,000,000 | 1,000,206 | |||||
a Smiths Group plc, 6.05% due 5/15/2014 | BBB+/Baa2 | 2,500,000 | 2,609,892 | |||||
c Tyco International Finance, 6.375% due 10/15/2011 | BBB+/Baa1 | 1,500,000 | 1,617,002 | |||||
MACHINERY — 2.57% | ||||||||
Caterpillar Financial Services Corp., 5.85% due 9/1/2017 | A/A2 | 1,500,000 | 1,613,548 | |||||
Caterpillar Financial Services Corp. Floating Rate Note, 1.033% due 6/24/2011 | A/A2 | 3,200,000 | 3,221,821 | |||||
a,b General American Railcar Corp., 6.69% due 9/20/2016 | AA-/Ba3 | 157,784 | 148,119 | |||||
a Illinois Tool Works Cupids Financing Trust, 6.55% due 12/31/2011 | NR/A1 | 5,000,000 | 5,007,555 | |||||
c Ingersoll-Rand Global Holding Co., 9.50% due 4/15/2014 | BBB+/Baa1 | 500,000 | 590,815 | |||||
John Deere Capital Corp., 5.25% due 10/1/2012 | A/A2 | 1,600,000 | 1,730,245 | |||||
a,c,e Volvo Treasury AB, 5.95% due 4/1/2015 | NR/NR | 1,000,000 | 999,070 | |||||
29,150,352 | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.31% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 0.31% | ||||||||
Science Applications International Corp., 6.25% due 7/1/2012 | A-/A3 | 1,000,000 | 1,098,048 | |||||
Waste Management, Inc., 7.375% due 8/1/2010 | BBB/Baa3 | 500,000 | 523,594 | |||||
1,621,642 | ||||||||
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
CONSUMER DURABLES & APPAREL — 0.96% | ||||||||
HOUSEHOLD DURABLES — 0.50% | ||||||||
Fortune Brands, Inc., 6.375% due 6/15/2014 | BBB-/Baa3 | $ | 2,500,000 | $ | 2,597,532 | |||
TEXTILES, APPAREL & LUXURY GOODS — 0.46% | ||||||||
Nike, Inc., 5.15% due 10/15/2015 | A+/A1 | 2,315,000 | 2,381,545 | |||||
4,979,077 | ||||||||
DIVERSIFIED FINANCIALS — 6.97% | ||||||||
CAPITAL MARKETS — 1.88% | ||||||||
Bear Stearns Co., Inc., 4.50% due 10/28/2010 | A+/Aa3 | 3,000,000 | 3,101,088 | |||||
f,g Lehman Brothers Holdings, Inc., 5.625% due 1/24/2013 | NR/NR | 1,300,000 | 229,125 | |||||
a,c Macquarie Group Ltd., 7.30% due 8/1/2014 | A-/A2 | 3,000,000 | 3,203,466 | |||||
a,c Macquarie Group Ltd., 7.625% due 8/13/2019 | NR/NR | 1,000,000 | 1,072,609 | |||||
Merrill Lynch & Co., Inc., 6.875% due 4/25/2018 | A/A2 | 2,000,000 | 2,103,394 | |||||
CONSUMER FINANCE — 0.88% | ||||||||
American Express Credit Corp., 5.875% due 5/2/2013 | BBB+/A2 | 2,500,000 | 2,650,685 | |||||
Capital One Bank, 6.50% due 6/13/2013 | BBB/A3 | 300,000 | 319,839 | |||||
Capital One Bank, 8.80% due 7/15/2019 | BBB/A3 | 500,000 | 577,979 | |||||
Capital One Financial Corp., 5.70% due 9/15/2011 | BBB/Baa1 | 950,000 | 992,473 | |||||
DIVERSIFIED FINANCIAL SERVICES — 4.21% | ||||||||
Bank of America Corp., 7.80% due 2/15/2010 | A-/A3 | 1,060,000 | 1,082,215 | |||||
Bank of America Corp., 7.40% due 1/15/2011 | A-/A3 | 1,500,000 | 1,575,075 | |||||
a Bank of America Covered Bond Issuer, 5.50% due 6/14/2012 | AAA/Aa1 | 3,000,000 | 3,087,300 | |||||
a Bank of America Institutional Series B, 7.70% due 12/31/2026 | B/Baa3 | 2,000,000 | 1,840,000 | |||||
Citigroup, Inc., 6.125% due 5/15/2018 | A/A3 | 500,000 | 492,322 | |||||
Citigroup, Inc., 5.00% due 9/15/2014 | A-/Baa1 | 3,000,000 | 2,854,755 | |||||
Citigroup, Inc., 6.50% due 8/19/2013 | A/A3 | 1,000,000 | 1,049,749 | |||||
CME Group, Inc., 5.75% due 2/15/2014 | AA/Aa3 | 750,000 | 820,837 | |||||
c Export Import Bank of Korea, 8.125% due 1/21/2014 | A/A2 | 1,000,000 | 1,145,482 | |||||
c Korea Development Bank, 0.718% due 4/3/2010 | A/A2 | 500,000 | 494,663 | |||||
c Korea Development Bank, 8.00% due 1/23/2014 | A/A2 | 1,000,000 | 1,142,910 | |||||
MBNA Corp., 6.125% due 3/1/2013 | A/A2 | 1,000,000 | 1,050,459 | |||||
a,c National Agricultural Cooperative Federation, 5.00% due 9/30/2014 | A/A2 | 2,000,000 | 2,017,536 | |||||
National Rural Utilities CFC, 10.375% due 11/1/2018 | A+/A1 | 1,500,000 | 1,983,849 | |||||
Textron Financial Corp. Floating Rate Note, 0.523% due 2/25/2011 | BB+/Baa3 | 1,250,000 | 1,155,666 | |||||
36,043,476 | ||||||||
ENERGY — 6.44% | ||||||||
ENERGY EQUIPMENT & SERVICES — 1.40% | ||||||||
Detroit Edison Corporate Senior Note Series D, 5.40% due 8/1/2014 | A-/A2 | 2,000,000 | 2,165,322 | |||||
Nabors Inds, Inc., 9.25% due 1/15/2019 | BBB+/Baa1 | 1,000,000 | 1,188,412 | |||||
Rowan Companies, Inc., 7.875% due 8/1/2019 | BBB-/Baa3 | 2,000,000 | 2,150,360 | |||||
Smith International, Inc., 8.625% due 3/15/2014 | BBB+/Baa1 | 1,500,000 | 1,722,600 | |||||
OIL, GAS & CONSUMABLE FUELS — 5.04% | ||||||||
c BP Capital Markets plc, 3.875% due 3/10/2015 | AA/Aa1 | 2,000,000 | 2,066,122 | |||||
Conocophillips, 4.75% due 2/1/2014 | A/A1 | 1,000,000 | 1,075,871 | |||||
a DCP Midstream LLC, 9.75% due 3/15/2019 | BBB/Baa2 | 1,500,000 | 1,791,933 | |||||
Enbridge Energy Partners LP, 9.875% due 3/1/2019 | BBB/Baa2 | 2,000,000 | 2,483,806 | |||||
c Enbridge, Inc., 5.80% due 6/15/2014 | A-/Baa1 | 2,000,000 | 2,195,616 | |||||
Energy Transfer Partners LP, 6.00% due 7/1/2013 | BBB-/Baa3 | 1,000,000 | 1,059,789 | |||||
Enterprise Products Participating LP, 7.50% due 2/1/2011 | BBB-/Baa3 | 250,000 | 266,881 | |||||
Murphy Oil Corp., 6.375% due 5/1/2012 | BBB/Baa3 | 750,000 | 797,368 | |||||
NuStar Logistics, 7.65% due 4/15/2018 | BBB-/Baa3 | 3,000,000 | 3,251,637 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Occidental Petroleum Corp., 7.00% due 11/1/2013 | A/A2 | $ | 1,000,000 | $ | 1,155,280 | |||
Oneok Partners LP, 8.625% due 3/1/2019 | BBB/Baa2 | 1,500,000 | 1,790,624 | |||||
c Petrobras International Finance Co., 7.875% due 3/15/2019 | BBB-/Baa1 | 1,500,000 | 1,730,625 | |||||
Phillips Petroleum Co., 9.375% due 2/15/2011 | A/A1 | 900,000 | 992,746 | |||||
Phillips Petroleum Co., 8.75% due 5/25/2010 | A/A1 | 250,000 | 263,914 | |||||
Sunoco Logistics Partner, 8.75% due 2/15/2014 | BBB/Baa2 | 500,000 | 540,098 | |||||
a,c Woodside Finance Ltd., 8.75% due 3/1/2019 | A-/Baa1 | 2,500,000 | 2,947,210 | |||||
a,c Woodside Finance Ltd., 8.125% due 3/1/2014 | A-/Baa1 | 1,500,000 | 1,683,822 | |||||
33,320,036 | ||||||||
FOOD, BEVERAGE & TOBACCO — 3.47% | ||||||||
BEVERAGES — 1.96% | ||||||||
Anheuser Busch Cos., Inc., 4.70% due 4/15/2012 | BBB+/Baa2 | 1,000,000 | 1,037,834 | |||||
Anheuser Busch Cos., Inc., 4.375% due 1/15/2013 | BBB+/Baa2 | 2,000,000 | 2,052,824 | |||||
a,c Bacardi Ltd., 7.45% due 4/1/2014 | BBB/Baa1 | 2,500,000 | 2,821,625 | |||||
a,c Bacardi Ltd., 8.20% due 4/1/2019 | BBB/Baa1 | 1,500,000 | 1,801,350 | |||||
Coca Cola Co., 5.75% due 3/15/2011 | A+/Aa3 | 200,000 | 212,958 | |||||
a,c Sabmiller plc, 6.50% due 7/15/2018 | BBB+/Baa1 | 2,000,000 | 2,219,858 | |||||
FOOD PRODUCTS — 0.42% | ||||||||
Conagra, Inc., 7.875% due 9/15/2010 | BBB/Baa2 | 11,000 | 11,643 | |||||
General Mills, 5.20% due 3/17/2015 | BBB+/Baa1 | 1,000,000 | 1,081,162 | |||||
Kraft Foods, Inc., 6.00% due 2/11/2013 | BBB+/Baa2 | 1,000,000 | 1,072,622 | |||||
TOBACCO — 1.09% | ||||||||
h Altria Group, Inc., 8.50% due 11/10/2013 | BBB/Baa1 | 1,000,000 | 1,159,840 | |||||
Altria Group, Inc., 9.70% due 11/10/2018 | BBB/Baa1 | 1,000,000 | 1,242,057 | |||||
Lorillard Tobacco Co., 8.125% due 6/23/2019 | BBB-/Baa2 | 2,000,000 | 2,269,746 | |||||
UST, Inc., 5.75% due 3/1/2018 | BBB/Baa1 | 1,000,000 | 963,831 | |||||
17,947,350 | ||||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.62% | ||||||||
HEALTH CARE PROVIDERS & SERVICES — 0.62% | ||||||||
Mckesson Corp., 6.50% due 2/15/2014 | BBB+/Baa3 | 1,000,000 | 1,096,145 | |||||
Unitedhealth Group, Inc., 6.00% due 2/15/2018 | A-/Baa1 | 1,000,000 | 1,050,846 | |||||
Wellpoint, Inc., 6.00% due 2/15/2014 | A-/Baa1 | 1,000,000 | 1,076,354 | |||||
3,223,345 | ||||||||
HOTELS RESTAURANTS & LEISURE — 0.80% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.80% | ||||||||
a Hyatt Hotels Corps., 5.75% due 8/15/2015 | BBB/Baa1 | 2,500,000 | 2,549,002 | |||||
a,c TDIC Finance Ltd., 6.50% due 7/2/2014 | AA/Aa2 | 1,500,000 | 1,609,484 | |||||
4,158,486 | ||||||||
INSURANCE — 5.73% | ||||||||
INSURANCE — 5.73% | ||||||||
American International Group, Inc., 5.85% due 1/16/2018 | A-/A3 | 2,000,000 | 1,448,016 | |||||
a Genworth Life Institutional Fund, 5.875% due 5/3/2013 | A/A2 | 1,000,000 | 983,228 | |||||
Hartford Financial Services Group, Inc., 4.625% due 7/15/2013 | BBB/Baa3 | 1,000,000 | 948,320 | |||||
International Lease Finance Corp., 5.00% due 9/15/2012 | BBB+/Baa3 | 2,000,000 | 1,604,584 | |||||
International Lease Finance Corp. Floating Rate Note, 0.909% due 1/15/2010 | BBB+/Baa3 | 2,925,000 | 2,856,970 | |||||
a Liberty Mutual Group, Inc., 5.75% due 3/15/2014 | BBB-/Baa2 | 1,000,000 | 941,288 | |||||
Lincoln National Corp., 4.75% due 2/15/2014 | A-/Baa2 | 1,000,000 | 984,050 | |||||
a Pacific Life Global Funding CPI Floating Rate Note, 0.75% due 2/6/2016 | AA-/A1 | 8,000,000 | 7,186,240 | |||||
a Principal Life Global Funding, 4.40% due 10/1/2010 | A+/Aa3 | 4,000,000 | 4,042,168 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
a,c QBE Insurance Group Ltd., 5.647% due 7/1/2023 | BBB+/Baa1 | $ | 1,500,000 | $ | 1,242,271 | |||
Torchmark, Corp., 9.25% due 6/15/2019 | A/Baa1 | 4,000,000 | 4,497,044 | |||||
Transatlantic Holdings, Inc., 5.75% due 12/14/2015 | BBB+/A3 | 2,400,000 | 2,162,830 | |||||
UnumProvident Corp., 7.625% due 3/1/2011 | BBB-/Ba1 | 691,000 | 712,341 | |||||
29,609,350 | ||||||||
MATERIALS — 2.58% | ||||||||
CHEMICALS — 1.34% | ||||||||
Chevron Phillips Chemical, 7.00% due 6/15/2014 | BBB/Baa1 | 4,000,000 | 4,423,864 | |||||
Chevron Phillips Chemical, 7.00% due 3/15/2011 | BBB/Baa1 | 500,000 | 531,561 | |||||
E.I. du Pont de Nemours & Co., 4.75% due 11/15/2012 | A/A2 | 1,000,000 | 1,074,903 | |||||
E.I. du Pont de Nemours & Co., 4.125% due 3/6/2013 | A/A2 | 325,000 | 341,973 | |||||
c Potash Corp. of Saskatchewan, 5.25% due 5/15/2014 | A-/Baa1 | 500,000 | 540,926 | |||||
CONSTRUCTION MATERIALS — 1.02% | ||||||||
CRH America, Inc., 8.125% due 7/15/2018 | BBB+/Baa1 | 2,000,000 | 2,248,678 | |||||
a,c Holcim, Ltd., 6.00% due 12/30/2019 | BBB/Baa2 | 1,500,000 | 1,518,252 | |||||
Martin Marietta Materials, Inc., 0.641% due 4/30/2010 | BBB+/Baa3 | 1,500,000 | 1,492,644 | |||||
METALS & MINING — 0.22% | ||||||||
a,c Anglo American Capital, 9.375% due 4/8/2014 | BBB/Baa1 | 1,000,000 | 1,165,000 | |||||
13,337,801 | ||||||||
MEDIA — 1.96% | ||||||||
MEDIA — 1.96% | ||||||||
AOL Time Warner, Inc., 6.75% due 4/15/2011 | BBB/Baa2 | 750,000 | 801,573 | |||||
Comcast Corp., 6.30% due 11/15/2017 | BBB+/Baa1 | 1,000,000 | 1,095,589 | |||||
c Thomson Reuters Corp., 5.95% due 7/15/2013 | A-/Baa1 | 2,000,000 | 2,195,630 | |||||
Time Warner Cable, Inc., 8.25% due 2/14/2014 | BBB/Baa2 | 750,000 | 873,989 | |||||
Time Warner Cable, Inc., 7.50% due 4/1/2014 | BBB/Baa2 | 1,500,000 | 1,720,396 | |||||
Time Warner Cable, Inc., 5.40% due 7/2/2012 | BBB/Baa2 | 3,000,000 | 3,205,563 | |||||
Time Warner Co., Inc., 8.05% due 1/15/2016 | BBB/Baa2 | 200,000 | 218,331 | |||||
10,111,071 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.95% | ||||||||
PHARMACEUTICALS — 0.95% | ||||||||
Abbott Labs, 3.75% due 3/15/2011 | AA/A1 | 500,000 | 518,194 | |||||
Pfizer, Inc., 5.35% due 3/15/2015 | AAA/Aa2 | 2,500,000 | 2,768,268 | |||||
Tiers Inflation Linked Trust Series Wyeth 2004-21 Trust Certificate CPI Floating Rate Note, 0.423% due 2/1/2014 | A+/A3 | 2,000,000 | 1,634,400 | |||||
4,920,862 | ||||||||
RETAILING — 1.24% | ||||||||
SPECIALTY RETAIL — 1.24% | ||||||||
Best Buy Co., Inc., 6.75% due 7/15/2013 | BBB-/Baa2 | 2,500,000 | 2,678,275 | |||||
Staples, Inc., 9.75% due 1/15/2014 | BBB/Baa2 | 1,750,000 | 2,102,166 | |||||
Staples, Inc., 7.75% due 4/1/2011 | BBB/Baa2 | 1,500,000 | 1,619,892 | |||||
6,400,333 | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.35% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.35% | ||||||||
KLA Tencor Corp. Senior Note, 6.90% due 5/1/2018 | BBB/Baa1 | 3,000,000 | 3,135,801 | |||||
National Semiconductor Corp. Senior Note, 0.549% due 6/15/2010 | BB+/Baa1 | 4,000,000 | 3,848,080 | |||||
6,983,881 | ||||||||
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
SOFTWARE & SERVICES — 0.63% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 0.63% | ||||||||
Computer Sciences Corp., 5.50% due 3/15/2013 | A-/Baa1 | $ | 1,000,000 | $ | 1,056,324 | |||
Electronic Data Systems Corp., 6.00% due 8/1/2013 | A/A2 | 1,000,000 | 1,115,820 | |||||
Western Union Co., 6.50% due 2/26/2014 | A-/A3 | 1,000,000 | 1,092,150 | |||||
3,264,294 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.11% | ||||||||
COMPUTERS & PERIPHERALS — 0.11% | ||||||||
Dell, Inc., 5.625% due 4/15/2014 | A-/A2 | 500,000 | 552,501 | |||||
552,501 | ||||||||
TELECOMMUNICATION SERVICES — 2.34% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.34% | ||||||||
AT&T, Inc., 4.85% due 2/15/2014 | A/A2 | 1,000,000 | 1,063,695 | |||||
AT&T, Inc., 5.80% due 2/15/2019 | A/A2 | 750,000 | 802,527 | |||||
c Deutsche Telekom International Finance, 6.75% due 8/20/2018 | BBB+/Baa1 | 2,000,000 | 2,239,270 | |||||
a,c Qtel International Finance Ltd., 6.50% due 6/10/2014 | A-/A1 | 1,000,000 | 1,091,856 | |||||
c Telecom Italia Capital SA, 6.175% due 6/18/2014 | BBB/Baa2 | 3,000,000 | 3,254,241 | |||||
Verizon Communications, Inc., 6.10% due 4/15/2018 | A/A3 | 500,000 | 539,995 | |||||
a Verizon Wireless Capital, 3.75% due 5/20/2011 | A/A2 | 1,000,000 | 1,031,727 | |||||
a Verizon Wireless Capital Floating Rate Note, 3.025% due 5/20/2011 | A/A2 | 2,000,000 | 2,069,054 | |||||
12,092,365 | ||||||||
TRANSPORTATION — 0.44% | ||||||||
AIR FREIGHT & LOGISTICS — 0.11% | ||||||||
FedEx Corp., 8.76% due 5/22/2015 | BBB+/Baa1 | 500,000 | 553,293 | |||||
AIRLINES — 0.02% | ||||||||
Continental Airlines Series 1997-4 Class 4-A, 6.90% due 1/2/2018 | BBB+/Baa2 | 148,378 | 137,992 | |||||
ROAD & RAIL — 0.31% | ||||||||
Ryder System, Inc., 7.20% due 9/1/2015 | BBB+/Baa1 | 1,500,000 | 1,603,462 | |||||
2,294,747 | ||||||||
UTILITIES — 13.65% | ||||||||
ELECTRIC UTILITIES — 8.00% | ||||||||
AEP Texas Central Transition Bond Series A-1, 4.98% due 1/1/2010 | AAA/Aaa | 383,154 | 387,207 | |||||
Appalachian Power Co., 7.95% due 1/15/2020 | BBB/Baa2 | 2,500,000 | 3,039,730 | |||||
Aquila, Inc., 7.95% due 2/1/2011 | BBB/Baa3 | 1,500,000 | 1,576,232 | |||||
Arizona Public Service Co., 8.75% due 3/1/2019 | BBB-/Baa2 | 1,000,000 | 1,210,734 | |||||
Centerpoint Energy, 7.00% due 3/1/2014 | BBB+/Baa1 | 2,000,000 | 2,272,914 | |||||
Commonwealth Edison Co., 6.15% due 3/15/2012 | A-/Baa1 | 910,000 | 987,480 | |||||
Commonwealth Edison Co., 4.74% due 8/15/2010 | A-/Baa1 | 975,000 | 997,166 | |||||
a,c E. ON AG, 5.80% due 4/30/2018 | A/A2 | 2,000,000 | 2,152,328 | |||||
a,c Electricite de France SA, 5.50% due 1/26/2014 | A+/Aa3 | 1,250,000 | 1,371,648 | |||||
Entergy Gulf States, Inc., 5.12% due 8/1/2010 | BBB+/Baa1 | 1,800,000 | 1,804,567 | |||||
Entergy Gulf States, Inc., 5.70% due 6/1/2015 | BBB+/Baa1 | 2,300,000 | 2,321,723 | |||||
Entergy Texas, Inc., 7.125% due 2/1/2019 | BBB+/Baa2 | 1,500,000 | 1,680,435 | |||||
a Great River Energy Series 2007-A, 5.829% due 7/1/2017 (Insured: Natl-Re) | AAA/A2 | 3,784,988 | 4,010,763 | |||||
Gulf Power Co., 4.35% due 7/15/2013 | A/A2 | 925,000 | 960,192 | |||||
Idaho Power Corp., 6.025% due 7/15/2018 | A-/A3 | 1,000,000 | 1,091,242 | |||||
Illinois Power Co., 9.75% due 11/15/2018 | BBB/Baa1 | 2,000,000 | 2,510,832 | |||||
a,c Korea Southern Power Co., 5.375% due 4/18/2013 | A/A1 | 1,000,000 | 988,128 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Metropolitan Edison Co., 7.70% due 1/15/2019 | BBB/Baa2 | $ | 2,250,000 | $ | 2,657,965 | |||
MP Environmental, 4.982% due 7/1/2014 | AAA/Aaa | 3,520,491 | 3,666,419 | |||||
Oglethorpe Power Corp., 6.10% due 6/15/2019 | A/A3 | 2,500,000 | 2,617,690 | |||||
PPL Energy Supply LLC, 6.50% due 5/1/2018 | BBB/Baa2 | 1,000,000 | 1,077,553 | |||||
Progress Energy, Inc., 6.05% due 3/15/2014 | BBB/Baa2 | 750,000 | 822,569 | |||||
Toledo Edison Co., 7.25% due 5/1/2020 | BBB+/Baa1 | 1,000,000 | 1,177,654 | |||||
GAS UTILITIES — 1.39% | ||||||||
Atmos Energy Corp., 8.50% due 3/15/2019 | BBB+/Baa2 | 2,250,000 | 2,777,771 | |||||
Kaneb Pipe Line Operating Partners, 5.875% due 6/1/2013 | BBB-/Baa3 | 2,000,000 | 2,070,956 | |||||
a Maritimes & North East Pipeline, 7.50% due 5/31/2014 | BBB/Baa3 | 2,000,000 | 2,103,560 | |||||
Southern California Gas Co., 4.375% due 1/15/2011 | NR/Aa3 | 225,000 | 232,252 | |||||
MULTI-UTILITIES — 4.26% | ||||||||
Ameren Energy Generating Co., 7.00% due 4/15/2018 | BBB-/Baa3 | 2,000,000 | 2,024,344 | |||||
Atlantic City Electric Co., 7.75% due 11/15/2018 | A-/A3 | 500,000 | 607,417 | |||||
Dominion Resources, Inc., 8.875% due 1/15/2019 | A-/Baa2 | 1,000,000 | 1,265,194 | |||||
a Enogex LLC, 6.875% due 7/15/2014 | BBB+/Baa3 | 4,000,000 | 4,156,476 | |||||
Northern States Power Co., 4.75% due 8/1/2010 | A/A1 | 2,825,000 | 2,920,705 | |||||
a Power Receivables Financing LLC, 6.29% due 1/1/2012 | NR/NR | 3,887,776 | 3,968,991 | |||||
Sempra Energy, 6.50% due 6/1/2016 | BBB+/Baa1 | 500,000 | 552,722 | |||||
Southern California Edison Co., 5.75% due 3/15/2014 | A/A1 | 500,000 | 554,170 | |||||
a,c Taqa Abu Dhabi National Energy Co., 7.25% due 8/1/2018 | AA-/Aa2 | 1,000,000 | 1,071,177 | |||||
a,c Taqa Abu Dhabi National Energy Co., 6.60% due 8/1/2013 | AA-/Aa2 | 1,000,000 | 1,069,288 | |||||
Union Electric Co., 4.65% due 10/1/2013 | BBB/A3 | 2,000,000 | 2,046,002 | |||||
Union Electric Co., 6.70% due 2/1/2019 | BBB/A3 | 500,000 | 564,305 | |||||
Wisconsin Public Service Corp., 6.125% due 8/1/2011 | A/A1 | 1,150,000 | 1,235,291 | |||||
70,603,792 | ||||||||
TOTAL CORPORATE BONDS (Cost $300,141,025) | 319,859,632 | |||||||
MUNICIPAL BONDS — 11.11% | ||||||||
Amelia County IDA, 4.80% due 4/1/2027 put 4/1/2010 (Waste Management) (AMT) | BBB/NR | 1,000,000 | 1,010,520 | |||||
American Campus Properties Student Housing, 7.38% due 9/1/2012 (Insured: Natl-Re) | A/Baa1 | 1,860,000 | 1,888,123 | |||||
American Fork City Utah Sales, 4.89% due 3/1/2012 (Insured: FSA) | AAA/Aa3 | 300,000 | 317,103 | |||||
American Fork City Utah Sales, 5.07% due 3/1/2013 (Insured: FSA) | AAA/Aa3 | 120,000 | 128,077 | |||||
Anaheim California Public Financing Authority, 5.316% due 9/1/2017 (Insured: Natl Re/FGIC) | A/A3 | 2,365,000 | 2,189,659 | |||||
Anaheim California Public Financing Authority, 5.486% due 9/1/2020 (Insured: Natl-Re/ FGIC) | A/A3 | 2,270,000 | 1,975,853 | |||||
Brockton Massachusetts Taxable Economic Development, 6.45% due 5/1/2017 (Insured: FGIC) | A/A2 | 130,000 | 130,581 | |||||
Canadian County Oklahoma Educational Facilities Authority, 4.253% due 9/1/2014 | A+/NR | 3,000,000 | 3,105,330 | |||||
Cleveland Cuyahoga County Ohio, 6.10% due 5/15/2013 | NR/NR | 1,095,000 | 1,090,850 | |||||
Cook County Illinois School District 083, 4.625% due 12/1/2010 (Insured: FSA) | NR/Aa3 | 250,000 | 260,443 | |||||
Cook County Illinois School District 083, 4.875% due 12/1/2011 (Insured: FSA) | NR/Aa3 | 150,000 | 161,018 | |||||
Granite City Madison County, 4.875% due 5/1/2027 (Waste Management) | BBB/NR | 1,000,000 | 1,008,360 | |||||
Green Bay Wisconsin, 4.875% due 4/1/2011 (Insured: Natl-Re) | NR/Aa2 | 365,000 | 378,976 | |||||
Hancock County Mississippi, 4.80% due 8/1/2010 (Insured: Natl-Re) | NR/A3 | 245,000 | 246,619 | |||||
Hancock County Mississippi, 4.90% due 8/1/2011 (Insured: Natl-Re) | NR/A3 | 315,000 | 316,525 | |||||
Hanover Pennsylvania Area School District Notes, 4.47% due 3/15/2013 (Insured: FSA) | AAA/Aa3 | 1,385,000 | 1,482,587 | |||||
Jefferson County Texas Navigation Refunding, 5.50% due 5/1/2010 (Insured: FSA) | NR/Aa3 | 210,000 | 210,760 | |||||
Louisiana Public Facilities Authority, 5.72% due 7/1/2015 (Insured: CIFG) | BBB-/Baa3 | 2,370,000 | 2,153,406 | |||||
Maine Finance Authority Waste Motor Oil, 4.55% due 10/1/2014 | A/NR | 1,855,000 | 1,889,726 | |||||
a Midwest Family Housing, 5.168% due 7/1/2016 | NR/NR | 1,535,000 | 1,260,250 | |||||
Mississippi Development Bank Special Obligation Refinance Harrison County B, 5.21% due | ||||||||
7/1/2013 (Insured: FSA) | AAA/NR | 1,200,000 | 1,309,176 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
Issuer-Description | Credit Rating† Moody’s/S&P | Principal Amount | Value | |||||
Missouri State Development Finance Board, 5.45% due 3/1/2011 (Crackerneck Creek) | A+/NR | $ | 1,090,000 | $ | 1,134,679 | |||
Montgomery County Maryland Revenue Authority, 5.00% due 2/15/2012 | AA+/Aa2 | 100,000 | 106,656 | |||||
New Jersey Health Care Facilities Financing, 10.75% due 7/1/2010 (ETM) | NR/NR | 110,000 | 116,636 | |||||
New Jersey Health Care Facilities Financing, 7.70% due 7/1/2011 (Insured: Connie Lee) | NR/NR | 50,000 | 52,787 | |||||
New Mexico Mtg Finance Authority SFMR, 5.77% due 1/1/2016 (GNMA/FNMA/FHLMC) | AAA/NR | 910,000 | 980,006 | |||||
New Mexico Mtg Finance Authority Taxable, 5.00% due 7/1/2025 | AAA/NR | 1,000,000 | 984,110 | |||||
New Rochelle New York Industrial Development Agency, 7.15% due 10/1/2014 (LOC: Bank of New York) | NR/Aaa | 275,000 | 285,497 | |||||
New York State Urban Development Corp., 4.75% due 12/15/2011 | AAA/NR | 1,400,000 | 1,483,944 | |||||
Newark New Jersey, 4.70% due 4/1/2011 (Insured: Natl-Re) | NR/A1 | 845,000 | 841,721 | |||||
Newark New Jersey, 4.90% due 4/1/2012 (Insured: Natl-Re) | NR/A1 | 1,225,000 | 1,211,905 | |||||
Niagara Falls New York Public Water, 4.30% due 7/15/2010 (Insured: Natl-Re) | A/Baa1 | 360,000 | 362,102 | |||||
e North Carolina Eastern Municipal Power, 4.43% due 1/1/2014 | A-/Baa1 | 2,000,000 | 2,029,300 | |||||
Oakland California Redevelopment Agency, 8.00% due 9/1/2016 | A-/NR | 4,200,000 | 4,266,864 | |||||
Ohio Housing Financing Agency Mtg, 5.20% due 9/1/2014 (GNMA/FNMA) | NR/Aaa | 2,395,000 | 2,561,500 | |||||
Ohio State Solid Waste, 4.25% due 4/1/2033 (Republic Services) | BBB/NR | 1,000,000 | 980,340 | |||||
Ohio State Taxable Development Assistance, 4.88% due 10/1/2011 (Insured: Natl-Re) | AA/Aa3 | 550,000 | 576,406 | |||||
Pasadena California Pension Funding, 7.33% due 5/15/2022 | AA+/NR | 2,000,000 | 2,273,800 | |||||
Pennsylvania Economic Development, 4.70% due 11/1/2021 (Waste Management) | BBB/NR | 2,250,000 | 2,318,625 | |||||
Port Walla Walla Washington Revenue, 5.30% due 12/1/2009 | NR/NR | 235,000 | 235,028 | |||||
Redlands California Redevelopment Agency, 5.818% due 8/1/2022 (Insured: AMBAC) | BBB+/NR | 2,715,000 | 2,420,477 | |||||
Riverside California Sewer Revenue, 5.61% due 8/1/2017 | AA/A1 | 2,000,000 | 2,139,660 | |||||
Santa Fe County New Mexico Charter School Taxable, 7.55% due 1/15/2010 (ATC Foundation) | NR/NR | 85,000 | 83,821 | |||||
Springfield Ohio City School District Tax Anticipation Notes, 6.35% due 12/1/2010 (Insured: AMBAC) | NR/NR | 1,400,000 | 1,437,772 | |||||
Springfield Ohio City School District Tax Anticipation Notes, 6.40% due 12/1/2011 (Insured: AMBAC) | NR/NR | 1,500,000 | 1,553,325 | |||||
Tazewell County Illinois Community High School, 5.20% due 12/1/2011 (Insured: FSA) | NR/Aa3 | 355,000 | 380,691 | |||||
Tennessee State Taxable, 6.00% due 2/1/2013 | AA+/Aa1 | 500,000 | 542,050 | |||||
Texas Tech University, 6.00% due 8/15/2011 (Insured: Natl-Re) | AA/Aa3 | 245,000 | 260,117 | |||||
Victor New York, 9.20% due 5/1/2014 | NR/NR | 1,085,000 | 1,111,279 | |||||
Wisconsin State General Revenue, 4.80% due 5/1/2013 (Insured: FSA) | AAA/Aa3 | 200,000 | 217,472 | |||||
Wisconsin State Health & Educational Facilities, 7.08% due 6/1/2016 (Insured: ACA) | NR/NR | 2,320,000 | 2,013,458 | |||||
TOTAL MUNICIPAL BONDS (Cost $56,449,411) | 57,475,970 | |||||||
SHORT TERM INVESTMENTS — 3.40% | ||||||||
Chicago GO, 0.50% due 1/1/2040 put 10/7/2009 (Insured: FSA/SPA-Dexia Credit Local) (weekly demand notes) | AAA/Aa3 | 6,000,000 | 6,000,000 | |||||
Devon Energy Corp., 0.20% due 10/1/2009 | NR/NR | 11,600,000 | 11,600,000 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $17,600,000) | 17,600,000 | |||||||
TOTAL INVESTMENTS — 97.95% (Cost $489,709,120) | $ | 506,662,973 | ||||||
OTHER ASSETS LESS LIABILITIES — 2.05% | 10,617,755 | |||||||
NET ASSETS — 100.00% | $ | 517,280,728 | ||||||
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
Footnote Legend
a | 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, 2009, the aggregate value of these securities in the Fund’s portfolio was $96,927,536, representing 18.75% of the Fund’s net assets. |
b | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
c | Yankee Bond – Denominated in U.S. dollars and publicly issued in the U.S. by foreign banks and corporations. |
d | Private Placement. |
e | When-issued security. |
f | Bond in default. |
g | Non-income producing. |
h | Segregated as collateral for a when-issued security. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
AMT | Alternative Minimum Tax | |
CIFG | CIFG Assurance North America Inc. | |
CMO | Collateralized Mortgage Obligation | |
CPI | Consumer Price Index | |
Cupids | Cumulative Undivided Preferred Interests In Debt Securities | |
ETM | Escrowed to Maturity | |
FCB | Farm Credit Bank | |
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. | |
GO | General Obligation | |
IDA | Industrial Development Authority | |
LOC | Letter of Credit | |
Mtg | Mortgage | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
SFMR | Single Family Mortgage Revenue Bond |
See notes to financial statements
Certified Annual Report 23
STATEMENTS OF ASSETS AND LIABILITIES | ||
Thornburg Limited Term Income Funds | September 30, 2009 |
Thornburg Limited Term U.S. Government Fund | Thornburg Limited Term Income Fund | ||||||
ASSETS | |||||||
Investments at value (cost $237,564,206 and $489,709,120) (Note 2) | $ | 246,690,575 | $ | 506,662,973 | |||
Cash | 12,892,762 | 444,487 | |||||
Receivable for investments sold | — | 2,053,039 | |||||
Principal receivable | 1,030 | — | |||||
Receivable for fund shares sold | 1,718,432 | 6,979,763 | |||||
Interest receivable | 1,421,507 | 5,707,150 | |||||
Prepaid expenses and other assets | 87,555 | 37,033 | |||||
Total Assets | 262,811,861 | 521,884,445 | |||||
LIABILITIES | |||||||
Payable for securities purchased | — | 2,998,070 | |||||
Payable for fund shares redeemed | 1,098,712 | 775,438 | |||||
Payable to investment advisor and other affiliates (Note 3) | 175,474 | 287,670 | |||||
Accounts payable and accrued expenses | — | 97,968 | |||||
Dividends payable | 164,366 | 444,571 | |||||
Total Liabilities | 1,438,552 | 4,603,717 | |||||
NET ASSETS | $ | 261,373,309 | $ | 517,280,728 | |||
NET ASSETS CONSIST OF: | |||||||
Undistributed/Distribution in excess of net investment income | $ | 298,159 | $ | (41,874 | ) | ||
Net unrealized appreciation on investments | 9,126,369 | 16,953,853 | |||||
Accumulated net realized gain (loss) | 1,202,117 | (3,496,872 | ) | ||||
Net capital paid in on shares of beneficial interest | 250,746,664 | 503,865,621 | |||||
$ | 261,373,309 | $ | 517,280,728 | ||||
24 Certified Annual Report
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 |
NET ASSET VALUE: | ||||||
Class A Shares: | ||||||
Net asset value and redemption price per share ($142,872,103 and $243,141,450 applicable to 10,366,473 and 18,974,705 shares of beneficial interest outstanding - Note 4) | $ | 13.78 | $ | 12.81 | ||
Maximum sales charge, 1.50% of offering price | 0.21 | 0.20 | ||||
Maximum offering price per share | $ | 13.99 | $ | 13.01 | ||
Class B Shares: | ||||||
Net asset value and offering price per share * ($5,949,666 applicable to 432,667 shares of beneficial interest outstanding - Note 4) | $ | 13.75 | $ | — | ||
Class C Shares: | ||||||
Net asset value and offering price per share * ($80,038,959 and $117,949,626 applicable to 5,772,707 and 9,219,527 shares of beneficial interest outstanding - Note 4) | $ | 13.87 | $ | 12.79 | ||
Class I Shares: | ||||||
Net asset value, offering and redemption price per share ($24,887,127 and $146,099,115 applicable to 1,805,972 and 11,399,539 shares of beneficial interest outstanding - Note 4) | $ | 13.78 | $ | 12.82 | ||
Class R3 Shares: | ||||||
Net asset value, offering and redemption price per share ($7,625,454 and $10,090,537 applicable to 553,005 and 786,930 shares of beneficial interest outstanding - Note 4) | $ | 13.79 | $ | 12.82 | ||
* | 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 25
STATEMENTS OF OPERATIONS | ||
Thornburg Limited Term Income Funds | Year Ended September 30, 2009 |
Thornburg Limited Term U.S. Government Fund | Thornburg Limited Term Income Fund | |||||||
INVESTMENT INCOME: | ||||||||
Interest income (net of premium amortized of $718,300 and $312,623) | $ | 10,933,046 | $ | 22,339,841 | ||||
EXPENSES: | ||||||||
Investment advisory fees (Note 3) | 1,034,391 | 1,849,196 | ||||||
Administration fees (Note 3) | ||||||||
Class A Shares | 188,126 | 208,584 | ||||||
Class B Shares | 8,243 | — | ||||||
Class C Shares | 110,894 | 96,679 | ||||||
Class I Shares | 11,361 | 58,238 | ||||||
Class R3 Shares | 9,131 | 11,455 | ||||||
Distribution and service fees (Note 3) | ||||||||
Class A Shares | 376,252 | 417,168 | ||||||
Class B Shares | 65,924 | — | ||||||
Class C Shares | 888,663 | 770,923 | ||||||
Class R3 Shares | 36,538 | 45,850 | ||||||
Transfer agent fees | ||||||||
Class A Shares | 145,652 | 148,986 | ||||||
Class B Shares | 14,210 | — | ||||||
Class C Shares | 107,315 | 90,075 | ||||||
Class I Shares | 22,903 | 67,144 | ||||||
Class R3 Shares | 7,227 | 9,718 | ||||||
Registration and filing fees | ||||||||
Class A Shares | 25,711 | 24,760 | ||||||
Class B Shares | 16,501 | — | ||||||
Class C Shares | 23,314 | 18,033 | ||||||
Class I Shares | 16,624 | 22,226 | ||||||
Class R3 Shares | 16,962 | 17,463 | ||||||
Custodian fees (Note 3) | 80,643 | 96,717 | ||||||
Professional fees | 40,437 | 45,461 | ||||||
Accounting fees | 14,485 | 16,927 | ||||||
Trustee fees | 10,535 | 13,742 | ||||||
Other expenses | 54,480 | 42,500 | ||||||
Total Expenses | 3,326,522 | 4,071,845 | ||||||
Less: | ||||||||
Expenses reimbursed by investment advisor (Note 3) | (37,407 | ) | (214,467 | ) | ||||
Distribution fees waived (Note 3) | (444,331 | ) | (385,461 | ) | ||||
Fees paid indirectly (Note 3) | (19,576 | ) | (1,541 | ) | ||||
Net Expenses | 2,825,208 | 3,470,376 | ||||||
Net Investment Income | $ | 8,107,838 | $ | 18,869,465 | ||||
26 Certified Annual Report
STATEMENTS OF OPERATIONS, CONTINUED | ||
Thornburg Limited Term Income Funds | Year Ended September 30, 2009 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||||
Net realized gain (loss) on investments | $ | 3,084,641 | $ | 3,552,821 | ||
Net change in unrealized appreciation (depreciation) of investments | 7,426,220 | 29,669,097 | ||||
Net Realized and Unrealized Gain | 10,510,861 | 33,221,918 | ||||
Net Increase in Net Assets Resulting From Operations | $ | 18,618,699 | $ | 52,091,383 | ||
See notes to financial statements.
Certified Annual Report 27
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Limited Term U.S. Government Fund |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 8,107,838 | $ | 5,523,034 | ||||
Net realized gain (loss) on investments | 3,084,641 | 591,631 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 7,426,220 | 2,079,673 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 18,618,699 | 8,194,338 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (4,723,163 | ) | (3,449,329 | ) | ||||
Class B Shares | (135,559 | ) | (62,097 | ) | ||||
Class C Shares | (2,517,507 | ) | (1,141,337 | ) | ||||
Class I Shares | (773,676 | ) | (687,676 | ) | ||||
Class R3 Shares | (226,391 | ) | (182,595 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 13,712,593 | 30,152,088 | ||||||
Class B Shares | 559,853 | 2,522,111 | ||||||
Class C Shares | 12,728,762 | 38,094,236 | ||||||
Class I Shares | 2,724,836 | 5,016,787 | ||||||
Class R3 Shares | 992,513 | 1,881,814 | ||||||
Net Increase in Net Assets | 40,960,960 | 80,338,340 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 220,412,349 | 140,074,009 | ||||||
End of Year | $ | 261,373,309 | $ | 220,412,349 | ||||
Undistributed net investment income | $ | 298,159 | $ | 83,044 |
See notes to financial statements.
28 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Limited Term Income Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 18,869,465 | $ | 13,741,379 | ||||
Net realized gain (loss) on investments | 3,552,821 | (1,268,288 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 29,669,097 | (11,780,991 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 52,091,383 | 692,100 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (8,418,379 | ) | (6,044,314 | ) | ||||
Class C Shares | (3,707,522 | ) | (1,908,409 | ) | ||||
Class I Shares | (6,277,646 | ) | (5,435,409 | ) | ||||
Class R3 Shares | (465,918 | ) | (353,247 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 92,947,695 | (15,302,054 | ) | |||||
Class C Shares | 53,379,024 | 18,676,711 | ||||||
Class I Shares | 18,599,359 | 19,634,479 | ||||||
Class R3 Shares | (287,139 | ) | 3,948,966 | |||||
Net Increase in Net Assets | 197,860,857 | 13,908,823 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 319,419,871 | 305,511,048 | ||||||
End of Year | $ | 517,280,728 | $ | 319,419,871 | ||||
See notes to financial statements.
Certified Annual Report 29
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Income Funds | September 30, 2009 |
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 Funds are currently two of fifteen separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Funds’ primary objectives are to obtain as high a level of current income as is consistent, in the view of the Funds’ investment advisor, with the safety of capital. As a secondary objective, the Funds seek to reduce changes in their share prices compared to longer term portfolios.
The Government Fund currently offers five classes of shares of beneficial interest: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Class (Class R3) shares. The Income Fund currently offers four classes of shares of beneficial interest, Class A, Class C, Institutional Class (Class I), and Retirement Class (Class R3) shares. Each class of shares of 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 of purchase, 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, and 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 a 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.
Valuation Measurements: Various inputs are used in determining the value of each Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
30 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 |
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
GOVERNMENT FUND
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Investments in Securities | ||||||||||||
U.S. Treasury Securities | $ | 52,383,754 | $ | 52,383,754 | $ | — | $ | — | ||||
U.S. Government Agencies | 46,944,880 | — | 46,944,880 | — | ||||||||
Mortgage Backed | 147,361,941 | — | 147,361,941 | — | ||||||||
Total Investments in Securities | $ | 246,690,575 | $ | 52,383,754 | $ | 194,306,821 | $ | — |
INCOME FUND
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Investments in Securities | ||||||||||||
U.S. Treasury Securities | $ | 3,391,328 | $ | 3,391,328 | $ | — | $ | — | ||||
U.S. Government Agencies | 10,492,665 | — | 10,492,665 | — | ||||||||
Other Government | 5,826,681 | — | 5,826,681 | — | ||||||||
Mortgage Backed | 67,942,045 | — | 67,942,045 | — | ||||||||
Asset Backed Securities | 24,074,652 | — | 24,074,652 | — | ||||||||
Corporate Bonds | 319,859,632 | — | 319,859,632 | — | ||||||||
Municipal Bonds | 57,475,970 | — | 57,475,970 | — | ||||||||
Short Term Investments | 17,600,000 | — | 17,600,000 | — | ||||||||
Total Investments in Securities | $ | 506,662,973 | $ | 3,391,328 | $ | 503,271,645 | $ | — |
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 to shareholders substantially all taxable income, including any net realized gain on investments of the Funds. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Funds may engage in when-issued or delayed delivery transactions. To the extent a Fund 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 a Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining the 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 each 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 Funds at net asset value per share at the close of business
Certified Annual Report 31
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 |
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 Translation: 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, 2009, 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, 2009, the Advisor voluntarily reimbursed certain class specific expenses and administrative fees of $1,540, $4,113, $1,968 and $29,786 for the Class B, C, I and R3 shares, respectively, of the Government Fund and $81,041, $65,250, $23,353, and $44,823 for the Class A, C, I, and R3 shares, respectively, of the Income Fund.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of each Fund’s shares. For the year ended September 30, 2009, the Distributor has advised the Funds that they earned net commissions aggregating $1,520 from the sale of Class A shares of the Government Fund, $2,934 from the sale of Class A
32 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 |
shares of the Income Fund, and collected contingent deferred sales charges aggregating $25,840 and $16,223 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, Class I, 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, 2009, are set forth in the Statements of Operations. Distribution fees of $444,331 and $385,461, 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, 2009, fees paid indirectly were $19,576 for the Government Fund and $1,541 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, 2009, 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, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 7,044,523 | $ | 95,215,680 | 4,369,558 | $ | 58,069,047 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 279,701 | 3,808,354 | 211,200 | 2,798,238 | ||||||||||
Shares repurchased | (6,282,151 | ) | (85,311,441 | ) | (2,318,228 | ) | (30,715,197 | ) | ||||||
Net Increase (Decrease) | 1,042,073 | $ | 13,712,593 | 2,262,530 | $ | 30,152,088 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 293,980 | $ | 3,952,703 | 287,259 | $ | 3,815,622 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 8,315 | 113,015 | 3,540 | 46,773 | ||||||||||
Shares repurchased | (258,733 | ) | (3,505,865 | ) | (101,549 | ) | (1,340,284 | ) | ||||||
Net Increase (Decrease) | 43,562 | $ | 559,853 | 189,250 | $ | 2,522,111 | ||||||||
Certified Annual Report 33
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 |
GOVERNMENT FUND
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 5,398,545 | $ | 73,120,285 | 4,329,138 | $ | 57,987,683 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 132,715 | 1,818,052 | 65,290 | 870,692 | ||||||||||
Shares repurchased | (4,556,448 | ) | (62,209,575 | ) | (1,556,409 | ) | (20,764,139 | ) | ||||||
Net Increase (Decrease) | 974,812 | $ | 12,728,762 | 2,838,019 | $ | 38,094,236 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 1,353,081 | $ | 18,389,155 | 922,038 | $ | 12,250,106 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 35,061 | 476,842 | 39,092 | 517,921 | ||||||||||
Shares repurchased | (1,186,944 | ) | (16,141,161 | ) | (587,596 | ) | (7,751,240 | ) | ||||||
Net Increase (Decrease) | 201,198 | $ | 2,724,836 | 373,534 | $ | 5,016,787 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 414,219 | $ | 5,628,281 | 265,853 | $ | 3,540,253 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 16,151 | 220,135 | 13,376 | 177,342 | ||||||||||
Shares repurchased | (357,273 | ) | (4,855,903 | ) | (138,318 | ) | (1,835,781 | ) | ||||||
Net Increase (Decrease) | 73,097 | $ | 992,513 | 140,911 | $ | 1,881,814 | ||||||||
INCOME FUND | ||||||||||||||
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 11,110,221 | $ | 133,515,913 | 4,077,504 | $ | 50,782,602 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 557,688 | 6,698,514 | 382,187 | 4,756,794 | ||||||||||
Shares repurchased | (3,969,959 | ) | (47,266,732 | ) | (5,687,221 | ) | (70,841,450 | ) | ||||||
Net Increase (Decrease) | 7,697,950 | $ | 92,947,695 | (1,227,530 | ) | $ | (15,302,054 | ) | ||||||
Class C Shares | ||||||||||||||
Shares sold | 6,724,821 | $ | 80,629,530 | 2,478,217 | $ | 30,760,300 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 218,899 | 2,628,336 | 109,746 | 1,362,431 | ||||||||||
Shares repurchased | (2,524,932 | ) | (29,878,842 | ) | (1,080,947 | ) | (13,446,020 | ) | ||||||
Net Increase (Decrease) | 4,418,788 | $ | 53,379,024 | 1,507,016 | $ | 18,676,711 | ||||||||
Class I Shares | ||||||||||||||
Shares sold | 5,532,405 | $ | 66,543,531 | 4,178,477 | $ | 52,176,888 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 414,485 | 4,961,968 | 358,454 | 4,462,198 | ||||||||||
Shares repurchased | (4,467,592 | ) | (52,906,140 | ) | (2,966,749 | ) | (37,004,607 | ) | ||||||
Net Increase (Decrease) | 1,479,298 | $ | 18,599,359 | 1,570,182 | $ | 19,634,479 | ||||||||
34 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 |
INCOME FUND
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 492,247 | $ | 5,906,665 | 538,236 | $ | 6,722,392 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 35,956 | 429,574 | 24,032 | 298,513 | ||||||||||
Shares repurchased | (555,753 | ) | (6,623,378 | ) | (246,888 | ) | (3,071,939 | ) | ||||||
Net Increase (Decrease) | (27,550 | ) | $ | (287,139 | ) | 315,380 | $ | 3,948,966 | ||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2009, the Government Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $155,140,171 and $101,876,153, respectively, while the Income Fund had purchase and sale transactions of investment securities (excluding short-term investments and U.S. Government obligations) of $261,093,793 and $153,637,873, respectively and purchase and sale of long-term U.S. Government obligations of $58,644,344 and 8,973,657, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Government Fund | Income Fund | |||||||
Cost of investments for tax purposes | $ | 237,564,206 | $ | 489,739,814 | ||||
Gross unrealized appreciation on a tax basis | $ | 9,251,553 | $ | 27,473,778 | ||||
Gross unrealized depreciation on a tax basis | (125,184 | ) | (10,550,619 | ) | ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 9,126,369 | $ | 16,923,159 | ||||
Distributable earnings ordinary income (tax basis) | $ | 470,177 | $ | 402,697 | ||||
Distributable capital gains | $ | 1,202,117 | $ | — |
The Government Fund utilized $1,409,057 capital loss carryforwards during the year ended September 30, 2009.
The Income Fund utilized $3,079,289 capital loss carryforwards during the year ended September 30, 2009 and deferred tax basis capital losses occurring subsequent to October 31, 2008 of $821,633. For tax purposes, such losses will be reflected in the year ending September 30, 2010. Unutilized tax basis capital losses may be carried forward to offset realized gains in future years. To the extent such carryforwards are used, capital gains distributions may be reduced to the extent provided by regulations.
At September 30, 2009, the Income Fund had tax basis capital losses, which may be carried forward to offset future capital gains. Such capital loss carryforwards expire as follows:
2014 | $ | 107,356 | |
2015 | 178,155 | ||
2016 | 2,359,034 | ||
$ | 2,644,545 | ||
In order to account for book/tax differences, the Government Fund increased undistributed net investment income by $483,573 decreased accumulated net realized gain by $473,467 and decreased net capital paid in on shares of beneficial interest by $10,106. The Income Fund decreased undistributed net investment loss by $56,980 and increased accumulated net realized loss by $56,980. This
Certified Annual Report 35
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 |
reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from paydown gains and losses, which are recorded as an adjustment to interest income in the financial statements and as realized gains in the tax returns.
For tax purposes, distributions for the years ended September 30, 2009 and September 30, 2008, were paid from ordinary income.
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
36 Certified Annual Report
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.26 | $ | 12.97 | $ | 12.75 | $ | 12.76 | $ | 13.01 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.41 | 0.45 | 0.40 | 0.37 | 0.32 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.54 | 0.29 | 0.23 | (0.01 | ) | (0.24 | ) | |||||||||||||
Total from investment operations | 0.95 | 0.74 | 0.63 | 0.36 | 0.08 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.43 | ) | (0.45 | ) | (0.41 | ) | (0.37 | ) | (0.33 | ) | ||||||||||
Change in net asset value | 0.52 | 0.29 | 0.22 | (0.01 | ) | (0.25 | ) | |||||||||||||
NET ASSET VALUE, end of year | $ | 13.78 | $ | 13.26 | $ | 12.97 | $ | 12.75 | $ | 12.76 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 7.21 | 5.75 | 5.03 | 2.87 | 0.66 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.04 | 3.39 | 3.13 | 2.90 | 2.50 | |||||||||||||||
Expenses, after expense reductions (%) | 0.94 | 0.95 | 0.98 | 0.99 | 0.99 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.93 | 0.93 | 0.97 | 0.96 | 0.98 | |||||||||||||||
Expenses, before expense reductions (%) | 0.94 | 0.95 | 0.99 | 0.99 | 0.99 | |||||||||||||||
Portfolio turnover rate (%) | 39.42 | 19.61 | 43.35 | 7.47 | 18.00 | |||||||||||||||
Net assets at end of year (thousands) | $ | 142,872 | $ | 123,625 | $ | 91,561 | $ | 106,913 | $ | 138,422 |
(a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
Certified Annual Report 37
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, | ||||||||||||||||||||
Class B Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.23 | $ | 12.94 | $ | 12.72 | $ | 12.73 | $ | 12.98 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.27 | 0.28 | 0.22 | 0.18 | 0.13 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.53 | 0.28 | 0.23 | (0.01 | ) | (0.24 | ) | |||||||||||||
Total from investment operations | 0.80 | 0.56 | 0.45 | 0.17 | (0.11 | ) | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.28 | ) | (0.27 | ) | (0.23 | ) | (0.18 | ) | (0.14 | ) | ||||||||||
Change in net asset value | 0.52 | 0.29 | 0.22 | (0.01 | ) | (0.25 | ) | |||||||||||||
NET ASSET VALUE, end of year | $ | 13.75 | $ | 13.23 | $ | 12.94 | $ | 12.72 | $ | 12.73 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 6.08 | 4.37 | 3.55 | 1.32 | (0.82 | ) | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 1.96 | 2.08 | 1.73 | 1.41 | 1.03 | |||||||||||||||
Expenses, after expense reductions (%) | 2.01 | 2.26 | 2.40 | 2.51 | 2.46 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.01 | 2.25 | 2.39 | 2.48 | 2.45 | |||||||||||||||
Expenses, before expense reductions (%) | 2.04 | 2.26 | 2.63 | 3.21 | 2.86 | |||||||||||||||
Portfolio turnover rate (%) | 39.42 | 19.61 | 43.35 | 7.47 | 18.00 | |||||||||||||||
Net assets at end of year (thousands) | $ | 5,950 | $ | 5,147 | $ | 2,586 | $ | 2,476 | $ | 1,875 |
See notes to financial statements.
38 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Limited Term U.S. Government Fund
Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.34 | $ | 13.04 | $ | 12.83 | $ | 12.84 | $ | 13.09 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.37 | 0.41 | 0.37 | 0.34 | 0.29 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.55 | 0.30 | 0.22 | (0.01 | ) | (0.24 | ) | |||||||||||||
Total from investment operations | 0.92 | 0.71 | 0.59 | 0.33 | 0.05 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.39 | ) | (0.41 | ) | (0.38 | ) | (0.34 | ) | (0.30 | ) | ||||||||||
Change in net asset value | 0.53 | 0.30 | 0.21 | (0.01 | ) | (0.25 | ) | |||||||||||||
NET ASSET VALUE, end of year | $ | 13.87 | $ | 13.34 | $ | 13.04 | $ | 12.83 | $ | 12.84 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 6.97 | 5.51 | 4.66 | 2.60 | 0.41 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 2.74 | 3.10 | 2.88 | 2.63 | 2.24 | |||||||||||||||
Expenses, after expense reductions (%) | 1.22 | 1.24 | 1.25 | 1.26 | 1.25 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.21 | 1.22 | 1.24 | 1.23 | 1.24 | |||||||||||||||
Expenses, before expense reductions (%) | 1.72 | 1.75 | 1.80 | 1.79 | 1.79 | |||||||||||||||
Portfolio turnover rate (%) | 39.42 | 19.61 | 43.35 | 7.47 | 18.00 | |||||||||||||||
Net assets at end of year (thousands) | $ | 80,039 | $ | 63,998 | $ | 25,566 | $ | 25,132 | $ | 32,821 |
See notes to financial statements.
Certified Annual Report 39
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund |
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.26 | $ | 12.97 | $ | 12.75 | $ | 12.76 | $ | 13.01 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.45 | 0.49 | 0.44 | 0.41 | 0.36 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.53 | 0.29 | 0.23 | (0.01 | ) | (0.24 | ) | |||||||||||||
Total from investment operations | 0.98 | 0.78 | 0.67 | 0.40 | 0.12 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.46 | ) | (0.49 | ) | (0.45 | ) | (0.41 | ) | (0.37 | ) | ||||||||||
Change in net asset value | 0.52 | 0.29 | 0.22 | (0.01 | ) | (0.25 | ) | |||||||||||||
NET ASSET VALUE, end of year | $ | 13.78 | $ | 13.26 | $ | 12.97 | $ | 12.75 | $ | 12.76 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 7.51 | 6.06 | 5.35 | 3.19 | 0.95 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.31 | 3.68 | 3.45 | 3.22 | 2.82 | |||||||||||||||
Expenses, after expense reductions (%) | 0.66 | 0.66 | 0.68 | 0.68 | 0.68 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.66 | 0.64 | 0.67 | 0.65 | 0.67 | |||||||||||||||
Expenses, before expense reductions (%) | 0.67 | 0.67 | 0.74 | 0.78 | 0.80 | |||||||||||||||
Portfolio turnover rate (%) | 39.42 | 19.61 | 43.35 | 7.47 | 18.00 | |||||||||||||||
Net assets at end of year (thousands) | $ | 24,887 | $ | 21,275 | $ | 15,963 | $ | 14,900 | $ | 16,075 |
See notes to financial statements.
40 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund |
Year Ended September 30, | ||||||||||||||||||||
Class R3 Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.27 | $ | 12.97 | $ | 12.76 | $ | 12.77 | $ | 13.02 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.41 | 0.44 | 0.40 | 0.37 | 0.34 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.53 | 0.30 | 0.22 | (0.01 | ) | (0.25 | ) | |||||||||||||
Total from investment operations | 0.94 | 0.74 | 0.62 | 0.36 | 0.09 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.42 | ) | (0.44 | ) | (0.41 | ) | (0.37 | ) | (0.34 | ) | ||||||||||
Change in net asset value | 0.52 | 0.30 | 0.21 | (0.01 | ) | (0.25 | ) | |||||||||||||
NET ASSET VALUE, end of year | $ | 13.79 | $ | 13.27 | $ | 12.97 | $ | 12.76 | $ | 12.77 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 7.15 | 5.77 | 4.93 | 2.86 | 0.72 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 3.00 | 3.33 | 3.15 | 2.90 | 2.66 | |||||||||||||||
Expenses, after expense reductions (%) | 1.00 | 1.01 | 1.00 | 1.00 | 0.93 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.99 | 0.97 | 0.91 | |||||||||||||||
Expenses, before expense reductions (%) | 1.40 | 1.47 | 1.64 | 1.55 | 3.55 | |||||||||||||||
Portfolio turnover rate (%) | 39.42 | 19.61 | 43.35 | 7.47 | 18.00 | |||||||||||||||
Net assets at end of year (thousands) | $ | 7,625 | $ | 6,367 | $ | 4,398 | $ | 3,591 | $ | 3,008 |
See notes to financial statements.
Certified Annual Report 41
FINANCIAL HIGHLIGHTS | ||
Thornburg Limited Term Income Fund |
Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.92 | $ | 12.40 | $ | 12.37 | $ | 12.51 | $ | 12.80 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.60 | 0.55 | 0.50 | 0.50 | 0.46 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.90 | (0.48 | ) | 0.04 | (0.14 | ) | (0.28 | ) | ||||||||||||
Total from investment operations | 1.50 | 0.07 | 0.54 | 0.36 | 0.18 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.61 | ) | (0.55 | ) | (0.51 | ) | (0.50 | ) | (0.47 | ) | ||||||||||
Change in net asset value | 0.89 | (0.48 | ) | 0.03 | (0.14 | ) | (0.29 | ) | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.81 | $ | 11.92 | $ | 12.40 | $ | 12.37 | $ | 12.51 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 13.05 | 0.44 | 4.43 | 2.96 | 1.44 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 5.04 | 4.38 | 4.07 | 4.05 | 3.52 | |||||||||||||||
Expenses, after expense reductions (%) | 0.99 | 0.99 | 1.00 | 1.00 | 1.00 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.99 | 0.99 | 0.99 | |||||||||||||||
Expenses, before expense reductions (%) | 1.04 | 1.03 | 1.08 | 1.09 | 1.09 | |||||||||||||||
Portfolio turnover rate (%) | 45.31 | 42.84 | 41.55 | 6.77 | 23.16 | |||||||||||||||
Net assets at end of year (thousands) | $ | 243,141 | $ | 134,372 | $ | 155,021 | $ | 190,670 | $ | 212,881 |
(a) | Sales loads are not reflected in computing total return. |
See notes to financial statements.
42 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Limited Term Income Fund |
Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.90 | $ | 12.38 | $ | 12.35 | $ | 12.49 | $ | 12.78 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.57 | 0.52 | 0.47 | 0.47 | 0.43 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.90 | (0.49 | ) | 0.03 | (0.14 | ) | (0.28 | ) | ||||||||||||
Total from investment operations | 1.47 | 0.03 | 0.50 | 0.33 | 0.15 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.58 | ) | (0.51 | ) | (0.47 | ) | (0.47 | ) | (0.44 | ) | ||||||||||
Change in net asset value | 0.89 | (0.48 | ) | 0.03 | (0.14 | ) | (0.29 | ) | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.79 | $ | 11.90 | $ | 12.38 | $ | 12.35 | $ | 12.49 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 12.78 | 0.18 | 4.17 | 2.71 | 1.19 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 4.79 | 4.15 | 3.82 | 3.79 | 3.27 | |||||||||||||||
Expenses, after expense reductions (%) | 1.24 | 1.24 | 1.24 | 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 (%) | 1.82 | 1.83 | 1.89 | 1.87 | 1.88 | |||||||||||||||
Portfolio turnover rate (%) | 45.31 | 42.84 | 41.55 | 6.77 | 23.16 | |||||||||||||||
Net assets at end of year (thousands) | $ | 117,950 | $ | 57,114 | $ | 40,769 | $ | 44,361 | $ | 59,355 |
See notes to financial statements.
Certified Annual Report 43
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Limited Term Income Fund |
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.92 | $ | 12.40 | $ | 12.37 | $ | 12.51 | $ | 12.80 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.64 | 0.59 | 0.54 | 0.54 | 0.51 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.90 | (0.48 | ) | 0.04 | (0.14 | ) | (0.29 | ) | ||||||||||||
Total from investment operations | 1.54 | 0.11 | 0.58 | 0.40 | 0.22 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.64 | ) | (0.59 | ) | (0.55 | ) | (0.54 | ) | (0.51 | ) | ||||||||||
Change in net asset value | 0.90 | (0.48 | ) | 0.03 | (0.14 | ) | (0.29 | ) | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.82 | $ | 11.92 | $ | 12.40 | $ | 12.37 | $ | 12.51 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 13.50 | 0.77 | 4.76 | 3.30 | 1.77 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 5.39 | 4.72 | 4.39 | 4.38 | 3.85 | |||||||||||||||
Expenses, after expense reductions (%) | 0.66 | 0.66 | 0.67 | 0.68 | 0.67 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.66 | 0.66 | 0.67 | 0.67 | 0.67 | |||||||||||||||
Expenses, before expense reductions (%) | 0.68 | 0.67 | 0.72 | 0.72 | 0.72 | |||||||||||||||
Portfolio turnover rate (%) | 45.31 | 42.84 | 41.55 | 6.77 | 23.16 | |||||||||||||||
Net assets at end of year (thousands) | $ | 146,099 | $ | 118,222 | $ | 103,530 | $ | 111,535 | $ | 99,396 |
See notes to financial statements.
44 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Limited Term Income Fund |
Year Ended September 30, | ||||||||||||||||||||
Class R3 Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.92 | $ | 12.40 | $ | 12.38 | $ | 12.52 | $ | 12.81 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.61 | 0.55 | 0.50 | 0.50 | 0.48 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.90 | (0.48 | ) | 0.03 | (0.14 | ) | (0.30 | ) | ||||||||||||
Total from investment operations | 1.51 | 0.07 | 0.53 | 0.36 | 0.18 | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.61 | ) | (0.55 | ) | (0.51 | ) | (0.50 | ) | (0.47 | ) | ||||||||||
Change in net asset value | 0.90 | (0.48 | ) | 0.02 | (0.14 | ) | (0.29 | ) | ||||||||||||
NET ASSET VALUE, end of year | $ | 12.82 | $ | 11.92 | $ | 12.40 | $ | 12.38 | $ | 12.52 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 13.13 | 0.44 | 4.34 | 2.97 | 1.43 | |||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 5.08 | 4.42 | 4.09 | 4.07 | 3.57 | |||||||||||||||
Expenses, after expense reductions (%) | 0.99 | 0.99 | 0.99 | 1.00 | 1.00 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.99 | 0.99 | 0.99 | |||||||||||||||
Expenses, before expense reductions (%) | 1.48 | 1.52 | 1.71 | 1.79 | 3.15 | |||||||||||||||
Portfolio turnover rate (%) | 45.31 | 42.84 | 41.55 | 6.77 | 23.16 | |||||||||||||||
Net assets at end of year (thousands) | $ | 10,091 | $ | 9,712 | $ | 6,191 | $ | 3,331 | $ | 2,162 |
See notes to financial statements.
Certified Annual Report 45
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, 2009, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
46 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Limited Term Income Funds | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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.
Beginning Account Value 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Limited Term U.S. Government Fund | |||||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,022.30 | $ | 4.86 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.26 | $ | 4.86 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,016.60 | $ | 10.49 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.66 | $ | 10.48 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,020.80 | $ | 6.34 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,023.80 | $ | 3.40 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.70 | $ | 3.40 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,022.20 | $ | 5.02 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 | |||
Limited Term Income Fund | |||||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,127.80 | $ | 5.33 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.06 | $ | 5.06 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,126.60 | $ | 6.58 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.88 | $ | 6.25 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,130.50 | $ | 3.56 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,021.72 | $ | 3.38 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,127.70 | $ | 5.28 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Thornburg Limited Term U.S. Government Fund expenses are equal to the annualized expense ratio for each class (A: 0.96%; B: 2.08%; C: 1.25%; I: 0.67%; R3: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
† | Thornburg Limited Term Income Fund expenses are equal to the annualized expense ratio for each class (A: 1.00%; C: 1.23%; I: 0.67%; R3: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Certified Annual Report 47
INDEX COMPARISON | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2009 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Limited Term U.S. Government Fund versus Barclays Capital Intermediate Government Bond Index
and Consumer Price Index (November 16, 1987 to September 30, 2009)
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 carry 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.
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (11/16/87) | 5.62 | % | 3.96 | % | 5.01 | % | 5.97 | % | ||||
B Shares (11/1/02) | 1.08 | % | 2.51 | % | — | 2.49 | % | |||||
C Shares (9/1/94) | 6.47 | % | 4.00 | % | 4.85 | % | 5.05 | % | ||||
I Shares (7/5/96) | 7.51 | % | 4.59 | % | 5.50 | % | 5.63 | % | ||||
R3 Shares (7/1/03) | 7.15 | % | 4.26 | % | — | 3.63 | % |
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.
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.
48 Certified Annual Report
INDEX COMPARISON | ||
Thornburg Limited Term Income Fund | September 30, 2009 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Limited Term Income Fund versus Barclays Capital Intermediate Government/Credit Index
and Consumer Price Index (October 1, 1992 to September 30, 2009)
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.
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (10/1/92) | 11.37 | % | 4.07 | % | 5.27 | % | 5.52 | % | ||||
C Shares (9/1/94) | 12.28 | % | 4.12 | % | 5.11 | % | 5.34 | % | ||||
I Shares (7/5/96) | 13.50 | % | 4.72 | % | 5.76 | % | 5.91 | % | ||||
R3 Shares (7/1/03) | 13.13 | % | 4.37 | % | — | 3.91 | % |
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.
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 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 breaks. The CPI is also known as the cost-of-living index.
Certified Annual Report 49
TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Income Funds | September 30, 2009 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
50 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 (Unaudited) |
Name, Age, | 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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report 51
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 (Unaudited) |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | Each Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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.
52 Certified Annual Report
OTHER INFORMATION | ||
Thornburg Limited Term Income Funds | September 30, 2009 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
The Trust has delegated to Thornburg Investment Management, Inc. (the “Advisor”) voting decisions respecting proxies for each of 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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s services and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees unanimously voted 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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the Fund’s investment objectives. In addition, the Trustees reviewed information specifically provided to them at their request in anticipation of their annual 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 U.S. government obligation 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 the challenges presented by these events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment policies.
Certified Annual Report 53
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 (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 observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
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, given the investment objectives of the Fund. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year compared favorably to the average return for the mutual fund category for which calendar year data was presented, that the Fund’s return had exceeded the average return of the same fund category in all but two of the preceding ten calendar years, and that the Fund’s returns fell within the top quartile of the same fund category for the one-year, three-year and five-year periods ended with the second quarter of the current year and fell within the top half of a second mutual fund category in the one-year period and in the top quartile in the three-year and five-year 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 obligation 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 comparable to 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 slightly higher than the median and comparable to the average expense ratios for the same fund group. The Trustees considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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, compliance and systems capabilities 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.
54 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 (Unaudited) |
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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees voted unanimously 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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the Fund’s investment objectives. In addition, the Trustees considered the information specifically provided to them at their request in anticipation of their annual 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 taxable fixed-income 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 the challenges presented by these events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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 observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns in most periods and performance in accordance with expectations over various periods, given the investment objectives of the Fund. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year compared favorably to the average return of the fixed-income mutual fund category for which calendar year data was presented, that the Fund’s returns had exceeded the average returns of the same fund category in most of the preceding ten calendar years, and that the Fund’s returns fell within the top quartile of the same fund category for the one-year, three-year and five-year periods ended with the second quarter of the current year and fell in the top half of a second mutual fund category in the one-year and three-year periods and in the top quartile in the five-year period. 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.
Certified Annual Report 55
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2009 (Unaudited) |
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 and comparable 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 median and average 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 considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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, compliance and systems capabilities 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.
56 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 22, 2009
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. 57
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58 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. 59
60 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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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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. | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources. | |||||
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TH076 |
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, 2009. 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. Bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. 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. Funds invested in mortgage backed securities may bear additional risk. Investments in lower rated and unrated bonds may be more sensitive to default, downgrades, and market volatility; these investments may also be less liquid than higher rated bonds. 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. Investments in equity securities are subject to additional risks, such as greater market fluctuations. Special risks may be associated with investments outside the United States, especially in emerging markets, including currency fluctuations, illiquidity and 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 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 shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | TSIAX | 885-215-228 | ||
Class C | TSICX | 885-215-210 | ||
Class I | TSIIX | 885-215-194 |
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.
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.
Duration – The weighted maturity of a bond’s cash flows. Duration measures the price sensitivity of a bond for a given change in interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
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.
This page is not part of the Annual Report. 3
Thornburg Strategic Income Fund
September 30, 2009
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.
4 Certified Annual Report
Jason Brady, CFA Co-Portfolio Manager | October 17, 2009 | |
Dear Fellow Shareholder: | ||
We are happy to present the Annual Report for the Thornburg Strategic Income Fund for the year ended September 30, 2009. The net asset value of a Class A share of the Fund increased $1.06 to $11.63 over the course of the past year. If you were invested for the entire period, you received dividends of 77.2 cents per share. If you reinvested your dividends, you received 79.6 cents per share. Please examine the accompanying financial statements for more detailed information. | ||
George Strickland Co-Portfolio Manager | Since the Fund’s inception, we have been navigating an environment of very high volatility in both the global fixed income and equity marketplaces. Going forward, we believe we are well positioned to continue to pursue the Fund’s primary goal, which is 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 18.67% (at NAV) over the course of the past year. A blended index of 80% of the Barclays Capital Aggregate Bond Index and 20% of the MSCI World Index produced an 8.61% 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 a 10.91% and 22.34% total return, respectively. These indices reflect no deduction for fees, expenses, or taxes.
The total return of the Fund was largely driven by investments in corporate bonds and, to a lesser extent, income-producing equities, currency movements, and mortgages. The scope of credit spread tightening that occurred in 2009 was only matched historically by the widening that occurred over the course of 2008. We believe that it is likely that the vast majority of that tightening move is behind us, but we are happy that the Fund was able to participate in that move to a significant degree, due in large part to investments we made during the darkest days of late 2008 and early 2009.
The current economic environment is still difficult, with tremendous uncertainty around the shape of any potential recovery. We believe that the U.S. recovery will be slow in coming, and slow when it gets here. Unemployment, consumer spending, and overall fiscal health will remain significant challenges to growth. Globally there are pockets of opportunity, though similar challenges remain in many areas such as the United Kingdom, developed Europe, and Japan. Developing markets may provide an engine for global growth, but a “this time is different” attitude has driven prices up, and complete decoupling seems unlikely. |
Certified Annual Report 5
Letter to Shareholders,
Continued
If spread tightening is largely at an end, performance from fixed income will come from the income qualities of those investments versus a potential for capital appreciation. While we have high hopes for our particular investments, as mentioned above, the economic landscape still looks fairly challenging. Saying that credit spreads, for example, will not continue to tighten aggressively is not to say that income-producing investments such as fixed income securities are likely to be poor performers. On the contrary, we believe that income-producing assets will continue to be in high demand going forward, and we are happy to be in a position to provide that income. We further believe that remaining invested in income-producing assets will be crucial to achieving interesting total returns, especially in an environment of slower growth. We also believe the Fund’s strategy to achieve income from a variety of different sources will be the support of strength and total return over time. In short, selectively investing in a range of high-quality companies and assets while keeping an eye on income production is this Fund’s strategy and a mindset which we believe will serve our shareholders well.
Thank you very much for investing in the Fund. We believe that the Thornburg Strategic Income 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, Inc. will continue to strive to chart a steady course in what continues to be a volatile marketplace.
Regards,
![]() | ![]() | |||
Jason Brady, CFA | George Strickland | |||
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.
6 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Strategic Income Fund | September 30, 2009 |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/09
Utilities | 13.4 | % | Miscellaneous | 1.1 | % | |||
Energy | 11.9 | % | Consumer Services | 1.1 | % | |||
Diversified Financials | 9.9 | % | Pharmaceuticals, Biotechnology & Life Sciences | 0.9 | % | |||
Telecommunication Services | 9.2 | % | Automobiles & Components | 0.8 | % | |||
Insurance | 8.8 | % | Health Care Equipment & Services | 0.6 | % | |||
Banks | 5.5 | % | Technology Hardware & Equipment | 0.3 | % | |||
Materials | 4.1 | % | Commercial & Professional Services | 0.3 | % | |||
Capital Goods | 4.0 | % | Other Non-Classified Securities: | |||||
Food, Beverage & Tobacco | 3.1 | % | Municipal Bonds | 3.9 | % | |||
Media | 3.1 | % | Asset Backed Securities | 2.9 | % | |||
Real Estate | 2.9 | % | U.S. Treasury Securities | 0.8 | % | |||
Retailing | 2.7 | % | U.S. Government Agencies | 0.5 | % | |||
Transportation | 2.1 | % | Mortgage Backed* | 0.0 | % | |||
Consumer Durables & Apparel | 1.7 | % | Other Assets & Cash Equivalents | 3.1 | % | |||
Semiconductors & Semiconductor Equipment | 1.3 | % | *Industry percentage was less than 0.1%. |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/09
United States | 77.0 | % | Canada | 0.5 | % | |||
Bermuda | 3.4 | % | Spain | 0.4 | % | |||
Australia | 2.5 | % | Cayman Islands | 0.4 | % | |||
Luxembourg | 1.8 | % | Germany | 0.4 | % | |||
Brazil | 1.5 | % | Belgium | 0.3 | % | |||
Italy | 1.3 | % | Malaysia | 0.2 | % | |||
Russia | 1.1 | % | Hong Kong | 0.1 | % | |||
United Kingdom | 1.1 | % | Greece | 0.1 | % | |||
United Arab Emirates | 1.0 | % | Singapore | 0.1 | % | |||
South Korea | 0.9 | % | Switzerland | 0.1 | % | |||
Trinidad and Tobago | 0.7 | % | Iceland* | 0.0 | % | |||
Mexico | 0.7 | % | Other Assets & Cash Equivalents | 3.1 | % | |||
China | 0.7 | % | *Country percentage was less than 0.1%. | |||||
Netherlands | 0.6 | % |
Certified Annual Report 7
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 7.80% | |||||
CONSUMER SERVICES — 0.30% | |||||
HOTELS, RESTAURANTS & LEISURE — 0.30% | |||||
Berjaya Sports Toto Berhad | 189,321 | $ | 242,326 | ||
OPAP SA | 8,300 | 214,009 | |||
456,335 | |||||
DIVERSIFIED FINANCIALS — 2.18% | |||||
CAPITAL MARKETS — 1.96% | |||||
Apollo Investment Corp. | 168,060 | 1,604,973 | |||
Prospect Capital Corp. | 131,433 | 1,407,648 | |||
DIVERSIFIED FINANCIAL SERVICES — 0.22% | |||||
a KKR Financial Holdings LLC | 73,000 | 337,260 | |||
3,349,881 | |||||
ENERGY — 0.95% | |||||
OIL, GAS & CONSUMABLE FUELS — 0.95% | |||||
Eni S.p.A. | 58,500 | 1,462,149 | |||
1,462,149 | |||||
INSURANCE — 0.13% | |||||
INSURANCE — 0.13% | |||||
Swiss Re | 4,400 | 198,622 | |||
198,622 | |||||
REAL ESTATE — 1.68% | |||||
REAL ESTATE INVESTMENT TRUSTS — 1.68% | |||||
Annaly Capital Management, Inc. | 72,900 | 1,322,406 | |||
Chimera Investment Corp. | 165,900 | 633,738 | |||
a Invesco Mortgage Capital | 29,000 | 633,650 | |||
2,589,794 | |||||
TELECOMMUNICATION SERVICES — 1.70% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.38% | |||||
France Telecom SA | 26,900 | 716,623 | |||
Telefonica SA | 21,500 | 593,216 | |||
Telstra Corp. Ltd. | 283,000 | 816,397 | |||
WIRELESS TELECOMMUNICATION SERVICES — 0.32% | |||||
Mobistar SA | 7,000 | 484,412 | |||
2,610,648 | |||||
TRANSPORTATION — 0.14% | |||||
TRANSPORTATION INFRASTRUCTURE — 0.14% | |||||
Hopewell Highway Infrastructure Ltd. | 359,000 | 220,031 | |||
220,031 | |||||
UTILITIES — 0.72% | |||||
ELECTRIC UTILITIES — 0.72% | |||||
E. ON AG | 13,100 | 555,543 | |||
Enel S.p.A. | 87,856 | 557,646 | |||
1,113,189 | |||||
TOTAL COMMON STOCK (Cost $11,894,784) | 12,000,649 | ||||
8 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
PREFERRED STOCK — 1.31% | ||||||
BANKS — 0.43% | ||||||
COMMERCIAL BANKS — 0.43% | ||||||
Huntington Bancshares Pfd, 8.50% | 750 | $ | 652,500 | |||
Webster Financial Corp. Pfd Series A, 8.50% | 15 | 12,281 | ||||
664,781 | ||||||
FOOD, BEVERAGE & TOBACCO — 0.33% | ||||||
FOOD PRODUCTS — 0.33% | ||||||
H.J. Heinz Finance Co. Pfd, 8.00% | 5 | 513,906 | ||||
513,906 | ||||||
INSURANCE — 0.55% | ||||||
INSURANCE — 0.55% | ||||||
Genworth Financial, Inc. Pfd Series A, 5.25% | 20,000 | 843,750 | ||||
843,750 | ||||||
TOTAL PREFERRED STOCK (Cost $2,051,575) | 2,022,437 | |||||
ASSET BACKED SECURITIES — 2.94% | ||||||
BANKS — 0.13% | ||||||
COMMERCIAL BANKS — 0.13% | ||||||
CW Capital Colbalt Series 2007-C2 Class A1, 5.064%, 9/15/2011 | $ | 23,299 | 23,637 | |||
Greenwich Capital Commercial Funding Corp. Series 2007-GG9 Class A1, 5.233%, 3/10/2039 | 25,957 | 26,356 | ||||
Wachovia Bank Commercial Mtg Trust Series 2007-C30 Class A1, 5.031%, 12/15/2043 | 21,921 | 22,202 | ||||
Wachovia Bank Commercial Mtg Trust Series 2007-C31 Class A1, 5.14%, 4/15/2047 | 12,825 | 12,998 | ||||
Wells Fargo Asset Securities Corp. Series 2005-AR1 Class B1, 4.531%, 2/25/2035 | 399,507 | 66,307 | ||||
Wells Fargo Asset Securities Corp. Series 2005-AR2 Class B1, 4.669%, 3/25/2035 | 395,172 | 51,864 | ||||
203,364 | ||||||
DIVERSIFIED FINANCIALS — 1.88% | ||||||
CAPITAL MARKETS — 0.97% | ||||||
Bear Stearns ARM Mtg Series 2003-6 Class 2B-1, 4.826%, 8/25/2033 | 929,402 | 413,108 | ||||
Bear Stearns Commercial Mtg Securities Series 2007-PW15 Class A1, 5.016%, 2/11/2044 | 3,591 | 3,614 | ||||
Bear Stearns Commercial Mtg Securities Series 2007-T26 Class A1, 5.145%, 1/12/2045 | 53,842 | 55,138 | ||||
Bear Stearns Commercial Mtg Securities Series 2007-T28 Class A1, 5.422%, 9/11/2042 | 25,105 | 25,967 | ||||
Commercial Mtg Series 2006-C8 Class A1, 5.108%, 12/10/2046 | 7,505 | 7,528 | ||||
Credit Suisse Mtg Capital Certificates Series 2007-C1 Class A1, 5.227%, 2/15/2040 | 17,356 | 17,677 | ||||
Credit Suisse Mtg Capital Certificates Series 2007-C2 Class A1, 5.269%, 1/15/2049 | 12,153 | 12,337 | ||||
Credit Suisse Mtg Capital Certificates Series 2007-C3 Class A1, 5.664%, 6/15/2039 | 16,726 | 17,060 | ||||
GS Mtg Securities Corp. II Series 2007-GG10 Class A1, 5.69%, 8/10/2045 | 32,734 | 33,584 | ||||
LB-UBS Commercial Mtg Trust Series 2007-C1 Class A1, 5.391%, 2/15/2040 | 14,449 | 14,718 | ||||
LB-UBS Commercial Mtg Trust Series 2007-C2 Class A1, 5.226%, 2/17/2040 | 13,923 | 14,149 | ||||
Merrill Lynch Mtg Investors Trust, 3.12%, 8/25/2034 | 383,013 | 164,464 | ||||
Merrill Lynch Mtg Trust, 5.384%, 11/12/2037 | 550,000 | 544,664 | ||||
Merrill Lynch/Countrywide Commercial Mtg Trust Series 2007-5 Class A1, 4.275%, 8/12/2048 | 11,155 | 11,214 | ||||
Merrill Lynch/Countrywide Commercial Mtg Trust Series 2007-6 Class A1, 5.175%, 3/12/2051 | 14,335 | 14,551 | ||||
Morgan Stanley Capital I Series 2007-HQ11 Class A1, 5.246%, 2/20/2044 | 25,486 | 25,919 | ||||
Morgan Stanley Capital I Series 2007-IQ13 Class A1, 5.05%, 3/15/2044 | 23,708 | 24,047 | ||||
Morgan Stanley Capital I Series 2007-IQ14 Class A1, 5.38%, 4/15/2049 | 52,132 | 53,146 | ||||
Morgan Stanley Capital I Series 2007-T25 Class A1, 5.391%, 11/12/2049 | 37,843 | 38,601 |
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
DIVERSIFIED FINANCIAL SERVICES — 0.91% | ||||||
Banc of America Commerical Mtg, Inc. Series 2007-2 Class A1, 5.421%, 1/10/2012 | $ | 28,542 | $ | 29,067 | ||
Banc of America Funding Corp. Series 2006-I Class SB1, 4.487%, 12/20/2036 | 987,366 | 83,768 | ||||
Banc of America Mtg Services Series 2005-A Class B1, 4.705%, 2/25/2035 | 964,162 | 137,122 | ||||
Citigroup Commercial Mtg Trust Series 2004-HYB2 Class B1, 4.842%, 3/25/2034 | 244,190 | 82,219 | ||||
Citigroup Commercial Mtg Trust Series 2007-C6 Class A1, 5.622%, 12/10/2049 | 80,366 | 82,329 | ||||
Citigroup/Deutsche Bank Commercial Mtg Series 2007-CD4 Class A1, 4.977%, 12/11/2049 | 40,844 | 41,329 | ||||
Countrywide Series 2005-11 Class AF3, 4.778%, 2/25/2036 | 1,233,716 | 896,741 | ||||
JPMorgan Chase Commercial Mtg Securities Corp. Series 2006-LDP9 Class A1, 5.17%, 5/15/2047 | 32,057 | 32,608 | ||||
JPMorgan Chase Commercial Mtg Securities Corp. Series 2007-LDPX Class A1, 5.122%, 1/15/2049 | 14,660 | 14,878 | ||||
JPMorgan Chase Series 2000-C9 Class A2, 7.77%, 10/15/2032 | 1,244 | 1,244 | ||||
2,892,791 | ||||||
TRANSPORTATION — 0.93% | ||||||
AIRLINES — 0.93% | ||||||
b,e American Airlines Depositor Corp., 8.00%, 10/5/2010 | 1,500,000 | 1,432,500 | ||||
1,432,500 | ||||||
TOTAL ASSET BACKED SECURITIES (Cost $7,050,708) | 4,528,655 | |||||
CORPORATE BONDS — 72.47% | ||||||
AUTOMOBILES & COMPONENTS — 0.81% | ||||||
AUTO COMPONENTS — 0.17% | ||||||
b Affinia Group, Inc., 10.75%, 8/15/2016 | 250,000 | 268,750 | ||||
AUTOMOBILES — 0.64% | ||||||
b American Honda Finance, 2.633%, 6/29/2011 | 500,000 | 498,727 | ||||
b Harley Davidson Funding Corp. Series C, 6.80%, 6/15/2018 | 500,000 | 486,886 | ||||
1,254,363 | ||||||
BANKS — 5.08% | ||||||
COMMERCIAL BANKS — 5.08% | ||||||
c Banco Industrial e Comercial S.A., 7.00%, 4/23/2010 | 500,000 | 507,500 | ||||
Charter One Bank NA, 5.50%, 4/26/2011 | 250,000 | 254,474 | ||||
b,c DBS Bank Ltd., 5.125%, 5/16/2017 | 200,000 | 201,370 | ||||
a,b,c,d Islandsbanki, 4.41%, 10/15/2008 | 60,000 | 14,700 | ||||
a,b,c,d LandsBanki Islands HF, 5.73%, 8/25/2009 | 175,000 | 9,188 | ||||
National City Bank Floating Rate Note, 0.684%, 6/7/2017 | 1,000,000 | 801,312 | ||||
b PNC Preferred Funding Trust III Floating Rate Note, 8.70%, 12/31/2049 | 500,000 | 471,615 | ||||
Provident Bank MD, 9.50%, 5/1/2018 | 1,500,000 | 1,559,451 | ||||
c Shinhan Bank, 6.819%, 9/20/2036 | 100,000 | 84,693 | ||||
Silicon Valley Bank, 6.05%, 6/1/2017 | 1,000,000 | 932,687 | ||||
Sovereign Bancorp, Inc., 0.519%, 3/23/2010 | 500,000 | 499,367 | ||||
Sovereign Bank, 5.125%, 3/15/2013 | 100,000 | 100,000 | ||||
Suntrust Bank, 7.25%, 3/15/2018 | 1,000,000 | 1,044,210 | ||||
Wells Fargo Capital XIII Preferred Note, 7.70%, 12/29/2049 | 500,000 | 440,000 | ||||
Zions Bancorp, 7.75%, 9/23/2014 | 1,000,000 | 895,000 | ||||
7,815,567 | ||||||
CAPITAL GOODS — 4.05% | ||||||
BUILDING PRODUCTS — 0.70% | ||||||
Owens Corning, Inc., 9.00%, 6/15/2019 | 1,000,000 | 1,074,009 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
INDUSTRIAL CONGLOMERATES — 1.26% | ||||||
General Electric Capital Corp., 0.432%, 6/20/2014 | $ | 1,000,000 | $ | 883,856 | ||
b,c Smiths Group plc, 6.05%, 5/15/2014 | 500,000 | 521,979 | ||||
c Tyco International Finance SA, 6.375%, 10/15/2011 | 500,000 | 539,000 | ||||
MACHINERY — 1.39% | ||||||
Caterpillar Financial Services Corp., 1.033%, 6/24/2011 | 500,000 | 503,410 | ||||
Ingersoll-Rand Co., 9.50%, 4/15/2014 | 500,000 | 590,814 | ||||
Timken Co., 6.00%, 9/15/2014 | 1,000,000 | 1,038,857 | ||||
TRADING COMPANIES & DISTRIBUTORS — 0.70% | ||||||
b,c Noble Group Ltd. Mtg, 8.50%, 5/30/2013 | 1,000,000 | 1,082,500 | ||||
6,234,425 | ||||||
CONSUMER DURABLES & APPAREL — 1.70% | ||||||
HOUSEHOLD DURABLES — 1.70% | ||||||
b,c Corporativo Javer SA, 13.00%, 8/4/2014 | 1,000,000 | 1,040,000 | ||||
Fortune Brands, Inc., 6.375%, 6/15/2014 | 500,000 | 519,507 | ||||
b Freedom Group, Inc., 10.25%, 8/1/2015 | 1,000,000 | 1,060,000 | ||||
2,619,507 | ||||||
CONSUMER SERVICES — 0.35% | ||||||
HOTELS, RESTAURANTS & LEISURE — 0.35% | ||||||
b,c TDIC Finance Ltd., 6.50%, 7/2/2014 | 500,000 | 536,495 | ||||
536,495 | ||||||
DIVERSIFIED FINANCIALS — 6.32% | ||||||
CAPITAL MARKETS — 1.77% | ||||||
Goldman Sachs Group, Inc., 5.625%, 1/15/2017 | 600,000 | 604,460 | ||||
a,d Lehman Brothers Holdings, Inc., 5.625%, 1/24/2013 | 200,000 | 35,250 | ||||
b,c Macquarie Group Ltd., 7.30%, 8/1/2014 | 1,000,000 | 1,067,822 | ||||
b Morgan Stanley, 10.09%, 5/3/2017 | 2,000,000 | 1,016,031 | ||||
CONSUMER FINANCE — 1.38% | ||||||
American Express Credit Corp., 5.875%, 5/2/2013 | 500,000 | 530,137 | ||||
Capital One Bank, 8.80%, 7/15/2019 | 500,000 | 577,979 | ||||
North Fork Bancorp, Inc., 5.875%, 8/15/2012 | 1,000,000 | 1,015,471 | ||||
DIVERSIFIED FINANCIAL SERVICES — 3.17% | ||||||
Bank of America Corp., 7.40%, 1/15/2011 | 500,000 | 525,025 | ||||
Bank of America Corp., 7.375%, 5/15/2014 | 1,000,000 | 1,112,664 | ||||
b Citicorp Series 1999-1 Class 2, 8.04%, 12/15/2019 | 250,000 | 247,410 | ||||
Citigroup, Inc., 5.00%, 9/15/2014 | 750,000 | 713,689 | ||||
CME Group, Inc., 5.75%, 2/15/2014 | 250,000 | 273,612 | ||||
c Export-Import Bank of Korea, 8.125%, 1/21/2014 | 250,000 | 286,371 | ||||
c Korea Development Bank, 5.30%, 1/17/2013 | 200,000 | 207,788 | ||||
c Korea Development Bank, 0.718%, 4/3/2010 | 300,000 | 296,798 | ||||
MBNA Corp., 6.125%, 3/1/2013 | 305,000 | 320,390 | ||||
National Rural Utilities CFC, 10.375%, 11/1/2018 | 500,000 | 661,283 | ||||
Textron Financial Corp., 0.523%, 2/25/2011 | 250,000 | 231,133 | ||||
9,723,313 | ||||||
ENERGY — 10.78% | ||||||
ENERGY EQUIPMENT & SERVICES — 1.40% | ||||||
b Calfrac Holdings LP, 7.75%, 2/15/2015 | 600,000 | 581,250 | ||||
Seacor Holdings, Inc., 7.375%, 10/1/2019 | 1,000,000 | 1,004,488 | ||||
Smith International, Inc., 8.625%, 3/15/2014 | 500,000 | 574,200 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
OIL, GAS & CONSUMABLE FUELS — 9.38% | ||||||
Concho Resources, Inc., 8.625%, 10/1/2017 | $ | 500,000 | $ | 512,500 | ||
b Continental Resources, 8.25%, 10/1/2019 | 500,000 | 513,750 | ||||
b DCP Midstream LLC, 9.75%, 3/15/2019 | 500,000 | 597,311 | ||||
El Paso Corp., 7.75%, 6/15/2010 | 55,000 | 55,220 | ||||
Enbridge Energy Partners LP, 9.875%, 3/1/2019 | 250,000 | 310,476 | ||||
Energy Transfer Partners, 8.50%, 4/15/2014 | 500,000 | 577,772 | ||||
Entergy Gulf States, 6.00%, 5/1/2018 | 240,000 | 252,102 | ||||
Enterprise Products Operating LP, 9.75%, 1/31/2014 | 250,000 | 301,847 | ||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 100,000 | 87,500 | ||||
b,f Forest Oil Corp., 8.50%, 2/15/2014 | 500,000 | 503,750 | ||||
b,c Gaz Capital SA, 7.51%, 7/31/2013 | 1,000,000 | 1,059,662 | ||||
b Inergy LP/Inergy Finance Corp., 8.75%, 3/1/2015 | 500,000 | 513,750 | ||||
Kinder Morgan Energy Partners, 9.00%, 2/1/2019 | 250,000 | 302,912 | ||||
b Maritimes & Northeast Pipeline LLC, 7.50%, 5/31/2014 | 1,000,000 | 1,051,780 | ||||
NuStar Logistics, 7.65%, 4/15/2018 | 1,000,000 | 1,083,879 | ||||
Oneok Partners LP, 8.625%, 3/1/2019 | 500,000 | 596,874 | ||||
b,c Petro Co. Trinadad Tobago Ltd., 9.75%, 8/14/2019 | 1,000,000 | 1,132,500 | ||||
c Petrobras International Finance Co., 7.875%, 3/15/2019 | 500,000 | 576,875 | ||||
b,c Petroplus Finance Ltd., 6.75%, 5/1/2014 | 1,000,000 | 936,250 | ||||
Plains All American Pipeline, LP, 8.75%, 5/1/2019 | 1,000,000 | 1,200,403 | ||||
Southwestern Energy Co., 7.50%, 2/1/2018 | 500,000 | 505,000 | ||||
Sunoco Logistics Partners LP, 8.75%, 2/15/2014 | 500,000 | 540,098 | ||||
Teppco Partners LP, 7.00%, 6/1/2067 | 500,000 | 427,465 | ||||
c Trans-Canada Pipelines Ltd., 6.35%, 5/15/2067 | 275,000 | 240,939 | ||||
b,c Woodside Finance Ltd., 8.125%, 3/1/2014 | 500,000 | 561,274 | ||||
16,601,827 | ||||||
FOOD, BEVERAGE & TOBACCO — 2.78% | ||||||
BEVERAGES — 1.26% | ||||||
Anheuser Busch Cos., Inc., 4.70%, 4/15/2012 | 250,000 | 259,459 | ||||
b Bacardi Ltd., 7.45%, 4/1/2014 | 500,000 | 564,325 | ||||
b Bacardi Ltd., 8.20%, 4/1/2019 | 500,000 | 600,450 | ||||
Constellation Brands, Inc., 8.375%, 12/15/2014 | 500,000 | 521,250 | ||||
FOOD PRODUCTS — 0.58% | ||||||
Bunge Ltd. Finance Co., 5.10%, 7/15/2015 | 321,000 | 318,964 | ||||
Bunge Ltd. Finance Co., 8.50%, 6/15/2019 | 500,000 | 576,415 | ||||
TOBACCO — 0.94% | ||||||
Altria Group, Inc., 9.70%, 11/10/2018 | 250,000 | 310,514 | ||||
Lorillard Tobacco Co, 8.125%, 6/23/2019 | 1,000,000 | 1,134,873 | ||||
4,286,250 | ||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.62% | ||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 0.35% | ||||||
Beckman Coulter, Inc., 6.00%, 6/1/2015 | 500,000 | 545,460 | ||||
HEALTH CARE PROVIDERS & SERVICES — 0.27% | ||||||
Alliance Imaging, Inc., 7.25%, 12/15/2012 | 175,000 | 168,875 | ||||
Alliance Imaging, Inc., 7.25%, 12/15/2012 | 250,000 | 241,250 | ||||
955,585 | ||||||
INSURANCE — 7.64% | ||||||
INSURANCE — 7.64% | ||||||
International Lease Finance Corp., 4.875%, 9/1/2010 | 1,000,000 | 937,693 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
b National Life Insurance of Vermont, 10.50%, 9/15/2039 | $ | 1,000,000 | $ | 1,018,420 | ||
b,c,e Oil Casualty Insurance, 8.00%, 9/15/2034 | 924,000 | 628,320 | ||||
b Oil Insurance Ltd., 7.558%, 12/29/2049 | 1,000,000 | 601,690 | ||||
b Prudential Holdings LLC, 8.695%, 12/18/2023 | 585,000 | 610,752 | ||||
b,c QBE Insurance Group Ltd., 5.647%, 7/1/2023 | 780,000 | 645,981 | ||||
b,c QBE Insurance Group Ltd., 9.75%, 3/14/2014 | 668,000 | 758,249 | ||||
b,c Swiss Re Capital I, LP, 6.854%, 5/29/2049 | 4,000,000 | 3,000,000 | ||||
Torchmark, Inc., 9.25%, 6/15/2019 | 1,000,000 | 1,124,261 | ||||
Transatlantic Holdings, Inc., 5.75%, 12/14/2015 | 1,000,000 | 901,179 | ||||
Unum Group, 7.125%, 9/30/2016 | 500,000 | 505,898 | ||||
Willis North America, Inc., 7.00%, 9/29/2019 | 1,000,000 | 1,028,219 | ||||
11,760,662 | ||||||
MATERIALS — 4.13% | ||||||
CHEMICALS — 0.72% | ||||||
b Chevron Phillips Chemical, 7.00%, 6/15/2014 | 1,000,000 | 1,105,966 | ||||
CONSTRUCTION MATERIALS — 0.87% | ||||||
CRH America, Inc., 8.125%, 7/15/2018 | 750,000 | 843,254 | ||||
Martin Marietta Materials, Inc. LIBOR Floating Rate Note, 0.641%, 4/30/2010 | 500,000 | 497,548 | ||||
CONTAINERS & PACKAGING — 0.34% | ||||||
b Plastipak Holdings, Inc., 10.625%, 8/15/2019 | 500,000 | 530,000 | ||||
METALS & MINING — 1.82% | ||||||
Allegheny Technologies, Inc., 9.375%, 6/1/2019 | 1,000,000 | 1,132,170 | ||||
Freeport-McMoRan Copper & Gold, Inc., 8.25%, 4/1/2015 | 500,000 | 531,875 | ||||
b,c Posco, 8.75%, 3/26/2014 | 500,000 | 580,642 | ||||
c RIO TINTO Alcan, Inc., 5.00%, 6/1/2015 | 50,000 | 51,266 | ||||
c Vedanta Resources, plc, 6.625%, 2/22/2010 | 500,000 | 502,500 | ||||
MISCELLANEOUS — 0.38% | ||||||
b,c Anglo American Capital, 9.375%, 4/8/2014 | 500,000 | 582,500 | ||||
6,357,721 | ||||||
MEDIA — 3.10% | ||||||
MEDIA — 3.10% | ||||||
CBS Corp., 8.20%, 5/15/2014 | 500,000 | 544,318 | ||||
DIRECTV Holdings, 6.375%, 6/15/2015 | 900,000 | 911,250 | ||||
Echostar DBS Corp., 7.75%, 5/31/2015 | 1,000,000 | 1,020,000 | ||||
Time Warner Cable, Inc., 8.25%, 2/14/2014 | 250,000 | 291,330 | ||||
Time Warner Cable, Inc., 7.50%, 4/1/2014 | 500,000 | 573,465 | ||||
Washington Post Co., 7.25%, 2/1/2019 | 500,000 | 553,103 | ||||
b,e Yahoo! Inc., 6.65%, 8/10/2026 | 981,878 | 871,604 | ||||
4,765,070 | ||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.87% | ||||||
BIOTECHNOLOGY — 0.69% | ||||||
Biogen Idec, Inc., 6.00%, 3/1/2013 | 1,000,000 | 1,062,932 | ||||
PHARMACEUTICALS — 0.18% | ||||||
Axcan Intermediate Holdings, Inc., 12.75%, 3/1/2016 | 250,000 | 270,000 | ||||
1,332,932 | ||||||
REAL ESTATE — 0.17% | ||||||
REAL ESTATE INVESTMENT TRUSTS — 0.17% | ||||||
HRPT Properties Trust, 0.895%, 3/16/2011 | 275,000 | 260,055 | ||||
260,055 | ||||||
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
RETAILING — 2.74% | ||||||
INTERNET & CATALOG RETAIL — 0.33% | ||||||
Ticketmaster, 10.75%, 8/1/2016 | $ | 500,000 | $ | 512,500 | ||
MULTILINE RETAIL — 0.20% | ||||||
c Parkson Retail Group, 7.125%, 5/30/2012 | 300,000 | 305,685 | ||||
SPECIALTY RETAIL — 2.21% | ||||||
b Ace Hardware Corp., 9.125%, 6/1/2016 | 750,000 | 783,750 | ||||
Best Buy, Inc., 6.75%, 7/15/2013 | 500,000 | 535,655 | ||||
b,g Nebraska Book Co., 10.00%, 12/1/2011 | 1,250,000 | 1,246,875 | ||||
Staples, Inc., 9.75%, 1/15/2014 | 250,000 | 300,309 | ||||
Staples, Inc., 7.75%, 4/1/2011 | 500,000 | 539,964 | ||||
4,224,738 | ||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.30% | ||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.30% | ||||||
KLA Instruments Corp., 6.90%, 5/1/2018 | 1,000,000 | 1,045,267 | ||||
National Semiconductor, 0.549%, 6/15/2010 | 1,000,000 | 962,020 | ||||
2,007,287 | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.34% | ||||||
COMMUNICATIONS EQUIPMENT — 0.34% | ||||||
Motorola, Inc., 7.625%, 11/15/2010 | 500,000 | 520,625 | ||||
520,625 | ||||||
TELECOMMUNICATION SERVICES — 5.13% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.43% | ||||||
c Deutsche Telekom International Finance, 5.75%, 3/23/2016 | 315,000 | 333,993 | ||||
b,c Global Crossing Ltd., 12.00%, 9/15/2015 | 1,000,000 | 1,050,000 | ||||
Level 3 Financing, Inc., 9.25%, 11/1/2014 | 700,000 | 616,875 | ||||
b Qwest Corp., 8.375%, 5/1/2016 | 500,000 | 517,500 | ||||
Qwest Corp., 8.875%, 3/15/2012 | 1,000,000 | 1,052,500 | ||||
c Telecom Italia Capital, 6.999%, 6/4/2018 | 520,000 | 574,645 | ||||
c Telecom Italia Capital, 1.12%, 7/18/2011 | 550,000 | 545,785 | ||||
b,c Telemar Norte Leste SA, 9.50%, 4/23/2019 | 500,000 | 597,500 | ||||
b,c Vimpelcom, 8.25%, 5/23/2016 | 500,000 | 502,500 | ||||
Windstream Corp., 8.125%, 8/1/2013 | 1,000,000 | 1,027,500 | ||||
WIRELESS TELECOMMUNICATION SERVICES — 0.70% | ||||||
Crown Castle International Corp., 9.00%, 1/15/2015 | 500,000 | 523,750 | ||||
b,c Digicel SA, 12.00%, 4/1/2014 | 500,000 | 557,500 | ||||
7,900,048 | ||||||
TRANSPORTATION — 1.96% | ||||||
AIR FREIGHT & LOGISTICS — 0.36% | ||||||
FedEx Corp., 8.76%, 5/22/2015 | 500,000 | 553,293 | ||||
AIRLINES — 0.32% | ||||||
United Air Lines, Inc., 12.75%, 7/15/2012 | 500,000 | 497,500 | ||||
MARINE — 0.93% | ||||||
b Commercial Barge Line Co., 12.50%, 7/15/2017 | 500,000 | 520,000 | ||||
b Windsor Petroleum Transport Corp., 7.84%, 1/15/2021 | 994,312 | 915,285 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
ROAD & RAIL — 0.35% | ||||||
Ryder System, Inc., 7.20%, 9/1/2015 | $ | 500,000 | $ | 534,488 | ||
3,020,566 | ||||||
UTILITIES — 12.60% | ||||||
ELECTRIC UTILITIES — 5.16% | ||||||
Alabama Power Capital Trust V, 5.50%, 10/1/2042 | 700,000 | 667,267 | ||||
Appalachian Power Co., 7.95%, 1/15/2020 | 500,000 | 607,946 | ||||
Aquila, Inc., 7.95%, 2/1/2011 | 500,000 | 525,410 | ||||
Arizona Public Service Co., 5.50%, 9/1/2035 | 370,000 | 321,873 | ||||
Arizona Public Service Co., 8.75%, 3/1/2019 | 500,000 | 605,367 | ||||
Atlantic City Electric, 7.75%, 11/15/2018 | 250,000 | 303,709 | ||||
Comed Financing III, 6.35%, 3/15/2033 | 1,500,000 | 1,180,800 | ||||
Commonwealth Edison, 6.15%, 3/15/2012 | 300,000 | 325,543 | ||||
Entergy Texas, Inc., 7.125%, 2/1/2019 | 500,000 | 560,145 | ||||
Illinois Power Co., 9.75%, 11/15/2018 | 500,000 | 627,708 | ||||
b Kansas Gas & Electric Co., 6.70%, 6/15/2019 | 500,000 | 572,531 | ||||
Metropolitan Edison, 7.70%, 1/15/2019 | 250,000 | 295,330 | ||||
Progress Energy, Inc., 6.05%, 3/15/2014 | 250,000 | 274,190 | ||||
b,c Taqa Abu Dhabi National Energy Co., 7.25%, 8/1/2018 | 500,000 | 535,588 | ||||
b,c Taqa Abu Dhabi National Energy Co., 6.60%, 8/1/2013 | 500,000 | 534,644 | ||||
GAS UTILITIES — 2.42% | ||||||
Atmos Energy Corp., 8.50%, 3/15/2019 | 750,000 | 925,924 | ||||
b Ferrellgas Partners LP, 9.125%, 10/1/2017 | 1,500,000 | 1,545,000 | ||||
Southern Union Co., 7.20%, 11/1/2066 | 1,600,000 | 1,260,000 | ||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.32% | ||||||
RRI Energy, Inc., 7.625%, 6/15/2014 | 500,000 | 490,625 | ||||
MULTI-UTILITIES — 4.70% | ||||||
Amerenenergy Generating Co., 7.00%, 4/15/2018 | 1,000,000 | 1,012,172 | ||||
Black Hills Corp., 9.00%, 5/15/2014 | 500,000 | 566,680 | ||||
DTE Energy Co., 7.625%, 5/15/2014 | 1,000,000 | 1,103,809 | ||||
b Enogex LLC, 6.875%, 7/15/2014 | 1,000,000 | 1,039,119 | ||||
NiSource Finance Corp., 6.40%, 3/15/2018 | 1,130,000 | 1,127,894 | ||||
Sempra Energy, 9.80%, 12/1/2019 | 250,000 | 320,187 | ||||
b Texas-New Mexico Power, 9.50%, 4/1/2019 | 1,000,000 | 1,229,265 | ||||
Wisconsin Energy Corp., 6.25%, 5/15/2067 | 1,000,000 | 840,000 | ||||
19,398,726 | ||||||
TOTAL CORPORATE BONDS (Cost $100,105,887) | 111,575,762 | |||||
CONVERTIBLE BONDS — 3.71% | ||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.29% | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.29% | ||||||
Covanta Holding Corp., 1.00%, 2/1/2027 | 500,000 | 444,375 | ||||
444,375 | ||||||
DIVERSIFIED FINANCIALS — 0.29% | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.29% | ||||||
KKR Financial Holdings LLC, 7.00%, 7/15/2012 | 500,000 | 448,125 | ||||
448,125 | ||||||
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
REAL ESTATE — 1.07% | ||||||
REAL ESTATE INVESTMENT TRUSTS — 1.07% | ||||||
b MPT Operating Partnership LP, 6.125%, 11/15/2011 | $ | 1,250,000 | $ | 1,162,500 | ||
Washington REIT, 3.875%, 9/15/2026 | 500,000 | 482,500 | ||||
1,645,000 | ||||||
TELECOMMUNICATION SERVICES — 2.06% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.21% | ||||||
Global Crossing Ltd., 5.00%, 5/15/2011 | 1,000,000 | 980,000 | ||||
Level 3 Communications, Inc., 10.00%, 5/1/2011 | 900,000 | 888,750 | ||||
WIRELESS TELECOMMUNICATION SERVICES — 0.85% | ||||||
NII Holdings, Inc., 3.125%, 6/15/2012 | 1,500,000 | 1,310,625 | ||||
3,179,375 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $4,917,911) | 5,716,875 | |||||
MUNICIPAL BONDS — 3.93% | ||||||
Anaheim California Public Financing Authority, 5.486%, 9/1/2020 | 1,000,000 | 870,420 | ||||
Louisiana Public Facilities Authority Revenue (Black & Gold Facilities Project C), 5.15%, 4/1/2012 | 255,000 | 250,540 | ||||
Michigan Higher Education Student Loan Authority, 3.95%, 3/1/2011 | 250,000 | 241,455 | ||||
Michigan Tobacco Settlement Finance Authority, 7.309%, 6/1/2034 | 1,000,000 | 782,240 | ||||
b Midwest Family Housing, 5.168%, 7/1/2016 | 1,000,000 | 821,010 | ||||
Oakland California Redevelopment Agency, 8.00%, 9/1/2016 | 1,000,000 | 1,015,920 | ||||
Ohio State Solid Waste (Republic Services Project), 4.25%, 4/1/2033 | 900,000 | 882,306 | ||||
Pennsylvania Economic Development Series A (Waste Management, Inc. Project), 4.70%, 11/1/2021 | 600,000 | 618,300 | ||||
Wisconsin State Health & Educational Facilities (Richland Hospital), 7.08%, 6/1/2016 | 655,000 | 568,455 | ||||
TOTAL MUNICIPAL BONDS (Cost $5,752,962) | 6,050,646 | |||||
U.S. TREASURY SECURITIES — 0.84% | ||||||
United States Treasury Notes, 3.375%, 11/30/2012 | 300,000 | 317,695 | ||||
United States Treasury Notes, 4.25%, 11/15/2017 | 900,000 | 969,996 | ||||
TOTAL U.S. TREASURY SECURITIES (Cost $1,204,396) | 1,287,691 | |||||
U.S. GOVERNMENT AGENCIES — 0.53% | ||||||
b Agribank FCB, 9.125%, 7/15/2019 | 750,000 | 811,135 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $750,000) | 811,135 | |||||
MORTGAGE BACKED — 0.01% | ||||||
Federal National Mtg Assoc. CMO Series 1994-37 Class L, 6.50%, 3/25/2024 | 14,576 | 15,578 | ||||
TOTAL MORTGAGE BACKED (Cost $14,642) | 15,578 | |||||
FOREIGN BONDS — 3.40% | ||||||
CONSUMER SERVICES — 0.47% | ||||||
HOTELS, RESTAURANTS & LEISURE — 0.47% | ||||||
FU JI Food (HKD), 0%, 10/18/2010 | 7,000,000 | 719,558 | ||||
719,558 | ||||||
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
DIVERSIFIED FINANCIALS — 1.05% | ||||||
CAPITAL MARKETS — 0.54% | ||||||
Morgan Stanley (AUD), 3.817%, 3/1/2013 | $ | 1,000,000 | $ | 824,933 | ||
CONSUMER FINANCE — 0.51% | ||||||
SLM Corp. (AUD), 6.00%, 12/15/2010 | 1,000,000 | 788,425 | ||||
1,613,358 | ||||||
ENERGY — 0.10% | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.10% | ||||||
OAO Gazprom (RUB), 7.25%, 2/22/2010 | 5,000,000 | 163,357 | ||||
163,357 | ||||||
INSURANCE — 0.38% | ||||||
INSURANCE — 0.38% | ||||||
c ELM BV (AUD), 7.635%, 12/31/2049 | 1,000,000 | 587,941 | ||||
587,941 | ||||||
MISCELLANEOUS — 1.14% | ||||||
MISCELLANEOUS — 1.14% | ||||||
Regional Muni of York (CAD), 5.00%, 4/29/2019 | 500,000 | 495,666 | ||||
Republic of Brazil (BRL), 12.50%, 1/5/2016 | 2,025,000 | 1,255,624 | ||||
1,751,290 | ||||||
TELECOMMUNICATION SERVICES — 0.26% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.26% | ||||||
c Wind Acquisition Finance SA (EUR), 11.75%, 7/15/2017 | 250,000 | 406,079 | ||||
406,079 | ||||||
TOTAL FOREIGN BONDS (Cost $4,695,486) | 5,241,583 | |||||
SHORT TERM INVESTMENTS — 1.62% | ||||||
Devon Energy Corp., 0.20%, 10/1/2009 | 2,500,000 | 2,500,000 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $2,500,000) | 2,500,000 | |||||
TOTAL INVESTMENTS — 98.56% (Cost $140,938,351) | $ | 151,751,011 | ||||
OTHER ASSETS LESS LIABILITIES — 1.44% | 2,210,118 | |||||
NET ASSETS — 100.00% | $ | 153,961,129 | ||||
Footnote Legend
a | Non-income producing |
b | 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, 2009, the aggregate value of these securities in the Fund’s portfolio was $44,447,851, representing 28.88% of the Fund’s net assets. |
c | Yankee Bond - denominated in U.S. dollars and is publicly issued in the U.S. by foreign banks and corporations. |
d | Bond in default. |
e | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
f | When-issued security. |
g | Segregated as collateral for a when issued security. |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ARM | Adjustable Rate Mortgage | |
AUD | Denominated in Australian Dollars | |
BRL | Denominated in Brazilian Dollars | |
CAD | Denominated in Canadian Dollars | |
CMO | Collateralized Mortgage Obligation | |
EUR | Denominated in Euro Dollars | |
FCB | Farm Credit Bank | |
HKD | Denominated in Hong Kong Dollars | |
LIBOR | London Interbank Offered Rate | |
Mtg | Mortgage | |
Pfd | Preferred Stock | |
REIT | Real Estate Investment Trust | |
RUB | Denominated in Russian Rubles | |
USD | Unified School District |
See notes to financial statements.
18 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Strategic Income Fund | September 30, 2009 |
ASSETS | |||
Investments at value (cost $140,938,351) (Note 2) | $ | 151,751,011 | |
Cash | 298,163 | ||
Receivable for fund shares sold | 1,324,593 | ||
Dividends receivable | 136,559 | ||
Interest receivable | 2,327,788 | ||
Prepaid expenses and other assets | 9,938 | ||
Total Assets | 155,848,052 | ||
LIABILITIES | |||
Payable for securities purchased | 1,246,250 | ||
Payable for fund shares redeemed | 287,880 | ||
Unrealized depreciation on forward currency contracts (Note 7) | 62,403 | ||
Payable to investment advisor and other affiliates (Note 3) | 117,648 | ||
Accounts payable and accrued expenses | 81,066 | ||
Dividends payable | 91,676 | ||
Total Liabilities | 1,886,923 | ||
NET ASSETS | $ | 153,961,129 | |
NET ASSETS CONSIST OF: | |||
Undistributed net investment income | $ | 129,172 | |
Net unrealized appreciation on investments | 10,755,382 | ||
Accumulated net realized gain (loss) | 284,145 | ||
Net capital paid in on shares of beneficial interest | 142,792,430 | ||
$ | 153,961,129 | ||
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($57,852,736 applicable to 4,973,293 shares of beneficial interest outstanding - Note 4) | $ | 11.63 | |
Maximum sales charge, 4.50% of offering price | 0.55 | ||
Maximum offering price per share | $ | 12.18 | |
Class C Shares: | |||
Net asset value and offering price per share * ($51,788,949 applicable to 4,456,140 shares of beneficial interest outstanding - Note 4) | $ | 11.62 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($44,319,444 applicable to 3,808,633 shares of beneficial interest outstanding - Note 4) | $ | 11.64 | |
* | 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 19
STATEMENT OF OPERATIONS | ||
Thornburg Strategic Income Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $39,516) | $ | 631,764 | ||
Interest income (net of premium amortized of $22,339) | 6,596,758 | |||
Other income | 108,580 | |||
Total Income | 7,337,102 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 617,271 | |||
Administration fees (Note 3) | ||||
Class A Shares | 37,174 | |||
Class C Shares | 32,584 | |||
Class I Shares | 13,249 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 73,885 | |||
Class C Shares | 259,554 | |||
Transfer agent fees | ||||
Class A Shares | 25,447 | |||
Class C Shares | 38,351 | |||
Class I Shares | 10,913 | |||
Registration and filing fees | ||||
Class A Shares | 24,210 | |||
Class C Shares | 21,416 | |||
Class I Shares | 23,784 | |||
Custodian fees (Note 3) | 56,773 | |||
Professional fees | 73,675 | |||
Accounting fees | 2,522 | |||
Trustee fees | 3,226 | |||
Other expenses | 22,282 | |||
Total Expenses | 1,336,316 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (227,518 | ) | ||
Investment advisory fees waived by investment advisor (Note 3) | (8,825 | ) | ||
Fees paid indirectly (Note 3) | (1,039 | ) | ||
Net Expenses | 1,098,934 | |||
Net Investment Income | $ | 6,238,168 | ||
20 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Strategic Income Fund | Year Ended September 30, 2009 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 640,837 | ||
Forward currency contracts (Note 7) | 37,183 | |||
Foreign currency transactions | 10,882 | |||
688,902 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 17,248,162 | |||
Forward currency contracts (Note 7) | (110,842 | ) | ||
Foreign currency translations | 9,700 | |||
17,147,020 | ||||
Net Realized and Unrealized Gain | 17,835,922 | |||
Net Increase in Net Assets Resulting From Operations | $ | 24,074,090 | ||
See notes to financial statements.
Certified Annual Report 21
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Strategic Income Fund |
Year Ended September 30, 2009 | Period Ended September 30, 2008* | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 6,238,168 | $ | 1,888,967 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | 688,902 | (397,587 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | 17,147,020 | (6,391,638 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 24,074,090 | (4,900,258 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,278,787 | ) | (697,021 | ) | ||||
Class C Shares | (1,843,592 | ) | (426,979 | ) | ||||
Class I Shares | (2,093,817 | ) | (664,946 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 33,284,870 | 21,118,332 | ||||||
Class C Shares | 31,887,106 | 15,777,216 | ||||||
Class I Shares | 23,418,359 | 17,306,556 | ||||||
Net Increase in Net Assets | 106,448,229 | 47,512,900 | ||||||
NET ASSETS: | ||||||||
Beginning of Period | 47,512,900 | — | ||||||
End of Period | $ | 153,961,129 | $ | 47,512,900 | ||||
Undistributed net investment income | $ | 129,172 | $ | 101,777 |
See notes to financial statements.
* | Fund commenced operations on December 19, 2007. |
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Strategic Income Fund | September 30, 2009 |
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 Fund is currently one of fifteen separate series of the Trust. 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) 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 of purchase, 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: 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.
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, and 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 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Assets | ||||||||||||||
Investments in Securities* | ||||||||||||||
Common Stock | $ | 12,000,649 | $ | 12,000,649 | $ | — | $ | — | ||||||
Preferred Stock | 2,022,437 | 664,781 | 1,357,656 | — | ||||||||||
Asset Backed Securities | 4,528,655 | — | 4,528,655 | — | ||||||||||
Corporate Bonds | 111,575,762 | — | 111,575,762 | — | ||||||||||
Convertible Bonds | 5,716,875 | — | 5,716,875 | — | ||||||||||
Municipal Bonds | 6,050,646 | — | 6,050,646 | — | ||||||||||
U.S. Treasury Securities | 1,287,691 | 1,287,691 | — | — | ||||||||||
U.S. Government Agencies | 811,135 | — | 811,135 | — | ||||||||||
Mortgage Backed | 15,578 | — | 15,578 | — | ||||||||||
Foreign Bonds | 5,241,583 | — | 5,241,583 | — | ||||||||||
Short Term Investments | 2,500,000 | — | 2,500,000 | — | ||||||||||
Total Investments in Securities | $ | 151,751,011 | $ | 13,953,121 | $ | 137,797,890 | $ | — | ||||||
Liabilities | ||||||||||||||
Other Financial Instruments** | ||||||||||||||
Forward Currency Contracts | $ | (62,403 | ) | $ | — | $ | (62,403 | ) | $ | — |
* | See Summary of Industry Exposure and Schedule of Investments beginning on page 7 for further detail. |
** | 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. |
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.
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
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 issuers. 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 to shareholders substantially all taxable income, including any net realized gain on investments of the Funds. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Dividends to shareholders are generally paid quarterly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date or, at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually. Distributions to shareholders are based on income tax regulations and therefore, their characteristics may differ for financial statement and tax purposes.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned and dividend income is recorded on the ex-dividend date. Certain income from foreign securities is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares of each class of shares at the beginning of the day (after adjusting for the current share activity of the respective class). Expenses common to all funds are allocated among the funds comprising the Trust based upon their relative net asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown. However, based on experience, the Trust expects the risk of loss to be remote.
Use of Estimates: The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
NOTE 3 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, Thornburg Investment Management, Inc. (the “Advisor”) serves as the investment advisor and performs services to the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2009, 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
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
depending on the Fund’s asset size. For the year ended September 30, 2009, the Advisor voluntarily waived investment advisory fees of $8,825. 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, 2009, the Advisor voluntarily reimbursed certain class specific expenses, administrative fees, and distribution fees of $67,480 for Class A shares, $127,876 for Class C shares, and $32,162 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, 2009, the Distributor has advised the Fund that it earned commissions aggregating $33,972 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $12,646 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, 2009, 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, 2009, fees paid indirectly were $1,039.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Period Ended September 30, 2008* | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 4,070,731 | $ | 41,692,987 | 2,036,571 | $ | 24,361,553 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 166,612 | 1,745,944 | 48,664 | 551,142 | ||||||||||
Shares repurchased | (1,017,988 | ) | (10,154,061 | ) | (331,297 | ) | (3,794,363 | ) | ||||||
Net Increase (Decrease) | 3,219,355 | $ | 33,284,870 | 1,753,938 | $ | 21,118,332 | ||||||||
Class C Shares | ||||||||||||||
Shares sold | 3,999,961 | $ | 40,130,318 | 1,944,005 | $ | 23,044,909 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 115,785 | 1,220,711 | 23,034 | 258,781 | ||||||||||
Shares repurchased | (967,856 | ) | (9,463,923 | ) | (658,789 | ) | (7,526,474 | ) | ||||||
Net Increase (Decrease) | 3,147,890 | $ | 31,887,106 | 1,308,250 | $ | 15,777,216 | ||||||||
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
Year Ended September 30, 2009 | Period Ended September 30, 2008* | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 2,608,167 | $ | 25,631,797 | 1,608,221 | $ | 19,363,753 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 155,088 | 1,629,414 | 40,595 | 461,471 | ||||||||||
Shares repurchased | (386,048 | ) | (3,842,852 | ) | (217,390 | ) | (2,518,668 | ) | ||||||
Net Increase (Decrease) | 2,377,207 | $ | 23,418,359 | 1,431,426 | $ | 17,306,556 | ||||||||
* | The Fund commenced operations on December 19, 2007. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments and U. S. Government obligations) of $122,972,579 and $38,648,180, respectively and purchase and sale transactions of long-term U.S. Government obligations of $750,000 and $3,404, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 140,606,279 | ||
Gross unrealized appreciation on a tax basis | $ | 16,162,406 | ||
Gross unrealized depreciation on a tax basis | (5,017,674 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 11,144,732 | ||
Distributable earnings – ordinary income | $ | 843,191 | ||
Distributable capital gains | $ | 60,821 |
At September 30, 2009, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2008 of $19,065 and $774,429, respectively. For tax purposes such losses will be recognized in the year ending September 30, 2010.
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized investment gain by $10,882 and increased undistributed net investment income by $10,882. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains.
The tax character of distributions paid during the years ended September 30, 2009 and September 30, 2008 were $6,216,196 and $1,788,946, respectively, from ordinary income.
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50, (“ASC 815”) require certain disclosures. The new requirement amends and expands disclosures related to derivative instruments to provide users of financial statements with an enhanced understanding of the use of derivative instruments by the Fund and how these derivatives affect the financial position, financial performance and cash flows of the Fund. The Fund does not designate any derivative instruments as hedging instruments under ASC 815. During the year ended September 30, 2009, the Fund’s principal exposure to derivative financial instruments of the type addressed by ASC 815 was investment in foreign exchange contracts. A foreign exchange contract is an agreement between two parties to exchange different currencies at a specified rate of exchange at an agreed upon future date. Foreign exchange contracts involve risks to the Fund, including the risk that a contract counterparty will not meet its obligations to the Fund, the risk that a change in a
Certified Annual Report 27
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 |
contract’s value may not correlate perfectly with the currency the contract was intended to track, and the risk that the Fund’s advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2009 in the normal course of pursuing its investment objectives, in anticipation of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments 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 investment transactions.
These contracts are accounted for by the Fund under ASC 815. Unrealized gains and unrealized losses on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities 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 each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations.
The following table displays the outstanding forward currency contracts, at September 30, 2009:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2009
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||
Euro Dollar | Sell | 1,125,000 | 02/19/2010 | $ | 1,645,829 | $ | — | $ | (62,403 | ) | ||||||
Total | $ | 1,645,829 | $ | — | $ | (62,403 | ) | |||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2009 is disclosed in the following table:
Fair Values of Derivative Financial Instruments at September 30, 2009
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (62,403 | ) |
The realized gains (losses) from forward currency contacts, and the change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2009 is disclosed in the following tables:
Amount of Realized Gain (Loss) on Derivative Financial Instruments
Recognized in Income for the Year Ended September 30, 2009
Total | Forward currency contracts | |||||
Foreign exchange contracts | $ | 37,183 | $ | 37,183 |
Change in Unrealized Appreciation (Depreciation) of Derivative Financial
Instruments Recognized in Income for the Year Ended September 30, 2009
Total | Forward currency contracts | |||||||
Foreign exchange contracts | $ | (110,842 | ) | $ | (110,842 | ) |
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
28 Certified Annual Report
Thornburg Strategic Income Fund
Class A Shares: | Year Ended Sept. 30, 2009 | Period Ended Sept. 30, 2008(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 10.57 | $ | 11.94 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.78 | 0.59 | ||||||
Net realized and unrealized gain (loss) on investments | 1.06 | (1.41 | ) | |||||
Total from investment operations | 1.84 | (0.82 | ) | |||||
Less dividends from: | ||||||||
Net investment income | (0.78 | ) | (0.55 | ) | ||||
Change in net asset value | 1.06 | (1.37 | ) | |||||
NET ASSET VALUE, end of period | $ | 11.63 | $ | 10.57 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 18.67 | (7.18 | ) | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 7.66 | 6.51 | (c) | |||||
Expenses, after expense reductions (%) | 1.25 | 1.27 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 1.25 | 1.25 | (c) | |||||
Expenses, before expense reductions (%) | 1.49 | 1.79 | (c) | |||||
Portfolio turnover rate (%) | 47.88 | 36.22 | ||||||
Net assets at end of period (thousands) | $ | 57,853 | $ | 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 29
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Strategic Income Fund |
Class C Shares: | Year Ended Sept. 30, 2009 | Period Ended Sept. 30, 2008(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 10.57 | $ | 11.94 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.73 | 0.55 | ||||||
Net realized and unrealized gain (loss) on investments | 1.04 | (1.42 | ) | |||||
Total from investment operations | 1.77 | (0.87 | ) | |||||
Less dividends from: | ||||||||
Net investment income | (0.72 | ) | (0.50 | ) | ||||
Change in net asset value | 1.05 | (1.37 | ) | |||||
NET ASSET VALUE, end of period | $ | 11.62 | $ | 10.57 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 17.95 | (7.57 | ) | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 7.13 | 5.96 | (c) | |||||
Expenses, after expense reductions (%) | 1.79 | 1.82 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 1.79 | 1.80 | (c) | |||||
Expenses, before expense reductions (%) | 2.29 | 2.65 | (c) | |||||
Portfolio turnover rate (%) | 47.88 | 36.22 | ||||||
Net assets at end of period (thousands) | $ | 51,789 | $ | 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.
30 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Strategic Income Fund |
Class I Shares: | Year Ended Sept. 30, 2009 | Period Ended Sept. 30, 2008(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 10.58 | $ | 11.94 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.81 | 0.63 | ||||||
Net realized and unrealized gain (loss) on investments | 1.05 | (1.42 | ) | |||||
Total from investment operations | 1.86 | (0.79 | ) | |||||
Less dividends from: | ||||||||
Net investment income | (0.80 | ) | (0.57 | ) | ||||
Change in net asset value | 1.06 | (1.36 | ) | |||||
NET ASSET VALUE, end of period | $ | 11.64 | $ | 10.58 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 18.95 | (6.90 | ) | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 7.94 | 6.81 | (c) | |||||
Expenses, after expense reductions (%) | 0.99 | 1.01 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | (c) | |||||
Expenses, before expense reductions (%) | 1.12 | 1.44 | (c) | |||||
Portfolio turnover rate (%) | 47.88 | 36.22 | ||||||
Net assets at end of period (thousands) | $ | 44,319 | $ | 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 31
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, 2009, 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 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 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
32 Certified Annual Report
Thornburg Strategic Income Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,289.70 | $ | 7.14 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.83 | $ | 6.29 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,286.60 | $ | 10.22 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,016.13 | $ | 9.01 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,291.00 | $ | 5.69 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.24%; C: 1.78%; I: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 33
Thornburg Strategic Income Fund | September 30, 2009 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Strategic Income Fund versus Barclays Capital U.S. Universal Index & Blended Benchmark
(December 19, 2007 to September 30, 2009)
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% CDSC for the first year only. There is no up-front sales charge for Class I shares.
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.
The 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.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009 (with sales charge)
1 Yr | Since Inception | |||||
A Shares (Incep: 12/19/07) | 13.31 | % | 2.90 | % | ||
C Shares (Incep: 12/19/07) | 16.95 | % | 4.97 | % | ||
I Shares (Incep: 12/19/07) | 18.95 | % | 5.89 | % | ||
Barclays Capital U.S. Universal Index | 10.91 | % | 6.00 | % | ||
Blended Benchmark | 8.61 | % | 2.42 | % |
34 Certified Annual Report
Thornburg Strategic Income Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 35
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
36 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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
Thornburg Strategic Income Fund | September 30, 2009 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
The Trust has delegated to Thornburg Investment Management, Inc. (the “Advisor”) voting decisions respecting proxies for the Fund’s voting securities. The Advisor makes voting decisions in accordance with its Proxy Voting Policy and Procedures. A description of the Policy and Procedures is available (i) without charge, upon request, by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
Information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information is available (i) without charge, upon request by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the tax year ended September 30, 2009, the Thornburg Strategic Income Fund designates 5.94% (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.
1.09% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2009 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, 2009. Complete information will be computed and reported in conjunction with your 2009 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 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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for the purpose. 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 the independent Trustees unanimously voted 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.
38 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 (Unaudited) |
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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the Fund’s investment objectives. In addition, the Trustees considered information specifically provided to them at their request in anticipation of their annual 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 since the Fund’s inception relative to a broad-based securities index, a blended benchmark comprised of two securities indices, and two categories of multi-sector fixed income mutual funds assembled by independent mutual fund analyst firms, 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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 observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment return in the one full calendar year since the Fund’s inception was significantly lower than the returns of the index and the blended benchmark and somewhat lower than the average return of the fund category for which calendar year performance was presented, but that the Fund’s returns for the year ended with the second quarter had improved significantly relative to the comparatives, and had, for the year-to-date ended with the second quarter of the current year, outpaced all of the comparatives and fallen within the top quartile of the two fund categories considered. The Trustees also noted that the Fund’s investment returns had generally met reasonable expectations over the periods since the Fund’s inception, given the investment objectives of the Fund.
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 Advisor currently was waiving its management fee, and that the overall expense ratio of the Fund was slightly higher than the median, and equivalent to the average, expense ratios for the group of funds assembled by the analyst firm. The Trustees considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
Certified Annual Report 39
OTHER INFORMATION, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2009 (Unaudited) |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees noted the Advisor’s management fee waivers. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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, compliance and systems capabilities 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 22, 2009
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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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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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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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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. | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources. | |||||
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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, 2009. 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. Special risks may be associated with investments outside the United States, especially in emerging markets, including currency fluctuations, illiquidity and volatility. Investments in small capitalization companies 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 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 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | TVAFX | 885-215-731 | ||
Class B | TVBFX | 885-215-590 | ||
Class C | TVCFX | 885-215-715 | ||
Class I | TVIFX | 885-215-632 | ||
Class R3 | TVRFX | 885-215-533 | ||
Class R4 | TVIRX | 885-215-277 | ||
Class R5 | TVRRX | 885-215-376 |
Glossary
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.
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.
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 equaling a company’s market value per share divided by earnings per share.
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Thornburg Value Fund
IMPORTANT
PERFORMANCE INFORMATION
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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.
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. The focus of the analysis is on what’s behind the numbers, its revenue and cash-generating model. We make an effort to get to know the company’s reputation in the industry, its people and its corporate culture.
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 2009
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 10/2/95) | |||||||||||||||
Without sales charge | 7.65 | % | -2.48 | % | 4.76 | % | 3.76 | % | 9.72 | % | |||||
With sales charge | 2.81 | % | -3.97 | % | 3.81 | % | 3.28 | % | 9.36 | % | |||||
S&P 500 Index | |||||||||||||||
(Since 10/2/95) | -6.91 | % | -5.43 | % | 1.02 | % | -0.15 | % | 6.23 | % |
4 This page is not part of the Annual Report.
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 flow and critical thinking intended to benefit portfolio decision making. We do not view our location in Santa Fe, New Mexico, 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 THE YEAR ENDED 9/30/09
Top Contributors | Top Detractors | |
priceline.com Inc. | ConocoPhillips | |
Apple, Inc. | Level 3 Communications, Inc. | |
U.S. Bancorp | KKR Financial Holdings LLC | |
Swiss Re | Allstate Corp. | |
Rite Aid Corp. | Fifth Third Bancorp | |
Source: FactSet |
KEY PORTFOLIO ATTRIBUTES
As of 9/30/09
Portfolio P/E Trailing 12-months* | 14.1x | ||
Portfolio Price to Cash Flow* | 5.8x | ||
Portfolio Price to Book Value* | 1.7x | ||
Median Market Cap* | $ | 15.7 B | |
7-Year Beta (A Shares vs. S&P 500)* | 1.08 | ||
Number of Companies | 51 |
* | Source: FactSet |
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Thornburg Value Fund
September 30, 2009
Table of Contents
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21 | ||
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38 | ||
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
William V. Fries, CFA Co-Portfolio Manager | October 20, 2009
Dear Fellow Shareholder:
The fiscal year just ended has been rewarding, both relative to our benchmark and with regard to the preservation of investment capital, both yours and ours. Thornburg Value Fund Class A shares at net asset value (NAV) returned positive 7.65% vs. negative 6.91% for the S&P 500 Index. A year ago we wrote, “Today we are more worried about deflationary pressures than inflationary ones, and a domestic, or even global recession, is much more likely today.” As we write this letter, our concern regarding potential deflation has diminished. Our fears regarding global recession were realized, but we believe that both the global and domestic recessions have ended and that economic growth should be positive in the coming year. | |
Connor Browne, CFA Co-Portfolio Manager | Our 2009 fiscal year began with credit fears permeating the market. In November 2008 and again in March 2009, the equity and debt markets experienced panic. In November 2008, voters elected Barack Obama as president. Upon taking office, his team enacted massive economic stimulus programs. Equally important, the Treasury and Federal Reserve worked together to ensure liquidity existed in a variety of fixed income markets and they reassured investors that the government had no desire to nationalize the nation’s largest banks. By September 30, 2009, the S&P 500 Index had risen almost 57% from the March 5, 2009 bottom and credit spreads improved at a rate that was unparalleled in modern history. | |
Edward E. Maran, CFA Co-Portfolio Manager | The rally off the bottom has been broad-based, with technology, consumer, financial, industrial and materials stocks all delivering strong performances. Our basket approach served us well in this environment as our technology, consumer staples, consumer discretionary, financial services and energy stocks all contributed to the portfolio’s strong performance. During the crisis, we made select bond investments that were intended to manage risk while providing an opportunity for a strong return. The result was gratifying, with our fixed income investments delivering returns even higher than our equity investments during the year. Many of our bonds have hit price targets and been sold. We expect that over the intermediate to long-term horizon that our fixed income exposure will return to historically normal levels of under 5% of the portfolio.
Looking forward, crisis appears to have been avoided but at the cost of increasing the government debt and the level of government involvement in the economy. The impact | |
Certified Annual Report 7
Letter to Shareholders, | ||
Continued |
of increased national debt and government regulation on share prices may not be evident in the near term, but increased government debt is likely a precursor toward either higher taxes or inflationary monetary policy, and neither of those likelihoods are shareholder friendly. Similarly, increased government regulation has the potential to lower the economic growth rate and hamper corporate profitability. The potentially less friendly regulatory and interest rate environments are offset by what appear to be unusually attractive valuations. Although stocks are up sharply off the bottom, they are still down significantly from their peaks and it is possible that corporate profits will hit record levels in 2011.
In this 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 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.
Our top contributors for the year included Priceline, Apple, US Bancorp, Swiss Re, Rite Aid, and bonds issued by the Hartford Financial Group. Priceline is an internet travel company that appears to be establishing a significant franchise in Europe. Priceline was able to grow right through the recession because of the high value added of its product and also because its product enables consumers to save money. Apple continues to gain market share in smart phones. The market for smart phones could be very large and Apple is a clear leader in the segment so far. US Bancorp shares declined in price by 60% during the early part of the fiscal year, despite having a fundamental outlook that was strong and intact, and we were fortunate to be able to buy them near the bottom. US Bancorp is a well-managed bank that avoided the big mistakes made by most of their competitors. They have been consistently profitable through the downturn and appear likely to emerge from this recession with increased market share and higher profit margins. Swiss Re recovered dramatically from depressed levels following negative developments and a capital infusion by Berkshire Hathaway. Many investors had assumed significant dilution due to the Berkshire deal, yet we have thought all along that Swiss Re would have the ability to buy back the notes without suffering significant dilution. Rite Aid is a drug store chain that was trading at an extremely low valuation due to investor concerns regarding their ability to meet debt payments. When Rite Aid successfully refinanced all of their near-term debt maturities and improved profitability by cutting expenses, the stock reacted favorably. Hartford Insurance Group is a major provider of both life insurance products as well as property and casualty insurance. When both the bond market and stock market collapsed, the Hartford appeared vulnerable because their fixed income portfolio was five times as large as their market capitalization and the primary product sold by their life insurance group was a variable annuity that provided a minimum guaranteed return on investments that were tied to the stock market. Our analysis indicated that the Hartford could weather the storm even if equity and debt markets got worse, but happily, both markets rallied strongly and Hartford equity and debt rallied, too.
8 Certified Annual Report
Stocks that hurt performance during the year included ConocoPhillips, Level 3 Communications, KKR Financial, Allstate, Fifth Third Bancorp, Eli Lilly and Hong Kong Exchanges. ConocoPhillips was hurt by declining natural gas prices, declining refinery margins, and investor antipathy toward investments in Russia. Prior to the decline in commodity prices, ConocoPhillips was aggressive in buying back its own shares. As oil and gas prices fell, ConocoPhillips stopped buying back shares and also cut its capital spending. Investors are skeptical that the company can deliver increasing production with reduced capital expenditures. Level 3 Communications equity was a drag on performance, though it is important to note that we moved out of the equity during the year but remained large investors in Level 3 debt securities. The gains on the debt securities offset the loss in the equity during the fiscal year. KKR Financial is a specialty finance company that invests mainly in senior secured, mezzanine and high-yield loans. While in the end, KKR Financial was able to make it through the credit crisis, we sold the stock on concerns regarding their funding vehicles. Allstate is a personal lines insurer that has exposure to commercial real estate in its asset portfolio. When AIG sold its controlling interest in Transatlantic Reinsurance Company, we sold Allstate and bought Transatlantic because we felt more comfortable with Transatlantic’s conservative investment portfolio and with its global growth potential. We have owned Fifth Third since before the crisis. While Fifth Third was a detractor, we did make the right decision to add to Fifth Third near its low prices and benefited as the price increased materially following the results of the government-required Stress Test. Lilly made a high-priced acquisition of a biotech company, Imclone, which disappointed investors that were hoping for a more shareholder friendly use of the cash. That acquisition, combined with fears regarding potential healthcare reform initiatives in Congress, provided major headwinds for the stock. Shares of Hong Kong Exchanges declined sharply as investors became skeptical of financial markets in general and of those in emerging markets, in particular. We sold the shares near the bottom, and in a year where we can take pride in many right decisions, that choice was demonstrably wrong. We should have recognized that the exchange business model and the exposure to Hong Kong and China would make Hong Kong Exchanges one of the first companies to recover from the downturn.
After the recent run-up in the market, many pundits are claiming that stocks are ahead of themselves. We remain cautiously optimistic, however. First, the market is actually lower than it was a year ago. The moment of crisis is behind us and the degree of uncertainty regarding the economy, home prices, and government policy is dramatically lower. Companies have reacted to the global downturn by aggressively cutting unnecessary expenses. So we find ourselves here today with stock prices lower, the economic outlook better, the level of uncertainty lower and potential corporate profitability higher. We do not try to time the market, but we believe the outlook for future earnings is far more important to share prices than where they happened to be trading in November 2008 or March 2009. For the companies in our portfolio, the outlook for future earnings appears very attractive relative to current share prices.
This downturn has been trying for you and for us, but through it all we have consistently remained faithful to our process and philosophy. This process and philosophy have delivered strong results to investors since inception and we remain confident that they have the potential to deliver similar results in the future. We invite you to visit our
Certified Annual Report 9
Letter to Shareholders, | ||
Continued |
website at www.thornburg.com where you will find useful information on the Thornburg Value Fund as well as our other Thornburg 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 |
Note from Bill Fries:
As of January 1, 2010, I will be stepping away from my responsibilities as a co-portfolio manager of the Thornburg Value Fund, handing over the leadership of the Fund to Ed Maran and Connor Browne. It has been my pleasure to work with Ed and Connor for many years on our equity team and as co-portfolio managers since February 2006. They are true professionals, with demonstrated analytical skills and independent thinking that supports our comprehensive approach to value investing. Their material contributions in stock selection and overall positioning have been increasingly reflected in portfolio performance in recent years. Since the exceptional results we are having are largely due to their efforts, it is a good time to formally complete this management transition. I will continue on as a co-portfolio manager of the Thornburg International Value Fund with my esteemed partners Wendy Trevisani and Lei Wang.
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
SCHEDULE OF INVESTMENTS | ||
Thornburg Value Fund | September 30, 2009 |
TOP TEN HOLDINGS
As of 9/30/09
Ace Ltd. | 3.8 | % | Gilead Sciences, Inc. | 3.0 | % | |||
Microsoft Corp. | 3.4 | % | ConocoPhillips | 2.9 | % | |||
Entergy Corp. | 3.2 | % | Dell, Inc. | 2.7 | % | |||
Marathon Oil Corp. | 3.1 | % | Hartford Financial Services Group, Inc. | 2.7 | % | |||
Swiss Re | 3.1 | % | Comcast Corp. | 2.5 | % |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/09
Insurance | 14.3 | % | Utilities | 3.2 | % | |||
Telecommunication Services | 10.1 | % | Materials | 2.6 | % | |||
Software & Services | 10.1 | % | Capital Goods | 2.6 | % | |||
Pharmaceuticals, Biotechnology & Life Sciences | 9.7 | % | Retailing | 2.2 | % | |||
Energy | 8.5 | % | Semiconductors & Semiconductor Equipment | 1.5 | % | |||
Technology Hardware & Equipment | 7.8 | % | Transportation | 1.2 | % | |||
Media | 6.9 | % | Consumer Services | 1.2 | % | |||
Banks | 6.6 | % | Food & Staples Retailing | 0.4 | % | |||
Diversified Financials | 3.3 | % | Other Assets & Cash Equivalents | 4.5 | % | |||
Health Care Equipment & Services | 3.3 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 83.51% | |||||
BANKS — 6.06% | |||||
COMMERCIAL BANKS — 6.06% | |||||
Fifth Third Bancorp | 3,672,032 | $ | 37,197,684 | ||
KeyCorp | 4,926,000 | 32,019,000 | |||
Mitsubishi UFJ Financial Group, Inc. | 12,788,100 | 68,666,676 | |||
U.S. Bancorp | 3,541,833 | 77,424,470 | |||
215,307,830 | |||||
CAPITAL GOODS — 2.06% | |||||
AEROSPACE & DEFENSE — 2.06% | |||||
Boeing Co. | 1,351,200 | 73,167,480 | |||
73,167,480 | |||||
CONSUMER SERVICES — 1.17% | |||||
HOTELS, RESTAURANTS & LEISURE — 1.17% | |||||
aLife Time Fitness, Inc. | 1,482,736 | 41,590,745 | |||
41,590,745 | |||||
DIVERSIFIED FINANCIALS — 0.40% | |||||
CAPITAL MARKETS — 0.40% | |||||
AllianceBernstein Holdings LP | 517,030 | 14,104,578 | |||
14,104,578 | |||||
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
ENERGY — 8.52% | |||||
ENERGY EQUIPMENT & SERVICES — 0.85% | |||||
a Transocean Ltd. | 352,300 | $ | 30,132,219 | ||
OIL, GAS & CONSUMABLE FUELS — 7.67% | |||||
ConocoPhillips | 2,283,500 | 103,122,860 | |||
Marathon Oil Corp. | 3,506,000 | 111,841,400 | |||
OAO Gazprom ADR | 2,479,700 | 57,653,025 | |||
302,749,504 | |||||
FOOD & STAPLES RETAILING — 0.40% | |||||
FOOD & STAPLES RETAILING — 0.40% | |||||
aRite Aid Corp. | 8,717,107 | 14,296,055 | |||
14,296,055 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 3.30% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 1.62% | |||||
aVarian Medical Services, Inc. | 1,368,690 | 57,662,910 | |||
HEALTH CARE PROVIDERS & SERVICES — 1.11% | |||||
a Community Health Systems, Inc. | 1,229,440 | 39,256,019 | |||
HEALTH CARE TECHNOLOGY — 0.57% | |||||
aEclipsys Corp. | 1,054,493 | 20,351,715 | |||
117,270,644 | |||||
INSURANCE — 11.90% | |||||
INSURANCE — 11.90% | |||||
Ace Ltd. | 2,529,745 | 135,240,168 | |||
Hartford Financial Services Group, Inc. | 3,618,759 | 95,897,113 | |||
Swiss Re | 2,407,900 | 108,695,901 | |||
Transatlantic Holdings, Inc. | 1,653,900 | 82,976,163 | |||
422,809,345 | |||||
MATERIALS — 1.81% | |||||
METALS & MINING — 1.81% | |||||
Tokyo Steel Mfg. | 5,241,900 | 64,235,392 | |||
64,235,392 | |||||
MEDIA — 6.90% | |||||
MEDIA — 6.90% | |||||
Comcast Corp. | 5,542,250 | 89,119,380 | |||
aDIRECTV Group, Inc. | 2,633,592 | 72,634,467 | |||
aDish Network Corp. | 4,328,938 | 83,375,346 | |||
245,129,193 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 9.71% | |||||
BIOTECHNOLOGY — 3.99% | |||||
aActelion Ltd. | 550,000 | 34,152,755 | |||
aGilead Sciences, Inc. | 2,310,100 | 107,604,458 | |||
LIFE SCIENCES TOOLS & SERVICES — 2.19% | |||||
aThermo Fisher Scientific, Inc. | 1,784,365 | 77,923,220 | |||
PHARMACEUTICALS — 3.53% | |||||
Eli Lilly & Co. | 2,549,043 | 84,194,890 | |||
Roche Holdings AG | 253,700 | 41,006,224 | |||
344,881,547 | |||||
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
RETAILING — 2.19% | |||||
INTERNET & CATALOG RETAIL — 2.19% | |||||
apriceline.com, Inc. | 468,200 | $ | 77,636,924 | ||
77,636,924 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.05% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.05% | |||||
aON Semiconductor Corp. | 4,537,327 | 37,432,948 | |||
37,432,948 | |||||
SOFTWARE & SERVICES — 10.10% | |||||
INFORMATION TECHNOLOGY SERVICES — 5.21% | |||||
aAmdocs Ltd. | 3,023,348 | 81,267,594 | |||
aFiserv, Inc. | 1,416,900 | 68,294,580 | |||
Visa, Inc. | 515,700 | 35,640,027 | |||
SOFTWARE — 4.89% | |||||
aANSYS, Inc. | 1,395,965 | 52,306,809 | |||
Microsoft Corp. | 4,683,600 | 121,258,404 | |||
358,767,414 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 7.77% | |||||
COMMUNICATIONS EQUIPMENT — 1.94% | |||||
aResearch In Motion Ltd. | 1,019,000 | 68,833,450 | |||
COMPUTERS & PERIPHERALS — 4.68% | |||||
aApple, Inc. | 198,000 | 36,703,260 | |||
aDell, Inc. | 6,331,300 | 96,615,638 | |||
aNCR Corp. | 2,391,400 | 33,049,148 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS — 1.15% | |||||
Corning, Inc. | 2,657,335 | 40,683,799 | |||
275,885,295 | |||||
TELECOMMUNICATION SERVICES — 6.98% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.98% | |||||
AT&T Inc. | 2,603,148 | 70,311,027 | |||
WIRELESS TELECOMMUNICATION SERVICES — 5.00% | |||||
China Mobile Ltd. | 6,961,200 | 67,815,124 | |||
aCrown Castle International Corp. | 2,378,439 | 74,587,847 | |||
aLeap Wireless International, Inc. | 1,806,300 | 35,313,165 | |||
248,027,163 | |||||
UTILITIES — 3.19% | |||||
ELECTRIC UTILITIES — 3.19% | |||||
Entergy Corp. | 1,420,236 | 113,420,047 | |||
113,420,047 | |||||
TOTAL COMMON STOCK (Cost $2,922,916,603) | 2,966,712,104 | ||||
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
CORPORATE BONDS — 7.66% | ||||||
BANKS — 0.55% | ||||||
COMMERCIAL BANKS — 0.55% | ||||||
Fifth Third Capital Trust IV, 6.50%, 4/15/2067 | $ | 28,864,000 | $ | 19,483,200 | ||
19,483,200 | ||||||
CAPITAL GOODS — 0.52% | ||||||
INDUSTRIAL CONGLOMERATES — 0.52% | ||||||
General Electric Capital Corp., 6.375%, 11/15/2067 | 22,448,000 | 18,575,720 | ||||
18,575,720 | ||||||
DIVERSIFIED FINANCIALS — 2.92% | ||||||
CAPITAL MARKETS — 1.18% | ||||||
Goldman Sachs Capital II, 5.793%, 12/29/2049 | 43,902,000 | 31,609,440 | ||||
Goldman Sachs Capital III, 1.131%, 9/29/2049 | 15,277,000 | 10,249,950 | ||||
DIVERSIFIED FINANCIAL SERVICES — 1.74% | ||||||
JPMorgan Chase Capital XXI, 1.433%, 2/2/2037 | 19,712,000 | 13,015,932 | ||||
JPMorgan Chase Capital XXIII, 1.44%, 5/15/2047 | 73,911,000 | 48,860,345 | ||||
103,735,667 | ||||||
INSURANCE — 2.39% | ||||||
INSURANCE — 2.39% | ||||||
bGlen Meadow Pass Through, 6.505%, 2/12/2067 | 36,389,000 | 24,744,520 | ||||
Hartford Financial Services Group, 8.125%, 6/15/2038 | 67,866,000 | 60,400,740 | ||||
85,145,260 | ||||||
TELECOMMUNICATION SERVICES — 1.28% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.28% | ||||||
Level 3 Financing, Inc., 9.25%, 11/1/2014 | 51,489,000 | 45,374,681 | ||||
45,374,681 | ||||||
TOTAL CORPORATE BONDS (Cost $174,565,489) | 272,314,528 | |||||
CONVERTIBLE BONDS — 4.37% | ||||||
MATERIALS — 0.79% | ||||||
METALS & MINING — 0.79% | ||||||
bAnglogold Holdings Ltd., 3.50%, 5/22/2014 | 25,000,000 | 27,879,000 | ||||
27,879,000 | ||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.48% | ||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.48% | ||||||
ON Semiconductor Corp., 2.625%, 12/15/2026 | 16,006,000 | 17,206,450 | ||||
17,206,450 | ||||||
TELECOMMUNICATION SERVICES — 1.86% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.86% | ||||||
Level 3 Communications, Inc., 10.00%, 5/1/2011 | 22,525,000 | 22,243,438 | ||||
Level 3 Communications, Inc., 5.25%, 12/15/2011 | 47,130,000 | 41,945,700 | ||||
Level 3 Communications, Inc., 2.875%, 7/15/2010 | 1,854,000 | 1,791,428 | ||||
65,980,566 | ||||||
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||||
TRANSPORTATION — 1.24% | |||||||
ROAD & R AIL — 1.24% | |||||||
Hertz Global Holdings, Inc., 5.25%, 6/1/2014 | $ | 29,332,000 | $ | 44,217,990 | |||
44,217,990 | |||||||
TOTAL CONVERTIBLE BONDS (Cost $107,604,677) | 155,284,006 | ||||||
SHORT TERM INVESTMENTS — 4.64% | |||||||
Brown-Forman Corp., 0.15%, 10/7/2009 | 25,000,000 | 24,999,375 | |||||
Clark County School District GO, put 10/1/2009 (Insured: FSA/SPA: Bayerische Landesbank) (daily demand notes), 0.34%, 6/15/2021 | 2,360,000 | 2,360,000 | |||||
Devon Energy Corp., 0.20%, 10/1/2009 | 17,000,000 | 17,000,000 | |||||
Devon Energy Corp., 0.21%, 10/14/2009 | 25,000,000 | 24,998,104 | |||||
Oglethorpe Power Corp., 0.25%, 10/1/2009 | 24,051,000 | 24,051,000 | |||||
Pepco Holdings, Inc., 0.50%, 10/6/2009 | 6,600,000 | 6,599,542 | |||||
Pepco Holdings, Inc., 0.50%, 10/13/2009 | 15,000,000 | 14,997,500 | |||||
Precision Castparts Corp., 0.20%, 10/1/2009 | 11,900,000 | 11,900,000 | |||||
Societe Generale North America, 0.03%, 10/1/2009 | 37,825,000 | 37,825,000 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $164,730,521) | 164,730,521 | ||||||
TOTAL INVESTMENTS — 100.18% (Cost $3,367,381,007) | $ | 3,559,041,159 | |||||
LIABILITIES NET OF OTHER ASSETS — (0.18)% | (6,542,697 | ) | |||||
NET ASSETS — 100.00% | $ | 3,552,498,462 | |||||
Footnote Legend
a | Non-income producing |
b | 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, 2009, the aggregate value of these securities in the Fund’s portfolio was $52,623,520, representing 1.48% of the Fund’s net assets. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt | |
COP | Certificates of Participation | |
FSA | Insured by Financial Security Assurance Co. | |
GO | General Obligation |
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Value Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (cost $3,367,381,007)(Note 2) | $ | 3,559,041,159 | ||
Cash | 7,520,628 | |||
Receivable for fund shares sold | 13,369,019 | |||
Dividends receivable | 3,125,077 | |||
Dividend & interest reclaim receivable | 234,288 | |||
Interest receivable | 9,002,103 | |||
Prepaid expenses and other assets | 69,188 | |||
Total Assets | 3,592,361,462 | |||
LIABILITIES | ||||
Payable for securities purchased | 29,710,909 | |||
Payable for fund shares redeemed | 5,934,625 | |||
Payable to investment advisor and other affiliates (Note 3) | 3,006,891 | |||
Accounts payable and accrued expenses | 1,192,926 | |||
Dividends payable | 17,649 | |||
Total Liabilities | 39,863,000 | |||
NET ASSETS | $ | 3,552,498,462 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 1,871,097 | ||
Net unrealized appreciation on investments | 191,682,253 | |||
Accumulated net realized gain (loss) | (1,171,418,920 | ) | ||
Net capital paid in on shares of beneficial interest | 4,530,364,032 | |||
$ | 3,552,498,462 | |||
16 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($1,204,450,287 applicable to 40,607,035 shares of beneficial interest outstanding - - Note 4) | $ | 29.66 | |
Maximum sales charge, 4.50% of offering price | 1.40 | ||
Maximum offering price per share | $ | 31.06 | |
Class B Shares: | |||
Net asset value and offering price per share * ($38,629,988 applicable to 1,369,447 shares of beneficial interest outstanding - Note 4) | $ | 28.21 | |
Class C Shares: | |||
Net asset value and offering price per share * ($361,965,995 applicable to 12,680,341 shares of beneficial interest outstanding - Note 4) | $ | 28.55 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($1,575,521,780 applicable to 52,249,635 shares of beneficial interest outstanding - Note 4) | $ | 30.15 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($162,230,714 applicable to 5,502,934 shares of beneficial interest outstanding - Note 4) | $ | 29.48 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($44,036,755 applicable to 1,486,930 shares of beneficial interest outstanding - Note 4) | $ | 29.62 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($165,662,943 applicable to 5,498,781 shares of beneficial interest outstanding - Note 4) | $ | 30.13 | |
* | 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
STATEMENT OF OPERATIONS | ||
Thornburg Value Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $643,848) | $ | 43,643,349 | ||
Interest income (net of premium amortized of $11,865) | 36,755,244 | |||
Total Income | 80,398,593 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 21,104,790 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,152,298 | |||
Class B Shares | 49,488 | |||
Class C Shares | 371,800 | |||
Class I Shares | 612,239 | |||
Class R3 Shares | 158,807 | |||
Class R4 Shares | 34,992 | |||
Class R5 Shares | 58,975 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 2,304,318 | |||
Class B Shares | 395,029 | |||
Class C Shares | 2,972,574 | |||
Class R3 Shares | 635,883 | |||
Class R4 Shares | 70,011 | |||
Transfer agent fees | ||||
Class A Shares | 1,408,067 | |||
Class B Shares | 97,400 | |||
Class C Shares | 543,430 | |||
Class I Shares | 1,683,325 | |||
Class R3 Shares | 346,770 | |||
Class R4 Shares | 83,937 | |||
Class R5 Shares | 364,006 | |||
Registration and filing fees | ||||
Class A Shares | 67,022 | |||
Class B Shares | 16,627 | |||
Class C Shares | 20,520 | |||
Class I Shares | 71,026 | |||
Class R3 Shares | 19,889 | |||
Class R4 Shares | 18,385 | |||
Class R5 Shares | 20,040 | |||
Custodian fees (Note 3) | 404,771 | |||
Professional fees | 128,546 | |||
Accounting fees | 144,617 | |||
Trustee fees | 90,926 | |||
Other expenses | 317,169 | |||
Total Expenses | 35,767,677 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,070,463 | ) | ||
Fees paid indirectly (Note 3) | (24,952 | ) | ||
Net Expenses | 34,672,262 | |||
Net Investment Income | $ | 45,726,331 | ||
18 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Value Fund | Year Ended September 30, 2009 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | (900,414,186 | ) | |
Forward currency contracts (Note 7) | 14,871,905 | |||
Foreign currency transactions | (542,560 | ) | ||
(886,084,841 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 907,270,180 | |||
Forward currency contracts (Note 7) | (7,651,780 | ) | ||
Foreign currency translations | 41,302 | |||
899,659,702 | ||||
Net Realized and Unrealized Gain | 13,574,861 | |||
Net Increase in Net Assets Resulting From Operations | $ | 59,301,192 | ||
See notes to financial statements.
Certified Annual Report 19
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Value Fund
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 45,726,331 | $ | 29,752,935 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (886,084,841 | ) | (269,404,026 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | 899,659,702 | (1,362,764,344 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 59,301,192 | (1,602,415,435 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (16,118,746 | ) | (5,630,222 | ) | ||||
Class B Shares | (326,779 | ) | (7,933 | ) | ||||
Class C Shares | (2,935,911 | ) | (85,943 | ) | ||||
Class I Shares | (24,133,460 | ) | (18,551,738 | ) | ||||
Class R3 Shares | (2,185,830 | ) | (726,604 | ) | ||||
Class R4 Shares | (535,872 | ) | (170,180 | ) | ||||
Class R5 Shares | (2,440,948 | ) | (1,086,258 | ) | ||||
From realized gains | ||||||||
Class A Shares | — | (145,917,343 | ) | |||||
Class B Shares | — | (10,428,887 | ) | |||||
Class C Shares | — | (57,732,547 | ) | |||||
Class I Shares | — | (223,563,517 | ) | |||||
Class R3 Shares | — | (14,403,384 | ) | |||||
Class R4 Shares | — | (1,166,969 | ) | |||||
Class R5 Shares | — | (9,376,741 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 64,047,983 | 120,614,733 | ||||||
Class B Shares | (22,207,742 | ) | (7,316,619 | ) | ||||
Class C Shares | (43,229,232 | ) | 20,666,716 | |||||
Class I Shares | (326,092,244 | ) | 597,263,995 | |||||
Class R3 Shares | (5,811,678 | ) | 84,257,580 | |||||
Class R4 Shares | 11,324,512 | 33,018,022 | ||||||
Class R5 Shares | 21,262,560 | 83,701,115 | ||||||
Net Decrease in Net Assets | (290,082,195 | ) | (1,159,058,159 | ) | ||||
NET ASSETS: | ||||||||
Beginning of Year | 3,842,580,657 | 5,001,638,816 | ||||||
End of Year | $ | 3,552,498,462 | $ | 3,842,580,657 | ||||
Undistributed net investment income | $ | 1,871,097 | $ | 4,912,939 |
See notes to financial statements.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Value Fund | September 30, 2009 |
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 Fund is currently one of fifteen separate series of the Trust. 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) 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 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 of purchase, 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.
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, and 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
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
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 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Investments in Securities* | ||||||||||||
Common Stock | $ | 2,966,712,104 | $ | 2,966,712,104 | $ | — | $ | — | ||||
Corporate Bonds | 272,314,528 | — | 272,314,528 | — | ||||||||
Convertible Bonds | 155,284,006 | — | 155,284,006 | — | ||||||||
Short Term Investments | 164,730,521 | — | 164,730,521 | — | ||||||||
Total Investments in Securities | $ | 3,559,041,159 | $ | 2,966,712,104 | $ | 592,329,055 | $ | — |
* | See Summary of Industry Exposure and Schedule of Investments beginning on page 11 for further detail. |
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.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
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 to shareholders substantially all taxable income, including any net realized gain on investments of the Funds. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Dividends to shareholders are generally paid quarterly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date or, at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually. Distributions to shareholders are based on income tax regulations and therefore, their characteristics may differ for financial statement and tax purposes.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned and dividend income is recorded on the ex-dividend date. Certain income from foreign securities is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares of each class of shares at the beginning of the day (after adjusting for the current share activity of the respective class). Expenses common to all funds are allocated among the funds comprising the Trust based upon their relative net asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown. However, based on experience, the Trust expects the risk of loss to be remote.
Use of Estimates: The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
NOTE 3 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, Thornburg Investment Management, Inc. (the “Advisor”) serves as the investment advisor and performs services to the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2009, 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, 2009, the Advisor voluntarily or contractually agreed to reimburse certain class specific expenses, administrative fees, and distribution fees of $282,545 for Class I shares, $467,766 for Class R3 shares, $82,156 for Class R4 Shares, and $237,996 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, 2009, the Distributor has advised the Fund that it earned
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
net commissions aggregating $45,040 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $19,499 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, 2009, 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, 2009, fees paid indirectly were $24,952.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 21,996,783 | $ | 495,137,300 | 11,174,321 | $ | 399,226,305 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 526,363 | 12,590,999 | 3,754,600 | 138,338,268 | ||||||||||
Shares repurchased | (20,767,504 | ) | (443,715,236 | ) | (12,304,141 | ) | (416,973,786 | ) | ||||||
Redemption fees received* | — | 34,920 | — | 23,946 | ||||||||||
Net Increase (Decrease) | 1,755,642 | $ | 64,047,983 | 2,624,780 | $ | 120,614,733 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 123,500 | $ | 2,607,505 | 129,348 | $ | 4,492,381 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 12,305 | 270,413 | 256,872 | 9,083,791 | ||||||||||
Shares repurchased | (1,177,554 | ) | (25,087,288 | ) | (649,891 | ) | (20,894,338 | ) | ||||||
Redemption fees received* | — | 1,628 | — | 1,547 | ||||||||||
Net Increase (Decrease) | (1,041,749 | ) | $ | (22,207,742 | ) | (263,671 | ) | $ | (7,316,619 | ) | ||||
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 1,876,368 | $ | 41,683,603 | 1,768,463 | $ | 62,269,164 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 110,865 | 2,523,300 | 1,418,890 | 50,776,902 | ||||||||||
Shares repurchased | (4,196,286 | ) | (87,447,481 | ) | (2,816,339 | ) | (92,388,285 | ) | ||||||
Redemption fees received* | — | 11,346 | — | 8,935 | ||||||||||
Net Increase (Decrease) | (2,209,053 | ) | $ | (43,229,232 | ) | 371,014 | $ | 20,666,716 | ||||||
Class I Shares | ||||||||||||||
Shares sold | 22,175,103 | $ | 544,582,100 | 33,733,127 | $ | 1,210,083,621 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 780,762 | 18,926,149 | 5,086,814 | 189,825,719 | ||||||||||
Shares repurchased | (39,596,078 | ) | (889,646,618 | ) | (23,528,996 | ) | (802,685,508 | ) | ||||||
Redemption fees received* | — | 46,125 | — | 40,163 | ||||||||||
Net Increase (Decrease) | (16,640,213 | ) | $ | (326,092,244 | ) | 15,290,945 | $ | 597,263,995 | ||||||
Class R3 Shares | ||||||||||||||
Shares sold | 1,686,345 | $ | 39,658,963 | 3,326,232 | $ | 116,410,112 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 89,721 | 2,114,046 | 401,141 | 14,656,658 | ||||||||||
Shares repurchased | (2,071,335 | ) | (47,589,434 | ) | (1,371,429 | ) | (46,812,136 | ) | ||||||
Redemption fees received* | — | 4,747 | — | 2,946 | ||||||||||
Net Increase (Decrease) | (295,269 | ) | $ | (5,811,678 | ) | 2,355,944 | $ | 84,257,580 | ||||||
Class R4 Shares | ||||||||||||||
Shares sold | 808,447 | $ | 20,006,549 | 1,140,551 | $ | 41,174,367 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 18,317 | 442,047 | 34,386 | 1,249,751 | ||||||||||
Shares repurchased | (392,575 | ) | (9,125,077 | ) | (281,635 | ) | (9,406,561 | ) | ||||||
Redemption fees received* | — | 993 | — | 465 | ||||||||||
Net Increase (Decrease) | 434,189 | $ | 11,324,512 | 893,302 | $ | 33,018,022 | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 2,235,661 | $ | 55,055,512 | 3,316,951 | $ | 117,084,163 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 99,135 | 2,411,510 | 282,183 | 10,452,223 | ||||||||||
Shares repurchased | (1,587,441 | ) | (36,208,743 | ) | (1,235,288 | ) | (43,837,491 | ) | ||||||
Redemption fees received* | — | 4,281 | — | 2,220 | ||||||||||
Net Increase (Decrease) | 747,355 | $ | 21,262,560 | 2,363,846 | $ | 83,701,115 | ||||||||
* | 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, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $2,296,610,229 and $2,623,207,665, respectively.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 3,392,621,462 | ||
Gross unrealized appreciation on a tax basis | $ | 471,273,977 | ||
Gross unrealized depreciation on a tax basis | (304,854,280 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 166,419,697 | ||
Distributable earnings - ordinary income | $ | 1,574,011 |
At September 30, 2009, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2008 of $1,484,675, and $617,127,482, respectively. For tax purposes, such losses will be recognized in the year ending September 30, 2010.
At September 30, 2009 the Fund had tax basis capital losses of $527,267,206, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards will expire September 30, 2017.
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $90,627, decreased net realized investment loss by $143,584, and decreased net capital paid in on shares of beneficial interest by $52,957. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from currency losses, non-deductible expenses, and the disposition of a partnership investment.
The tax character of distributions paid during the years ended September 30, 2009, and September 30, 2008, was as follows:
2009 | 2008 | |||||
Distributions from: | ||||||
Ordinary income | $ | 48,677,546 | $ | 129,259,793 | ||
Capital gains | — | 359,588,473 | ||||
Total distributions | $ | 48,677,546 | $ | 488,848,266 | ||
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50, (“ASC 815”) require certain disclosures. The new requirement amends and expands disclosures related to derivative instruments to provide users of financial statements with an enhanced understanding of the use of derivative instruments by the Fund and how these derivatives affect the financial position, financial performance and cash flows of the Fund. The Fund does not designate any derivative instruments as hedging instruments under ASC 815. During the year ended September 30, 2009, the Fund’s principal exposure to derivative financial instruments of the type addressed by ASC 815 was investment in foreign exchange contracts. A foreign exchange contract is an agreement between two parties to exchange different currencies at a specified rate of exchange at an agreed upon future date. Foreign exchange contracts involve risks to the Fund, including the risk that a contract counterparty will not meet its obligations to the Fund, the risk that a change in a contract’s value may not correlate perfectly with the currency the contract was intended to track, and the risk that the Fund’s advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2009 in the normal course of pursuing its investment objectives, in anticipation of purchasing foreign investments or with the intent of reducing the risk to the value of the
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 |
Fund’s foreign investments 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 investment transactions.
These contracts are accounted for by the Fund under ASC 815. Unrealized gains and unrealized losses on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities 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 each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations.
There were no outstanding forward currency contracts in the Fund’s Statement of Assets and Liabilities at September 30, 2009.
The realized gains (losses) from forward currency contracts, and the change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2009 is disclosed in the following tables:
Amount of Realized Gain (Loss) on Derivative
Financial Instruments Recognized in Income for the
Year Ended September 30, 2009
Total | Forward Currency Contracts | |||||
Foreign exchange contracts | $ | 14,871,905 | $ | 14,871,905 |
Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2009
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (7,651,780 | ) | $ | (7,651,780 | ) |
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
Certified Annual Report 27
Thornburg Value Fund
Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 28.02 | $ | 44.17 | $ | 37.59 | $ | 32.79 | $ | 28.11 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.37 | 0.18 | 0.29 | 0.35 | 0.32 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.67 | (12.26 | ) | 7.86 | 4.76 | 4.64 | ||||||||||||||
Total from investment operations | 2.04 | (12.08 | ) | 8.15 | 5.11 | 4.96 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.40 | ) | (0.14 | ) | (0.27 | ) | (0.31 | ) | (0.28 | ) | ||||||||||
Net realized gains | — | (3.93 | ) | (1.30 | ) | — | — | |||||||||||||
Total dividends | (0.40 | ) | (4.07 | ) | (1.57 | ) | (0.31 | ) | (0.28 | ) | ||||||||||
Change in net asset value | 1.64 | (16.15 | ) | 6.58 | 4.80 | 4.68 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 29.66 | $ | 28.02 | $ | 44.17 | $ | 37.59 | $ | 32.79 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 7.65 | (29.52 | ) | 22.23 | 15.63 | 17.70 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 1.58 | 0.52 | 0.70 | 1.02 | 1.05 | |||||||||||||||
Expenses, after expense reductions (%) | 1.34 | 1.27 | 1.27 | 1.35 | 1.40 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.34 | 1.27 | 1.27 | 1.34 | 1.40 | |||||||||||||||
Expenses, before expense reductions (%) | 1.34 | 1.27 | 1.27 | 1.35 | 1.40 | |||||||||||||||
Portfolio turnover rate (%) | 83.00 | 70.65 | 79.29 | 51.36 | 58.90 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,204,450 | $ | 1,088,766 | $ | 1,599,976 | $ | 1,121,720 | $ | 972,478 |
(a) | Sales loads are not reflected in computing total return. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
28 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | ||||||||||||||||||||
Class B Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 26.66 | $ | 42.36 | $ | 36.17 | $ | 31.60 | $ | 27.13 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.16 | (0.09 | ) | (0.04 | ) | 0.07 | 0.08 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 1.58 | (11.68 | ) | 7.55 | 4.58 | 4.47 | ||||||||||||||
Total from investment operations | 1.74 | (11.77 | ) | 7.51 | 4.65 | 4.55 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.19 | ) | (0.00 | )(a) | (0.02 | ) | (0.08 | ) | (0.08 | ) | ||||||||||
Net realized gains | — | (3.93 | ) | (1.30 | ) | — | — | |||||||||||||
Total dividends | (0.19 | ) | (3.93 | ) | (1.32 | ) | (0.08 | ) | (0.08 | ) | ||||||||||
Change in net asset value | 1.55 | (15.70 | ) | 6.19 | 4.57 | 4.47 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 28.21 | $ | 26.66 | $ | 42.36 | $ | 36.17 | $ | 31.60 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 6.72 | (30.05 | ) | 21.26 | 14.71 | 16.78 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 0.74 | (0.28 | ) | (0.09 | ) | 0.21 | 0.27 | |||||||||||||
Expenses, after expense reductions (%) | 2.22 | 2.05 | 2.07 | 2.15 | 2.17 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.22 | 2.05 | 2.07 | 2.14 | 2.17 | |||||||||||||||
Expenses, before expense reductions (%) | 2.22 | 2.05 | 2.07 | 2.15 | 2.17 | |||||||||||||||
Portfolio turnover rate (%) | 83.00 | 70.65 | 79.29 | 51.36 | 58.90 | |||||||||||||||
Net assets at end of year (thousands) | $ | 38,630 | $ | 64,287 | $ | 113,299 | $ | 96,587 | $ | 92,410 |
(a) | Dividends from net investment income per share were less than $(0.01). |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 29
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 26.99 | $ | 42.82 | $ | 36.55 | $ | 31.92 | $ | 27.40 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.18 | (0.08 | ) | (0.02 | ) | 0.09 | 0.09 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 1.61 | (11.81 | ) | 7.62 | 4.62 | 4.51 | ||||||||||||||
Total from investment operations | 1.79 | (11.89 | ) | 7.60 | 4.71 | 4.60 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.23 | ) | (0.01 | ) | (0.03 | ) | (0.08 | ) | (0.08 | ) | ||||||||||
Net realized gains | — | (3.93 | ) | (1.30 | ) | — | — | |||||||||||||
Total dividends | (0.23 | ) | (3.94 | ) | (1.33 | ) | (0.08 | ) | (0.08 | ) | ||||||||||
Change in net asset value | 1.56 | (15.83 | ) | 6.27 | 4.63 | 4.52 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 28.55 | $ | 26.99 | $ | 42.82 | $ | 36.55 | $ | 31.92 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 6.83 | (30.03 | ) | 21.29 | 14.77 | 16.80 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 0.81 | (0.23 | ) | (0.05 | ) | 0.27 | 0.31 | |||||||||||||
Expenses, after expense reductions (%) | 2.12 | 2.02 | 2.03 | 2.09 | 2.14 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.12 | 2.01 | 2.03 | 2.09 | 2.14 | |||||||||||||||
Expenses, before expense reductions (%) | 2.12 | 2.02 | 2.03 | 2.09 | 2.14 | |||||||||||||||
Portfolio turnover rate (%) | 83.00 | 70.65 | 79.29 | 51.36 | 58.90 | |||||||||||||||
Net assets at end of year (thousands) | $ | 361,966 | $ | 401,880 | $ | 621,687 | $ | 490,399 | $ | 446,567 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
30 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | ||||||||||||||||||||
Class I Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 28.47 | $ | 44.80 | $ | 38.11 | $ | 33.23 | $ | 28.49 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.46 | 0.32 | 0.44 | 0.50 | 0.45 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.70 | (12.45 | ) | 7.96 | 4.82 | 4.70 | ||||||||||||||
Total from investment operations | 2.16 | (12.13 | ) | 8.40 | 5.32 | 5.15 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.48 | ) | (0.27 | ) | (0.41 | ) | (0.44 | ) | (0.41 | ) | ||||||||||
Net realized gains | — | (3.93 | ) | (1.30 | ) | — | — | |||||||||||||
Total dividends | (0.48 | ) | (4.20 | ) | (1.71 | ) | (0.44 | ) | (0.41 | ) | ||||||||||
Change in net asset value | 1.68 | (16.33 | ) | 6.69 | 4.88 | 4.74 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 30.15 | $ | 28.47 | $ | 44.80 | $ | 38.11 | $ | 33.23 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 8.04 | (29.24 | ) | 22.62 | 16.10 | 18.16 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 1.94 | 0.92 | 1.05 | 1.41 | 1.44 | |||||||||||||||
Expenses, after expense reductions (%) | 0.98 | 0.91 | 0.93 | 0.98 | 0.99 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.97 | 0.90 | 0.92 | 0.97 | 0.98 | |||||||||||||||
Expenses, before expense reductions (%) | 1.00 | 0.91 | 0.93 | 0.98 | 1.00 | |||||||||||||||
Portfolio turnover rate (%) | 83.00 | 70.65 | 79.29 | 51.36 | 58.90 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,575,522 | $ | 1,961,495 | $ | 2,401,473 | $ | 1,074,492 | $ | 457,788 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 31
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | ||||||||||||||||||||
Class R3 Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 27.86 | $ | 43.94 | $ | 37.43 | $ | 32.68 | $ | 28.06 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.36 | 0.17 | 0.26 | 0.37 | 0.33 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.66 | (12.19 | ) | 7.81 | 4.71 | 4.60 | ||||||||||||||
Total from investment operations | 2.02 | (12.02 | ) | 8.07 | 5.08 | 4.93 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.40 | ) | (0.13 | ) | (0.26 | ) | (0.33 | ) | (0.31 | ) | ||||||||||
Net realized gains | — | (3.93 | ) | (1.30 | ) | — | — | |||||||||||||
Total dividends | (0.40 | ) | (4.06 | ) | (1.56 | ) | (0.33 | ) | (0.31 | ) | ||||||||||
Change in net asset value | 1.62 | (16.08 | ) | 6.51 | 4.75 | 4.62 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 29.48 | $ | 27.86 | $ | 43.94 | $ | 37.43 | $ | 32.68 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 7.62 | (29.54 | ) | 22.11 | 15.60 | 17.64 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 1.57 | 0.50 | 0.63 | 1.05 | 1.07 | |||||||||||||||
Expenses, after expense reductions (%) | 1.35 | 1.35 | 1.35 | 1.36 | 1.35 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.35 | 1.35 | 1.35 | 1.35 | 1.35 | |||||||||||||||
Expenses, before expense reductions (%) | 1.72 | 1.66 | 1.63 | 1.69 | 1.94 | |||||||||||||||
Portfolio turnover rate (%) | 83.00 | 70.65 | 79.29 | 51.36 | 58.90 | |||||||||||||||
Net assets at end of year (thousands) | $ | 162,231 | $ | 161,517 | $ | 151,260 | $ | 48,627 | $ | 11,661 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
32 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Class R4 Shares: | Year Ended Sept 30, | Period Ended Sept 30, | ||||||||||
2009 | 2008 | 2007(a) | ||||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 27.99 | $ | 44.14 | $ | 41.00 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.39 | 0.19 | 0.20 | |||||||||
Net realized and unrealized gain (loss) on investments | 1.67 | (12.23 | ) | 3.12 | ||||||||
Total from investment operations | 2.06 | (12.04 | ) | 3.32 | ||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.43 | ) | (0.18 | ) | (0.18 | ) | ||||||
Net realized gains | — | (3.93 | ) | — | ||||||||
Total dividends | (0.43 | ) | (4.11 | ) | (0.18 | ) | ||||||
Change in net asset value | 1.63 | (16.15 | ) | 3.14 | ||||||||
NET ASSET VALUE, end of period | $ | 29.62 | $ | 27.99 | $ | 44.14 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | 7.74 | (29.47 | ) | 8.09 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | 1.65 | 0.58 | 0.70 | (c) | ||||||||
Expenses, after expense reductions (%) | 1.25 | 1.24 | 1.25 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.25 | 1.24 | 1.25 | (c) | ||||||||
Expenses, before expense reductions (%) | 1.54 | 1.48 | 2.34 | (c) | ||||||||
Portfolio turnover rate (%) | 83.00 | 70.65 | 79.29 | |||||||||
Net assets at end of period (thousands) | $ | 44,037 | $ | 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.
Certified Annual Report 33
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Value Fund |
Year Ended September 30, | Period Ended Sept. 30, | |||||||||||||||||||
Class R5 Shares: | 2009 | 2008 | 2007 | 2006 | 2005(a) | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||||||
Net asset value, beginning of period | $ | 28.45 | $ | 44.78 | $ | 38.09 | $ | 33.22 | $ | 30.75 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.46 | 0.32 | 0.49 | 0.24 | 0.28 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.71 | (12.47 | ) | 7.91 | 5.07 | 2.45 | ||||||||||||||
Total from investment operations | 2.17 | (12.15 | ) | 8.40 | 5.31 | 2.73 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.49 | ) | (0.25 | ) | (0.41 | ) | (0.44 | ) | (0.26 | ) | ||||||||||
Net realized gains | — | (3.93 | ) | (1.30 | ) | — | — | |||||||||||||
Total dividends | (0.49 | ) | (4.18 | ) | (1.71 | ) | (0.44 | ) | (0.26 | ) | ||||||||||
Change in net asset value | 1.68 | (16.33 | ) | 6.69 | 4.87 | 2.47 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 30.13 | $ | 28.45 | $ | 44.78 | $ | 38.09 | $ | 33.22 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(b) | 8.05 | (29.30 | ) | 22.63 | 16.07 | 8.93 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 1.93 | 0.92 | 1.14 | 0.64 | 1.31 | (c) | ||||||||||||||
Expenses, after expense reductions (%) | 0.98 | 0.98 | 0.91 | 1.00 | 1.00 | (c) | ||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.98 | 0.98 | 0.91 | 0.98 | 0.99 | (c) | ||||||||||||||
Expenses, before expense reductions (%) | 1.18 | 1.03 | 0.93 | 3.24 | 127.30 | (c)(d) | ||||||||||||||
Portfolio turnover rate (%) | 83.00 | 70.65 | 79.29 | 51.36 | 58.90 | |||||||||||||||
Net assets at end of period (thousands) | $ | 165,663 | $ | 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.
34 Certified Annual Report
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, 2009, 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
Certified Annual Report 35
Thornburg Value Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,506.30 | $ | 8.14 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.57 | $ | 6.56 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,499.40 | $ | 13.65 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.14 | $ | 11.00 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,500.30 | $ | 13.03 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.65 | $ | 10.50 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,508.20 | $ | 6.08 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.22 | $ | 4.90 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,506.00 | $ | 8.48 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.30 | $ | 6.83 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,506.30 | $ | 7.85 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,508.70 | $ | 6.13 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.18 | $ | 4.94 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.30%; B: 2.18%; C: 2.08%; I: 0.97%; R3: 1.35%; R4: 1.25%; R5: 0.97%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
36 Certified Annual Report
Thornburg Value Fund | September 30, 2009 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 10/2/95) | 2.81 | % | 3.81 | % | 3.28 | % | 9.36 | % | ||||
B Shares (Incep: 4/3/00) | 1.72 | % | 3.58 | % | — | 0.50 | % | |||||
C Shares (Incep: 10/2/95) | 5.83 | % | 3.98 | % | 2.96 | % | 8.87 | % | ||||
I Shares (Incep: 11/2/98) | 8.04 | % | 5.16 | % | 4.17 | % | 5.70 | % | ||||
R3 Shares (Incep: 7/1/03) | 7.62 | % | 4.72 | % | — | 5.28 | % | |||||
R4 Shares (Incep: 2/1/07) | 7.74 | % | — | — | -7.13 | % | ||||||
R5 Shares (Incep: 2/1/05) | 8.05 | % | — | — | 3.70 | % | ||||||
S&P 500 Index (Since 10/2/95) | -6.91 | % | 1.02 | % | -0.15 | % | 6.23 | % |
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 carry 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.
Certified Annual Report 37
Thornburg Value Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
38 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 (Unaudited) |
Name, Age, Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report 39
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 (Unaudited) |
Name, Age, Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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 Value Fund | September 30, 2009 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
The Trust has delegated to Thornburg Investment Management, Inc. (the “Advisor”) voting decisions respecting proxies for the Fund’s voting securities. The Advisor makes voting decisions in accordance with its Proxy Voting Policy and Procedures. A description of the Policy and Procedures is available (i) without charge, upon request, by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
Information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information is available (i) without charge, upon request by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the tax year ended September 30, 2009, the Thornburg Value Fund designates 84.31% (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.
71.17% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2009 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, 2009. Complete information will be computed and reported in conjunction with your 2009 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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of that information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees unanimously voted 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.
Certified Annual Report 41
OTHER INFORMATION, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 (Unaudited) |
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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the Fund’s investment objectives. In addition, the Trustees considered the information specifically provided to them at their request in anticipation of their annual 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 large blend equity mutual funds selected by an independent mutual fund analyst firm, and relative to broad-based securities indices, and (iv) a measure of expected earnings per share and 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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, tax efficiency, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment return had been lower than the returns of the two indices and the average return of the large blend mutual fund category in the most recent full calendar year. The Trustees also noted that the Fund’s investment returns had generally met or exceeded reasonable expectations over multi-year periods, given the investment objectives of the Fund. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment returns had exceeded the returns of the indices in the majority of the preceding eight calendar years (notwithstanding that the Fund’s returns are net of expenses and the returns of the indices do not reflect payment of any expenses), that the Fund’s returns had similarly exceeded the average returns of the category in most of those years, and that the Fund’s returns fell within the top decile of the category for the three-month, year-to-date, one-year, three year and five-year periods ending with the second quarter of the current year. The Trustees further noted the Fund’s higher cumulative investment return (net of expenses) relative to the Fund’s benchmark 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 slightly higher than the median and average expense ratios for the group of mutual funds assembled by the independent mutual fund analyst firm, that the management fee was slightly higher than the median and average 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 considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
42 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Value Fund | September 30, 2009 (Unaudited) |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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 from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing, compliance and systems capabilities 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 43
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 22, 2009
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.
44 This page is not part of the Annual Report.
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. 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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg. com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
This page is not part of the Annual Report. 47
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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. |
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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, 2009. 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. Special risks may be associated with investments outside the United States, especially in emerging markets, including currency fluctuations, illiquidity and volatility. Investments in small capitalization companies 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 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 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | TGVAX | 885-215-657 | ||
Class B | THGBX | 885-215-616 | ||
Class C | THGCX | 885-215-640 | ||
Class I | TGVIX | 885-215-566 | ||
Class R3 | TGVRX | 885-215-525 | ||
Class R4 | THVRX | 885-215-269 | ||
Class R5 | TIVRX | 885-215-368 |
Glossary
MSCI EAFE (Europe, Australasia, Far East) Index – An unmanaged, market capitalization weighted index that is the common benchmark for international portfolio performance. 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.
Beta – A measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price. The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median, and half have values that are less.
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 equaling 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
IMPORTANT
PERFORMANCE INFORMATION
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 1.36%, 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, 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:
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 2009
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | |||||||||||
A Shares (Incep: 5/28/98) | |||||||||||||||
Without sales charge | 2.05 | % | 1.21 | % | 9.37 | % | 9.30 | % | 9.07 | % | |||||
With sales charge | -2.56 | % | -0.33 | % | 8.36 | % | 8.80 | % | 8.63 | % | |||||
MSCI EAFE Index (Since 5/28/98) | 3.23 | % | -3.60 | % | 6.07 | % | 2.55 | % | 3.37 | % |
4 This page is not part of the Annual Report.
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 THE YEAR ENDED 9/30/09
Top Contributors | Top Detractors | |
Baidu, Inc. (ADR) | Swiss Reinsurance Co. | |
Hong Kong Exchanges & Clearing Ltd. | AXA | |
Standard Chartered plc | Nintendo Co. Ltd. | |
Hennes & Mauritz AB | Carlsberg AS | |
LVMH Moët Hennessy Louis Vuitton | Gazprom OAO (ADR) | |
Source: FactSet |
KEY PORTFOLIO ATTRIBUTES
As of 9/30/09
Portfolio P/E Trailing 12-months* | 17.3x | ||
Portfolio Price to Cash Flow* | 7.7x | ||
Portfolio Price to Book Value* | 2.4x | ||
Median Market Cap* | $ | 26.4 B | |
7-Year Beta (A Shares vs. MSCI EAFE)* | 0.91 | ||
Number of Companies | 65 | ||
* Source: FactSet |
This page is not part of the Annual Report. 5
Thornburg International Value Fund
September 30, 2009
Table of Contents | ||
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21 | ||
29 | ||
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37 | ||
38 | ||
39 | ||
42 |
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 23, 2009
Dear Fellow Shareholder:
What a year it has been. The seemingly modest 3.23% twelve-month return as of September 30, 2009 for the Morgan Stanley Capital International Europe, Australasia, and Far East Index (MSCI EAFE) masks the extraordinary ride down and back up experienced by equity investors worldwide over the last year. Real fear of an economic and market collapse was pervasive among investors in late 2008 and early 2009. With the failure of many long established financial institutions like AIG as well as once premier industrial enterprises such as GM, those fears were well justified. We will never know with any certainty, but it might be that government and monetary initiatives were executed in the nick of time. Nonetheless, early on equities sold off indiscriminately, led by financials. Cyclical areas such as steel, chemicals, consumer discretionary, and retail were also particularly hard-hit. Loosely coordinated efforts by a variety of governments, including massive infrastructure spending by the Chinese, provided enough encouragement to investors to set off the biggest stock market rally since 1937. Not surprisingly, many of the strongest rebounds were seen in areas that had been hit the hardest early in the period. Financials led the rebound, but almost all stocks perceived as viable franchises recovered significant lost ground. In a matter of weeks, risk aversion evaporated and equity market performance flip-flopped. By September 30, 2009, the MSCI EAFE Index had risen over 70% off the March 9, 2009 bottom. A year ago in the annual letter, we quoted an ancient Chinese proverb, “Chaos begets the order of the universe”. As we write this letter, we think that order has been brought back to the global financial system, and more importantly, we believe that calm has been restored among investors.
For the twelve months ended September 30, 2009, the Thornburg International Value Fund (Class A shares at NAV) slightly underperformed the MSCI EAFE Index, returning 2.05%. Relative performance was strong early in the period. Later in the period, despite strong absolute performance as reflected by over 60% total return from the bottom, our portfolio didn’t participate as dramatically as the market which had been led by very strong upward momentum, particularly in the financials and cyclicals sectors.
Today, developed markets continue to struggle with the hangovers of a recession. High unemployment and depressed capacity utilization continue to plague these economies. Interestingly, a recent trip to Asia found a more upbeat outlook. Over there, rising |
Certified Annual Report 7
Letter to Shareholders,
Continued
consumerism, coupled with healthy household balance sheets, is expected to boost local consumption, thus reducing dependence on the United States. Not surprisingly, developing markets have led the rebound more than established ones. Exposure to these economies provided many of the strongest absolute gains within the portfolio – Asian stocks such as Baidu, Hong Kong Exchanges, Industrial & Commercial Bank of China and China Life Insurance were some of the top contributors to performance. Exposure to other fast-growing markets also benefitted Fund shareholders. BM&F Bovespa is a vertically-integrated exchange platform in Brazil, facilitating transactions in stocks, equity derivatives, currencies and commodities. Two separate visits by our portfolio managers to Brazil cemented our thesis that recent initiatives should result in additional listings on the exchange and that the company has the opportunity to enjoy success in the future. Other emerging market stocks that did well included those which may be considered more defensive, such as Teva Pharmaceuticals and Wal-Mart de México.
Relative strength in emerging markets manifested itself in indirect ways as well with Standard Chartered and LVMH as notable examples. Despite being domiciled in the United Kingdom, Standard Chartered receives over 70% of its revenues from Asia. By purchasing a bank such as Standard Chartered, we believe that we take advantage of the region’s economic growth with little exposure to the toxic assets plaguing western banks. In a similar fashion, LVMH is achieving much greater growth from its emerging market customers than its developed ones. China has surpassed Japan as purchasers of their luxury goods, from handbags to high-end cognac. Yet France-based LVMH is often valued based on its developed market characteristics.
Throughout this challenging period, we have continued to execute the same investment philosophy and process that has led to a historically strong track record. We believe that our somewhat unique approach to diversification and value provides a framework of portfolio construction that is rational in today’s unsettled times. We continue to adhere to our comprehensive approach to value, combining basic value, consistent earners, and emerging franchises together into a diversified portfolio. Our consistent earner basket is comprised of business models which usually prove more resilient in difficult environments and subsequently these names held up better during the recent crisis. More recently, we have used the relative outperformance of specific stocks within this basket to fund opportunities in the other two categories. Notably, we have purchased stocks in the financial, materials and energy sectors. If we are correct and a gradual recovery materializes, these companies should see a normalization in earnings; hence validating the attractiveness of current valuations. Mitsubishi Financial UFJ is a stock we purchased during the period which reflects that view. The bank is among the cheapest in the world, holds modest exposure to securitized U.S. assets and loans relative to its total assets, and is priced at a significant discount to book value. Similarly, earlier in the year we were afforded the opportunity to buy large stable financial franchises such as Julius Baer and BNP Paribas at depressed valuations. Finally, decisions not to sell into the weakness we experienced in previously purchased entities such as National Bank of Greece and AXA served us particularly well as the market rebounded.
8 Certified Annual Report
We have consistently remained faithful to our process and philosophy during this trying time. We remain confident that our portfolio has great risk-adjusted quality to deliver better returns in the years ahead of us. As a Danish proverb says, “Above the clouds, the sky is always blue.”
We encourage you to learn more about your portfolio’s holdings. Please visit www.thornburg.com/funds to learn more about the Thornburg International Value Fund. Thank you for your trust and confidence.
Sincerely, | ||||
![]() | ![]() | ![]() | ||
William V. Fries,CFA | Wendy Q. Trevisani | Lei Wang,CFA | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager | ||
Managing Director | Managing Director | Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 9
SCHEDULE OF INVESTMENTS | ||
Thornburg International Value Fund | September 30, 2009 |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/09
Banks | 14.5 | % | Media | 2.4 | % | |||
Pharmaceuticals, Biotechnology & Life Sciences | 8.8 | % | Consumer Durables & Apparel | 2.4 | % | |||
Diversified Financials | 7.5 | % | Household & Personal Products | 2.3 | % | |||
Energy | 6.9 | % | Technology Hardware & Equipment | 2.2 | % | |||
Materials | 6.8 | % | Utilities | 2.1 | % | |||
Telecommunication Services | 6.4 | % | Consumer Services | 1.9 | % | |||
Software & Services | 5.9 | % | Transportation | 1.8 | % | |||
Capital Goods | 5.8 | % | Food & Staples Retailing | 1.7 | % | |||
Food, Beverage & Tobacco | 5.2 | % | Automobiles & Components | 1.6 | % | |||
Health Care Equipment & Services | 3.5 | % | Semiconductors & Semiconductor Equipment | 0.7 | % | |||
Retailing | 3.4 | % | Other Assets & Cash Equivalents | 3.6 | % | |||
Insurance | 2.6 | % |
TOP TEN HOLDINGS
As of 9/30/09
Teva Pharmaceutical Industries Ltd. ADR | 3.1 | % | Komatsu Ltd. | 2.3 | % | |||
National Bank of Greece S.A. | 2.6 | % | AXA | 2.3 | % | |||
Industrial & Commercial Bank of China Ltd. | 2.4 | % | Hong Kong Exchanges & Clearing Ltd. | 2.3 | % | |||
Novo Nordisk A/S | 2.4 | % | Petróleo Brasileiro S.A. ADR | 2.2 | % | |||
LVMH Moët Hennessy Louis Vuitton SA | 2.4 | % | Standard Chartered plc | 2.2 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/09 (percent of equity holdings)
United Kingdom | 17.2 | % | Greece | 2.7 | % | |||
France | 10.3 | % | Finland | 2.5 | % | |||
Switzerland | 8.2 | % | Hong Kong | 2.4 | % | |||
Japan | 8.2 | % | Spain | 2.2 | % | |||
Germany | 7.7 | % | Sweden | 2.1 | % | |||
Canada | 7.1 | % | Australia | 1.9 | % | |||
China | 6.6 | % | Netherlands | 1.4 | % | |||
Brazil | 5.8 | % | Turkey | 1.1 | % | |||
Denmark | 4.0 | % | Italy | 1.0 | % | |||
Mexico | 3.9 | % | Ireland | 0.5 | % | |||
Israel | 3.2 | % |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 96.37% | |||||
AUTOMOBILES & COMPONENTS — 1.57% | |||||
AUTOMOBILES — 1.57% | |||||
Toyota Motor Corp. | 6,411,100 | $ | 254,972,729 | ||
254,972,729 | |||||
BANKS — 14.62% | |||||
COMMERCIAL BANKS — 14.62% | |||||
a Barclays plc | 25,479,915 | 150,666,806 | |||
BNP Paribas SA | 4,234,800 | 338,355,664 | |||
China Merchants Bank Co., Ltd. | 120,073,933 | 267,724,410 | |||
Industrial & Commercial Bank of China Ltd. | 529,167,100 | 398,067,650 | |||
a Intesa Sanpaolo | 36,421,046 | 161,089,275 | |||
Mitsubishi UFJ Financial Group, Inc. | 53,405,200 | 286,763,286 | |||
a National Bank of Greece S.A. | 11,658,699 | 417,988,254 | |||
Standard Chartered plc | 14,419,447 | 355,345,533 | |||
2,376,000,878 | |||||
CAPITAL GOODS — 5.84% | |||||
AEROSPACE & DEFENSE — 0.77% | |||||
Empresa Brasileira de Aeronáutica SA ADR | 5,421,345 | 124,365,654 | |||
ELECTRICAL EQUIPMENT — 1.42% | |||||
a Vestas Wind Systems A/S | 3,189,171 | 230,549,658 | |||
MACHINERY — 3.65% | |||||
Fanuc Ltd. | 2,369,307 | 212,476,147 | |||
Komatsu Ltd. | 20,340,288 | 381,132,562 | |||
948,524,021 | |||||
CONSUMER DURABLES & APPAREL — 2.36% | |||||
TEXTILES, APPAREL & LUXURY GOODS — 2.36% | |||||
LVMH Moët Hennessy Louis Vuitton SA | 3,820,611 | 384,261,673 | |||
384,261,673 | |||||
CONSUMER SERVICES — 1.88% | |||||
HOTELS, RESTAURANTS & LEISURE — 1.88% | |||||
Carnival plc | 8,974,400 | 305,781,005 | |||
305,781,005 | |||||
DIVERSIFIED FINANCIALS — 7.47% | |||||
CAPITAL MARKETS — 3.05% | |||||
Deutsche Bank AG | 3,224,397 | 247,457,432 | |||
Julius Baer Holding AG | 4,956,430 | 247,510,617 | |||
DIVERSIFIED FINANCIAL SERVICES — 4.42% | |||||
BM&F Bovespa SA | 25,633,400 | 188,966,022 | |||
Deutsche Boerse AG | 1,949,917 | 159,362,894 | |||
Hong Kong Exchanges & Clearing Ltd. | 20,445,200 | 370,649,299 | |||
1,213,946,264 | |||||
ENERGY — 6.88% | |||||
ENERGY EQUIPMENT & SERVICES — 1.33% | |||||
Schlumberger Ltd. | 3,630,472 | 216,376,131 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
OIL, GAS & CONSUMABLE FUELS — 5.55% | |||||
Canadian Natural Resources Ltd. | 5,140,100 | $ | 347,106,178 | ||
Cnooc Ltd. | 144,783,679 | 195,036,369 | |||
Petróleo Brasileiro S.A. ADR | 7,845,695 | 360,117,401 | |||
1,118,636,079 | |||||
FOOD & STAPLES RETAILING — 1.67% | |||||
FOOD & STAPLES RETAILING — 1.67% | |||||
Wal-Mart de Mexico SAB de C.V. | 78,180,000 | 271,084,241 | |||
271,084,241 | |||||
FOOD, BEVERAGE & TOBACCO — 5.16% | |||||
BEVERAGES — 1.28% | |||||
Sabmiller plc | 8,615,750 | 207,778,310 | |||
FOOD PRODUCTS — 2.05% | |||||
Nestlé SA | 7,807,300 | 332,693,590 | |||
TOBACCO — 1.83% | |||||
British American Tobacco plc | 9,487,125 | 297,627,327 | |||
838,099,227 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 3.52% | |||||
HEALTH CARE EQUIPMENT & SUPPLIES — 1.72% | |||||
Covidien plc | 1,709,308 | 73,944,664 | |||
Smith & Nephew plc | 17,870,272 | 160,075,424 | |||
Synthes, Inc. | 373,509 | 45,017,152 | |||
HEALTH CARE PROVIDERS & SERVICES — 1.80% | |||||
Fresenius Medical Care AG & Co. | 4,936,500 | 245,826,668 | |||
a Sinopharm Group Co. H | 18,370,800 | 46,602,270 | |||
571,466,178 | |||||
HOUSEHOLD & PERSONAL PRODUCTS — 2.33% | |||||
HOUSEHOLD PRODUCTS — 1.83% | |||||
Reckitt Benckiser plc | 6,093,678 | 297,806,974 | |||
PERSONAL PRODUCTS — 0.50% | |||||
Natura Cosmeticos SA | 4,465,800 | 80,538,671 | |||
378,345,645 | |||||
INSURANCE — 2.58% | |||||
INSURANCE — 2.58% | |||||
AXA | 13,944,600 | 377,507,595 | |||
Willis Group Holdings Ltd. | 1,463,300 | 41,294,326 | |||
418,801,921 | |||||
MATERIALS — 6.78% | |||||
CHEMICALS — 2.69% | |||||
Air Liquide SA | 2,232,413 | 253,993,641 | |||
Potash Corp. of Saskatchewan, Inc. | 2,029,100 | 183,308,894 | |||
CONSTRUCTION MATERIALS — 1.57% | |||||
Lafarge SA | 2,860,261 | 255,946,992 | |||
METALS & MINING — 2.52% | |||||
BHP Billiton Ltd. | 8,796,908 | 292,808,606 | |||
Southern Copper Corp. | 3,781,200 | 116,045,028 | |||
1,102,103,161 | |||||
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
MEDIA — 2.40% | |||||
MEDIA — 2.40% | |||||
British Sky Broadcasting Group plc | 26,620,886 | $ | 243,140,117 | ||
Pearson plc | 11,948,731 | 147,229,231 | |||
390,369,348 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 8.88% | |||||
PHARMACEUTICALS — 8.88% | |||||
Novartis AG | 5,638,996 | 282,140,252 | |||
Novo Nordisk A/S | 6,200,750 | 388,228,713 | |||
Roche Holding AG | 1,666,000 | 269,280,131 | |||
Teva Pharmaceutical Industries Ltd. ADR | 9,941,300 | 502,632,128 | |||
1,442,281,224 | |||||
RETAILING — 3.38% | |||||
SPECIALTY RETAIL — 3.38% | |||||
Hennes & Mauritz AB | 5,906,987 | 331,727,056 | |||
Kingfisher plc | 64,177,863 | 218,362,870 | |||
550,089,926 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.72% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.72% | |||||
Arm Holdings plc | 50,986,100 | 117,010,306 | |||
117,010,306 | |||||
SOFTWARE & SERVICES — 5.91% | |||||
INFORMATION TECHNOLOGY SERVICES — 2.01% | |||||
a Amdocs Ltd. | 6,593,900 | 177,244,032 | |||
a Cia Brasileira De Meios De Pagamento SA | 14,957,000 | 148,421,800 | |||
INTERNET SOFTWARE & SERVICES — 0.79% | |||||
a Baidu, Inc. ADR | 327,600 | 128,107,980 | |||
SOFTWARE — 3.11% | |||||
Nintendo Co., Ltd. | 588,831 | 150,872,979 | |||
SAP AG | 7,290,861 | 355,066,779 | |||
959,713,570 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.17% | |||||
COMMUNICATIONS EQUIPMENT — 1.49% | |||||
Nokia Oyj | 16,481,900 | 242,393,651 | |||
COMPUTERS & PERIPHERALS — 0.68% | |||||
a Logitech International SA | 6,057,621 | 110,420,207 | |||
352,813,858 | |||||
TELECOMMUNICATION SERVICES — 6.35% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.07% | |||||
Telefónica SA | 12,229,900 | 337,440,609 | |||
WIRELESS TELECOMMUNICATION SERVICES — 4.28% | |||||
América Móvil SAB de C.V. ADR | 5,173,344 | 226,747,667 | |||
Rogers Communications, Inc. | 10,259,100 | 289,667,579 | |||
Turkcell | 25,027,800 | 178,770,000 | |||
1,032,625,855 | |||||
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
TRANSPORTATION — 1.78% | ||||||
ROAD & RAIL — 1.78% | ||||||
Canadian National Railway Co. | 5,889,800 | $ | 290,075,332 | |||
290,075,332 | ||||||
UTILITIES — 2.12% | ||||||
ELECTRIC UTILITIES — 2.12% | ||||||
E. ON AG | 4,614,901 | 195,708,043 | ||||
Fortum Oyj | 5,780,828 | 148,208,139 | ||||
343,916,182 | ||||||
TOTAL COMMON STOCK (Cost $14,508,010,238) | 15,660,918,623 | |||||
RIGHTS — 0.05% | ||||||
BANKS — 0.05% | ||||||
COMMERCIAL BANKS — 0.05% | ||||||
a BNP Paribas SA | 4,234,800 | 9,171,545 | ||||
TOTAL RIGHTS (Cost $0) | 9,171,545 | |||||
SHORT TERM INVESTMENTS — 3.30% | ||||||
AGL Capital Corp., 0.30%, 10/5/2009 | $ | 15,000,000 | 14,999,500 | |||
Atlantic City Electric, 0.30%, 10/2/2009 | 15,000,000 | 14,999,875 | ||||
Atmos Energy Corp, 0.20%, 10/1/2009 | 30,000,000 | 30,000,000 | ||||
California State Department of Water Resources, put 10/7/2009 (Insured: FSA/SPA: Dexia Credit Local) (weekly demand notes), 0.45%, 5/1/2022 | 33,150,000 | 33,150,000 | ||||
Chicago GO, put 10/7/2009 (Insured: FSA/SPA: Dexia Credit Local) (weekly demand notes), 0.50%, 1/1/2040 | 66,840,000 | 66,840,000 | ||||
Devon Energy Corp., 0.16%, 10/1/2009 | 125,000,000 | 125,000,000 | ||||
Farmington PCR, put 10/1/2009, (LOC: Barclays Bank) (daily demand notes), 0.32%, 5/1/2024 | 8,100,000 | 8,100,000 | ||||
Mississippi State, put 10/7/2009 (Nissan; Insured: Bank of America) (weekly demand notes), 0.50%, 11/1/2028 | 30,700,000 | 30,700,000 | ||||
New York City GO, put 10/1/2009 (Insured: FSA/SPA: Dexia Credit Local) (daily demand notes), 0.28%, 11/1/2026 | 8,000,000 | 8,000,000 | ||||
New York City Municipal Water Finance Authority, put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes), 0.35%, 6/15/2033 | 7,000,000 | 7,000,000 | ||||
New York, NY, put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes), 0.31%, 8/1/2028 | 39,300,000 | 39,300,000 | ||||
Oglethorpe Power Corp., 0.25%, 10/13/2009 | 44,087,000 | 44,083,326 | ||||
Oneok, Inc., 0.29%, 10/9/2009 | 51,700,000 | 51,696,668 | ||||
Pepco Holdings, Inc., 0.50%, 10/5/2009 | 20,000,000 | 19,998,889 | ||||
Pepco Holdings, Inc., 0.50%, 10/14/2009 | 35,000,000 | 34,993,681 | ||||
South Fulton Georgia Municipal Water & Sewer Authority, put 10/7/2009 (LOC: Bank of America) (weekly demand notes), 0.37%, 1/1/2033 | 7,455,000 | 7,455,000 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $536,316,939) | 536,316,939 | |||||
TOTAL INVESTMENTS — 99.72% (Cost $15,044,327,177) | $ | 16,206,407,107 | ||||
OTHER ASSETS LESS LIABILITIES — 0.28% | 44,693,698 | |||||
NET ASSETS — 100.00% | $ | 16,251,100,805 | ||||
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
Footnote Legend
a | Non-income producing |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt | |
FSA | Insured by Financial Security Assurance Co. | |
GO | General Obligation | |
LOC | Letter of Credit | |
PCR | Pollution Control Revenue Bond | |
SPA | Standby Purchase Agreement |
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg International Value Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (cost $15,044,327,177) (Note 2) | $ | 16,206,407,107 | ||
Cash | 2,689,694 | |||
Cash denominated in foreign currency (cost $5,003,660) | 4,916,096 | |||
Receivable for investments sold | 38,394,254 | |||
Receivable for fund shares sold | 79,209,581 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 2,977,604 | |||
Dividends receivable | 26,375,373 | |||
Dividend and interest reclaim receivable | 18,783,885 | |||
Interest receivable | 65,418 | |||
Prepaid expenses and other assets | 147,166 | |||
Total Assets | 16,379,966,178 | |||
LIABILITIES | ||||
Payable for securities purchased | 69,669,480 | |||
Payable for fund shares redeemed | 40,324,111 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 247,203 | |||
Payable to investment advisor and other affiliates (Note 3) | 12,714,442 | |||
Accounts payable and accrued expenses | 5,905,672 | |||
Dividends payable | 4,465 | |||
Total Liabilities | 128,865,373 | |||
NET ASSETS | $ | 16,251,100,805 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 10,029,383 | ||
Net unrealized appreciation on investments | 1,165,461,584 | |||
Accumulated net realized gain (loss) | (2,812,815,712 | ) | ||
Net capital paid in on shares of beneficial interest | 17,888,425,550 | |||
$ | 16,251,100,805 | |||
16 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($5,309,704,293 applicable to 222,096,095 shares of beneficial interest outstanding - Note 4) | $ | 23.91 | |
Maximum sales charge, 4.50% of offering price | 1.13 | ||
Maximum offering price per share | $ | 25.04 | |
Class B Shares: | |||
Net asset value and offering price per share * ($80,908,133 applicable to 3,586,278 shares of beneficial interest outstanding - Note 4) | $ | 22.56 | |
Class C Shares: | |||
Net asset value and offering price per share * ($1,551,487,700 applicable to 68,498,788 shares of beneficial interest outstanding - - Note 4) | $ | 22.65 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($6,330,267,586 applicable to 259,242,028 shares of beneficial interest outstanding - Note 4) | $ | 24.42 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($1,042,247,977 applicable to 43,507,717 shares of beneficial interest outstanding - Note 4) | $ | 23.96 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($522,363,442 applicable to 21,933,496 shares of beneficial interest outstanding - Note 4) | $ | 23.82 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($1,414,121,674 applicable to 58,000,417 shares of beneficial interest outstanding - Note 4) | $ | 24.38 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 17
Thornburg International Value Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $30,789,870) | $ | 291,290,549 | ||
Interest income | 5,525,739 | |||
Total Income | 296,816,288 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 84,378,714 | |||
Administration fees (Note 3) | ||||
Class A Shares | 5,273,850 | |||
Class B Shares | 88,671 | |||
Class C Shares | 1,653,582 | |||
Class I Shares | 2,242,498 | |||
Class R3 Shares | 994,246 | |||
Class R4 Shares | 360,665 | |||
Class R5 Shares | 474,186 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 10,528,663 | |||
Class B Shares | 707,939 | |||
Class C Shares | 13,205,973 | |||
Class R3 Shares | 3,977,818 | |||
Class R4 Shares | 722,425 | |||
Transfer agent fees | ||||
Class A Shares | 9,061,640 | |||
Class B Shares | 162,516 | |||
Class C Shares | 2,397,355 | |||
Class I Shares | 4,807,020 | |||
Class R3 Shares | 2,018,397 | |||
Class R4 Shares | 1,048,807 | |||
Class R5 Shares | 2,601,350 | |||
Registration and filing fees | ||||
Class A Shares | 81,551 | |||
Class B Shares | 18,114 | |||
Class C Shares | 36,432 | |||
Class I Shares | 302,715 | |||
Class R3 Shares | 28,398 | |||
Class R4 Shares | 28,414 | |||
Class R5 Shares | 36,831 | |||
Custodian fees (Note 3) | 4,136,422 | |||
Professional fees | 305,160 | |||
Accounting fees | 636,620 | |||
Trustee fees | 418,050 | |||
Other expenses | 1,528,777 | |||
Total Expenses | 154,263,799 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (3,085,936 | ) | ||
Fees paid indirectly (Note 3) | (248,222 | ) | ||
Net Expenses | 150,929,641 | |||
Net Investment Income | $ | 145,886,647 | ||
18 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
Thornburg International Value Fund | Year Ended September 30, 2009 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | (2,287,341,877 | ) | |
Forward currency contracts (Note 7) | 299,333,761 | |||
Foreign currency transactions | 558,308 | |||
(1,987,449,808 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 2,320,668,253 | |||
Forward currency contracts (Note 7) | (112,855,171 | ) | ||
Foreign currency translations | 1,587,353 | |||
2,209,400,435 | ||||
Net Realized and Unrealized Gain | 221,950,627 | |||
Net Increase in Net Assets Resulting From Operations | $ | 367,837,274 | ||
See notes to financial statements.
Certified Annual Report 19
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg International Value Fund
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 145,886,647 | $ | 220,879,180 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (1,987,449,808 | ) | (808,936,421 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | 2,209,400,435 | (4,947,975,765 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 367,837,274 | (5,536,033,006 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (47,691,328 | ) | (75,245,625 | ) | ||||
Class B Shares | (281,872 | ) | (664,681 | ) | ||||
Class C Shares | (6,234,690 | ) | (13,733,669 | ) | ||||
Class I Shares | (72,241,951 | ) | (86,528,884 | ) | ||||
Class R3 Shares | (8,457,824 | ) | (10,260,007 | ) | ||||
Class R4 Shares | (4,136,350 | ) | (2,772,322 | ) | ||||
Class R5 Shares | (14,813,551 | ) | (13,817,161 | ) | ||||
From realized gains | ||||||||
Class A Shares | — | (600,769,404 | ) | |||||
Class B Shares | — | (11,739,966 | ) | |||||
Class C Shares | — | (203,158,109 | ) | |||||
Class I Shares | — | (426,254,876 | ) | |||||
Class R3 Shares | — | (85,519,217 | ) | |||||
Class R4 Shares | — | (4,805,028 | ) | |||||
Class R5 Shares | — | (39,612,380 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (151,656,229 | ) | 1,289,526,844 | |||||
Class B Shares | (14,340,619 | ) | 15,813,625 | |||||
Class C Shares | (234,811,763 | ) | 509,105,066 | |||||
Class I Shares | 990,522,432 | 2,388,464,998 | ||||||
Class R3 Shares | 113,114,566 | 349,026,118 | ||||||
Class R4 Shares | 249,654,449 | 262,833,310 | ||||||
Class R5 Shares | 392,644,180 | 844,102,498 | ||||||
Net Increase (Decrease) in Net Assets | 1,559,106,724 | (1,452,041,876 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 14,691,994,081 | 16,144,035,957 | ||||||
End of Year | $ | 16,251,100,805 | $ | 14,691,994,081 | ||||
Undistributed net investment income | $ | 10,029,383 | $ | 17,441,994 |
See notes to financial statements.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg International Value Fund | September 30, 2009 |
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 Fund is currently one of fifteen separate series of the Trust. 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) 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 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 of purchase, 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.
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, and 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.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
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 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Investments in Securities* | |||||||||||||||
Common Stock | $ | 15,660,918,623 | $ | 15,660,918,623 | $ | — | $ | — | |||||||
Rights | 9,171,545 | 9,171,545 | — | — | |||||||||||
Short Term Investments | 536,316,939 | — | 536,316,939 | — | |||||||||||
Total Investments in Securities | $ | 16,206,407,107 | $ | 15,670,090,168 | $ | 536,316,939 | $ | — | |||||||
Other Financial Instruments** | |||||||||||||||
Forward Currency Contracts | $ | 2,977,604 | $ | — | $ | 2,977,604 | $ | — | |||||||
Spot Currency | 14,309 | 14,309 | — | — | |||||||||||
Liabilities | |||||||||||||||
Other Financial Instruments** | |||||||||||||||
Forward Currency Contracts | $ | (247,203 | ) | $ | — | $ | (247,203 | ) | $ | — | |||||
Spot Currency | (43,456 | ) | (43,456 | ) | — | — |
* | See Summary of Industry Exposure and Schedule of Investments beginning on page 10 for further detail. |
** | 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. |
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.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
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 issuers. 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 to shareholders substantially all taxable income, including any net realized gain on investments of the Funds. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery 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.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
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, 2009, 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, 2009, the Advisor contractually agreed to reimburse certain class specific expenses, administrative fees, and distribution fees of $1,485,259 for Class R3 shares, $724,278 for Class R4 shares, and $876,399 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, 2009, the Distributor has advised the Fund that it earned net commissions aggregating $213,857 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $354,268 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, 2009, 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, 2009, fees paid indirectly were $248,222.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 94,350,075 | $ | 1,855,765,245 | 108,956,029 | $ | 3,391,672,055 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,910,696 | 39,880,680 | 18,277,901 | 582,600,796 | ||||||||||
Shares repurchased | (106,827,831 | ) | (2,047,398,938 | ) | (91,613,103 | ) | (2,684,825,344 | ) | ||||||
Redemption fees received* | — | 96,784 | — | 79,337 | ||||||||||
Net Increase (Decrease) | (10,567,060 | ) | $ | (151,656,229 | ) | 35,620,827 | $ | 1,289,526,844 | ||||||
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class B Shares | ||||||||||||||
Shares sold | 307,132 | $ | 5,564,270 | 839,348 | $ | 25,311,160 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 9,713 | 190,063 | 287,761 | 8,760,191 | ||||||||||
Shares repurchased | (1,134,846 | ) | (20,096,620 | ) | (669,684 | ) | (18,259,141 | ) | ||||||
Redemption fees received* | — | 1,668 | — | 1,415 | ||||||||||
Net Increase (Decrease) | (818,001 | ) | $ | (14,340,619 | ) | 457,425 | $ | 15,813,625 | ||||||
Class C Shares | ||||||||||||||
Shares sold | 13,413,646 | $ | 251,623,816 | 27,283,818 | $ | 819,809,729 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 204,651 | 4,041,962 | 4,272,790 | 130,242,728 | ||||||||||
Shares repurchased | (27,577,857 | ) | (490,508,597 | ) | (16,133,810 | ) | (440,973,314 | ) | ||||||
Redemption fees received* | — | 31,056 | — | 25,923 | ||||||||||
Net Increase (Decrease) | (13,959,560 | ) | $ | (234,811,763 | ) | 15,422,798 | $ | 509,105,066 | ||||||
Class I Shares | ||||||||||||||
Shares sold | 135,891,137 | $ | 2,743,024,095 | 114,796,742 | $ | 3,562,363,852 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,218,946 | 47,387,069 | 10,634,700 | 342,652,908 | ||||||||||
Shares repurchased | (91,998,012 | ) | (1,799,987,899 | ) | (51,339,452 | ) | (1,516,614,397 | ) | ||||||
Redemption fees received* | — | 99,167 | — | 62,635 | ||||||||||
Net Increase (Decrease) | 46,112,071 | $ | 990,522,432 | 74,091,990 | $ | 2,388,464,998 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 20,079,362 | $ | 393,943,531 | 22,845,687 | $ | 711,229,882 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 355,098 | 7,415,099 | 2,601,406 | 82,998,888 | ||||||||||
Shares repurchased | (14,936,306 | ) | (288,262,022 | ) | (14,653,445 | ) | (445,214,207 | ) | ||||||
Redemption fees received* | — | 17,958 | — | 11,555 | ||||||||||
Net Increase (Decrease) | 5,498,154 | $ | 113,114,566 | 10,793,648 | $ | 349,026,118 | ||||||||
Class R4 Shares | ||||||||||||||
Shares sold | 17,358,823 | $ | 351,220,800 | 10,423,276 | $ | 310,505,054 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 137,569 | 2,904,177 | 199,073 | 6,047,020 | ||||||||||
Shares repurchased | (5,390,436 | ) | (104,476,483 | ) | (1,883,686 | ) | (53,720,408 | ) | ||||||
Redemption fees received* | — | 5,955 | — | 1,644 | ||||||||||
�� | ||||||||||||||
Net Increase (Decrease) | 12,105,956 | $ | 249,654,449 | 8,738,663 | $ | 262,833,310 | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 32,451,475 | $ | 662,220,472 | 33,390,724 | $ | 1,036,104,971 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 642,611 | 13,721,112 | 1,568,885 | 49,576,729 | ||||||||||
Shares repurchased | (14,216,177 | ) | (283,317,991 | ) | (8,111,555 | ) | (241,587,993 | ) | ||||||
Redemption fees received* | — | 20,587 | — | 8,791 | ||||||||||
Net Increase (Decrease) | 18,877,909 | $ | 392,644,180 | 26,848,054 | $ | 844,102,498 | ||||||||
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
* | 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, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $5,806,729,064 and $3,821,391,985, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 15,063,897,868 | ||
Gross unrealized appreciation on a tax basis | $ | 2,203,579,145 | ||
Gross unrealized depreciation on a tax basis | (1,061,069,906 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 1,142,509,239 | ||
Distributable earnings - ordinary income | $ | 11,728,896 |
At September 30, 2009, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2008 of $1,737,786,157. For tax purposes, such losses will be recognized in the year ending September 30, 2010.
At September 30, 2009, the Fund had tax basis capital losses of $1,052,728,465, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards will expire September 30, 2017.
In order to account for permanent book/tax differences, the Fund increased undistributed net investment income by $558,308 and increased accumulated net realized investment loss by $558,308. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains/losses.
The tax character of distributions paid during the years ended September 30, 2009, and September 30, 2008, was as follows:
2009 | 2008 | |||||
Distributions from: | ||||||
Ordinary income | $ | 153,857,566 | $ | 874,665,689 | ||
Capital gains | — | 700,215,640 | ||||
Total distributions | $ | 153,857,566 | $ | 1,574,881,329 | ||
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50, (“ASC 815”) require certain disclosures. The new requirement amends and expands disclosures related to derivative instruments to provide users of financial statements with an enhanced understanding of the use of derivative instruments by the Fund and how these derivatives affect the financial position, financial performance and cash flows of the Fund. The Fund does not designate any derivative instruments as hedging instruments under ASC 815. During the year ended September 30, 2009, the Fund’s principal exposure to derivative financial instruments of the type
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
addressed by ASC 815 was investment in foreign exchange contracts. A foreign exchange contract is an agreement between two parties to exchange different currencies at a specified rate of exchange at an agreed upon future date. Foreign exchange contracts involve risks to the Fund, including the risk that a contract counterparty will not meet its obligations to the Fund, the risk that a change in a contract’s value may not correlate perfectly with the currency the contract was intended to track, and the risk that the Fund’s advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2009 in the normal course of pursuing its investment objectives, in anticipation of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments 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 investment transactions.
These contracts are accounted for by the Fund under ASC 815. Unrealized gains and unrealized losses on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities 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 each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations.
The following table displays the outstanding forward currency contracts, at September 30, 2009:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2009
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||
Mexican Peso | Sell | 5,083,766,000 | 11/30/2009 | $ | 373,620,650 | $ | 2,940,662 | $ | — | |||||||
Mexican Peso | Sell | 1,046,362,000 | 11/30/2009 | 76,900,166 | — | (247,203 | ) | |||||||||
Mexican Peso | Buy | 208,762,000 | 11/30/2009 | 15,342,522 | 36,942 | — | ||||||||||
Total | $ | 465,863,338 | $ | 2,977,604 | $ | (247,203 | ) | |||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2009 is disclosed in the following table:
Fair Values of Derivative Financial Instruments at September 30, 2009
Asset Derivatives | ||||||
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 2,977,604 | |||
Liability Derivatives | ||||||
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (247,203 | ) |
Certified Annual Report 27
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Value Fund | September 30, 2009 |
The realized gains (losses) from forward currency contracts, and the change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2009 is disclosed in the following tables:
Amount of Realized Gain (Loss) on Derivative Financial Instruments
Recognized in Income for the Year Ended September 30, 2009
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 299,333,761 | $ | 299,333,761 | ||||
Change in Unrealized Appreciation (Depreciation) of Derivative Financial Instruments Recognized in Income for the Year Ended September 30, 2009 |
| |||||||
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (112,855,171 | ) | $ | (112,855,171 | ) |
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
28 Certified Annual Report
Thornburg International Value Fund
Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 23.68 | $ | 36.09 | $ | 26.51 | $ | 22.80 | $ | 18.18 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.21 | 0.37 | 0.27 | 0.32 | 0.18 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.24 | (9.59 | ) | 10.25 | 4.00 | 4.63 | ||||||||||||||
Total from investment operations | 0.45 | (9.22 | ) | 10.52 | 4.32 | 4.81 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.22 | ) | (0.31 | ) | (0.29 | ) | (0.21 | ) | (0.19 | ) | ||||||||||
Net realized gains | — | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | ||||||||||||
Total dividends | (0.22 | ) | (3.19 | ) | (0.94 | ) | (0.61 | ) | (0.19 | ) | ||||||||||
Change in net asset value | 0.23 | (12.41 | ) | 9.58 | 3.71 | 4.62 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 23.91 | $ | 23.68 | $ | 36.09 | $ | 26.51 | $ | 22.80 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 2.05 | (27.77 | ) | 40.64 | 19.30 | 26.51 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 1.09 | 1.23 | 0.88 | 1.25 | 0.87 | |||||||||||||||
Expenses, after expense reductions (%) | 1.34 | 1.28 | 1.29 | 1.33 | 1.44 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.34 | 1.28 | 1.29 | 1.33 | 1.44 | |||||||||||||||
Expenses, before expense reductions (%) | 1.34 | 1.28 | 1.29 | 1.33 | 1.44 | |||||||||||||||
Portfolio turnover rate (%) | 32.76 | 27.31 | 64.77 | 36.58 | 34.17 | |||||||||||||||
Net assets at end of year (thousands) | $ | 5,309,704 | $ | 5,510,070 | $ | 7,111,205 | $ | 4,261,892 | $ | 2,205,924 |
(a) | Sales loads are not reflected in computing total return. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 29
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Class B Shares: | Year Ended September 30, | |||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 22.37 | $ | 34.33 | $ | 25.28 | $ | 21.82 | $ | 17.39 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.05 | 0.13 | 0.03 | 0.11 | 0.01 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.22 | (9.06 | ) | 9.75 | 3.81 | 4.44 | ||||||||||||||
Total from investment operations | 0.27 | (8.93 | ) | 9.78 | 3.92 | 4.45 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.08 | ) | (0.15 | ) | (0.08 | ) | (0.06 | ) | (0.02 | ) | ||||||||||
Net realized gains | — | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | ||||||||||||
Total dividends | (0.08 | ) | (3.03 | ) | (0.73 | ) | (0.46 | ) | (0.02 | ) | ||||||||||
Change in net asset value | 0.19 | (11.96 | ) | 9.05 | 3.46 | 4.43 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 22.56 | $ | 22.37 | $ | 34.33 | $ | 25.28 | $ | 21.82 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 1.24 | (28.33 | ) | 39.55 | 18.32 | 25.59 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 0.29 | 0.44 | 0.11 | 0.44 | 0.04 | |||||||||||||||
Expenses, after expense reductions (%) | 2.13 | 2.04 | 2.06 | 2.13 | 2.26 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.13 | 2.04 | 2.06 | 2.13 | 2.25 | |||||||||||||||
Expenses, before expense reductions (%) | 2.13 | 2.04 | 2.06 | 2.13 | 2.27 | |||||||||||||||
Portfolio turnover rate (%) | 32.76 | 27.31 | 64.77 | 36.58 | 34.17 | |||||||||||||||
Net assets at end of year (thousands) | $ | 80,908 | $ | 98,541 | $ | 135,486 | $ | 82,799 | $ | 47,306 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
30 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Class C Shares: | Year Ended September 30, | |||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 22.46 | $ | 34.45 | $ | 25.37 | $ | 21.89 | $ | 17.46 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.06 | 0.15 | 0.05 | 0.13 | 0.03 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.22 | (9.10 | ) | 9.78 | 3.82 | 4.45 | ||||||||||||||
Total from investment operations | 0.28 | (8.95 | ) | 9.83 | 3.95 | 4.48 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.09 | ) | (0.16 | ) | (0.10 | ) | (0.07 | ) | (0.05 | ) | ||||||||||
Net realized gains | — | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | ||||||||||||
Total dividends | (0.09 | ) | (3.04 | ) | (0.75 | ) | (0.47 | ) | (0.05 | ) | ||||||||||
Change in net asset value | 0.19 | (11.99 | ) | 9.08 | 3.48 | 4.43 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 22.65 | $ | 22.46 | $ | 34.45 | $ | 25.37 | $ | 21.89 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 1.31 | (28.28 | ) | 39.63 | 18.41 | 25.65 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 0.34 | 0.50 | 0.17 | 0.55 | 0.16 | |||||||||||||||
Expenses, after expense reductions (%) | 2.06 | 2.00 | 2.01 | 2.06 | 2.16 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.06 | 2.00 | 2.01 | 2.05 | 2.15 | |||||||||||||||
Expenses, before expense reductions (%) | 2.06 | 2.00 | 2.01 | 2.06 | 2.16 | |||||||||||||||
Portfolio turnover rate (%) | 32.76 | 27.31 | 64.77 | 36.58 | 34.17 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,551,488 | $ | 1,852,185 | $ | 2,309,487 | $ | 1,290,250 | $ | 635,833 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 31
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Class I Shares: | Year Ended September 30, | |||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 24.18 | $ | 36.77 | $ | 26.99 | $ | 23.19 | $ | 18.48 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.31 | 0.51 | 0.41 | 0.43 | 0.28 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.24 | (9.79 | ) | 10.42 | 4.06 | 4.72 | ||||||||||||||
Total from investment operations | 0.55 | (9.28 | ) | 10.83 | 4.49 | 5.00 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.31 | ) | (0.43 | ) | (0.40 | ) | (0.29 | ) | (0.29 | ) | ||||||||||
Net realized gains | — | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | ||||||||||||
Total dividends | (0.31 | ) | (3.31 | ) | (1.05 | ) | (0.69 | ) | (0.29 | ) | ||||||||||
Change in net asset value | 0.24 | (12.59 | ) | 9.78 | 3.80 | 4.71 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 24.42 | $ | 24.18 | $ | 36.77 | $ | 26.99 | $ | 23.19 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 2.46 | (27.45 | ) | 41.17 | 19.76 | 27.15 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 1.54 | 1.64 | 1.32 | 1.67 | 1.32 | |||||||||||||||
Expenses, after expense reductions (%) | 0.92 | 0.89 | 0.90 | 0.94 | 0.99 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.92 | 0.89 | 0.90 | 0.94 | 0.99 | |||||||||||||||
Expenses, before expense reductions (%) | 0.92 | 0.89 | 0.90 | 0.94 | 1.02 | |||||||||||||||
Portfolio turnover rate (%) | 32.76 | 27.31 | 64.77 | 36.58 | 34.17 | |||||||||||||||
Net assets at end of year (thousands) | $ | 6,330,268 | $ | 5,152,506 | $ | 5,113,109 | $ | 2,034,453 | $ | 892,216 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
32 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Class R3 Shares: | Year Ended September 30, | |||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 23.73 | $ | 36.18 | $ | 26.58 | $ | 22.88 | $ | 18.28 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.20 | 0.33 | 0.23 | 0.33 | 0.21 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.23 | (9.63 | ) | 10.26 | 3.97 | 4.63 | ||||||||||||||
Total from investment operations | 0.43 | (9.30 | ) | 10.49 | 4.30 | 4.84 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.20 | ) | (0.27 | ) | (0.24 | ) | (0.20 | ) | (0.24 | ) | ||||||||||
Net realized gains | — | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | ||||||||||||
Total dividends | (0.20 | ) | (3.15 | ) | (0.89 | ) | (0.60 | ) | (0.24 | ) | ||||||||||
Change in net asset value | 0.23 | (12.45 | ) | 9.60 | 3.70 | 4.60 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 23.96 | $ | 23.73 | $ | 36.18 | $ | 26.58 | $ | 22.88 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 1.96 | (27.90 | ) | 40.43 | 19.15 | 26.54 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 1.02 | 1.07 | 0.75 | 1.29 | 0.99 | |||||||||||||||
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 (%) | 1.64 | 1.62 | 1.61 | 1.61 | 1.72 | |||||||||||||||
Portfolio turnover rate (%) | 32.76 | 27.31 | 64.77 | 36.58 | 34.17 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,042,248 | $ | 902,150 | $ | 984,587 | $ | 445,081 | $ | 118,436 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 33
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Class R4 Shares: | Year Ended Sept. 30, | Period Ended Sept. 30, | ||||||||||
2009 | 2008 | 2007(a) | ||||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 23.60 | $ | 36.02 | $ | 28.86 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.26 | 0.44 | 0.09 | |||||||||
Net realized and unrealized gain (loss) on investments | 0.21 | (9.62 | ) | 7.36 | ||||||||
Total from investment operations | 0.47 | (9.18 | ) | 7.45 | ||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.25 | ) | (0.36 | ) | (0.29 | ) | ||||||
Net realized gains | — | (2.88 | ) | — | ||||||||
Total dividends | (0.25 | ) | (3.24 | ) | (0.29 | ) | ||||||
Change in net asset value | 0.22 | (12.42 | ) | 7.16 | ||||||||
NET ASSET VALUE, end of period | $ | 23.82 | $ | 23.60 | $ | 36.02 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | 2.16 | (27.73 | ) | 25.90 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | 1.29 | 1.51 | 0.42 | (c) | ||||||||
Expenses, after expense reductions (%) | 1.25 | 1.25 | 1.25 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.25 | 1.25 | 1.25 | (c) | ||||||||
Expenses, before expense reductions (%) | 1.50 | 1.40 | 1.70 | (c) | ||||||||
Portfolio turnover rate (%) | 32.76 | 27.31 | 64.77 | |||||||||
Net assets at end of period (thousands) | $ | 522,363 | $ | 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.
34 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Value Fund |
Class R5 Shares: | Year Ended September 30, | Period Ended Sept. 30, | ||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005(a) | ||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||||||
Net asset value, beginning of period | $ | 24.14 | $ | 36.74 | $ | 26.97 | $ | 23.18 | $ | 20.37 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.30 | 0.50 | 0.43 | 0.45 | 0.16 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.23 | (9.81 | ) | 10.39 | 4.03 | 2.84 | ||||||||||||||
Total from investment operations | 0.53 | (9.31 | ) | 10.82 | 4.48 | 3.00 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.29 | ) | (0.41 | ) | (0.40 | ) | (0.29 | ) | (0.19 | ) | ||||||||||
Net realized gains | — | (2.88 | ) | (0.65 | ) | (0.40 | ) | — | ||||||||||||
Total dividends | (0.29 | ) | (3.29 | ) | (1.05 | ) | (0.69 | ) | (0.19 | ) | ||||||||||
Change in net asset value | 0.24 | (12.60 | ) | 9.77 | 3.79 | 2.81 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 24.38 | $ | 24.14 | $ | 36.74 | $ | 26.97 | $ | 23.18 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(b) | 2.40 | (27.54 | ) | 41.13 | 19.72 | 14.72 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 1.51 | 1.65 | 1.33 | 1.76 | 1.10 | (c) | ||||||||||||||
Expenses, after expense reductions (%) | 0.99 | 0.99 | 0.94 | 0.95 | 1.00 | (c) | ||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.94 | 0.95 | 0.99 | (c) | ||||||||||||||
Expenses, before expense reductions (%) | 1.08 | 1.01 | 0.95 | 0.96 | 2.13 | (c) | ||||||||||||||
Portfolio turnover rate (%) | 32.76 | 27.31 | 64.77 | 36.58 | 34.17 | |||||||||||||||
Net assets at end of period (thousands) | $ | 1,414,122 | $ | 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 35
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, 2009, 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
36 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg International Value Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,417.00 | $ | 7.88 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.55 | $ | 6.58 | |||
Class B Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,411.70 | $ | 12.73 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.51 | $ | 10.63 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,412.10 | $ | 12.25 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.91 | $ | 10.23 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,420.20 | $ | 5.47 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.55 | $ | 4.57 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,416.50 | $ | 8.76 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.82 | $ | 7.31 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,418.10 | $ | 7.58 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,418.60 | $ | 6.27 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,019.88 | $ | 5.24 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.30%; B: 2.11%; C: 2.03%; I: 0.90%; R3: 1.45%; R4: 1.25%; R5: 1.03%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 37
INDEX COMPARISON | ||
Thornburg International Value Fund | September 30, 2009 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||
A Shares (Incep: 5/28/98) | -2.56 | % | 8.36 | % | 8.80 | % | 8.63 | % | ||||
B Shares (Incep: 4/3/00) | -3.76 | % | 8.22 | % | — | 5.42 | % | |||||
C Shares (Incep: 5/28/98) | 0.31 | % | 8.58 | % | 8.44 | % | 8.18 | % | ||||
I Shares (Incep: 3/30/01) | 2.46 | % | 9.82 | % | — | 8.72 | % | |||||
R3 Shares (Incep: 7/1/03) | 1.96 | % | 9.25 | % | — | 12.55 | % | |||||
R4 Shares (Incep: 2/1/07) | 2.16 | % | — | — | -2.71 | % | ||||||
R5 Shares (Incep: 2/1/05) | 2.40 | % | — | — | 8.11 | % | ||||||
MSCI EAFE Index (Since 5/28/98) | 3.23 | % | 6.07 | % | 2.55 | % | 3.37 | % |
The MSCI EAFE (Europe, Australasia, Far East) Index is an unmanaged, market capitalization weighted index and is the common benchmark for international portfolio performance. 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.
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 carry 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.
38 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg International Value Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 39
TRUSTEES AND OFFICERS, CONTINUED
Thornburg International Value Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
40 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg International Value Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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 41
OTHER INFORMATION | ||
Thornburg International Value Fund | September 30, 2009 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
The Trust has delegated to Thornburg Investment Management, Inc. (the “Advisor”) voting decisions respecting proxies for the Fund’s voting securities. The Advisor makes voting decisions in accordance with its Proxy Voting Policy and Procedures. A description of the Policy and Procedures is available (i) without charge, upon request, by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
Information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information is available (i) without charge, upon request by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the tax year ended September 30, 2009, the Thornburg International Value Fund designates 100.00% (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, 2009, foreign taxes paid and foreign source income is $30,730,753 and $308,931,255, 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, 2009. Complete information will be computed and reported in conjunction with your 2009 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 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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the annual evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of this information with the Trustees and addressed questions from the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees voted unanimously 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.
42 Certified Annual Report
OTHER INFORMATION, CONTINUED
Thornburg International Value Fund | September 30, 2009 (Unaudited) |
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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the Fund’s investment objectives. In addition, the Trustees considered information specifically provided to them at their request in anticipation of their annual 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) a measure of expected earnings per share, and 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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, tax efficiency, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s lower investment return for the most recent three months relative to two broad based securities indices and the category of foreign large blend equity mutual funds selected by the independent analyst firm, and a lower return relative to one of the indices for the year-to-date ended with the second quarter of the current year. The Trustees also noted that the Fund’s investment returns had generally met or exceeded reasonable expectations over multi-year periods, given the investment objectives of the Fund. The quantitative data presented also demonstrated to the Trustees that the Fund’s investment returns exceeded the returns of the indices in most of the last eight calendar years (notwithstanding that the Fund’s returns are net of expenses and the returns of the indices do not reflect payment of any expenses) and also exceeded the average returns of the category in all of the most recent eight calendar years, and that the Fund’s returns fell close to the top quartile of the category for the year-to-date ended with the second quarter of the current year and within or close to the top decile of the category for the one-year, three-year and five-year periods. The Trustees also considered in this regard the Fund’s higher cumulative return (net of expenses) relative to the Fund’s benchmark 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 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 also was somewhat lower than the median and average expense ratios for the same fund group. The Trustees considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
Certified Annual Report 43
OTHER INFORMATION, CONTINUED
Thornburg International Value Fund | September 30, 2009 (Unaudited) |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, 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.
44 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 22, 2009
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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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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48 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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg. com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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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
TH078 | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources.
Go to www.thornburg.com/edelivery and sign up to receive your shareholder reports, prospectuses, and proxy statements electronically.
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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, 2009. 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. Special risks may be associated with investments outside the United States, especially in emerging markets, including currency fluctuations, illiquidity and volatility. Investments in small capitalization companies 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 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 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | THCGX | 885-215-582 | ||
Class C | TCGCX | 885-215-574 | ||
Class I | THIGX | 885-215-475 | ||
Class R3 | THCRX | 885-215-517 | ||
Class R4 | TCGRX | 885-215-251 | ||
Class R5 | THGRX | 885-215-350 |
Glossary
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.
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.
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.
Equity Duration – A measure of the sensitivity of a stock’s price to changes in interest rates. The price of a long-duration stock has greater sensitivity to changes in interest rates compared to short-duration stocks because a greater piece of their value is derived from future profits.
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.
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.
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 equaling a company’s market value per share divided by earnings per share.
This page is not part of the Annual Report. 3
Thornburg Core Growth Fund
Alexander M.V. Motola, CFA
IMPORTANT
PERFORMANCE INFORMATION
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 1.65%, 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.
Continually Evaluating the Risk Equation
Growth stocks are often referred to as “glamour” stocks . . . and it is easy to understand why. Growth stocks generate excitement. These are stocks where rapid earnings growth is expected to be followed by rapid price appreciation. Growth stocks capture the imagination, and investing in them 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 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.
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 2009
1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||
A Shares (Incep: 12/27/00) | ||||||||||||
Without sales charge | 1.87 | % | -5.97 | % | 4.96 | % | 1.71 | % | ||||
With sales charge | -2.72 | % | -7.40 | % | 4.00 | % | 1.17 | % | ||||
Russell 3000 Growth Index | ||||||||||||
(Since 12/27/00) | -2.19 | % | -2.51 | % | 1.96 | % | -2.50 | % |
4 This page is not part of the Annual Report.
Companies are initially screened using a variety of quantitative measures and parameters. Most are rejected and logged as a screening rejection. 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.
STOCKS CONTRIBUTING AND DETRACTING
FOR THE YEAR ENDED 9/30/09
Top Contributors | Top Detractors | |
priceline.com, Inc. | Guess?, Inc. | |
Goldman Sachs Group, Inc. | VistaPrint N.V. | |
Starent Networks Corp. | Bare Escentuals, Inc. | |
SBA Communications Corp. | Electronic Arts, Inc. | |
SVB Financial Group | Celgene Corp. | |
Source: FactSet |
KEY PORTFOLIO ATTRIBUTES
As of 9/30/09
Portfolio P/E Trailing 12-months* | 23.3x | ||
Portfolio Price to Cash Flow* | 10.1x | ||
Portfolio Price to Book Value* | 3.2x | ||
Median Market Cap* | $ | 5.5 B | |
7-Year Beta (A Shares vs. Russell 3K G)* 1.18 | |||
Number of Companies | 38 |
* | Source: FactSet |
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Thornburg Core Growth Fund
September 30, 2009
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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
Alexander M.V. Motola, CFA Portfolio Manager |
October 21, 2009
Dear Fellow Shareholder:
I sat down to write last year’s shareholder letter in the immediate aftermath of Lehman’s demise, when there was massive and omnipresent fear regarding the global economy. There was also no confidence in a successful bailout, either. Over the course of the preceding twelve months, many interesting things have happened.
The market ended one of the most tumultuous years in financial history modestly negative while our Fund modestly increased in value over the trailing twelve months. The key themes from the 2008 shareholder letter were uncertainty, discipline and flexibility in investing, and the “cheapness” of stocks. Some of the lost value has been recaptured, but there are still opportunistic areas in which to invest.
For the fiscal year ended September 30, 2009, the Thornburg Core Growth Fund generated respectable absolute and relative performance. On September 30, 2008, the net asset value (NAV) for the Class A shares was $13.36. As of the end of this fiscal year, the Fund’s NAV was $13.61. The Fund’s Class A shares outperformed their benchmark with a total return of positive 1.87% over that period at NAV. The Russell 3000 Growth Index returned negative 2.19% for the year ended September 30, 2009. For comparative purposes, the S&P 500 Index’s return over the same period was negative 6.91%, including dividends.
The market has been a perilous place for growth investors. Long duration stocks were crushed last year and professional investors became increasingly cautious as 2008 concluded and we moved into 2009. By March 9th the S&P 500 Index was off almost 25% year-to-date, and our benchmark (the Russell 3000 Growth Index) was, at negative 18%, not doing much better. The failure of the market to rally into 2009 convinced many that an ultraconservative posture was best.
In the Thornburg Core Growth Fund, we did not get extraordinarily defensive; we did what we always do: seek out promising growth companies. Although I believe some investors mistakenly believed we did alter our style, since our portfolio outperformed the market through March 9th and then expanded its lead during the rally, this performance is not a result of market timing or material adjustments to our beta. |
Certified Annual Report 7
Letter to Shareholders
Continued
I wrote last year that, “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.” One of those disciplines that we follow is our basket structure to manage market exposure within the portfolio.
Before I discuss our application of the basket structure, I want to briefly discuss how it came to be that we use the baskets in the first place. Bill Fries came to Thornburg in 1995 to start the Thornburg Value Fund – our first equity product. The firm’s culture was (and remains) deeply rooted in searching for value. However, Bill did not want to be constrained to just buying cheap companies – he wanted to be able to buy promising companies as well. So, the Value Fund, and the International Value Fund after it, used three baskets to manage market exposure and to diversify the portfolio by buying different types of stocks.
When we launched the Core Growth Fund in late 2000, we adopted this structure, but modified it to apply to the growth stock universe. Over the past nine years, we have targeted about one-third of the portfolio in each basket: Growth Industry Leaders, Consistent Growth Companies, and Emerging Growth Companies. The baskets are relevant to any discussion covering the last two years for several reasons.
• | Growth Industry Leaders are companies that maintain strong share positions or gain share in industries that are growing faster than the economy as a whole. In our portfolio, stocks such as Microsoft, Google, and Visa fall into this category. As you might expect, this basket did relatively well in 2008, as well as 2009. |
• | Consistent Growth Companies are more defensive in nature. They are defined by having diversified businesses or recurring revenue models. Many of these companies generally have some leverage, generate a lot of cash, have higher capital returns, and benefit from stable margins. In our portfolio, Consistent Growth Companies include Express Scripts, Fiserv, Talecris, and DIRECTV. This part of the portfolio should have outperformed the market last year, but did not. Part of this was due to poor stock selection and some was due to the nature of the financial crisis and how it impacted the market. Clearly, indebted companies, regardless of their cash generation capability, were out of favor in 2008. In recovery, these companies have generated positive returns, but have not materially outperformed. |
• | The Emerging Growth Company basket has been the star thus far in 2009. To us, Emerging Growth Companies are companies that enjoy high rates of growth and by our judgement have particular advantages in their marketplaces – it can be a marketing or brand advantage, a better technology, or the best management. Many of these companies have a narrow product offering or compete in a niche area of the market. In some cases, we are hopeful that they can “grow up” to be Growth Industry Leaders – as long-time holding Gilead Sciences did. |
8 Certified Annual Report
Theoretically, Growth Industry Leaders are good stocks to own most of the time. Consistent Growers provide defense in turbulent markets, and Emerging Growth Companies, while carrying a higher risk profile, historically have done well for our shareholders in rising markets. Our goal is to pick the best stocks we can find for each basket. Although we always consider a range of macroeconomic outcomes and how those will impact both individual holdings and the portfolio as a whole, we never try to predict what “the market” is going to do – except assume that over a very long time horizon it will trend upwards.
The basket structure is important because we seek to invest approximately a third of the portfolio in each category. During the fourth calendar quarter of 2008, we were buying several stocks into our most underweighted basket – Emerging Growth Companies. New purchases included Starent Networks, SBA Communications, FLIR Systems, and Las Vegas Sands. Other securities were purchased as well, but most fell into this category. At the time these stocks were purchased, we – and the rest of the world – were trying to figure what would happen to the U.S. consumer, the global economy, and the financial infrastructure. We were fearful. We considered the potential impacts of rising taxes, health care reform, the stimulus plans globally, and the ramifications of Lehman’s bankruptcy. The basket structure told us to buy faster growing companies, and we believed that at some future point the portfolio would benefit by having done so. So we did.
Oddly, considering the bleak market conditions in the first quarter of 2009, both Starent and SBA Communications performed strongly to become top 10 contributors during that quarter. From the March 20, 2009 lows to the end of the Fund’s fiscal year, the basket structure continued to ensure that we maintained our approach and discipline and helped us buy emerging growth stocks for our shareholders.
I would like to also highlight the increasing involvement of the other members of the team that are responsible for running the Core Growth Fund. Since the last letter, both Greg Dunn and Tim Cunningham have been promoted to the position of Associate Portfolio Manager. Tim and Greg, working as analysts, have done great research over the past several years and will continue to focus their efforts on finding the best possible names for inclusion into the portfolio.
We have and will continue to use our basket structure to help in our goal of long-term growth of capital. Recognizing that we may at times 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 believe we have delivered on our goal, despite difficult market periods. We launched the Fund nearly nine years ago as the internet bubble was in the process of imploding, and over that time we have outperformed (from inception to September 30, 2009, Class A shares at NAV) the Russell 3000 Growth Index by 421 basis points annualized.
Thornburg Investment Management has, over the past 27 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
Certified Annual Report 9
Letter to Shareholders
Continued
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 hope 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, |
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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.
10 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Core Growth Fund | September 30, 2009 |
TOP TEN HOLDINGS
As of 9/30/09
Microsoft Corp. | 4.1 | % | DIRECTV Group, Inc. | 3.3 | % | |||
Gilead Sciences, Inc. | 4.1 | % | Goldman Sachs Group, Inc. | 3.1 | % | |||
Amdocs Ltd. | 3.6 | % | Charles Schwab Corp. | 3.0 | % | |||
Qualcomm, Inc. | 3.4 | % | Equinix, Inc. | 3.0 | % | |||
SVB Financial Group | 3.3 | % | Amedisys, Inc. | 3.0 | % |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/09
Software & Services | 26.9 | % | Energy | 4.0 | % | |||
Technology Hardware & Equipment | 10.4 | % | Banks | 3.3 | % | |||
Health Care Equipment & Services | 9.3 | % | Materials | 2.7 | % | |||
Pharmaceuticals, Biotechnology & Life Sciences | 8.5 | % | Retailing | 2.5 | % | |||
Diversified Financials | 8.3 | % | Semiconductors & Semiconductor Equipment | 2.4 | % | |||
Consumer Services | 6.9 | % | Food, Beverage & Tobacco | 2.3 | % | |||
Telecommunication Services | 5.0 | % | Utilities | 0.3 | % | |||
Media | 4.5 | % | Other Assets & Cash Equivalents | 2.7 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/09 (% of equity holdings)
United States | 86.8 | % | Canada | 2.8 | % | |||
United Kingdom | 5.8 | % | China | 1.3 | % | |||
Mexico | 3.0 | % | Philippines | 0.3 | % |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 97.35% | |||||
BANKS — 3.25% | |||||
COMMERCIAL BANKS — 3.25% | |||||
aSVB Financial Group | 1,241,373 | $ | 53,714,210 | ||
53,714,210 | |||||
CONSUMER SERVICES — 6.93% | |||||
DIVERSIFIED CONSUMER SERVICES — 4.62% | |||||
aCoinstar, Inc. | 1,271,440 | 41,932,091 | |||
aGrand Canyon Education, Inc. | 1,928,900 | 34,392,287 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
HOTELS, RESTAURANTS & LEISURE — 2.31% | |||||
aLas Vegas Sands Corp. | 2,258,105 | $ | 38,026,488 | ||
114,350,866 | |||||
DIVERSIFIED FINANCIALS — 8.32% | |||||
CAPITAL MARKETS — 8.32% | |||||
aAffiliated Managers Group, Inc. | 543,589 | 35,338,721 | |||
Charles Schwab Corp. | 2,624,000 | 50,249,600 | |||
Goldman Sachs Group, Inc. | 280,925 | 51,788,524 | |||
137,376,845 | |||||
ENERGY — 3.95% | |||||
OIL, GAS & CONSUMABLE FUELS — 3.95% | |||||
aContinental Resources, Inc. | 709,300 | 27,783,281 | |||
XTO Energy, Inc. | 907,600 | 37,502,032 | |||
65,285,313 | |||||
FOOD, BEVERAGE & TOBACCO — 2.34% | |||||
BEVERAGES — 2.34% | |||||
aHansen Natural Corp. | 1,050,205 | 38,584,532 | |||
38,584,532 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 9.34% | |||||
HEALTH CARE PROVIDERS & SERVICES — 9.34% | |||||
aAmedisys, Inc. | 1,145,900 | 49,995,617 | |||
aCommunity Health Systems, Inc. | 549,454 | 17,544,066 | |||
aExpress Scripts, Inc. | 631,300 | 48,976,254 | |||
aVCA Antech, Inc. | 1,399,203 | 37,624,569 | |||
154,140,506 | |||||
MATERIALS — 2.67% | |||||
CHEMICALS — 2.67% | |||||
Ecolab, Inc. | 954,189 | 44,112,157 | |||
44,112,157 | |||||
MEDIA — 4.52% | |||||
MEDIA — 4.52% | |||||
a,bAirmedia Group, Inc. ADR | 2,848,627 | 20,937,408 | |||
aDIRECTV Group, Inc. | 1,947,341 | 53,707,665 | |||
74,645,073 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 8.50% | |||||
BIOTECHNOLOGY — 8.50% | |||||
aAlexion Pharmaceuticals, Inc. | 847,019 | 37,726,226 | |||
aGilead Sciences, Inc. | 1,455,960 | 67,818,617 | |||
aTalecris Biotherapeutics Holdings Corp. | 1,835,500 | 34,874,500 | |||
140,419,343 | |||||
RETAILING — 2.48% | |||||
INTERNET & CATALOG RETAIL — 2.48% | |||||
apriceline.com, Inc. | 246,444 | 40,865,344 | |||
40,865,344 | |||||
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.39% | ||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.39% | ||||||
aON Semiconductor Corp. | 4,791,998 | $ | 39,533,984 | |||
39,533,984 | ||||||
SOFTWARE & SERVICES — 26.94% | ||||||
INFORMATION TECHNOLOGY SERVICES — 12.19% | ||||||
aAmdocs Ltd. | 2,223,106 | 59,757,089 | ||||
aFiserv, Inc. | 1,007,640 | 48,568,248 | ||||
Visa, Inc. | 648,556 | 44,821,705 | ||||
Western Union Co. | 2,541,037 | 48,076,420 | ||||
INTERNET SOFTWARE & SERVICES — 7.79% | ||||||
aEquinix, Inc. | 544,014 | 50,049,288 | ||||
aGoogle, Inc. | 90,205 | 44,728,149 | ||||
aTelecity Group plc | 6,629,100 | 33,891,180 | ||||
SOFTWARE — 6.96% | ||||||
Microsoft Corp. | 2,627,638 | 68,029,548 | ||||
aRovi Corp. | 1,398,243 | 46,980,965 | ||||
444,902,592 | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 10.41% | ||||||
COMMUNICATIONS EQUIPMENT — 6.12% | ||||||
Qualcomm, Inc. | 1,252,900 | 56,355,442 | ||||
aResearch In Motion Ltd. | 662,338 | 44,740,932 | ||||
COMPUTERS & PERIPHERALS — 1.82% | ||||||
aSTEC, Inc. | 1,020,510 | 29,992,789 | ||||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS — 2.47% | ||||||
aFLIR Systems, Inc. | 1,459,352 | 40,818,075 | ||||
171,907,238 | ||||||
TELECOMMUNICATION SERVICES — 5.05% | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 5.05% | ||||||
América Móvil SAB de C.V. | 21,837,600 | 47,810,704 | ||||
aLeap Wireless International, Inc. | 1,816,683 | 35,516,153 | ||||
83,326,857 | ||||||
UTILITIES — 0.26% | ||||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.26% | ||||||
PNOC Energy Development Corp. | 43,265,903 | 4,291,890 | ||||
4,291,890 | ||||||
TOTAL COMMON STOCK (Cost $1,348,866,323) | 1,607,456,750 | |||||
SHORT TERM INVESTMENTS — 5.41% | ||||||
Brown-Forman Corp., 0.16%, 10/1/2009 | $ | 25,000,000 | 25,000,000 | |||
California State, put 10/7/2009 (LOC: Bank of America) (weekly demand notes), 0.28%, 5/1/2040 | 800,000 | 800,000 | ||||
Clark County School District GO, put 10/1/2009 (Insured: FSA/ SPA: Bayerische Landesbank) (daily demand notes), 0.34%, 6/15/2021 | 6,880,000 | 6,880,000 | ||||
Devon Energy Corp., 0.20%, 10/1/2009 | 39,000,000 | 39,000,000 | ||||
Maryland State Health & Higher Educational Facilities Authority, put 10/1/2009 (Insured: Suntrust Bank) (daily demand notes), 0.41%, 7/1/2041 | 2,500,000 | 2,500,000 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||||
Maryland State Health & Higher Educational Facilities, put 10/7/2009 (Univ. of Maryland Medical; LOC: Bank of America) (weekly demand notes), 0.32%, 7/1/2034 | $ | 2,000,000 | $ | 2,000,000 | |||
New York City Municipal Water Finance Authority, put 10/1/2009 (SPA: Dexia Credit Local) (daily demand notes), 0.35%, 6/15/2033 | 3,200,000 | 3,200,000 | |||||
Oneok, Inc., 0.30%, 10/2/2009 | 10,000,000 | 9,999,917 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $89,379,917) | 89,379,917 | ||||||
TOTAL INVESTMENTS — 102.76% (Cost $1,438,246,240) | $ | 1,696,836,667 | |||||
LIABILITIES NET OF OTHER ASSETS — (2.76)% | (45,532,171 | ) | |||||
NET ASSETS — 100.00% | $ | 1,651,304,496 | |||||
Footnote Legend
a | Non-income producing |
b | 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 Sep 30, 2008 | Gross Additions | Gross Reductions | Shares at September 30, 2009 | Market Value September 30, 2009 | Dividend Income | |||||||||
Airmedia Group, Inc. ADR | 2,938,927 | 464,700 | 555,000 | 2,848,627 | $ | * | $ | — | |||||||
ATP Oil & Gas Corp. | 2,213,652 | — | 2,213,652 | — | — | — | |||||||||
$ | * | $ | — | ||||||||||||
* | Issuers not affiliated as of September 30, 2009. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
FSA | Insured by Financial Security Assurance Co. |
GO | General Obligation |
LOC | Letter of Credit |
SPA | Stand-by Purchase Agreement |
See notes to financial statements.
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Core Growth Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (Cost $1,438,246,240) (Note 2) | $ | 1,696,836,667 | ||
Cash | 532,347 | |||
Receivable for investments sold | 311,805 | |||
Receivable for fund shares sold | 2,765,022 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 400,207 | |||
Dividends receivable | 247,036 | |||
Interest receivable | 3,007 | |||
Prepaid expenses and other assets | 36,545 | |||
Total Assets | 1,701,132,636 | |||
LIABILITIES | ||||
Payable for securities purchased | 40,134,038 | |||
Payable for fund shares redeemed | 6,795,580 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 443,400 | |||
Payable to investment advisor and other affiliates (Note 3) | 1,590,501 | |||
Accounts payable and accrued expenses | 864,621 | |||
Total Liabilities | 49,828,140 | |||
NET ASSETS | $ | 1,651,304,496 | ||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (102,236 | ) | |
Net unrealized appreciation on investments | 258,548,755 | |||
Accumulated net realized gain (loss) | (1,032,319,271 | ) | ||
Net capital paid in on shares of beneficial interest | 2,425,177,248 | |||
$ | 1,651,304,496 | |||
Certified Annual Report 15
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($511,065,343 applicable to 37,539,395 shares of beneficial interest outstanding - Note 4) | $ | 13.61 | |
Maximum sales charge, 4.50% of offering price | 0.64 | ||
Maximum offering price per share | $ | 14.25 | |
Class C Shares: | |||
Net asset value and offering price per share * ($289,223,793 applicable to 22,839,600 shares of beneficial interest outstanding - Note 4) | $ | 12.66 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($218,299,525 applicable to 15,553,297 shares of beneficial interest outstanding - Note 4) | $ | 14.04 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($278,576,251 applicable to 20,452,523 shares of beneficial interest outstanding - Note 4) | $ | 13.62 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($30,871,185 applicable to 2,264,667 shares of beneficial interest outstanding - Note 4) | $ | 13.63 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($323,268,399 applicable to 23,052,216 shares of beneficial interest outstanding - Note 4) | $ | 14.02 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
16 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg Core Growth Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $223,666) | $ | 8,664,590 | ||
Interest income | 403,678 | |||
Total Income | 9,068,268 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 11,312,104 | |||
Administration fees (Note 3) | ||||
Class A Shares | 575,686 | |||
Class C Shares | 319,266 | |||
Class I Shares | 99,348 | |||
Class R3 Shares | 278,722 | |||
Class R4 Shares | 22,385 | |||
Class R5 Shares | 104,276 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,148,795 | |||
Class C Shares | 2,550,651 | |||
Class R3 Shares | 1,114,835 | |||
Class R4 Shares | 44,754 | |||
Transfer agent fees | ||||
Class A Shares | 1,102,736 | |||
Class C Shares | 636,795 | |||
Class I Shares | 288,770 | |||
Class R3 Shares | 570,900 | |||
Class R4 Shares | 86,369 | |||
Class R5 Shares | 700,424 | |||
Registration and filing fees | ||||
Class A Shares | 34,786 | |||
Class C Shares | 27,248 | |||
Class I Shares | 25,583 | |||
Class R3 Shares | 18,528 | |||
Class R4 Shares | 19,803 | |||
Class R5 Shares | 24,787 | |||
Custodian fees (Note 3) | 242,390 | |||
Professional fees | 80,840 | |||
Accounting fees | 77,200 | |||
Trustee fees | 45,060 | |||
Other expenses | 136,906 | |||
Total Expenses | 21,689,947 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,527,176 | ) | ||
Fees paid indirectly (Note 3) | (4,695 | ) | ||
Net Expenses | 20,158,076 | |||
Net Investment Loss | $ | (11,089,808 | ) | |
Certified Annual Report 17
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Core Growth Fund | Year Ended September 30, 2009 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | ||||
Non-affiliated issuers | $ | (634,770,036 | ) | |
Non-controlled affiliated issuers | (88,141,956 | ) | ||
Forward currency contracts (Note 7) | 1,305,009 | |||
Foreign currency transactions | (1,065,101 | ) | ||
(722,672,084 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | ||||
Non-affiliated issuers | 584,079,187 | |||
Non-controlled affiliated issuers | 57,296,899 | |||
Forward currency contracts (Note 7) | (932,105 | ) | ||
Foreign currency translations | 1,521 | |||
640,445,502 | ||||
Net Realized and Unrealized Loss | (82,226,582 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (93,316,390 | ) | |
See notes to financial statements.
18 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Core Growth Fund |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (11,089,808 | ) | $ | (19,529,732 | ) | ||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (722,672,084 | ) | (311,125,361 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | 640,445,502 | (955,488,623 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (93,316,390 | ) | (1,286,143,716 | ) | ||||
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 | (181,036,761 | ) | (210,044,230 | ) | ||||
Class C Shares | (73,693,439 | ) | (29,193,088 | ) | ||||
Class I Shares | (97,505,210 | ) | (68,000,355 | ) | ||||
Class R3 Shares | (10,832,300 | ) | 35,651,603 | |||||
Class R4 Shares | 8,821,947 | 25,878,562 | ||||||
Class R5 Shares | 66,956,015 | 213,479,491 | ||||||
Net Decrease in Net Assets | (380,606,138 | ) | (1,320,363,471 | ) | ||||
NET ASSETS: | ||||||||
Beginning of Year | 2,031,910,634 | 3,352,274,105 | ||||||
End of Year | $ | 1,651,304,496 | $ | 2,031,910,634 | ||||
See notes to financial statements.
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Core Growth Fund | September 30, 2009 |
NOTE 1 – ORGANIZATION
Thornburg Core Growth 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 Fund is currently one of fifteen separate series of the Trust. 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) 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 of purchase, 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.
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, and 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.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
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 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Assets | ||||||||||||||
Investments in Securities* | ||||||||||||||
Common Stock | $ | 1,607,456,750 | $ | 1,572,582,250 | $ | 34,874,500 | $ | — | ||||||
Short Term Investments | 89,379,917 | — | 89,379,917 | — | ||||||||||
Total Investments in Securities | $ | 1,696,836,667 | $ | 1,572,582,250 | $ | 124,254,417 | $ | — | ||||||
Other Financial Instruments** | ||||||||||||||
Forward Currency Contracts | $ | 400,207 | $ | — | $ | 400,207 | $ | — | ||||||
Liabilities | ||||||||||||||
Other Financial Instruments** | ||||||||||||||
Forward Currency Contracts | $ | (443,400 | ) | $ | — | $ | (443,400 | ) | $ | — |
* | See Summary of Industry Exposure and Schedule of Investments beginning on page 11 for further detail. |
** | 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. |
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.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
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 issuers. 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 to shareholders substantially all taxable income, including any net realized gain on investments of the Funds. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Dividends to shareholders are generally paid quarterly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date or, at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually. Distributions to shareholders are based on income tax regulations and therefore, their characteristics may differ for financial statement and tax purposes.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned and dividend income is recorded on the ex-dividend date. Certain income from foreign securities is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares of each class of shares at the beginning of the day (after adjusting for the current share activity of the respective class). Expenses common to all funds are allocated among the funds comprising the Trust based upon their relative net asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown. However, based on experience, the Trust expects the risk of loss to be remote.
Use of Estimates: The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
NOTE 3 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, Thornburg Investment Management, Inc. (the “Advisor”) serves as the investment advisor and performs services to the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2009, 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
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
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, 2009, the Advisor voluntarily or contractually agreed to reimburse certain class specific expenses, administrative fees, and distribution fees of $67,530 for Class A shares, $214,506 for Class I shares, $589,481 for Class R3 shares, $77,253 for Class R4 shares, and $578,406 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, 2009, the Distributor has advised the Fund that it earned commissions aggregating $38,772 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $60,126 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, 2009, 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, 2009, fees paid indirectly were $4,695.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 9,126,775 | $ | 96,741,227 | 26,809,564 | $ | 495,189,261 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 40,087 | 785,693 | ||||||||||
Shares repurchased | (26,846,401 | ) | (277,785,984 | ) | (42,528,073 | ) | (706,046,372 | ) | ||||||
Redemption fees received* | — | 7,996 | — | 27,188 | ||||||||||
Net Increase (Decrease) | (17,719,626 | ) | $ | (181,036,761 | ) | (15,678,422 | ) | $ | (210,044,230 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 2,808,141 | $ | 28,136,349 | 8,646,972 | $ | 152,462,922 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 16,338 | 302,087 | ||||||||||
Shares repurchased | (10,711,900 | ) | (101,834,215 | ) | (11,861,766 | ) | (181,970,668 | ) | ||||||
Redemption fees received* | — | 4,427 | — | 12,571 | ||||||||||
Net Increase (Decrease) | (7,903,759 | ) | $ | (73,693,439 | ) | (3,198,456 | ) | $ | (29,193,088 | ) | ||||
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 4,198,353 | $ | 47,389,356 | 15,461,535 | $ | 279,059,846 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 14,035 | 281,124 | ||||||||||
Shares repurchased | (13,922,964 | ) | (144,898,258 | ) | (20,541,257 | ) | (347,352,869 | ) | ||||||
Redemption fees received* | — | 3,692 | — | 11,544 | ||||||||||
Net Increase (Decrease) | (9,724,611 | ) | $ | (97,505,210 | ) | (5,065,687 | ) | $ | (68,000,355 | ) | ||||
Class R3 Shares | ||||||||||||||
Shares sold | 6,870,209 | $ | 74,934,313 | 12,855,510 | $ | 228,947,293 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 12,192 | 239,334 | ||||||||||
Shares repurchased | (8,069,388 | ) | (85,770,165 | ) | (11,177,709 | ) | (193,542,866 | ) | ||||||
Redemption fees received* | — | 3,552 | — | 7,842 | ||||||||||
Net Increase (Decrease) | (1,199,179 | ) | $ | (10,832,300 | ) | 1,689,993 | $ | 35,651,603 | ||||||
Class R4 Shares | ||||||||||||||
Shares sold | 1,420,248 | $ | 16,469,736 | 1,828,792 | $ | 32,886,157 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 176 | 3,449 | ||||||||||
Shares repurchased | (729,912 | ) | (7,648,053 | ) | (423,841 | ) | (7,011,429 | ) | ||||||
Redemption fees received* | — | 264 | — | 385 | ||||||||||
Net Increase (Decrease) | 690,336 | $ | 8,821,947 | 1,405,127 | $ | 25,878,562 | ||||||||
Class R5 Shares | ||||||||||||||
Shares sold | 14,249,535 | $ | 178,677,744 | 16,258,681 | $ | 304,900,695 | ||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 4,768 | 95,440 | ||||||||||
Shares repurchased | (9,543,854 | ) | (111,724,983 | ) | (5,390,743 | ) | (91,522,347 | ) | ||||||
Redemption fees received* | — | 3,254 | — | 5,703 | ||||||||||
Net Increase (Decrease) | 4,705,681 | $ | 66,956,015 | 10,872,706 | $ | 213,479,491 | ||||||||
* | 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, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $1,148,994,922 and $1,433,339,518, respectively.
NOTE 6 – INCOME TAXES.
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 1,446,830,254 | ||
Gross unrealized appreciation on a tax basis | $ | 328,711,259 | ||
Gross unrealized depreciation on a tax basis | (78,704,846 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 250,006,413 | ||
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
At September 30, 2009, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2008 of $102,236 and $363,580,663, respectively. For tax purposes, such losses will be recognized in the year ending September 30, 2010.
At September 30, 2009, the Fund had tax basis capital losses, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryforwards expire as follows:
2016 | $ | 10,083,359 | |
2017 | 650,071,235 | ||
$ | 660,154,594 | ||
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $12,622,609, decreased accumulated net realized investment loss by $1,065,101, and decreased net investment loss by $11,557,508. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from nondeductible net operating loss and foreign currency losses.
The tax character of distributions paid during the year ended September 30, 2009, and September 30, 2008, was as follows:
2009 | 2008 | |||||
Distributions from: | ||||||
Capital gains | $ | — | $ | 1,991,738 |
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50, (“ASC 815”) require certain disclosures. The new requirement amends and expands disclosures related to derivative instruments to provide users of financial statements with an enhanced understanding of the use of derivative instruments by the Fund and how these derivatives affect the financial position, financial performance and cash flows of the Fund. The Fund does not designate any derivative instruments as hedging instruments under ASC 815. During the year ended September 30, 2009, the Fund’s principal exposure to derivative financial instruments of the type addressed by ASC 815 was investment in foreign exchange contracts. A foreign exchange contract is an agreement between two parties to exchange different currencies at a specified rate of exchange at an agreed upon future date. Foreign exchange contracts involve risks to the Fund, including the risk that a contract counterparty will not meet its obligations to the Fund, the risk that a change in a contract’s value may not correlate perfectly with the currency the contract was intended to track, and the risk that the Fund’s advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2009 in the normal course of pursuing its investment objectives, in anticipation of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments 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 investment transactions.
These contracts are accounted for by the Fund under ASC 815. Unrealized gains and unrealized losses on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities 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 each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
The following table displays the outstanding forward currency contracts, at September 30, 2009:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2009
Contract Description | Buy/Sell | Contract Amount | Contract Value date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||
Philippine Peso | Sell | 1,200,000,000 | 12/11/2009 | $ | 25,136,537 | $ | — | $ | (435,014 | ) | ||||||
Philippine Peso | Buy | 42,300,000 | 12/11/2009 | 886,063 | 12,457 | — | ||||||||||
Philippine Peso | Buy | 55,700,000 | 12/11/2009 | 1,166,754 | 16,166 | — | ||||||||||
Philippine Peso | Buy | 100,000,000 | 12/11/2009 | 2,094,711 | 18,731 | — | ||||||||||
Philippine Peso | Buy | 55,000,000 | 12/11/2009 | 1,152,091 | 21,102 | — | ||||||||||
Philippine Peso | Buy | 92,700,000 | 12/11/2009 | 1,941,797 | 37,525 | — | ||||||||||
Philippine Peso | Buy | 73,110,000 | 12/11/2009 | 1,531,444 | 45,468 | — | ||||||||||
Philippine Peso | Buy | 58,600,000 | 12/11/2009 | 1,227,501 | 33,532 | — | ||||||||||
Philippine Peso | Buy | 116,100,000 | 12/11/2009 | 2,431,960 | 43,071 | — | ||||||||||
Philippine Peso | Buy | 65,672,000 | 12/11/2009 | 1,375,639 | — | (8,386 | ) | |||||||||
Philippine Peso | Buy | 106,490,000 | 12/11/2009 | 2,230,658 | 34,988 | — | ||||||||||
Philippine Peso | Buy | 80,000,000 | 12/11/2009 | 1,675,769 | 49,753 | — | ||||||||||
Philippine Peso | Buy | 85,000,000 | 12/11/2009 | 1,780,505 | 58,811 | — | ||||||||||
Philippine Peso | Buy | 51,100,000 | 12/11/2009 | 1,070,398 | 28,603 | — | ||||||||||
Total | $ | 45,701,827 | $ | 400,207 | $ | (443,400 | ) | |||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2009 is disclosed in the following table:
Fair Values of Derivative Financial Instruments at September 30, 2009
Asset Derivatives | ||||||
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 400,207 | |||
Liability Derivatives | ||||||
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (443,400 | ) |
The realized gains (losses) from forward currency contracts, and the change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund's Statement of Operations for the year ended September 30, 2009 is disclosed in the following tables:
Amount of Realized Gain (Loss) on Derivative Financial Instruments
Recognized in Income for the Year Ended September 30, 2009
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 1,305,009 | $ | 1,305,009 | ||||
Change in Unrealized Appreciation (Depreciation) of Derivative Financial Instruments Recognized in Income for the Year Ended September 30, 2009 |
| |||||||
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (932,105 | ) | $ | (932,105 | ) |
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 |
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
Certified Annual Report 27
Thornburg Core Growth Fund
Year Ended September 30, | ||||||||||||||||||||
Class A Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.36 | $ | 20.72 | $ | 16.38 | $ | 14.21 | $ | 10.87 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.09 | ) | (0.10 | ) | (0.15 | ) | (0.14 | ) | (0.14 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.34 | (7.25 | ) | 4.49 | 2.54 | 3.48 | ||||||||||||||
Total from investment operations | 0.25 | (7.35 | ) | 4.34 | 2.40 | 3.34 | ||||||||||||||
Redemption fees added to paid in capital | — | — | — | 0.01 | — | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net realized gains | — | (0.01 | ) | — | (0.24 | ) | — | |||||||||||||
Change in net asset value | 0.25 | (7.36 | ) | 4.34 | 2.17 | 3.34 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 13.61 | $ | 13.36 | $ | 20.72 | $ | 16.38 | $ | 14.21 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 1.87 | (35.48 | ) | 26.50 | 17.20 | 30.73 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | (0.81 | ) | (0.58 | ) | (0.78 | ) | (0.86 | ) | (1.14 | ) | ||||||||||
Expenses, after expense reductions (%) | 1.48 | 1.38 | 1.37 | 1.48 | 1.60 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.48 | 1.38 | 1.36 | 1.46 | 1.57 | |||||||||||||||
Expenses, before expense reductions (%) | 1.49 | 1.38 | 1.37 | 1.48 | 1.60 | |||||||||||||||
Portfolio turnover rate (%) | 82.86 | 79.73 | 82.37 | 98.00 | 115.37 | |||||||||||||||
Net assets at end of year (thousands) | $ | 511,065 | $ | 738,457 | $ | 1,470,020 | $ | 502,345 | $ | 110,836 |
(a) | Sales loads are not reflected in computing total return. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
28 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Year Ended September 30, | ||||||||||||||||||||
Class C Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.53 | $ | 19.57 | $ | 15.59 | $ | 13.63 | $ | 10.51 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.16 | ) | (0.22 | ) | (0.28 | ) | (0.24 | ) | (0.23 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.29 | (6.81 | ) | 4.26 | 2.43 | 3.35 | ||||||||||||||
Total from investment operations | 0.13 | (7.03 | ) | 3.98 | 2.19 | 3.12 | ||||||||||||||
Redemption fees added to paid in capital | — | — | — | 0.01 | — | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net realized gains | — | (0.01 | ) | — | (0.24 | ) | — | |||||||||||||
Change in net asset value | 0.13 | (7.04 | ) | 3.98 | 1.96 | 3.12 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 12.66 | $ | 12.53 | $ | 19.57 | $ | 15.59 | $ | 13.63 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 1.04 | (35.93 | ) | 25.53 | 16.38 | 29.69 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | (1.59 | ) | (1.34 | ) | (1.53 | ) | (1.63 | ) | (1.91 | ) | ||||||||||
Expenses, after expense reductions (%) | 2.26 | 2.13 | 2.12 | 2.25 | 2.37 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.26 | 2.13 | 2.11 | 2.23 | 2.34 | |||||||||||||||
Expenses, before expense reductions (%) | 2.26 | 2.13 | 2.12 | 2.25 | 2.37 | |||||||||||||||
Portfolio turnover rate (%) | 82.86 | 79.73 | 82.37 | 98.00 | 115.37 | |||||||||||||||
Net assets at end of year (thousands) | $ | 289,224 | $ | 385,110 | $ | 664,252 | $ | 187,180 | $ | 41,737 |
+ | 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, | ||||||||||||||||||||
Class I Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.71 | $ | 21.16 | $ | 16.66 | $ | 14.37 | $ | 10.93 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.03 | ) | (0.03 | ) | (0.08 | ) | (0.06 | ) | (0.07 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.36 | (7.41 | ) | 4.58 | 2.58 | 3.51 | ||||||||||||||
Total from investment operations | 0.33 | (7.44 | ) | 4.50 | 2.52 | 3.44 | ||||||||||||||
Redemption fees added to paid in capital | — | — | — | 0.01 | — | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net realized gains | — | (0.01 | ) | — | (0.24 | ) | — | |||||||||||||
Change in net asset value | 0.33 | (7.45 | ) | 4.50 | 2.29 | 3.44 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 14.04 | $ | 13.71 | $ | 21.16 | $ | 16.66 | $ | 14.37 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 2.41 | (35.17 | ) | 27.01 | 17.85 | 31.47 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | (0.29 | ) | (0.17 | ) | (0.39 | ) | (0.40 | ) | (0.55 | ) | ||||||||||
Expenses, after expense reductions (%) | 0.97 | 0.96 | 0.98 | 1.01 | 1.02 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.97 | 0.96 | 0.97 | 0.99 | 0.99 | |||||||||||||||
Expenses, before expense reductions (%) | 1.08 | 0.96 | 0.98 | 1.10 | 1.15 | |||||||||||||||
Portfolio turnover rate (%) | 82.86 | 79.73 | 82.37 | 98.00 | 115.37 | |||||||||||||||
Net assets at end of year (thousands) | $ | 218,300 | $ | 346,497 | $ | 642,143 | $ | 188,422 | $ | 49,975 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
30 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Year Ended September 30, | ||||||||||||||||||||
Class R3 Shares: | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.37 | $ | 20.75 | $ | 16.43 | $ | 14.26 | $ | 10.90 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.09 | ) | (0.13 | ) | (0.18 | ) | (0.14 | ) | (0.14 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.34 | (7.24 | ) | 4.50 | 2.54 | 3.50 | ||||||||||||||
Total from investment operations | 0.25 | (7.37 | ) | 4.32 | 2.40 | 3.36 | ||||||||||||||
Redemption fees added to paid in capital | — | — | — | 0.01 | — | |||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net realized gains | — | (0.01 | ) | — | (0.24 | ) | — | |||||||||||||
Change in net asset value | 0.25 | (7.38 | ) | 4.32 | 2.17 | 3.36 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 13.62 | $ | 13.37 | $ | 20.75 | $ | 16.43 | $ | 14.26 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 1.87 | (35.53 | ) | 26.29 | 17.14 | 30.83 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | (0.84 | ) | (0.74 | ) | (0.91 | ) | (0.90 | ) | (1.08 | ) | ||||||||||
Expenses, after expense reductions (%) | 1.49 | 1.50 | 1.51 | 1.53 | 1.52 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.49 | 1.50 | 1.50 | 1.50 | 1.49 | |||||||||||||||
Expenses, before expense reductions (%) | 1.76 | 1.72 | 1.64 | 1.73 | 3.56 | |||||||||||||||
Portfolio turnover rate (%) | 82.86 | 79.73 | 82.37 | 98.00 | 115.37 | |||||||||||||||
Net assets at end of year (thousands) | $ | 278,576 | $ | 289,500 | $ | 414,267 | $ | 90,167 | $ | 6,345 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 31
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Year Ended Sept. 30, | Period Ended Sept. 30 | |||||||||||
Class R4 Shares: | 2009 | 2008 | 2007(a) | |||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 13.37 | $ | 20.73 | $ | 18.90 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | (0.08 | ) | (0.13 | ) | (0.12 | ) | ||||||
Net realized and unrealized gain (loss) on investments | 0.34 | (7.22 | ) | 1.95 | ||||||||
Total from investment operations | 0.26 | (7.35 | ) | 1.83 | ||||||||
Less dividends from: | ||||||||||||
Net realized gains | — | (0.01 | ) | — | ||||||||
Change in net asset value | 0.26 | (7.36 | ) | 1.83 | ||||||||
NET ASSET VALUE, end of period | $ | 13.63 | $ | 13.37 | $ | 20.73 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | 1.94 | (35.47 | ) | 9.68 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | (0.77 | ) | (0.78 | ) | (0.93 | )(c) | ||||||
Expenses, after expense reductions (%) | 1.40 | 1.40 | 1.41 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.40 | 1.40 | 1.40 | (c) | ||||||||
Expenses, before expense reductions (%) | 1.83 | 1.73 | 8.74 | (c)(d) | ||||||||
Portfolio turnover rate (%) | 82.86 | 79.73 | 82.37 | |||||||||
Net assets at end of period (thousands) | $ | 30,871 | $ | 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.
32 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Core Growth Fund |
Year Ended Sept. 30, | Period Ended Sept. 30, 2006(a) | |||||||||||||||
Class R5 Shares: | 2009 | 2008 | 2007 | |||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 13.70 | $ | 21.15 | $ | 16.65 | $ | 14.43 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | (0.04 | ) | (0.05 | ) | (0.07 | ) | (0.06 | ) | ||||||||
Net realized and unrealized gain (loss) on investments | 0.36 | (7.39 | ) | 4.57 | 2.51 | |||||||||||
Total from investment operations | 0.32 | (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 | 0.32 | (7.45 | ) | 4.50 | 2.22 | |||||||||||
NET ASSET VALUE, end of period | $ | 14.02 | $ | 13.70 | $ | 21.15 | $ | 16.65 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return (%)(b) | 2.34 | (35.19 | ) | 27.03 | 17.29 | |||||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) (%) | (0.34 | ) | (0.30 | ) | (0.37 | ) | (0.38 | )(c) | ||||||||
Expenses, after expense reductions (%) | 0.99 | 0.99 | 0.95 | 1.01 | (c) | |||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.95 | 0.99 | (c) | |||||||||||
Expenses, before expense reductions (%) | 1.27 | 1.18 | 0.97 | 176.54 | (c)(d) | |||||||||||
Portfolio turnover rate (%) | 82.86 | 79.73 | 82.37 | 98.00 | ||||||||||||
Net assets at end of period (thousands) | $ | 323,268 | $ | 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.
Certified Annual Report 33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Core Growth Fund
To the Trustees and Shareholders of
Thornburg Core Growth Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Core Growth Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2009, 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
34 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Core Growth Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,414.80 | $ | 8.23 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.25 | $ | 6.88 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,409.80 | $ | 13.08 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,014.21 | $ | 10.93 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,419.60 | $ | 5.81 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.27 | $ | 4.85 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,414.30 | $ | 9.02 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.60 | $ | 7.54 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,415.40 | $ | 8.48 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.05 | $ | 7.08 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,417.60 | $ | 6.00 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.36%; C: 2.17%; I: 0.96%; R3: 1.49%; R4: 1.40%; R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 35
INDEX COMPARISON | ||
Thornburg Core Growth Fund | September 30, 2009 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | Since Inception | |||||||
A Shares (Incep: 12/27/00) | -2.72 | % | 4.00 | % | 1.17 | % | |||
C Shares (Incep: 12/27/00) | 0.04 | % | 4.17 | % | 0.88 | % | |||
I Shares (Incep: 11/1/03) | 2.41 | % | 5.49 | % | 4.73 | % | |||
R3 Shares (Incep: 7/1/03) | 1.87 | % | 4.91 | % | 6.06 | % | |||
R4 Shares (Incep: 2/1/07) | 1.94 | % | — | -11.54 | % | ||||
R5 Shares (Incep: 10/3/05) | 2.34 | % | — | -0.30 | % | ||||
Russell 3000G Index (Since 12/27/00) | -2.19 | % | 1.96 | % | -2.50 | % |
The Russell 3000 Growth Index is an unmanaged index comprised of those Russell 3000 companies with higher price-to-book ratios and higher forecasted growth values. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index. The performance of any index is not indicative of the performance of any particular investment.
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.
36 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Core Growth Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 37
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
38 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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 39
OTHER INFORMATION | ||
Thornburg Core Growth Fund | September 30, 2009 (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.
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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the annual evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of this information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees voted unanimously 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. These reports addressed a wide range of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the Fund’s investment objectives. In addition, the Trustees considered information specifically provided to them at their request in anticipation of their annual 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 growth-oriented mid-capitalization 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment policies.
40 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 (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, tax efficiency, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment return had been lower in the most recent calendar year than the returns of the two indices and the average return of the mid-cap growth category of mutual funds selected by an independent mutual fund analyst firm. The Trustees also noted that the Fund’s investment returns had generally met reasonable expectations over the periods since the Fund’s inception, given the investment objectives of the Fund. The quantitative data presented also demonstrated to the Trustees that the Fund’s investment returns had exceeded the returns of each of the two indices in each of the seven calendar years preceding the most recent year (notwithstanding that the Fund’s performance is net of expenses and the performance of the indices does not reflect payment of any expenses) and also exceeded the average returns of the category in four of the preceding seven years, and that the Fund’s investment returns fell within the top decile of the category for the three-month, year-to-date and five-year periods ending with the second quarter of the current year, within the top quartile for the one-year period and at the median for the three-year period. The Trustees also considered in this regard the Fund’s higher cumulative return (net of expenses) relative to the Fund’s benchmark 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-oriented 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 slightly higher 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 was slightly higher than the median and average expense ratios for the same fund group, but that the differences were not significant in view of their degree and the other factors considered. The Trustees considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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
Certified Annual Report 41
OTHER INFORMATION, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2009 (Unaudited) |
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, compliance and systems capabilities 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 22, 2009
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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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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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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg. com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
This page is not part of the Annual Report. 47
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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. | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources. | |||||||
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TH082 | You invest in the future, without spending a dime. |
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, 2009. 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. Special risks may be associated with investments outside the United States, especially in emerging markets, including currency fluctuations, illiquidity and volatility. Investments in small capitalization companies 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 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 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 the Fund. There is no assurance that the Fund will have continued access to profitable IPOs and, as the 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | TIGAX | 885-215-319 | ||
Class C | TIGCX | 885-215-293 | ||
Class I | TINGX | 885-215-244 | ||
Class R3 | TIGVX | 885-215-178 | ||
Class R4 | TINVX | 885-215-160 | ||
Class R5 | TINFX | 885-215-152 |
Glossary
MSCI All Country (AC) World ex-U.S. Growth Index – The Morgan Stanley Capital International All Country World ex-U.S. Growth Index is a market capitalization weighted index which 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).
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.
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 equaling 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
IMPORTANT
PERFORMANCE INFORMATION
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 2.00%, 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.
Comprehensive International Growth Investing
A major benefit of an interconnected global economy is the ability to tap into a country or region’s comparative advantages. Some countries have abundant natural resources, while others excel at manufacturing or engineering. The ability to allocate capital across borders allows the entire globe to benefit from these advantages. 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 35–50 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 SEPTEMBER 30, 2009
1 Yr | Since Incep | |||||
A Shares (Incep: 2/1/07) | ||||||
Without sales charge | 1.89 | % | -3.71 | % | ||
With sales charge | -2.71 | % | -5.36 | % | ||
MSCI AC World ex-U.S. Growth Index (Since 2/1/07) | 2.14 | % | -5.87 | % |
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
FOR THE YEAR ENDED 9/30/09
Top Contributors | Top Detractors | |
Baidu, Inc. (ADR) | EFG Eurobank Ergasias S.A. | |
Telecity Group plc | HHLA | |
BM&F Bovespa SA | EFG International AG | |
Research In Motion Ltd. | Nintendo Co. Ltd. | |
New Oriental Ed. & Tech. Group Inc. (ADR) | Cez A.S. | |
Source: FactSet |
KEY PORTFOLIO ATTRIBUTES As of 9/30/09 | |||
Portfolio P/E Trailing 12-months* | 20.4x | ||
Portfolio Price to Cash Flow* | 11.3x | ||
Portfolio Price to Book Value* | 3.1x | ||
Median Market Cap* | $ | 5.5 B | |
Number of Companies | 38 | ||
* Source: FactSet |
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Thornburg International Growth Fund
September 30, 2009
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39 |
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
Alexander M.V. Motola,CFA Portfolio Manager | October 21, 2009
Dear Fellow Shareholder:
For the year ended September 30, 2009, the Thornburg International Growth Fund returned positive 1.89% for Class A shares at net asset value (NAV), slightly underperforming its benchmark, the MSCI AC World ex-US Growth Index, which returned positive 2.14%. On September 30, 2008 the NAV per Class A share of the Fund was $10.35 and it ended the fiscal year on September 30, 2009 with an NAV of $10.36. Investments in initial public offerings within the Fund contributed 1.32% to performance during the period.
It was a very volatile period for global markets. In the first month of the period alone, our benchmark was down 21.85%. Lows of the period were reached March 3, 2009, when our benchmark briefly touched levels it had not seen since 2003. The fiscal year-to-date return on the benchmark at that point was negative 38.54%. Sentiment was extremely low. The outlook was bleak. And if you didn’t believe the world was ending, stocks were cheap. From that low point, the benchmark has recovered 66.18% and the Thornburg International Growth Fund has recovered 72.38%.
The greatest danger of a volatile market is that we deviate from our process and philosophy. There are many examples of portfolio managers who have succumbed to the pressure to become more conservative during a market downturn only to miss out on the subsequent recovery, which is often sharp. The same phenomenon occurs during bull markets as managers respond to the pressure to get more aggressive just as the rally is topping out. We believe our process and philosophy help us avoid this pitfall. We do not position our portfolio from a top-down perspective, but rather, we build a portfolio from the bottom up with what we believe are promising growth stocks with attractive valuations. We take this approach regardless of market environment. The result is consistent, disciplined exposure to growth stocks for our shareholders. We attempt to ignore the noise of the overall market and focus on the prospects of individual stocks. Even in the worst environment there are companies with unique opportunities and competitive advantages that present compelling investment opportunities.
Another important part of our disciplined approach is the application of our basket structure. We assign each of the stocks in the portfolio to one of three baskets: Growth Industry Leader; Consistent Growth Company; or Emerging Growth Company. We loosely target a third of the portfolio exposed to each basket. The characteristics | |
Certified Annual Report 7
Letter to Shareholders,
Continued
of each basket are different. Growth Industry Leaders are companies with a leading position in an industry that is growing faster then the economy as a whole. Consistent Growth Companies are more defensive in nature with diversified business models or recurring revenue models. Emerging Growth Companies enjoy high rates of growth and by our judgement have particular advantages in their marketplaces.
Theoretically, Growth Industry Leaders are good stocks to own most of the time. Consistent Growers provide a defensive element in turbulent markets, and Emerging Growth Companies, while carrying a higher risk profile, tend to do very well for our shareholders in rising markets. Our goal is to pick the best stocks we can find for each basket. Although we always consider a range of macroeconomic outcomes and how those will impact both individual holdings and the portfolio as a whole, we never try to predict what “the market” is going to do – except to assume that over a very long time horizon, it will trend upwards.
Moving on to a brief look at performance drivers during the year:
Information technology was a sector where we found quite a bit of opportunity during the year. It was our largest sector weighting. Strong performers included Baidu, Telecity and Research in Motion. These companies are also a good reflection of the diverse nature of our exposure to technology in the portfolio. Baidu is a Chinese internet portal (the “Google” of China), Telecity is a British company that operates data centers throughout Europe, and Research in Motion is a Canadian company and a leader in the smartphone industry.
As the Thornburg International Growth Fund is built from the bottom up as opposed to the top down, other contributions came from a variety of sectors. We purchased top performer Banco ABC Brasil at the height of the credit crisis in November 2008, based on our analysis that the balance sheet was sound, funding sources were secure, and the depressed multiple was unwarranted. Actelion, a Swiss biotech stock, was purchased in April 2009 and performed strongly through the close of the fiscal year as the market showed greater recognition of the competitive position of its existing products and the exciting near-term opportunities in their pipeline.
What we did not own had both positive and negative impacts on the performance of the Fund. We had very little exposure to the utility and energy sectors, which were the worst performing sectors of our benchmark. We simply did not find compelling opportunities at the individual security level as we conducted our bottom-up process. On the negative side, we had no exposure to materials stocks during the year. Materials stocks are often driven by highly cyclical commodities. We are less comfortable owning stocks driven by the shifting macro-environmental factors than those where we can formulate a unique investment thesis and our own earnings power assumptions.
Thornburg Investment Management, Inc. has, over the past 27 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
8 Certified Annual Report
fact that every day I work with shareholders of the Thornburg International 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 International Growth Fund continues to fulfill its mandate as a growth-oriented investment vehicle that can form part 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 websites can be found by pointing your Internet browser to www.thornburg.com/funds. Thank you for investing in the Thornburg International Growth Fund.
Sincerely,
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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
SCHEDULE OF INVESTMENTS | ||
Thornburg International Growth Fund | September 30, 2009 |
TOP TEN HOLDINGS
As of 9/30/09
Wynn Macau Ltd. | 5.3 | % | Bayer AG | 3.1 | % | |||
Telefonica SA | 3.7 | % | Actelion Ltd. | 3.1 | % | |||
Amdocs Ltd. | 3.7 | % | Teva Pharmaceutical Industries Ltd. ADR | 3.0 | % | |||
Shanda Games Ltd. ADR | 3.4 | % | Deutsche Börse AG | 2.9 | % | |||
America Movil SAB de C.V. | 3.3 | % | Coca-Cola Hellenic Bottling Co. S.A. | 2.8 | % |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/09
Software & Services | 19.9 | % | Semiconductors & Semiconductor Equipment | 4.3 | % | |||
Pharmaceuticals, Biotechnology & Life Sciences | 16.0 | % | Banks | 3.0 | % | |||
Consumer Services | 7.5 | % | Food, Beverage & Tobacco | 2.8 | % | |||
Diversified Financials | 7.2 | % | Technology Hardware & Equipment | 2.7 | % | |||
Telecommunication Services | 7.0 | % | Food & Staples Retailing | 2.5 | % | |||
Energy | 6.4 | % | Utilities | 0.3 | % | |||
Media | 6.3 | % | Other Assets & Cash Equivalents | 9.3 | % | |||
Commercial & Professional Services | 4.8 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/09 (percent of equity holdings)
China | 12.9 | % | Greece | 3.1 | % | |||
Brazil | 12.2 | % | Ireland | 2.7 | % | |||
United Kingdom | 11.2 | % | Japan | 2.6 | % | |||
Germany | 6.6 | % | Norway | 2.6 | % | |||
Hong Kong | 5.8 | % | Australia | 2.6 | % | |||
Switzerland | 5.8 | % | Denmark | 2.5 | % | |||
United States | 5.2 | % | Taiwan | 2.3 | % | |||
Israel | 5.2 | % | Russia | 1.7 | % | |||
Canada | 4.4 | % | Turkey | 1.4 | % | |||
Spain | 4.1 | % | Cyprus | 1.1 | % | |||
Mexico | 3.7 | % | Philippines | 0.3 | % |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 88.12% | |||||
BANKS — 3.00% | |||||
COMMERCIAL BANKS — 3.00% | |||||
Industrial & Commercial Bank of China Ltd. | 1,787,000 | $ | 1,344,276 | ||
Marfin Popular Bank ADR | 83,350 | 706,633 | |||
2,050,909 | |||||
COMMERCIAL & PROFESSIONAL SERVICES — 4.78% | |||||
PROFESSIONAL SERVICES — 4.78% | |||||
Experian plc | 198,700 | 1,671,915 | |||
Seek Ltd. | 327,465 | 1,591,781 | |||
3,263,696 | |||||
CONSUMER SERVICES — 7.46% | |||||
DIVERSIFIED CONSUMER SERVICES — 2.17% | |||||
a New Oriental Education & Technology Group, Inc. ADR | 18,400 | 1,480,280 | |||
HOTELS, RESTAURANTS & LEISURE — 5.29% | |||||
a,b Wynn Macau Ltd. | 2,781,643 | 3,618,233 | |||
5,098,513 | |||||
DIVERSIFIED FINANCIALS — 7.25% | |||||
DIVERSIFIED FINANCIAL SERVICES — 7.25% | |||||
Banco ABC Brasil S.A. | 223,200 | 1,322,872 | |||
BM&F Bovespa SA | 227,335 | 1,675,884 | |||
Deutsche Börse AG | 23,900 | 1,953,300 | |||
4,952,056 | |||||
ENERGY — 6.41% | |||||
OIL, GAS & CONSUMABLE FUELS — 6.41% | |||||
a BPZ Resources, Inc. | 179,380 | 1,348,938 | |||
OAO Gazprom ADR | 46,000 | 1,069,500 | |||
Petroleo Brasileiro S.A. ADR | 27,300 | 1,073,163 | |||
Tupras-Turkiye Petrol Rafinerileri A.S. | 53,400 | 885,202 | |||
4,376,803 | |||||
FOOD & STAPLES RETAILING — 2.49% | |||||
FOOD & STAPLES RETAILING — 2.49% | |||||
Drogasil S.A. | 134,000 | 1,701,851 | |||
1,701,851 | |||||
FOOD, BEVERAGE & TOBACCO — 2.79% | |||||
BEVERAGES — 2.79% | |||||
Coca-Cola Hellenic Bottling Co. S.A. | 71,500 | 1,903,210 | |||
1,903,210 | |||||
MEDIA — 6.26% | |||||
MEDIA — 6.26% | |||||
a Airmedia Group, Inc. ADR | 185,891 | 1,366,299 | |||
a Net Servicos de Comunicacao SA | 150,800 | 1,754,340 | |||
RRsat Global Communications Network | 89,211 | 1,150,822 | |||
4,271,461 | |||||
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 16.01% | |||||
BIOTECHNOLOGY — 3.07% | |||||
a Actelion Ltd. | 33,800 | $ | 2,098,842 | ||
PHARMACEUTICALS — 12.94% | |||||
Bayer AG | 30,700 | 2,127,190 | |||
Novo Nordisk A/S | 24,800 | 1,552,727 | |||
a Pronova BioPharma AS | 540,000 | 1,636,052 | |||
Roche Holding AG | 9,100 | 1,470,858 | |||
Teva Pharmaceutical Industries Ltd. ADR | 40,600 | 2,052,736 | |||
10,938,405 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.31% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.31% | |||||
Arm Holdings plc | 659,700 | 1,513,975 | |||
Taiwan Semiconductor Manufacturing Co., Ltd. ADR | 130,649 | 1,431,913 | |||
2,945,888 | |||||
SOFTWARE & SERVICES — 19.97% | |||||
INFORMATION TECHNOLOGY SERVICES — 3.65% | |||||
a Amdocs Ltd. | 92,829 | 2,495,243 | |||
INTERNET SOFTWARE & SERVICES — 5.70% | |||||
a Baidu, Inc. ADR | 3,750 | 1,466,438 | |||
a Open Text Corp. | 24,100 | 899,653 | |||
a Telecity Group plc | 299,400 | 1,530,678 | |||
SOFTWARE — 10.62% | |||||
Nintendo Co. Ltd. | 6,400 | 1,639,837 | |||
Playtech Ltd. | 223,700 | 1,379,975 | |||
a Shanda Games Ltd. ADR | 200,000 | 2,340,000 | |||
a Solera Holdings, Inc. | 60,900 | 1,894,599 | |||
13,646,423 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.66% | |||||
COMMUNICATIONS EQUIPMENT — 2.66% | |||||
a Research In Motion Ltd. | 26,900 | 1,817,095 | |||
1,817,095 | |||||
TELECOMMUNICATION SERVICES — 7.05% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 3.72% | |||||
Telefonica SA | 92,000 | 2,538,413 | |||
WIRELESS TELECOMMUNICATION SERVICES — 3.33% | |||||
America Movil SAB de C.V. | 1,040,800 | 2,278,702 | |||
4,817,115 | |||||
UTILITIES — 0.25% | |||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.25% | |||||
PNOC Energy Development Corp. | 1,745,742 | 173,174 | |||
173,174 | |||||
TOTAL COMMON STOCK (Cost $57,518,053) | 61,956,599 | ||||
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||||
SHORT TERM INVESTMENTS — 9.51% | |||||||
Devon Energy Corp, 0.20%, 10/1/2009 | $ | 3,400,000 | $ | 3,400,000 | |||
Precision Castparts Corp, 0.20%, 10/1/2009 | 3,100,000 | 3,100,000 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $6,500,000) | 6,500,000 | ||||||
TOTAL INVESTMENTS — 100.20% (Cost $64,018,053) | $ | 68,456,599 | |||||
LIABILITIES NET OF OTHER ASSETS — (0.20)% | (136,370 | ) | |||||
NET ASSETS — 100.00% | $ | 68,320,229 | |||||
Footnote Legend
a | Non-income producing |
b | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
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 13
STATEMENT OF ASSETS AND LIABILITIES
Thornburg International Growth Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (cost $64,018,053) (Note 2) | $ | 68,456,599 | ||
Cash | 391,201 | |||
Cash denominated in foreign currency (cost $8,486) | 9,019 | |||
Receivable for investments sold | 3,318,216 | |||
Receivable for fund shares sold | 179,199 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 16,446 | |||
Dividends receivable | 108,512 | |||
Dividend and interest reclaim receivable | 48,231 | |||
Prepaid expenses and other assets | 29,272 | |||
Total Assets | 72,556,695 | |||
LIABILITIES | ||||
Payable for securities purchased | 3,944,542 | |||
Payable for fund shares redeemed | 125,035 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 18,010 | |||
Payable to investment advisor and other affiliates (Note 3) | 55,955 | |||
Accounts payable and accrued expenses | 92,924 | |||
Total Liabilities | 4,236,466 | |||
NET ASSETS | $ | 68,320,229 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 297,117 | ||
Net unrealized appreciation on investments | 4,444,394 | |||
Accumulated net realized gain (loss) | (41,377,319 | ) | ||
Net capital paid in on shares of beneficial interest | 104,956,037 | |||
$ | 68,320,229 | |||
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($24,015,358 applicable to 2,318,644 shares of beneficial interest outstanding - Note 4) | $ | 10.36 | |
Maximum sales charge, 4.50% of offering price | 0.49 | ||
Maximum offering price per share | $ | 10.85 | |
Class C Shares: | |||
Net asset value and offering price per share * ($19,232,422 applicable to 1,862,184 shares of beneficial interest outstanding - Note 4) | $ | 10.33 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($24,312,490 applicable to 2,329,120 shares of beneficial interest outstanding - Note 4) | $ | 10.44 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($748,425 applicable to 72,467 shares of beneficial interest outstanding - - Note 4) | $ | 10.33 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($2,438 applicable to 237 shares of beneficial interest outstanding - Note 4) | $ | 10.29 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($9,096 applicable to 870 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 15
Thornburg International Growth Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $152,820) | $ | 1,170,418 | ||
Interest income | 21,549 | |||
Total Income | 1,191,967 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 484,200 | |||
Administration fees (Note 3) | ||||
Class A Shares | 23,630 | |||
Class C Shares | 20,226 | |||
Class I Shares | 9,903 | |||
Class R3 Shares | 552 | |||
Class R4 Shares | 3 | |||
Class R5 Shares | 1 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 47,106 | |||
Class C Shares | 160,535 | |||
Class R3 Shares | 2,207 | |||
Class R4 Shares | 5 | |||
Transfer agent fees | ||||
Class A Shares | 40,145 | |||
Class C Shares | 44,539 | |||
Class I Shares | 13,842 | |||
Class R3 Shares | 2,801 | |||
Class R4 Shares | 2,132 | |||
Class R5 Shares | 2,138 | |||
Registration and filing fees | ||||
Class A Shares | 32,893 | |||
Class C Shares | 21,976 | |||
Class I Shares | 21,611 | |||
Class R3 Shares | 16,439 | |||
Class R4 Shares | 16,439 | |||
Class R5 Shares | 16,439 | |||
Custodian fees (Note 3) | 82,612 | |||
Professional fees | 52,702 | �� | ||
Accounting fees | 3,186 | |||
Trustee fees | 1,765 | |||
Other expenses | 32,723 | |||
Total Expenses | 1,152,750 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (152,500 | ) | ||
Investment advisory fees waived by investment advisor (Note 3) | (106,931 | ) | ||
Fees paid indirectly (Note 3) | (2,145 | ) | ||
Net Expenses | 891,174 | |||
Net Investment Income | $ | 300,793 | ||
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED
Thornburg International Growth Fund | Year Ended September 30, 2009 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | (37,153,700 | ) | |
Forward currency contracts (Note 7) | 1,422,497 | |||
Foreign currency transactions | (666 | ) | ||
(35,731,869 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 33,020,403 | |||
Forward currency contracts (Note 7) | (713,302 | ) | ||
Foreign currency translations | 15,158 | |||
32,322,259 | ||||
Net Realized and Unrealized Loss | (3,409,610 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (3,108,817 | ) | |
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg International Growth Fund
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 300,793 | $ | 512,202 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (35,731,869 | ) | (4,538,662 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | 32,322,259 | (33,963,511 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (3,108,817 | ) | (37,989,971 | ) | ||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (345,267 | ) | — | |||||
Class C Shares | (109,592 | ) | — | |||||
Class I Shares | (518,715 | ) | — | |||||
Class R3 Shares | (1,928 | ) | — | |||||
Class R4 Shares | (47 | ) | — | |||||
Class R5 Shares | (42 | ) | — | |||||
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 | (2,611,014 | ) | 19,403,825 | |||||
Class C Shares | (3,186,558 | ) | 23,121,017 | |||||
Class I Shares | (2,620,197 | ) | 13,038,441 | |||||
Class R3 Shares | 483,136 | 149,898 | ||||||
Class R4 Shares | 47 | 3,200 | ||||||
Class R5 Shares | 5,940 | 3,254 | ||||||
Net Increase (Decrease) in Net Assets | (12,013,054 | ) | 15,152,415 | |||||
NET ASSETS: | ||||||||
Beginning of Year | 80,333,283 | 65,180,868 | ||||||
End of Year | $ | 68,320,229 | $ | 80,333,283 | ||||
Undistributed net investment income | $ | 297,117 | $ | 972,581 |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg International Growth Fund | September 30, 2009 |
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 Fund is currently one of fifteen separate series of the Trust. 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) 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 of purchase, 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.
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, and 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.
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
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 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Assets | ||||||||||||||
Investments in Securities* | ||||||||||||||
Common stock | $ | 61,956,599 | $ | 57,631,733 | $ | 4,324,866 | † | $ | — | |||||
Short term investments | 6,500,000 | — | 6,500,000 | — | ||||||||||
Total Investments in Securities | $ | 68,456,599 | $ | 57,631,733 | $ | 10,824,866 | $ | — | ||||||
Other Financial Instruments** | ||||||||||||||
Forward Currency Contracts | $ | 16,446 | $ | — | $ | 16,446 | $ | — | ||||||
Liabilities | ||||||||||||||
Other Financial Instruments** | ||||||||||||||
Forward Currency Contracts | $ | (18,010 | ) | $ | — | $ | (18,010 | ) | $ | — |
* | See Summary of Industry Exposure and Schedule of Investments beginning on page 10 for further detail. |
† | Securities of $3,618,233 included in this classification, were purchased in an initial public offering where the trading on an official exchange commenced subsequent to September 30, 2009. |
** | 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. |
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.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
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 issuers. 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 to shareholders substantially all taxable income, including any net realized gain on investments of the Funds. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Dividends to shareholders are generally paid quarterly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date or, at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually. Distributions to shareholders are based on income tax regulations and therefore, their characteristics may differ for financial statement and tax purposes.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned and dividend income is recorded on the ex-dividend date. Certain income from foreign securities is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares of each class of shares at the beginning of the day (after adjusting for the current share activity of the respective class). Expenses common to all funds are allocated among the funds comprising the Trust based upon their relative net asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown. However, based on experience, the Trust expects the risk of loss to be remote.
Use of Estimates: The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
NOTE 3 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, Thornburg Investment Management, Inc. (the “Advisor”) serves as the investment advisor and performs services to the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2009, these fees were payable at annual rates ranging from .875 of 1% to .675 of 1% per annum of the average daily net assets
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
of the Fund depending on the Fund’s asset size. For the year ended September 30, 2009, the Advisor voluntarily waived investment advisory fees of $106,931. 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, 2009, the Advisor voluntarily or contractually agreed to reimburse certain class specific expenses, administrative fees, and distribution fees of $25,932 for Class A shares, $24,241 for Class C shares, $45,356 for Class I shares, $19,823 for Class R3 shares, $18,571 for Class R4 shares, and $18,577 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, 2009, the Distributor has advised the Fund that it earned commissions aggregating $2,921 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $8,690 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, 2009, 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, 2009, fees paid indirectly were $2,145.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 1,521,502 | $ | 12,014,685 | 2,783,429 | $ | 40,878,185 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 42,746 | 313,329 | 63,051 | 972,881 | ||||||||||
Shares repurchased | (1,990,658 | ) | (14,939,580 | ) | (1,786,855 | ) | (22,448,682 | ) | ||||||
Redemption fees received** | — | 552 | — | 1,441 | ||||||||||
�� | ||||||||||||||
Net Increase (Decrease) | (426,410 | ) | $ | (2,611,014 | ) | 1,059,625 | $ | 19,403,825 | ||||||
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 762,783 | $ | 5,916,858 | 1,946,922 | $ | 28,877,850 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 9,948 | 72,723 | 28,999 | 444,555 | ||||||||||
Shares repurchased | (1,222,548 | ) | (9,176,628 | ) | (497,198 | ) | (6,202,344 | ) | ||||||
Redemption fees received** | — | 489 | — | 956 | ||||||||||
Net Increase (Decrease) | (449,817 | ) | $ | (3,186,558 | ) | 1,478,723 | $ | 23,121,017 | ||||||
Class I Shares | ||||||||||||||
Shares sold | 612,383 | $ | 4,995,741 | 1,311,234 | $ | 18,680,586 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 65,869 | 484,137 | 48,137 | 747,089 | ||||||||||
Shares repurchased | (1,041,778 | ) | (8,100,654 | ) | (511,958 | ) | (6,390,352 | ) | ||||||
Redemption fees received** | — | 579 | — | 1,118 | ||||||||||
Net Increase (Decrease) | (363,526 | ) | $ | (2,620,197 | ) | 847,413 | $ | 13,038,441 | ||||||
Class R3 Shares* | ||||||||||||||
Shares sold | 74,718 | $ | 578,635 | 11,033 | $ | 151,712 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 264 | 1,928 | — | — | ||||||||||
Shares repurchased | (13,404 | ) | (97,436 | ) | (144 | ) | (1,815 | ) | ||||||
Redemption fees received** | — | 9 | — | 1 | ||||||||||
Net Increase (Decrease) | 61,578 | $ | 483,136 | 10,889 | $ | 149,898 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | — | $ | — | 230 | $ | 3,200 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 7 | 47 | — | — | ||||||||||
Shares repurchased | — | — | — | — | ||||||||||
Redemption fees received** | — | — | — | — | ||||||||||
Net Increase (Decrease) | 7 | $ | 47 | 230 | $ | 3,200 | ||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 636 | $ | 5,903 | 229 | $ | 3,254 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 6 | 42 | — | — | ||||||||||
Shares repurchased | (1 | ) | (5 | ) | — | — | ||||||||
Redemption fees received** | — | — | — | — | ||||||||||
Net Increase (Decrease) | 641 | $ | 5,940 | 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.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $53,623,329 and $66,750,521, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 64,127,956 | ||
Gross unrealized appreciation on a tax basis | $ | 9,584,829 | ||
Gross unrealized depreciation on a tax basis | (5,256,186 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 4,328,643 | ||
Distributable earnings - ordinary income | $ | 291,260 |
In order to account for permanent book/tax differences, the Fund decreased undistributed net realized investment losses by $666, and decreased undistributed net investment income by $666. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains/losses.
At September 30, 2009, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2008 of $23,985,997. For tax purposes, such losses will be recognized in the year ending September 30, 2010.
At September 30, 2009, the Fund had tax basis capital losses, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations.
Such capital loss carryforwards expire as follows:
2016 | $ | 4,974,731 | |
2017 | 12,306,688 | ||
$ | 17,281,419 | ||
The tax character of distributions paid during the year ended September 30, 2009, and September 30, 2008, was $ 975,591 and $ 2,577,249, respectively, from ordinary income.
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50, (“ASC 815”) require certain disclosures. The new requirement amends and expands disclosures related to derivative instruments to provide users of financial statements with an enhanced understanding of the use of derivative instruments by the Fund and how these derivatives affect the financial position, financial performance and cash flows of the Fund. The Fund does not designate any derivative instruments as hedging instruments under ASC 815. During the year ended September 30, 2009, the Fund’s principal exposure to derivative financial instruments of the type addressed by ASC 815 was investment in foreign exchange contracts. A foreign exchange contract is an agreement between two parties to exchange different currencies at a specified rate of exchange at an agreed upon future date. Foreign exchange contracts involve risks to the Fund, including the risk that a contract counterparty will not meet its obligations to the Fund, the risk that a change in a contract’s value may not correlate perfectly with the currency the contract was intended to track, and the risk that the Fund’s advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
The Fund entered into forward currency contracts during the year ended September 30, 2009 in the normal course of pursuing its investment objectives, in anticipation of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments 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 investment transactions.
These contracts are accounted for by the Fund under ASC 815. Unrealized gains and unrealized losses on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities 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 each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations.
The following table displays the outstanding forward currency contracts, at September 30, 2009:
Outstanding Forward Currency Contracts to Buy or Sell at September 30, 2009 |
| |||||||||||||||
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||
Philippine Peso | Sell | 48,750,000 | 12/11/2009 | $ | 1,021,172 | $ | — | $ | (17,672 | ) | ||||||
Philippine Peso | Buy | 2,943,400 | 12/11/2009 | 61,656 | 1,830 | — | ||||||||||
Philippine Peso | Buy | 3,740,000 | 12/11/2009 | 78,342 | 1,514 | — | ||||||||||
Philippine Peso | Buy | 2,700,000 | 12/11/2009 | 56,557 | 1,545 | — | ||||||||||
Philippine Peso | Buy | 2,200,000 | 12/11/2009 | 46,084 | 844 | — | ||||||||||
Philippine Peso | Buy | 2,650,700 | 12/11/2009 | 55,525 | — | (338 | ) | |||||||||
Philippine Peso | Buy | 4,544,000 | 12/11/2009 | 95,184 | 1,686 | — | ||||||||||
Philippine Peso | Buy | 4,116,600 | 12/11/2009 | 86,231 | 1,353 | — | ||||||||||
Philippine Peso | Buy | 3,300,000 | 12/11/2009 | 69,125 | 2,052 | — | ||||||||||
Philippine Peso | Buy | 4,000,000 | 12/11/2009 | 83,788 | 2,768 | — | ||||||||||
Philippine Peso | Buy | 1,750,000 | 12/11/2009 | 36,657 | 979 | — | ||||||||||
Philippine Peso | Buy | 1,600,000 | 12/11/2009 | 33,515 | 471 | — | ||||||||||
Philippine Peso | Buy | 2,000,000 | 12/11/2009 | 41,894 | 580 | — | ||||||||||
Philippine Peso | Buy | 4,400,000 | 12/11/2009 | 92,168 | 824 | — | ||||||||||
Total | $ | 1,857,898 | $ | 16,446 | $ | (18,010 | ) | |||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2009 is disclosed in the following table:
Fair Values of Derivative Financial Instruments at September 30, 2009 | ||||||
Asset Derivatives | ||||||
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 16, 446 | |||
Liability Derivatives | ||||||
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (18,010 | ) |
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 |
The realized gains (losses) from forward currency contracts, and the change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2009 is disclosed in the following tables:
Amount of Realized Gain (Loss) on Derivative Financial Instruments Recognized in Income for the Year Ended September 30, 2009 | ||||
Total | Forward Currency Contracts | |||
Foreign exchange contracts | $1,422,497 | $ 1,422,497 | ||
Change in Unrealized Appreciation (Depreciation) of Derivative Financial Instruments Recognized in Income for the Year Ended September 30, 2009 | ||||
Total | Forward Currency Contracts | |||
Foreign exchange contracts | $(713,302) | $(713,302) |
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
26 Certified Annual Report
Thornburg International Growth Fund
Year Ended Sept. 30, | Period Ended Sept. 30, | |||||||||||
Class A Shares: | 2009 | 2008 | 2007(a) | |||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 10.35 | $ | 14.92 | $ | 11.94 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.04 | 0.07 | (0.03 | ) | ||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | (4.27 | ) | 3.01 | ||||||||
Total from investment operations | 0.14 | (4.20 | ) | 2.98 | ||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.13 | ) | — | — | ||||||||
Net realized gains | — | (0.37 | ) | — | ||||||||
Total dividends | (0.13 | ) | (0.37 | ) | — | |||||||
Change in net asset value | 0.01 | (4.57 | ) | 2.98 | ||||||||
NET ASSET VALUE, end of period | $ | 10.36 | $ | 10.35 | $ | 14.92 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | 1.89 | (28.98 | ) | 24.96 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | 0.52 | 0.53 | (0.29 | )(c) | ||||||||
Expenses, after expense reductions (%) | 1.62 | 1.56 | 1.64 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.61 | 1.55 | 1.62 | (c) | ||||||||
Expenses, before expense reductions (%) | 1.95 | 1.63 | 2.10 | (c) | ||||||||
Portfolio turnover rate (%) | 103.57 | 54.31 | 113.34 | |||||||||
Net assets at end of period (thousands) | $ | 24,015 | $ | 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 27
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Growth Fund
Year Ended Sept. 30, | Period Ended Sept. 30, | |||||||||||
Class C Shares: | 2009 | 2008 | 2007(a) | |||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 10.22 | $ | 14.85 | $ | 11.94 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | (0.02 | ) | (0.03 | ) | (0.10 | ) | ||||||
Net realized and unrealized gain (loss) on investments | 0.18 | (4.23 | ) | 3.01 | ||||||||
Total from investment operations | 0.16 | (4.26 | ) | 2.91 | ||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.05 | ) | — | — | ||||||||
Net realized gains | — | (0.37 | ) | — | ||||||||
Total dividends | (0.05 | ) | (0.37 | ) | — | |||||||
Change in net asset value | 0.11 | (4.63 | ) | 2.91 | ||||||||
NET ASSET VALUE, end of period | $ | 10.33 | $ | 10.22 | $ | 14.85 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | 1.76 | (29.53 | ) | 24.37 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | (0.21 | ) | (0.23 | ) | (1.13 | )(c) | ||||||
Expenses, after expense reductions (%) | 2.37 | 2.32 | 2.39 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.37 | 2.32 | 2.38 | (c) | ||||||||
Expenses, before expense reductions (%) | 2.72 | 2.45 | 3.23 | (c) | ||||||||
Portfolio turnover rate (%) | 103.57 | 54.31 | 113.34 | |||||||||
Net assets at end of period (thousands) | $ | 19,233 | $ | 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.
28 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Growth Fund
Year Ended Sept. 30, | Period Ended Sept. 30, | |||||||||||
Class I Shares: | 2009 | 2008 | 2007(a) | |||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 10.46 | $ | 14.99 | $ | 11.94 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.10 | 0.14 | 0.05 | |||||||||
Net realized and unrealized gain (loss) on investments | 0.08 | (4.30 | ) | 3.00 | ||||||||
Total from investment operations | 0.18 | (4.16 | ) | 3.05 | ||||||||
Less dividends from: | ||||||||||||
Net investment income | (0.20 | ) | — | — | ||||||||
Net realized gains | — | (0.37 | ) | — | ||||||||
Total dividends | (0.20 | ) | (0.37 | ) | — | |||||||
Change in net asset value | (0.02 | ) | (4.53 | ) | 3.05 | |||||||
NET ASSET VALUE, end of period | $ | 10.44 | $ | 10.46 | $ | 14.99 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | 2.56 | (28.57 | ) | 25.54 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | 1.17 | 1.03 | 0.52 | (c) | ||||||||
Expenses, after expense reductions (%) | 0.99 | 1.00 | 1.01 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.99 | (c) | ||||||||
Expenses, before expense reductions (%) | 1.42 | 1.25 | 1.64 | (c) | ||||||||
Portfolio turnover rate (%) | 103.57 | 54.31 | 113.34 | |||||||||
Net assets at end of period (thousands) | $ | 24,313 | $ | 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 29
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Growth Fund
Class R3 Shares: | Year Ended Sept. 30, 2009 | Period Ended Sept. 30, 2008(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 10.36 | $ | 13.94 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.08 | 0.09 | ||||||
Net realized and unrealized gain (loss) on investments | 0.06 | (3.67 | ) | |||||
Total from investment operations | 0.14 | (3.58 | ) | |||||
Less dividends from: | ||||||||
Net investment income | (0.17 | ) | — | |||||
Change in net asset value | (0.03 | ) | (3.58 | ) | ||||
NET ASSET VALUE, end of period | $ | 10.33 | $ | 10.36 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 2.09 | (25.68 | ) | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 0.94 | 1.08 | (c) | |||||
Expenses, after expense reductions (%) | 1.46 | 1.50 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 1.46 | 1.49 | (c) | |||||
Expenses, before expense reductions (%) | 6.14 | (d) | 26.47 | (c)(d) | ||||
Portfolio turnover rate (%) | 103.57 | 54.31 | ||||||
Net assets at end of period (thousands) | $ | 748 | $ | 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.
30 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Growth Fund
Class R4 Shares: | Year Ended Sept. 30, 2009 | Period Ended Sept. 30, 2008(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 10.36 | $ | 13.94 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.07 | 0.10 | ||||||
Net realized and unrealized gain (loss) on investments | 0.06 | (3.68 | ) | |||||
Total from investment operations | 0.13 | (3.58 | ) | |||||
Less dividends from: | ||||||||
Net investment income | (0.20 | ) | — | |||||
Change in net asset value | (0.07 | ) | (3.58 | ) | ||||
NET ASSET VALUE, end of period | $ | 10.29 | $ | 10.36 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 2.10 | (25.68 | ) | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 0.82 | 1.16 | (c) | |||||
Expenses, after expense reductions (%) | 1.40 | 1.40 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 1.40 | 1.40 | (c) | |||||
Expenses, before expense reductions (%) | 980.09 | (d) | 861.94 | (c)(d) | ||||
Portfolio turnover rate (%) | 103.57 | 54.31 | ||||||
Net assets at end of period (thousands) | $ | 2 | $ | 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 31
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg International Growth Fund
Class R5 Shares: | Year Ended Sept. 30, 2009 | Period Ended Sept. 30, 2008(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 10.46 | $ | 14.03 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.08 | 0.14 | ||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (3.71 | ) | |||||
Total from investment operations | 0.19 | (3.57 | ) | |||||
Less dividends from: | ||||||||
Net investment income | (0.19 | ) | — | |||||
Change in net asset value | 0.00 | (3.57 | ) | |||||
NET ASSET VALUE, end of period | $ | 10.46 | $ | 10.46 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 2.53 | (25.45 | ) | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 0.92 | 1.57 | (c) | |||||
Expenses, after expense reductions (%) | 0.97 | 0.96 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 0.97 | 0.95 | (c) | |||||
Expenses, before expense reductions (%) | 522.27 | (d) | 851.43 | (c)(d) | ||||
Portfolio turnover rate (%) | 103.57 | 54.31 | ||||||
Net assets at end of period (thousands) | $ | 9 | $ | 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.
32 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, 2009, 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
Certified Annual Report 33
EXPENSE EXAMPLE | ||
Thornburg International Growth Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,492.80 | $ | 10.13 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,016.94 | $ | 8.20 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,494.90 | $ | 14.79 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.21 | $ | 11.93 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,497.80 | $ | 6.20 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,492.80 | $ | 9.00 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.85 | $ | 7.28 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,493.50 | $ | 8.95 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.89 | $ | 7.24 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,496.40 | $ | 6.15 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.14 | $ | 4.98 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.62%; C: 2.36%; I: 0.99%; R3: 1.44%; R4: 1.43%; R5: 0.98%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table 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 Growth Fund | September 30, 2009 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009 (with sales charge)
1 Yr | Since Inception | |||||
A Shares (Incep: 2/1/07) | -2.71 | % | -5.36 | % | ||
C Shares (Incep: 2/1/07) | 0.76 | % | -4.21 | % | ||
I Shares (Incep: 2/1/07) | 2.56 | % | -3.09 | % | ||
R3 Shares (Incep: 2/1/08) | 2.09 | % | -15.30 | % | ||
R4 Shares (Incep: 2/1/08) | 2.10 | % | -15.30 | % | ||
R5 Shares (Incep: 2/1/08) | 2.53 | % | -14.92 | % | ||
MSCI AC World ex-U.S. | ||||||
Growth Index (Since 2/1/07) | 2.14 | % | -5.87 | % |
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% 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 MSCI All Country (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 35
TRUSTEES AND OFFICERS | ||
Thornburg International Growth Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
36 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report 37
TRUSTEES AND OFFICERS, CONTINUED
Thornburg International Growth Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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 Growth Fund | September 30, 2009 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
The Trust has delegated to Thornburg Investment Management, Inc. (the “Advisor”) voting decisions respecting proxies for the Fund’s voting securities. The Advisor makes voting decisions in accordance with its Proxy Voting Policy and Procedures. A description of the Policy and Procedures is available (i) without charge, upon request, by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
Information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information is available (i) without charge, upon request by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the tax year ended September 30, 2009, the Thornburg International Growth Fund designates 100.00% (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, 2009, foreign taxes paid and foreign source income is $140,550 and $1,132,923, 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, 2009. Complete information will be computed and reported in conjunction with your 2009 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 2009 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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees unanimously voted 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.
Certified Annual Report 39
OTHER INFORMATION, CONTINUED
Thornburg International Growth Fund | September 30, 2009 (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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the Fund’s investment objectives. In addition, the Trustees considered information specifically provided to them at their request in anticipation of their annual 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 primarily in foreign growth stocks, and relative to a broad-based securities index, and (iv) 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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, tax efficiency, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data), that the Fund’s investment return in the one full calendar year since the Fund’s inception was lower than the return for the index and the average return of the fund category, but that the Fund’s returns for the three-month, six-month and one-year periods ended with the second quarter of the current year were higher than the returns for the index and the average returns for the category, and fell at or within the top quartile of the category for each of those periods. The Trustees also noted that the Fund’s investment returns had generally met reasonable expectations over the periods since the Fund’s inception, given the investment objectives of the Fund.
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 slightly higher than the median and comparable to the 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 lower than the median and average fee rates for the same group of funds. The Trustees considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
40 Certified Annual Report
OTHER INFORMATION, CONTINUED
Thornburg International Growth Fund | September 30, 2009 (Unaudited) |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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, compliance and systems capabilities 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 41
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 22, 2009
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.
42 This page is not part of the Annual Report.
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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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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg. com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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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. | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources. | |||||
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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, 2009. 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 bonds 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | TIBAX | 885-215-558 | ||
Class C | TIBCX | 885-215-541 | ||
Class I | TIBIX | 885-215-467 | ||
Class R3 | TIBRX | 885-215-384 | ||
Class R4 | TIBGX | 885-215-186 | ||
Class R5 | TIBMX | 885-215-236 |
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.
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 January 2009, the MSCI All Country Asia ex-Japan Index consisted of the following 10 developed and emerging market country indices: China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, 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.
Duration – The weighted maturity of a bond’s cash flows. Duration measures the price sensitivity of a bond for a given change in interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
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.
Price to Earnings Ratio (P/E) – A valuation ratio equaling 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.
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The Dividend Landscape
To appreciate the investment environment that Thornburg Investment Income Builder Fund operates in, you may wish to review these highlights of the “dividend landscape.”
The S&P 500 Index Payout Ratio — A Historical Perspective
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, even as dividends paid by the S&P 500 portfolio have themselves declined by more than 20 times in 2009.
Sources: Standard & Poor’s, beginning in 1999 (uses operating earnings); “Irrational Exuberance” by Robert J. Shiller, through 1998 (uses reported earnings). |
Corporate Willingness to Pay Dividends is Key to the Fund’s Investment Process
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. Dividends returned to fashion between 2002 and 2008, but the current recession has stalled dividend momentum.
Source: CSFB Quantitative and Equity Derivatives Strategy, Baseline & FactSet. |
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Rising Dividend Payments Despite Decreasing Dividend Yields
Source: Bloomberg and FactSet. |
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 | |||||
Financials | 40 | % | 76 | % | ||
Real Estate | 27 | % | 47 | % | ||
Banks & Other | 13 | % | 29 | % | ||
Utilities | 29 | % | 3 | % | ||
Communications | 6 | % | 4 | % | ||
Consumer Staples | 6 | % | 2 | % | ||
Energy | 5 | % | 4 | % | ||
Consumer Cyclicals | 4 | % | 5 | % | ||
Materials | 3 | % | 1 | % | ||
Health Care | 3 | % | 1 | % | ||
Technology | 2 | % | 2 | % | ||
Industrials | 2 | % | 2 | % | ||
Source: FactSet, as of September 30, 2009 |
In the (large cap) Russell 1000 Index, 69% of the top 100 dividend payers are in the Financials and Utilities sectors. In the (small cap) Russell 2000 Index, 76% 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 these sectors. We do!
Dividend yield is a ratio that shows how much a company pays out in dividends each year relative to its share price.
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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.
Source: FactSet, as of September 30, 2009; Countries and regions above, except the United States, are represented by MSCI indices defined on page three. The United States is represented by the S&P 500 Index. |
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Portfolio Overview
Thornburg Investment Income Builder Fund
IMPORTANT PERFORMANCE INFORMATION
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 1.31%, 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, CLASS A
Q1 | Q2 | Q3 | Q4 | Total | |||||||||||
2003 | 9.2 | ¢ | 11.2 | ¢ | 12.4 | ¢ | 17.5 | ¢ | 50.3 | ¢ | |||||
2004 | 10.2 | ¢ | 12.5 | ¢ | 15.0 | ¢ | 21.8 | ¢ | 59.5 | ¢ | |||||
2005 | 11.0 | ¢ | 13.6 | ¢ | 17.4 | ¢ | 29.0 | ¢ | 71.0 | ¢ | |||||
2006 | 12.5 | ¢ | 16.0 | ¢ | 19.2 | ¢ | 33.0 | ¢ | 80.7 | ¢ | |||||
2007 | 14.2 | ¢ | 18.5 | ¢ | 21.5 | ¢ | 36.8 | ¢ | 91.0 | ¢ | |||||
2008 | 17.9 | ¢ | 21.8 | ¢ | 26.0 | ¢ | 36.8 | ¢ | 102.5 | ¢ | |||||
2009 | 18.0 | ¢ | 24.2 | ¢ | 28.0 | ¢ |
30-day SEC Yield as of September 30, 2009 (A Shares): 6.14%
KEY PORTFOLIO ATTRIBUTES
As of 9/30/09
Equity Statistics | ||||
Portfolio P/E (12-mo. trailing) | 11.4x | |||
Median Market Cap | $ | 9.9 B | ||
Equity Holdings | 55 | |||
Fixed Income Statistics | ||||
Weighted Average Coupon | 6.7 | % | ||
Average Credit Quality | BBB | |||
Average Maturity | 11.9 yrs | |||
Duration | 4.6 yrs | |||
Bond & Pref. Equity Holdings | 189 |
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 2009
1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||
A Shares (Incep: 12/24/02) | ||||||||||||
Without sales charge | 10.89 | % | 3.08 | % | 8.67 | % | 11.61 | % | ||||
With sales charge | 5.92 | % | 1.51 | % | 7.66 | % | 10.86 | % | ||||
Blended Index (Since 12/24/02) | 1.62 | % | -1.35 | % | 4.21 | % | 6.97 | % | ||||
S&P 500 Index (Since 12/24/02) | -6.91 | % | -5.43 | % | 1.02 | % | 4.60 | % |
* | Blended Index: 25% Barclays Capital Aggregate Bond Index/75% MSCI World Index |
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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 9/30/09
Telecommunication Services | 14.5 | % | |
Energy | 12.7 | % | |
Utilities | 11.2 | % | |
Diversified Financials | 10.1 | % | |
Banks | 8.8 | % | |
Food, Beverage & Tobacco | 6.2 | % | |
Real Estate | 5.3 | % | |
Insurance | 4.6 | % | |
Consumer Services | 4.6 | % | |
Materials | 2.9 | % |
TOP TEN INDUSTRIES
As of 6/30/09
Telecommunication Services | 15.2 | % | |
Utilities | 13.1 | % | |
Energy | 10.2 | % | |
Banks | 9.1 | % | |
Diversified Financials | 8.3 | % | |
Food, Beverage & Tobacco | 8.0 | % | |
Insurance | 6.2 | % | |
Real Estate | 5.7 | % | |
Consumer Services | 3.9 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 3.0 | % |
TOP TEN INDUSTRIES
As of 3/31/09
Telecommunication Services | 15.0 | % | |
Utilities | 12.4 | % | |
Energy | 11.3 | % | |
Food, Beverage & Tobacco | 8.4 | % | |
Banks | 7.7 | % | |
Diversified Financials | 7.6 | % | |
Consumer Services | 5.2 | % | |
Real Estate | 4.8 | % | |
Materials | 4.7 | % | |
Insurance | 4.2 | % |
TOP TEN INDUSTRIES
As of 12/31/08
Telecommunication Services | 15.4 | % | |
Energy | 11.5 | % | |
Utilities | 11.3 | % | |
Food, Beverage & Tobacco | 8.0 | % | |
Diversified Financials | 7.9 | % | |
Banks | 7.7 | % | |
Consumer Services | 7.0 | % | |
Insurance | 5.6 | % | |
Materials | 3.9 | % | |
Pharmaceuticals, Biotechnology & Life Sciences | 3.7 | % |
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Thornburg Investment Income Builder Fund
September 30, 2009
Table of Contents
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report 9
October 19, 2009
Dear Fellow Shareholder:
This letter will highlight the basic results of your Fund’s investment activities for the twelve-month period under review. In addition, we will comment on the overall investment landscape, which changed in important ways in 2008 and 2009.
Thornburg Investment Income Builder Fund paid ordinary income dividends of $1.07 per Class A share in the twelve months ended September 30, 2009, up 4.9% from the $1.02 per share paid in the comparable prior year period. The dividends per share were higher for Class I and Class R5 shares, and lower on the Class C, R3, and R4 shares, to account for varying class specific expenses. The net asset value (NAV) per Class A share increased during the period, from $16.86 to $17.38 with a total return including dividends of 10.89% at net asset value (NAV).
For the fiscal year ended September 30, 2009, Thornburg Investment Income Builder Fund outperformed the S&P 500 Index by 17.80%, and outperformed the Blended Index of 75% MSCI World Index/25% Barclays Capital Aggregate Bond Index by 9.27%.
For 3- and 5-year time periods, and since inception, your Fund has significantly outperformed both indices, as noted for Class A shares on page 7 of the accompanying Informational Brochure. Performance relative to indices for all share classes over various periods is set forth on page 47.
We do not expect to pay any capital gain distributions for 2009.
In assessing the performance of your Fund, it is constructive to consider the performance in U.S. dollars of the sector components of the MSCI World Index over the year ended September 30, 2009 because this comprises 75%, and all of the equity portion, of our global performance benchmark:
1. | Four sectors (information technology, telecommunications, materials, and consumer discretionary) showed positive total returns, with a range of 6.70% (information technology) to 2.73% (consumer discretionary). |
2. | Six sectors (consumer staples, health care, industrials, utilities, energy, and financials) showed negative total returns, with a range of negative 0.03% (consumer staples) to negative 9.48% (financials). |
Relative to the index weightings, Investment Income Builder Fund had a relatively large portfolio allocation in telecommunication services firms. These investments delivered well above average returns, mostly driven by their sizable dividends. Telefónica, France Telecom, and an 8.75% bond from Deutsche Telekom International
10 Certified Annual Report
Finance were each among the leading contributors to portfolio performance for the period. We continue to have a large weighting in the cash generative telecommunication service providers.
Investment Income Builder also maintained a relatively large investment allocation to the financial sector during the year. While this allocation hurt the absolute and relative performance of the portfolio during the October to March period, the rebound has been significant and your Fund’s average return from this sector is greater than 10% for the fiscal year as a whole – well above the negative 9.48% performance of the comparable equities in the finance sector of the MSCI World Index. Our investment choices in the financial sector ended up being the largest driver of outperformance vis-à-vis the benchmark for the twelve-month period. Among the best contributing investments to portfolio performance from this sector were Swiss Re Capital 6.85% notes, Bank of Montreal, mortgage REITs Chimera Investment and Annaly Capital, convertible preferred stocks from Fifth Third Bancorp and Huntington Bancshares, business development company Apollo Investment, and Hong Kong Exchanges & Clearing.
Your portfolio had strong outperformance, relative to MSCI World Index sector performance, from its investments in utilities and industrials. In utilities, timely investment in E.ON AG and various bonds contributed to portfolio performance. Among industrials, Macquarie Airports and various bonds contributed. The health care investments of Investment Income Builder detracted from the Fund’s performance. The stock price of Eli Lilly & Co. was particularly disappointing among these, though the damage from its poor performance was mitigated somewhat by your Fund’s significant underweighting in health care investments generally in relation to the overall index weighting in this sector of just above 10%. Your Fund had relatively few investments in two of the best performing sectors of the MSCI World Index, information technology and materials, due to the fact that firms in these sectors tend to pay low dividends. This under-allocation, which we expect to persist, created a performance headwind that we were able to overcome with our investments in other areas.
Within its bond portfolio, Investment Income Builder Fund owned significantly fewer U.S. government and agency bonds than the Barclays Capital Aggregate Bond Index. This fact hurt the relative performance of your Fund’s portfolio in Q4 2008, but was quite helpful as both the relative and absolute performance of corporate bonds improved significantly during 2009. Readers of this letter who are long-time shareholders of Income Builder will recall that the interest-bearing debt portion of the Fund’s portfolio fell well below 20% during the “yield drought” between 2004 and 2007, and stood at approximately 15% of the Fund’s portfolio on March 31, 2008 before increasing to around 30% at September 30, 2008. Since early 2009, the Investment Income Builder portfolio has been weighted more than 40% in interest-bearing debt. In general, these debt investments have performed very well. It is quite possible that low-yield conditions will return, as has already happened in the highest credit quality segments of the debt markets. If this materializes, expect your Fund’s percentage allocation of interest-bearing debt to decline somewhat. Our consolation prize in a persistent lower rate environment should be higher prices on many of the debt instruments that we now own.
As of September 30, 2009, your portfolio included more than 150 bonds and hybrid securities, with an average cost just below 86.5% of the maturity value of these bonds. In general, secondary market prices of these bonds declined over the six-month period ended March 31, 2009, so the average market price of these bonds on
Certified Annual Report 11
Letter to Shareholders,
Continued
March 31 was slightly below 63% of maturity value. Bond prices made a strong recovery since March of 2009, achieving an average market price of 95.0% on September 30, 2009. We believe most of these bonds will hold their value over time, while paying us interesting income yields in the interim. Why? (1) Corporate borrowers are finding it attractive to buy back their debt at discounted prices in the secondary market, even if they have to issue new equity to do so; (2) Individual and institutional investors are allocating additional investment dollars to bonds as the realization sinks in that money market yields will remain low for an extended period.
In the September 30, 2009 fiscal year end, approximately 54.6% of Income Builder’s income was derived from stock dividends, with the remaining 45.4% coming from interest. At September 30, 2009, domestic stocks, including preferred stocks, comprise around 27% of your portfolio; foreign stocks around 32%, and interest-bearing investments 41%.
Owners of approximately 57 million shares of Thornburg Investment Income Builder Fund sold their shares at an average price of approximately $13.32 per share between October 1, 2008 and March 31, 2009. We have no idea how these investors redeployed the funds redeemed from Income Builder, but the fact that the Fund achieved a price of $17.38 per share on September 30, 2009 and paid dividends totaling $1.07 over the course of the fiscal year sets a relatively high bar for the opportunity cost of having sold the Fund shares, thus far.
Recall that Thornburg Investment Income Builder Fund seeks to generate attractive, and rising, dividends over time from its portfolio of income producing stocks, bonds, and hybrid securities. We continued to make good progress in generating income during the period ended September 30, 2009, mostly due to the fact that we increased your allocation to bonds during a period when many other investors were liquidating bonds at distress prices. The equity dividend landscape remains challenging. Enough firms either cut or eliminated their dividends over the last year to cause the overall cash dividends paid by those firms comprising the S&P 500 Index to decline by more than 20%. Your Fund clearly avoided that outcome.
We received many calls over the course of the last year asking, “what happened?”
In brief, an enormous buildup in financial leverage throughout the developed world, and especially in the United States, was partially unwound. This liquidation exerted downward pressure on prices of stocks and bonds for more than a year through March of 2009, as debt previously accumulated by banks, brokerage firms, hedge funds and others was reduced via asset liquidations. Both the liquidations and price reductions became particularly disorderly in between October 2008 and March of 2009, and the degree of downward price pressure during those months exceeded our expectations. The most acute price declines generally followed the demise of Lehman Brothers in September of 2008, which set in motion 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 pushed other financial investors holding these assets, including insurance companies and hedge funds, to sell. Finally, certain other investors who became caught up in the drama of falling prices joined in the selling.
12 Certified Annual Report
As shareholders and portfolio managers of Thornburg Investment Income Builder Fund, we believe there is excellent value in the portfolio of financial assets we owned at the close of the fiscal year ended September 30, 2009. We sold most of the stocks and bonds that we least expect to contribute to your Fund’s objective of paying attractive income today, with the potential to pay higher income in the future. On average, the companies in the equity portion of the Income Builder portfolio are expected to grow revenues in the recession year of 2009. We currently expect earnings per share of these companies to decline by around 15% in 2009, with the energy holdings showing particularly significant earnings declines. For 2010, average earnings of the equities held in the Income Builder portfolio are expected to approximately recover the earnings lost during 2009. We expect dividends from the average equity held in the Income Builder portfolio to be only slightly positive in 2009 vs. 2008, an outcome that is disappointing in absolute terms and outstanding in relative terms.
Over the last six years, the annual dividends paid by Thornburg Investment Income Builder Fund from net investment income have increased at an average annual rate of 14.2%, from 55¢ per Class A share for the year ended September 30, 2004 to $1.07 for the fiscal year just ended. Over time, higher income dividends are their own reward, so long as an investment portfolio that powers them remains in place. While the market prices of most Income Builder investments have appreciated modestly over the last year, we believe that the income generators in your portfolio have considerable intrinsic value, especially in an environment where there is a noticeable shortage of visible investment income.
Thank you for being a shareholder of the 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 | Jason Brady,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 13
Thornburg Investment Income Builder Fund | September 30, 2009 |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/09
Telecommunication Services | 14.5 | % | Commercial & Professional Services | 1.3 | % | |||
Energy | 12.7 | % | Media | 1.0 | % | |||
Utilities | 11.2 | % | Consumer Durables & Apparel | 0.3 | % | |||
Diversified Financials | 10.1 | % | Automobiles & Components | 0.2 | % | |||
Banks | 8.8 | % | Retailing | 0.2 | % | |||
Food, Beverage & Tobacco | 6.2 | % | Technology Hardware & Equipment | 0.2 | % | |||
Real Estate | 5.3 | % | Other Non-Classified Securities: | |||||
Insurance | 4.6 | % | Other Securities | 1.0 | % | |||
Consumer Services | 4.6 | % | Exchange Traded Funds | 1.2 | % | |||
Materials | 2.9 | % | U.S. Government Agencies | 0.5 | % | |||
Transportation | 2.7 | % | Asset Backed Securities | 0.5 | % | |||
Pharmaceuticals, Biotechnology & Life Sciences | 2.4 | % | Miscellaneous | 0.4 | % | |||
Software & Services | 1.8 | % | Municipal Bonds | 0.1 | % | |||
Semiconductors & Semiconductor Equipment | 1.7 | % | Other Assets & Cash Equivalents | 2.1 | % | |||
Food & Staples Retailing | 1.5 | % |
TOP TEN HOLDINGS
As of 9/30/09
Eni SpA | 3.0 | % | Eli Lilly & Co. | 2.2 | % | |||
Telefonica SA | 2.9 | % | McDonald’s Corp. | 2.1 | % | |||
Philip Morris | 2.8 | % | OPAP SA | 2.0 | % | |||
Telstra Corp. Ltd. | 2.6 | % | Apollo Investment Corp. | 2.0 | % | |||
France Telecom SA | 2.2 | % | Total SA | 2.0 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/09
United States | 59.3 | % | Mexico | 0.8 | % | |||
Australia | 7.6 | % | Germany | 0.8 | % | |||
Italy | 4.9 | % | Brazil | 0.6 | % | |||
France | 4.2 | % | Russia | 0.5 | % | |||
Spain | 3.4 | % | South Africa | 0.4 | % | |||
United Kingdom | 2.9 | % | South Korea | 0.4 | % | |||
Canada | 2.4 | % | Bermuda | 0.3 | % | |||
Switzerland | 2.1 | % | Czech Republic | 0.2 | % | |||
Greece | 2.0 | % | Malaysia | 0.2 | % | |||
China | 1.6 | % | Trinidad and Tobago | 0.1 | % | |||
Luxembourg | 1.3 | % | Ireland | 0.0 | % | |||
Netherlands | 1.0 | % | Other Assets & Cash Equivalents | 2.1 | % | |||
Hong Kong | 0.9 | % |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 55.17% | |||||
BANKS — 3.22% | |||||
COMMERCIAL BANKS — 3.22% | |||||
Bank of Montreal | 668,500 | $ | 33,823,047 | ||
Banque Cantonale Vaudoise | 22,000 | 9,064,942 | |||
CVB Financial Corp. | 942,500 | 7,153,575 | |||
Liechtensteinische Landesbank AG | 910,000 | 61,161,343 | |||
St. Galler Kantonalbank | 20,800 | 9,498,794 | |||
120,701,701 | |||||
COMMERCIAL & PROFESSIONAL SERVICES — 1.17% | |||||
PROFESSIONAL SERVICES — 1.17% | |||||
Seek Ltd. | 9,000,000 | 43,748,291 | |||
43,748,291 | |||||
CONSUMER SERVICES — 4.33% | |||||
HOTELS, RESTAURANTS & LEISURE — 4.33% | |||||
Berjaya Sports Toto Berhad | 5,753,100 | 7,363,835 | |||
McDonald’s Corp. | 1,382,400 | 78,893,568 | |||
OPAP SA | 2,946,900 | 75,983,485 | |||
162,240,888 | |||||
DIVERSIFIED FINANCIALS — 5.30% | |||||
CAPITAL MARKETS — 3.55% | |||||
AllianceBernstein Holdings LP | 750,000 | 20,460,000 | |||
Apollo Investment Corp. | 7,904,600 | 75,488,930 | |||
Henderson Group plc | 4,819,600 | 9,936,160 | |||
Prospect Capital Corp. | 2,538,415 | 27,186,425 | |||
DIVERSIFIED FINANCIAL S ERVICES — 1.75% | |||||
Bolsas y Mercados Espanoles | 497,300 | 19,364,721 | |||
Hong Kong Exchanges & Clearing Ltd. | 1,422,800 | 25,793,821 | |||
a,bKKR Financial Holdings, LLC | 4,474,857 | 20,673,839 | |||
198,903,896 | |||||
ENERGY — 7.23% | |||||
ENERGY EQUIPMENT & SERVICES — 0.49% | |||||
Diamond Offshore Drilling, Inc. | 192,700 | 18,406,704 | |||
OIL, GAS & CONSUMABLE FUELS — 6.74% | |||||
BP plc | 3,971,600 | 35,100,113 | |||
Canadian Oil Sands Trust | 992,600 | 28,508,336 | |||
Eni SpA | 4,573,000 | 114,297,563 | |||
Total SA | 1,257,900 | 74,743,518 | |||
271,056,234 | |||||
FOOD & STAPLES RETAILING — 1.19% | |||||
FOOD & STAPLES RETAILING — 1.19% | |||||
Metcash Ltd. | 4,414,539 | 17,525,275 | |||
Sysco Corp. | 1,090,000 | 27,086,500 | |||
44,611,775 | |||||
FOOD, BEVERAGE & TOBACCO — 5.40% | |||||
BEVERAGES — 1.62% | |||||
Coca Cola Co. | 1,134,200 | 60,906,540 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
FOOD PRODUCTS — 0.98% | |||||
Kraft Foods, Inc. | 1,402,200 | $ | 36,835,794 | ||
TOBACCO — 2.80% | |||||
Philip Morris | 2,150,000 | 104,791,000 | |||
202,533,334 | |||||
MATERIALS — 1.16% | |||||
CHEMICALS — 0.28% | |||||
Nufarm Ltd. | 1,048,700 | 10,500,600 | |||
METALS & MINING — 0.88% | |||||
Impala Platinum Holdings Ltd. | 638,300 | 14,869,875 | |||
Southern Copper Corp. | 589,300 | 18,085,617 | |||
43,456,092 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 2.20% | |||||
PHARMACEUTICALS — 2.20% | |||||
Eli Lilly & Co. | 2,500,000 | 82,575,000 | |||
82,575,000 | |||||
REAL ESTATE — 3.44% | |||||
REAL ESTATE INVESTMENT TRUSTS — 3.44% | |||||
Annaly Capital Management, Inc. | 2,850,000 | 51,699,000 | |||
Chimera Investment Corp. | 13,239,600 | 50,575,272 | |||
a,bInvesco Mortgage Capital, Inc. | 1,223,112 | 26,724,997 | |||
128,999,269 | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.02% | |||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.02% | |||||
Intel Corp. | 1,961,200 | 38,380,684 | |||
38,380,684 | |||||
SOFTWARE & SERVICES — 1.55% | |||||
INFORMATION TECHNOLOGY SERVICES — 1.55% | |||||
Paychex, Inc. | 1,906,000 | 55,369,300 | |||
Redecard SA | 178,800 | 2,750,226 | |||
58,119,526 | |||||
TELECOMMUNICATION SERVICES — 10.61% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 7.93% | |||||
France Telecom SA | 3,134,100 | 83,493,263 | |||
Telefonica 02 Czech Republic a.s. | 332,000 | 8,218,298 | |||
Telefonica SA | 3,914,300 | 108,001,192 | |||
Telstra Corp. Ltd. | 33,878,581 | 97,732,711 | |||
WIRELESS TELECOMMUNICATION SERVICES — 2.68% | |||||
China Mobile Ltd. | 5,720,000 | 55,723,512 | |||
Vodafone Group plc | 19,938,900 | 44,675,260 | |||
397,844,236 | |||||
TRANSPORTATION — 1.79% | |||||
TRANSPORTATION INFRASTRUCTURE — 1.79% | |||||
Hopewell Highway | 15,643,500 | 9,587,890 | |||
Macquarie Airports | 23,000,000 | 57,625,294 | |||
67,213,184 | |||||
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
UTILITIES — 5.56% | ||||||
ELECTRIC UTILITIES — 4.05% | ||||||
E. ON AG | 700,000 | $ | 29,685,497 | |||
Enel S.p.A. | 10,684,100 | 67,814,933 | ||||
Entergy Corp. | 680,000 | 54,304,800 | ||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.32% | ||||||
bAlgonquin Power Income Fund Trust | 3,710,900 | 12,027,108 | ||||
MULTI-UTILITIES — 1.19% | ||||||
Dominion Resources, Inc. | 1,300,000 | 44,850,000 | ||||
208,682,338 | ||||||
TOTAL COMMON STOCK (Cost $2,054,236,139) | 2,069,066,448 | |||||
PREFERRED STOCK — 3.58% | ||||||
BANKS — 3.37% | ||||||
COMMERCIAL BANKS — 3.37% | ||||||
Barclays Bank plc Pfd, 7.10% | 200,000 | 4,460,000 | ||||
Fifth Third Bancorp Pfd, 8.50% | 404,704 | 48,430,927 | ||||
First Tennessee Bank Pfd, 3.75% | 12,000 | 6,015,000 | ||||
Huntington Bancshares Pfd, 8.50% | 77,557 | 67,474,590 | ||||
126,380,517 | ||||||
DIVERSIFIED FINANCIALS — 0.21% | ||||||
CAPITAL MARKETS — 0.06% | ||||||
Morgan Stanley Pfd, 4.00% | 120,000 | 2,298,000 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.15% | ||||||
Bank of America Corp. Pfd, 3.00% | 420,000 | 5,565,000 | ||||
7,863,000 | ||||||
TOTAL PREFERRED STOCK (Cost $121,429,273) | 134,243,517 | |||||
EXCHANGE TRADED FUNDS — 1.21% | ||||||
iShares High Yield Corporate Bond | 525,000 | 45,333,750 | ||||
TOTAL EXCHANGE TRADED FUNDS (Cost $37,557,948) | 45,333,750 | |||||
ASSET BACKED SECURITIES — 0.47% | ||||||
BANKS — 0.08% | ||||||
COMMERCIAL BANKS — 0.08% | ||||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 4.669%, 3/25/2035 | $ | 9,879,289 | 1,296,595 | |||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 4.531%, 2/25/2035 | 10,596,899 | 1,758,791 | ||||
3,055,386 | ||||||
DIVERSIFIED FINANCIALS — 0.17% | ||||||
CAPITAL MARKETS — 0.09% | ||||||
Bear Stearns ARM Mtg Series 2003-6 Class 2B-1, 4.826%, 8/25/2033 | 929,402 | 413,108 | ||||
Merrill Lynch Mtg Investors Trust, 3.12%, 8/25/2034 | 7,047,442 | 3,026,143 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.08% | ||||||
Banc of America Funding Corp. Series 2006-I Class SB1, 4.487%, 12/20/2036 | 3,317,057 | 281,420 | ||||
Banc of America Mtg Securities Series 2005-A Class B1, 4.705%, 2/25/2035 | 5,382,919 | 765,552 | ||||
Citigroup Mtg Loan Trust, Inc., 4.842%, 3/25/2034 | 1,953,517 | 657,753 | ||||
Structured Asset Security Corp. Series 2002-27A Class B1, 4.634%, 1/25/2033 | 3,094,125 | 1,237,147 | ||||
6,381,123 | ||||||
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
TRANSPORTATION — 0.22% | ||||||
AIRLINES — 0.22% | ||||||
c,fAmerican Airlines Depositor Corp., 8.00%, 10/5/2010 | $ | 8,700,000 | $ | 8,308,500 | ||
8,308,500 | ||||||
TOTAL ASSET BACKED SECURITIES (Cost $46,090,586) | 17,745,009 | |||||
CORPORATE BONDS — 30.60% | ||||||
AUTOMOBILES & COMPONENTS — 0.22% | ||||||
AUTOMOBILES — 0.22% | ||||||
cAmerican Honda Finance, 7.625%, 10/1/2018 | 7,000,000 | 8,092,119 | ||||
8,092,119 | ||||||
BANKS — 2.19% | ||||||
COMMERCIAL BANKS — 2.19% | ||||||
c,dAlfa Diversified, 2.299%, 3/15/2012 | 4,375,000 | 3,907,094 | ||||
dBanco Industrial e Comercial S.A., 7.00%, 4/23/2010 | 500,000 | 507,500 | ||||
Fifth Third Bancorp, 6.25%, 5/1/2013 | 2,750,000 | 2,836,367 | ||||
a,c,d,eLandsbanki Islands HF, 7.431%, 12/31/2049 | 5,000,000 | 500 | ||||
National City Bank, 7.25%, 7/15/2010 | 5,000,000 | 5,147,870 | ||||
National City Preferred Capital Trust I, 12.00%, 12/29/2049 | 3,250,000 | 3,667,657 | ||||
PNC Financial Services Group, Inc., 8.25%, 5/29/2049 | 10,000,000 | 9,526,170 | ||||
cPNC Preferred Funding Trust III, 8.70%, 12/31/2049 | 4,500,000 | 4,244,535 | ||||
Provident Bank MD, 9.50%, 5/1/2018 | 5,600,000 | 5,821,950 | ||||
dShinhan Bank, 6.819%, 9/20/2036 | 900,000 | 762,237 | ||||
Silicon Valley Bank, 6.05%, 6/1/2017 | 26,713,000 | 24,914,868 | ||||
Sovereign Bancorp, Inc., 0.519%, 3/23/2010 | 17,500,000 | 17,477,862 | ||||
Webster Capital Trust IV, 7.65%, 6/15/2037 | 1,950,000 | 1,196,813 | ||||
Wells Fargo Capital XIII Preferred Note, 7.70%, 12/29/2049 | 2,500,000 | 2,200,000 | ||||
82,211,423 | ||||||
COMMERCIAL & PROFESSIONAL S ERVICES — 0.02% | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.02% | ||||||
Allied Waste North America, Inc., 6.375%, 4/15/2011 | 500,000 | 521,577 | ||||
Waste Management, Inc., 7.375%, 8/1/2010 | 175,000 | 183,258 | ||||
704,835 | ||||||
CONSUMER DURABLES & APPAREL — 0.28% | ||||||
HOUSEHOLD DURABLES — 0.28% | ||||||
c,dCorporativo Javer SA, 13.00%, 8/4/2014 | 10,000,000 | 10,400,000 | ||||
10,400,000 | ||||||
CONSUMER SERVICES — 0.19% | ||||||
HOTELS, RESTAURANTS & LEISURE — 0.19% | ||||||
NPC International, Inc., 9.50%, 5/1/2014 | 3,000,000 | 3,000,000 | ||||
aSeneca Nation of Indians Capital Improvements Authority, 6.75%, 12/1/2013 | 4,585,000 | 4,263,729 | ||||
7,263,729 | ||||||
DIVERSIFIED FINANCIALS — 3.04% | ||||||
CAPITAL MARKETS — 0.45% | ||||||
Goldman Sachs Group, Inc., 5.625%, 1/15/2017 | 8,000,000 | 8,059,472 | ||||
cMorgan Stanley, 10.09%, 5/3/2017 | 11,000,000 | 5,588,169 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
Morgan Stanley, 3.817%, 3/1/2013 | $ | 4,000,000 | $ | 3,299,734 | ||
CONSUMER FINANCE — 1.34% | ||||||
American Express Credit Co., 5.875%, 5/2/2013 | 5,000,000 | 5,301,370 | ||||
Capital One Capital IV, 6.745%, 2/17/2037 | 6,400,000 | 4,864,000 | ||||
Capital One Financial Corp., 6.15%, 9/1/2016 | 25,500,000 | 25,040,847 | ||||
SLM Corp., 4.50%, 7/26/2010 | 11,580,000 | 11,251,869 | ||||
SLM Corp., 6.00%, 12/15/2010 | 1,000,000 | 788,425 | ||||
SLM Corp. LIBOR Floating Rate Note, 0.804%, 1/27/2014 | 5,000,000 | 3,154,850 | ||||
DIVERSIFIED FINANCIAL S ERVICES — 1.25% | ||||||
CIT Group, Inc., 5.00%, 2/13/2014 | 5,000,000 | 3,193,890 | ||||
Citigroup, Inc., 5.00%, 9/15/2014 | 16,250,000 | 15,463,256 | ||||
dExport-Import Bank of Korea, 8.125%, 1/21/2014 | 2,750,000 | 3,150,076 | ||||
JPMorgan Chase & Co., 7.90%, 4/29/2049 | 15,000,000 | 14,402,550 | ||||
dKorea Development Bank, 5.30%, 1/17/2013 | 800,000 | 831,153 | ||||
dKorea Development Bank, 0.718%, 4/3/2010 | 1,000,000 | 989,325 | ||||
MBNA Corp., 6.125%, 3/1/2013 | 2,000,000 | 2,100,918 | ||||
National Rural Utilities CFC, 10.375%, 11/1/2018 | 5,000,000 | 6,612,830 | ||||
114,092,734 | ||||||
ENERGY — 5.02% | ||||||
ENERGY EQUIPMENT & SERVICES — 0.61% | ||||||
aCalfrac Holdings LP, 7.75%, 2/15/2015 | 7,900,000 | 7,653,125 | ||||
Nabors Industries, Inc., 9.25%, 1/15/2019 | 10,500,000 | 12,478,326 | ||||
Seacor Holdings, Inc., 7.375%, 10/1/2019 | 2,000,000 | 2,008,976 | ||||
Seitel, Inc., 9.75%, 2/15/2014 | 1,000,000 | 680,000 | ||||
OIL, GAS & CONSUMABLE FUELS — 4.41% | ||||||
Chesapeake Energy Corp., 7.00%, 8/15/2014 | 1,000,000 | 967,500 | ||||
cDCP Midstream LLC, 9.75%, 3/15/2019 | 5,000,000 | 5,973,110 | ||||
Enbridge Energy Partners LP, 9.875%, 3/1/2019 | 9,750,000 | 12,108,554 | ||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 5,900,000 | 5,162,500 | ||||
Enterprise Products Operating LP, 9.75%, 1/31/2014 | 4,750,000 | 5,735,088 | ||||
dGaz Capital SA, 8.146%, 4/11/2018 | 2,000,000 | 2,112,600 | ||||
c,dGriffin Coal Mining Ltd., 9.50%, 12/1/2016 | 22,000,000 | 15,400,000 | ||||
c,dGS Caltex Corp., 7.25%, 7/2/2013 | 7,000,000 | 7,441,840 | ||||
Kinder Morgan Energy Partners, 9.00%, 2/1/2019 | 9,750,000 | 11,813,549 | ||||
cMaritimes & Northeast Pipeline, LLC, 7.50%, 5/31/2014 | 7,500,000 | 7,888,350 | ||||
Murphy Oil Corp., 6.375%, 5/1/2012 | 5,000,000 | 5,315,785 | ||||
NuStar Logistics, 7.65%, 4/15/2018 | 19,000,000 | 20,593,701 | ||||
Oneok Partners LP, 5.90%, 4/1/2012 | 3,000,000 | 3,160,290 | ||||
Oneok Partners LP, 8.625%, 3/1/2019 | 8,000,000 | 9,549,992 | ||||
c,dPetro Co. Trinidad Tobago Ltd., 9.75%, 8/14/2019 | 4,000,000 | 4,530,000 | ||||
c,dPetroplus Finance Ltd., 6.75%, 5/1/2014 | 4,000,000 | 3,745,000 | ||||
Plains Exploration & Production Co., 7.625%, 6/1/2018 | 1,000,000 | 980,000 | ||||
Southern Union Co., 7.20%, 11/1/2066 | 25,920,000 | 20,412,000 | ||||
Teppco Partners LP, 7.00%, 6/1/2067 | 6,500,000 | 5,557,045 | ||||
cWindsor Petroleum Transport Corp., 7.84%, 1/15/2021 | 8,892,132 | 8,185,394 | ||||
c,dWoodside Financial Ltd., 8.125%, 3/1/2014 | 8,000,000 | 8,980,384 | ||||
188,433,109 | ||||||
FOOD & STAPLES RETAILING — 0.27% | ||||||
FOOD & STAPLES RETAILING — 0.27% | ||||||
Rite Aid Corp., 8.625%, 3/1/2015 | 3,000,000 | 2,441,250 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
Rite Aid Corp., 9.375%, 12/15/2015 | $ | 9,500,000 | $ | 7,718,750 | ||
10,160,000 | ||||||
FOOD, BEVERAGE & TOBACCO — 0.76% | ||||||
BEVERAGES — 0.11% | ||||||
Anheuser Busch Cos., Inc., 4.70%, 4/15/2012 | 3,750,000 | 3,891,877 | ||||
TOBACCO — 0.65% | ||||||
Altria Group, Inc., 8.50%, 11/10/2013 | 4,000,000 | 4,639,360 | ||||
Altria Group, Inc., 9.70%, 11/10/2018 | 10,750,000 | 13,352,113 | ||||
cB.A.T. International Finance, plc, 9.50%, 11/15/2018 | 5,000,000 | 6,485,135 | ||||
28,368,485 | ||||||
INSURANCE — 4.59% | ||||||
INSURANCE — 4.59% | ||||||
American General Finance Corp., 4.875%, 7/15/2012 | 1,000,000 | 775,856 | ||||
Hartford Financial Services Group, 8.125%, 6/15/2038 | 7,150,000 | 6,363,500 | ||||
International Lease Finance Corp., 5.125%, 11/1/2010 | 5,000,000 | 4,681,895 | ||||
cLiberty Mutual Group, Inc., 5.75%, 3/15/2014 | 1,000,000 | 941,288 | ||||
cMetlife Capital Trust X, 9.25%, 4/8/2068 | 24,000,000 | 24,960,000 | ||||
Metlife, Inc. Series A, 6.817%, 8/15/2018 | 4,000,000 | 4,452,008 | ||||
cNational Life Insurance of Vermont, 10.50%, 9/15/2039 | 2,000,000 | 2,036,840 | ||||
c,dOil Insurance Ltd., 7.558%, 12/29/2049 | 4,000,000 | 2,406,760 | ||||
cPacific Life Global Funding CPI Floating Rate Note, 0.75%, 2/6/2016 | 2,000,000 | 1,796,560 | ||||
cPrudential Holdings, LLC, 8.695%, 12/18/2023 | 4,500,000 | 4,698,090 | ||||
cSwiss Re Capital I, LP, 6.854%, 5/29/2049 | 139,925,000 | 104,943,750 | ||||
Transatlantic Holdings, Inc., 5.75%, 12/14/2015 | 14,647,000 | 13,199,569 | ||||
cZFS Finance USA Trust V, 6.50%, 5/9/2037 | 1,260,000 | 1,020,600 | ||||
172,276,716 | ||||||
MATERIALS — 1.71% | ||||||
CONSTRUCTION MATERIALS — 0.58% | ||||||
a,cAce Hardware Corp., 9.125%, 6/1/2016 | 6,250,000 | 6,531,250 | ||||
a,c,dC8 Capital Ltd., 6.64%, 12/31/2049 | 2,000,000 | 1,542,180 | ||||
CRH America, Inc., 8.125%, 7/15/2018 | 12,250,000 | 13,773,153 | ||||
CONTAINERS & PACKAGING — 0.05% | ||||||
cPlastipak Holdings, Inc., 10.625%, 8/15/2019 | 1,750,000 | 1,855,000 | ||||
METALS & MINING — 1.08% | ||||||
Allegheny Technologies, Inc., 9.375%, 6/1/2019 | 3,000,000 | 3,396,510 | ||||
c,dAnglo American Capital, 9.375%, 4/8/2014 | 3,500,000 | 4,077,500 | ||||
c,dBemax Resources Ltd., 9.375%, 7/15/2014 | 5,000,000 | 3,650,000 | ||||
Freeport-McMoRan Copper & Gold, 8.25%, 4/1/2015 | 8,000,000 | 8,510,000 | ||||
Freeport-McMoRan Copper & Gold, 8.375%, 4/1/2017 | 4,965,000 | 5,281,518 | ||||
Freeport-McMoRan Corp., 6.125%, 3/15/2034 | 4,500,000 | 3,580,362 | ||||
cGTL Trade Finance, Inc., 7.25%, 10/20/2017 | 7,000,000 | 7,385,000 | ||||
dVedanta Resources, plc, 6.625%, 2/22/2010 | 4,500,000 | 4,522,500 | ||||
64,104,973 | ||||||
MEDIA — 1.03% | ||||||
MEDIA — 1.03% | ||||||
AOL Time Warner, Inc., 6.875%, 5/1/2012 | 425,000 | 467,848 | ||||
CBS Corp., 8.20%, 5/15/2014 | 1,500,000 | 1,632,954 | ||||
Comcast Cable Communications, 8.875%, 5/1/2017 | 5,000,000 | 6,166,340 | ||||
DIRECTV Holdings, 6.375%, 6/15/2015 | 5,100,000 | 5,163,750 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
DIRECTV Holdings, 7.625%, 5/15/2016 | $ | 3,000,000 | $ | 3,210,000 | ||
Time Warner Cable, Inc., 8.75%, 2/14/2019 | 14,000,000 | 17,247,020 | ||||
Time Warner Cable, Inc., 8.25%, 2/14/2014 | 4,000,000 | 4,661,272 | ||||
38,549,184 | ||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.18% | ||||||
BIOTECHNOLOGY — 0.18% | ||||||
Biogen Idec, Inc., 6.00%, 3/1/2013 | 4,000,000 | 4,251,728 | ||||
Tiers Inflation Linked Trust Series Wyeth 2004 21 Trust Certificate CPI Floating Rate Note, 0.423%, 2/1/2014 | 3,000,000 | 2,451,600 | ||||
6,703,328 | ||||||
REAL ESTATE — 0.26% | ||||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 0.26% | ||||||
c,dAgile Property Holdings Ltd, 9.00%, 9/22/2013 | 10,000,000 | 9,800,000 | ||||
9,800,000 | ||||||
RETAILING — 0.21% | ||||||
INTERNET & CATALOG RETAIL — 0.04% | ||||||
Ticketmaster, 10.75%, 8/1/2016 | 1,500,000 | 1,537,500 | ||||
MULTILINE RETAIL — 0.06% | ||||||
dParkson Retail Group, 7.125%, 5/30/2012 | 2,110,000 | 2,149,985 | ||||
SPECIALTY RETAIL — 0.11% | ||||||
Best Buy, Inc., 6.75%, 7/15/2013 | 4,000,000 | 4,285,240 | ||||
7,972,725 | ||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.65% | ||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.65% | ||||||
KLA Instruments Corp., 6.90%, 5/1/2018 | 10,000,000 | 10,452,670 | ||||
National Semiconductor Corp., 0.549%, 6/15/2010 | 11,200,000 | 10,774,624 | ||||
National Semiconductor Corp., 6.15%, 6/15/2012 | 2,000,000 | 2,086,890 | ||||
National Semiconductor Corp., 6.60%, 6/15/2017 | 1,000,000 | 988,259 | ||||
24,302,443 | ||||||
SOFTWARE & SERVICES — 0.29% | ||||||
INTERNET SOFTWARE & SERVICES — 0.17% | ||||||
c,fYahoo! Inc., 6.65%, 8/10/2026 | 7,364,088 | 6,537,028 | ||||
SOFTWARE — 0.12% | ||||||
BMC Software, Inc., 7.25%, 6/1/2018 | 4,000,000 | 4,330,500 | ||||
10,867,528 | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.16% | ||||||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS — 0.16% | ||||||
Corning, Inc., 6.05%, 6/15/2015 | 6,000,000 | 6,076,686 | ||||
6,076,686 | ||||||
TELECOMMUNICATION SERVICES — 2.93% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.87% | ||||||
dDeutsche Telekom International Finance B.V., 8.75%, 6/15/2030 | 26,150,000 | 33,864,851 | ||||
c,dGlobal Crossing Ltd., 12.00%, 9/15/2015 | 4,000,000 | 4,200,000 | ||||
Level 3 Financing, Inc., 12.25%, 3/15/2013 | 6,000,000 | 6,060,000 | ||||
Level 3 Financing, Inc., 9.25%, 11/1/2014 | 33,600,000 | 29,610,000 | ||||
dTelecom Italia Capital SA, 5.25%, 10/1/2015 | 4,190,000 | 4,337,786 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
c,dTelemar Norte Leste SA, 9.50%, 4/23/2019 | $ | 7,500,000 | $ | 8,962,500 | ||
c,dVimpelcom, 8.25%, 5/23/2016 | 4,500,000 | 4,522,500 | ||||
dWind Acquisition Finance SA, 11.75%, 7/15/2017 | 3,000,000 | 4,872,952 | ||||
Windstream Corp., 8.125%, 8/1/2013 | 10,800,000 | 11,097,000 | ||||
WIRELESS TELECOMMUNICATION SERVICES — 0.06% | ||||||
c,dDigicel SA, 12.00%, 4/1/2014 | 2,000,000 | 2,230,000 | ||||
109,757,589 | ||||||
TRANSPORTATION — 0.94% | ||||||
MARINE — 0.14% | ||||||
cCommercial Barge Line Co., 12.50%, 7/15/2017 | 5,000,000 | 5,200,000 | ||||
TRANSPORTATION INFRASTRUCTURE — 0.80% | ||||||
dSouthern Cross Air Corp., 4.96%, 12/20/2016 | 41,348,300 | 30,057,431 | ||||
35,257,431 | ||||||
UTILITIES — 5.65% | ||||||
ELECTRIC UTILITIES — 2.66% | ||||||
Alabama Power Capital Trust V, 5.50%, 10/1/2042 | 4,000,000 | 3,812,952 | ||||
Aquila, Inc., 7.95%, 2/1/2011 | 3,000,000 | 3,152,463 | ||||
Arizona Public Services Co., 5.50%, 9/1/2035 | 5,000,000 | 4,349,635 | ||||
Arizona Public Services Co., 8.75%, 3/1/2019 | 6,500,000 | 7,869,771 | ||||
Comed Financing III, 6.35%, 3/15/2033 | 2,961,000 | 2,330,899 | ||||
c,dEnel Finance International S.A., 6.25%, 9/15/2017 | 38,000,000 | 40,929,421 | ||||
Entergy Gulf States Louisiana, LLC, 6.00%, 5/1/2018 | 9,000,000 | 9,453,834 | ||||
cGreat River Energy, 5.829%, 7/1/2017 | 2,183,938 | 2,314,211 | ||||
cMonongahela Power Co., 7.95%, 12/15/2013 | 2,000,000 | 2,214,964 | ||||
cTexas-New Mexico Power, 9.50%, 4/1/2019 | 19,000,000 | 23,356,035 | ||||
GAS UTILITIES — 0.30% | ||||||
cFerrellgas Partners LP, 9.125%, 10/1/2017 | 1,000,000 | 1,030,000 | ||||
Southwest Gas Corp., 7.625%, 5/15/2012 | 9,465,000 | 10,263,997 | ||||
MULTI-UTILITIES — 2.69% | ||||||
Amerenenergy Generating, 7.00%, 4/15/2018 | 9,050,000 | 9,160,157 | ||||
Black Hills Corp., 9.00%, 5/15/2014 | 4,500,000 | 5,100,124 | ||||
Dominion Resources, Inc., 8.875%, 1/15/2019 | 14,750,000 | 18,661,611 | ||||
cEnogex, LLC, 6.875%, 7/15/2014 | 2,000,000 | 2,078,238 | ||||
Illinois Power Co., 9.75%, 11/15/2018 | 5,000,000 | 6,277,080 | ||||
NiSource Finance Corp., 6.15%, 3/1/2013 | 12,237,000 | 12,814,232 | ||||
NiSource Finance Corp., 6.40%, 3/15/2018 | 20,000,000 | 19,962,720 | ||||
Sempra Energy, 9.80%, 12/1/2019 | 7,750,000 | 9,925,805 | ||||
Sempra Energy, 8.90%, 11/15/2013 | 2,000,000 | 2,337,404 | ||||
Union Electric Co., 6.70%, 2/1/2019 | 2,500,000 | 2,821,526 | ||||
dVille De Montreal, 5.45%, 12/1/2019 | 10,000,000 | 9,912,857 | ||||
Wisconsin Energy Corp., 6.25%, 5/15/2067 | 2,365,000 | 1,986,600 | ||||
212,116,536 | ||||||
TOTAL CORPORATE BONDS (cost $990,867,624) | 1,147,511,573 | |||||
CONVERTIBLE BONDS — 4.57% | ||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.09% | ||||||
COMMERCIAL SERVICES & SUPPLIES — 0.09% | ||||||
Covanta Holding Corp., 1.00%, 2/1/2027 | 4,000,000 | 3,555,000 | ||||
3,555,000 | ||||||
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
DIVERSIFIED FINANCIALS — 1.53% | ||||||
DIVERSIFIED FINANCIAL SERVICES — 1.53% | ||||||
bKKR Financial Holdings LLC, 7.00%, 7/15/2012 | $ | 64,100,000 | $ | 57,449,625 | ||
57,449,625 | ||||||
ENERGY — 0.23% | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.23% | ||||||
Chesapeake Energy Corp., 2.25%, 12/15/2038 | 11,500,000 | 8,596,250 | ||||
8,596,250 | ||||||
REAL ESTATE — 1.65% | ||||||
REAL ESTATE INVESTMENT TRUSTS — 1.65% | ||||||
cExtra Space Storage, LP, 3.625%, 4/1/2027 | 10,000,000 | 8,837,500 | ||||
cMPT Operating Partnership, L.P., 6.125%, 11/15/2011 | 18,750,000 | 17,437,500 | ||||
Vornado Realty Trust, 2.85%, 4/1/2027 | 35,800,000 | 34,054,750 | ||||
Washington REIT, 3.875%, 9/15/2026 | 1,470,000 | 1,418,550 | ||||
61,748,300 | ||||||
TELECOMMUNICATION SERVICES — 1.07% | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.36% | ||||||
Global Crossing Ltd., 5.00%, 5/15/2011 | 9,250,000 | 9,065,000 | ||||
Level 3 Communications, Inc., 5.25%, 12/15/2011 | 5,000,000 | 4,450,000 | ||||
WIRELESS TELECOMMUNICATION SERVICES — 0.71% | ||||||
NII Holdings, 3.125%, 6/15/2012 | 23,500,000 | 20,533,125 | ||||
SBA Communications Corp., 1.875%, 5/1/2013 | 6,500,000 | 6,004,375 | ||||
40,052,500 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $144,434,310) | 171,401,675 | |||||
MUNICIPAL BONDS — 0.13% | ||||||
Michigan TOB Settlement Finance Authority Series A, 7.309%, 6/1/2034 | 4,000,000 | 3,128,960 | ||||
Victor New York, 9.20%, 5/1/2014 | 1,735,000 | 1,777,022 | ||||
TOTAL MUNICIPAL BONDS (Cost $4,728,857) | 4,905,982 | |||||
U.S. GOVERNMENT AGENCIES — 0.48% | ||||||
cAgribank FCB, 9.125%, 7/15/2019 | 6,750,000 | 7,300,220 | ||||
Federal National Mtg Association Remic Series 2006-B1 Class AB, 6.00%, 6/25/2016 | 10,081,445 | 10,548,097 | ||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $16,800,286) | 17,848,317 | |||||
FOREIGN BONDS — 0.64% | ||||||
CONSUMER SERVICES — 0.04% | ||||||
HOTELS, RESTAURANTS & LEISURE — 0.04% | ||||||
dFUJI Food and Catering (HKD), 0%, 10/18/2010 | 17,500,000 | 1,798,896 | ||||
1,798,896 | ||||||
ENERGY — 0.17% | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.17% | ||||||
c,dOAO Gazprom (RUB), 7.25%, 2/22/2010 | 195,000,000 | 6,370,915 | ||||
6,370,915 | ||||||
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Shares/ Principal Amount | Value | |||||
INSURANCE — 0.04% | ||||||
INSURANCE — 0.04% | ||||||
dELM BV (AUD), 7.635%, 12/31/2049 | $ | 3,000,000 | $ | 1,763,824 | ||
1,763,824 | ||||||
MEDIA — 0.01% | ||||||
MEDIA — 0.01% | ||||||
a,d,eIndependent News & Media plc (EUR), 4.715%, 5/17/2009 | 600,000 | 263,403 | ||||
263,403 | ||||||
MISCELLANEOUS — 0.38% | ||||||
MISCELLANEOUS — 0.38% | ||||||
dRegional Muni of York (CAD), 5.00%, 4/29/2019 | 4,500,000 | 4,460,995 | ||||
dRepublic of Brazil (BRL), 12.50%, 1/5/2016 | 15,750,000 | 9,765,960 | ||||
14,226,955 | ||||||
TOTAL FOREIGN BONDS (cost $24,225,725) | 24,423,993 | |||||
OTHER SECURITIES — 0.99% | ||||||
LOAN PARTICIPATIONS — 0.99% | ||||||
Charter Communications, Inc., 6.25%, 3/6/2014 | 7,939,547 | 7,475,559 | ||||
Crown Castle Operating Co., 1.783%, 3/6/2014 | 2,969,543 | 2,809,188 | ||||
Mylan Laboratories, Inc., 3.875%, 10/2/2014 | 7,824,726 | 7,611,268 | ||||
Mylan Laboratories, Inc., 3.563%, 10/2/2014 | 533,803 | 519,241 | ||||
Mylan Laboratories, Inc., 3.563%, 10/2/2014 | 1,341,471 | 1,304,876 | ||||
Texas Comp Electric Holdings, LLC, 3.754%, 10/10/2014 | 7,878,788 | 6,265,448 | ||||
Texas Comp Electric Holdings, LLC, 3.754%, 10/10/2014 | 13,787,879 | 10,964,535 | ||||
Texas Comp Electric Holdings, LLC, 3.761%, 10/31/2014 | 106,061 | 84,342 | ||||
Texas Comp Electric Holdings, LLC, 3.761%, 10/10/2014 | 60,606 | 48,196 | ||||
TOTAL OTHER SECURITIES (cost $34,742,592) | 37,082,653 | |||||
SHORT TERM INVESTMENTS — 1.78% | ||||||
American Water Capital, 0.40%, 10/21/2009 | 7,776,000 | 7,774,272 | ||||
Atlantic City Electric, 0.25%, 10/1/2009 | 25,100,000 | 25,100,000 | ||||
California State, put 10/7/2009 (LOC: Bank of America) (weekly demand notes), 0.28%, 5/1/2040 | 2,500,000 | 2,500,000 | ||||
Chicago GO, put 10/7/2009 (Insured: FSA/SPA: Dexia Credit Local) (weekly demand notes), 0.50%, 1/1/2040 | 4,600,000 | 4,600,000 | ||||
Devon Energy Corp., 0.16%, 10/1/2009 | 10,000,000 | 10,000,000 | ||||
New York City GO, put 10/1/2009 (Insured: FSA/SPA: Dexia Credit Local) (daily demand notes), 0.28%, 11/1/2026 | 3,200,000 | 3,200,000 | ||||
New York City Municipal Water Finance, put 10/1/2009 (SPA:Landesbank) (daily demand notes) 0.29%, 6/15/2039 | 10,000,000 | 10,000,000 | ||||
Precision Castparts Corp., 0.25%, 10/1/2009 | 3,600,000 | 3,600,000 | ||||
TOTAL SHORT TERM INVESTMENTS (cost $66,774,272) | 66,774,272 | |||||
TOTAL INVESTMENTS — 99.62% (cost $3,541,887,612) | $ | 3,736,337,189 | ||||
OTHER ASSETS LESS LIABILITIES — 0.38% | 14,157,813 | |||||
NET ASSETS — 100.00% | $ | 3,750,495,002 | ||||
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Footnote Legend
a | Non-income producing |
b | 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/Principal September 30, 2008 | Gross Additions | Gross Reductions | Shares/Principal September 30, 2009 | Market Value September 30, 2009 | Investment Income | |||||||||||
Algonquin Pwr. Inc. Fund Trust | 3,710,900 | — | — | 3,710,900 | $ | * | $ | 643,822 | |||||||||
Invesco Mortgage Capital, Inc. | — | 1,223,112 | — | 1,223,112 | 26,724,997 | — | |||||||||||
KKR Financial Holdings, LLC | 7,400,000 | 100,000 | 3,025,143 | 4,474,857 | * | — | |||||||||||
KKR Financial Holdings, LLC, 7% 7/15/2012 | $ | 56,600,000 | $ | 7,500,000 | — | $ | 64,100,000 | * | 7,101,346 | ||||||||
Reddy Ice Holdings, Inc. | 1,257,412 | — | 1,257,412 | — | — | — | |||||||||||
Total non-controlled affiliated issuers – 0.71% of net assets. | $ | 26,724,997 | $ | 7,745,168 | |||||||||||||
* | Issuers not affiliated at September 30, 2009. |
c | 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, 2009, the aggregate value of these securities in the Fund’s portfolio was $430,335,980, representing 11.47% of the Fund’s net assets. |
d | Yankee Bond – Denominated in U.S. dollars and is publicly issued in the U.S. by foreign banks and corporations. |
e | Bond in default. |
f | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ARM | Adjustable Rate Mortgage |
AUD | Denominated in Australian Dollars |
BRL | Denominated in Brazilian Dollars |
CAD | Denominated in Canadian Dollars |
CPI | Consumer Price Index |
EUR | Denominated in Euro Dollars |
FCB | Farm Credit Bank |
FSA | Insured by Financial Security Assurance Co. |
GO | General Obligation |
HKD | Denominated in Hong Kong Dollars |
LIBOR | London Interbank Offered Rate |
Mtg | Mortgage |
Pfd | Preferred Stock |
REIT | Real Estate Investment Trust |
REMIC | Real Estate Mortgage Investment Conduit |
RUB | Denominated in Russian Rubles |
SBA | Small Business Administration |
SPA | Stand-by Purchase Agreement |
See notes to financial statements.
Certified Annual Report 25
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (Note 2) | ||||
Non-affiliated issuers (cost $3,517,438,737) | $ | 3,709,612,192 | ||
Non-controlled affiliated issuers (cost $24,448,875) | 26,724,997 | |||
Cash | 3,430,308 | |||
Receivable for investments sold | 2,044,787 | |||
Receivable for fund shares sold | 20,460,841 | |||
Dividends receivable | 12,218,834 | |||
Dividend and interest reclaim receivable | 682,551 | |||
Interest receivable | 27,904,331 | |||
Prepaid expenses and other assets | 49,459 | |||
Total Assets | 3,803,128,300 | |||
LIABILITIES | ||||
Payable for securities purchased | 5,826,723 | |||
Payable for fund shares redeemed | 4,167,545 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 35,441,895 | |||
Payable to investment advisor and other affiliates (Note 3) | 3,705,376 | |||
Accounts payable and accrued expenses | 1,098,104 | |||
Dividends payable | 2,393,655 | |||
Total Liabilities | 52,633,298 | |||
NET ASSETS | $ | 3,750,495,002 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 20,577,079 | ||
Net unrealized appreciation on investments | 159,164,580 | |||
Accumulated net realized gain (loss) | (741,617,020 | ) | ||
Net capital paid in on shares of beneficial interest | 4,312,370,363 | |||
$ | 3,750,495,002 | |||
26 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($1,400,453,851 applicable to 80,572,790 shares of beneficial interest outstanding - - Note 4) | $ | 17.38 | |
Maximum sales charge, 4.50% of offering price | 0.82 | ||
Maximum offering price per share | $ | 18.20 | |
Class C Shares: | |||
Net asset value and offering price per share * ($1,426,612,923 applicable to 82,048,735 shares of beneficial interest outstanding - - Note 4) | $ | 17.39 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($908,125,608 applicable to 51,895,045 shares of beneficial interest outstanding - Note 4) | $ | 17.50 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($14,828,278 applicable to 853,158 shares of beneficial interest outstanding - Note 4) | $ | 17.38 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($47,747 applicable to 2,733 shares of beneficial interest outstanding - Note 4) | $ | 17.47 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($426,595 applicable to 24,382 shares of beneficial interest outstanding - - Note 4) | $ | 17.50 | |
* | 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 27
STATEMENT OF OPERATIONS | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $8,426,432) | $ | 129,057,779 | ||
Non-controlled affiliated issuers (net of foreign taxes withheld of $113,616) | 643,822 | |||
Interest income | ||||
Non-affiliated issuers (net of premium amortized of $533,402) | 101,663,632 | |||
Non-controlled affiliated issuers | 7,101,346 | |||
Total Income | 238,466,579 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 21,794,384 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,357,200 | |||
Class C Shares | 1,400,900 | |||
Class I Shares | 320,462 | |||
Class R3 Shares | 13,120 | |||
Class R4 Shares | 296 | |||
Class R5 Shares | 145 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 2,708,917 | |||
Class C Shares | 11,191,027 | |||
Class R3 Shares | 52,607 | |||
Class R4 Shares | 592 | |||
Transfer agent fees | ||||
Class A Shares | 1,210,315 | |||
Class C Shares | 1,550,625 | |||
Class I Shares | 678,350 | |||
Class R3 Shares | 27,867 | |||
Class R4 Shares | 2,727 | |||
Class R5 Shares | 3,081 | |||
Registration and filing fees | ||||
Class A Shares | 63,324 | |||
Class C Shares | 38,502 | |||
Class I Shares | 38,079 | |||
Class R3 Shares | 16,976 | |||
Class R4 Shares | 17,078 | |||
Class R5 Shares | 21,126 | |||
Custodian fees (Note 3) | 619,992 | |||
Professional fees | 142,355 | |||
Accounting fees | 152,915 | |||
Trustee fees | 97,734 | |||
Other expenses | 431,170 | |||
Total Expenses | 43,951,866 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (2,067,053 | ) | ||
Fees paid indirectly (Note 3) | (83,732 | ) | ||
Net Expenses | 41,801,081 | |||
Net Investment Income | $ | 196,665,498 | ||
28 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2009 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | ||||
Non-affiliated issuers | $ | (578,612,478 | ) | |
Non-controlled affiliated issuers | (67,692,931 | ) | ||
Forward currency contracts (Note 7) | 75,764,918 | |||
Foreign currency transactions | (564,023 | ) | ||
(571,104,514 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | ||||
Non-affiliated issuers | 722,924,829 | |||
Non-controlled affiliated issuers | 2,276,122 | |||
Forward currency contracts (Note 7) | (78,731,348 | ) | ||
Foreign currency translations | 455,952 | |||
646,925,555 | ||||
Net Realized and Unrealized Gain | 75,821,041 | |||
Net Increase in Net Assets Resulting From Operations | $ | 272,486,539 | ||
See notes to financial statements.
Certified Annual Report 29
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Investment Income Builder Fund
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 196,665,498 | $ | 201,925,832 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (571,104,514 | ) | (186,719,560 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | �� | 646,925,555 | (1,088,917,409 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 272,486,539 | (1,073,711,137 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (81,529,583 | ) | (87,293,427 | ) | ||||
Class C Shares | (77,646,832 | ) | (69,974,272 | ) | ||||
Class I Shares | (50,077,981 | ) | (38,332,930 | ) | ||||
Class R3 Shares | (760,087 | ) | (528,541 | ) | ||||
Class R4 Shares | (17,372 | ) | (5,226 | ) | ||||
Class R5 Shares | (22,654 | ) | (10,324 | ) | ||||
From realized gains | ||||||||
Class A Shares | — | (36,128,892 | ) | |||||
Class C Shares | — | (32,902,777 | ) | |||||
Class I Shares | — | (13,856,430 | ) | |||||
Class R3 Shares | — | (182,203 | ) | |||||
Class R5 Shares | — | (1,810 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (9,678,354 | ) | 262,958,781 | |||||
Class C Shares | 6,320,252 | 396,649,527 | ||||||
Class I Shares | 116,899,650 | 372,408,738 | ||||||
Class R3 Shares | 2,235,374 | 8,197,717 | ||||||
Class R4 Shares | (220,497 | ) | 294,327 | |||||
Class R5 Shares | 199,300 | 223,121 | ||||||
Net Increase (Decrease) in Net Assets | 178,187,755 | (312,195,758 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 3,572,307,247 | 3,884,503,005 | ||||||
End of Year | $ | 3,750,495,002 | $ | 3,572,307,247 | ||||
Undistributed net investment income | $ | 20,577,079 | $ | 23,305,063 |
See notes to financial statements.
30 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
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 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 Fund is currently one of fifteen separate series of the Trust. 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) 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 of purchase, 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.
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, and 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.
Certified Annual Report 31
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
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 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Investments in Securities* | |||||||||||||||
Common Stock | $ | 2,069,066,448 | $ | 2,069,066,448 | $ | — | $ | — | |||||||
Preferred Stock | 134,243,517 | 128,228,517 | 6,015,000 | — | |||||||||||
Exchange Traded Funds | 45,333,750 | 45,333,750 | — | — | |||||||||||
Asset Backed Securities | 17,745,009 | — | 17,745,009 | — | |||||||||||
Corporate Bonds | 1,147,511,573 | — | 1,147,511,573 | — | |||||||||||
Convertible Bonds | 171,401,675 | — | 171,401,675 | — | |||||||||||
Municipal Bonds | 4,905,982 | — | 4,905,982 | — | |||||||||||
U.S. Government Agencies | 17,848,317 | — | 17,848,317 | — | |||||||||||
Foreign Bonds | 24,423,993 | — | 24,423,993 | — | |||||||||||
Other Securities | 37,082,653 | — | 37,082,653 | — | |||||||||||
Short Term Investments | 66,774,272 | — | 66,774,272 | — | |||||||||||
Total Investments in Securities | $ | 3,736,337,189 | $ | 2,242,628,715 | $ | 1,493,708,474 | $ | — | |||||||
Other Financial Instruments** | |||||||||||||||
Spot Currency | $ | 13,001 | $ | 13,001 | $ | — | $ | — | |||||||
Liabilities | |||||||||||||||
Other Financial Instruments** | |||||||||||||||
Forward Currency Contracts | $ | (35,441,895 | ) | $ | — | $ | (35,441,895 | ) | $ | — | |||||
Spot Currency | $ | (4,182 | ) | $ | (4,182 | ) | $ | — | $ | — |
* | See Summary of Industry Exposure and Schedule of Investments beginning on page 14 for further detail. |
** | 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. |
32 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
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 issuers. 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 to shareholders substantially all taxable income, including any net realized gain on investments of the Funds. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery 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
Certified Annual Report 33
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
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, 2009, 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, 2009, the Advisor voluntarily or contractually agreed to reimburse certain class specific expenses, administrative fees, and distribution fees of $1,985,837 for Class C shares, $38,084 for Class R3 shares, $19,306 for Class R4 shares, and $23,826 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, 2009, the Distributor has advised the Fund that it earned commissions aggregating $365,659 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $254,256 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, 2009, 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, 2009, fees paid indirectly were $83,732.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 23,619,565 | $ | 344,260,373 | 32,312,509 | $ | 694,658,919 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 4,335,112 | 63,114,813 | 4,928,456 | 101,966,780 | ||||||||||
Shares repurchased | (30,011,243 | ) | (417,076,271 | ) | (27,276,934 | ) | (533,691,076 | ) | ||||||
Redemption fees received** | — | 22,731 | — | 24,158 | ||||||||||
Net Increase (Decrease) | (2,056,566 | ) | $ | (9,678,354 | ) | 9,964,031 | $ | 262,958,781 | ||||||
34 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class C Shares | ||||||||||||||
Shares sold | 20,018,794 | $ | 292,989,819 | 28,098,198 | $ | 605,445,590 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 3,950,571 | 57,445,432 | 3,780,967 | 78,327,028 | ||||||||||
Shares repurchased | (24,910,649 | ) | (344,138,583 | ) | (14,602,336 | ) | (287,145,318 | ) | ||||||
Redemption fees received** | — | 23,584 | — | 22,227 | ||||||||||
Net Increase (Decrease) | (941,284 | ) | $ | 6,320,252 | 17,276,829 | $ | 396,649,527 | |||||||
Class I Shares | ||||||||||||||
Shares sold | 25,254,006 | $ | 372,821,670 | 28,502,232 | $ | 584,478,619 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 2,665,325 | 39,209,566 | 1,872,549 | 38,475,342 | ||||||||||
Shares repurchased | (21,210,176 | ) | (295,144,783 | ) | (12,599,865 | ) | (250,554,875 | ) | ||||||
Redemption fees received** | — | 13,197 | — | 9,652 | ||||||||||
Net Increase (Decrease) | 6,709,155 | $ | 116,899,650 | 17,774,916 | $ | 372,408,738 | ||||||||
Class R3 Shares | ||||||||||||||
Shares sold | 421,734 | $ | 6,146,795 | 530,412 | $ | 11,253,161 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 46,884 | 688,297 | 32,259 | 656,744 | ||||||||||
Shares repurchased | (318,696 | ) | (4,599,932 | ) | (182,609 | ) | (3,712,337 | ) | ||||||
Redemption fees received** | — | 214 | — | 149 | ||||||||||
Net Increase (Decrease) | 149,922 | $ | 2,235,374 | 380,062 | $ | 8,197,717 | ||||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 2,542 | $ | 38,228 | 14,552 | $ | 289,196 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,173 | 17,252 | 281 | 5,130 | ||||||||||
Shares repurchased | (15,815 | ) | (275,982 | ) | — | — | ||||||||
Redemption fees received** | — | 5 | — | 1 | ||||||||||
Net Increase (Decrease) | (12,100 | ) | $ | (220,497 | ) | 14,833 | $ | 294,327 | ||||||
Class R5 Shares | ||||||||||||||
Shares sold | 40,091 | $ | 600,510 | 22,563 | $ | 462,911 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,391 | 20,773 | 342 | 6,456 | ||||||||||
Shares repurchased | (30,138 | ) | (421,988 | ) | (12,922 | ) | (246,249 | ) | ||||||
Redemption fees received** | — | 5 | — | 3 | ||||||||||
Net Increase (Decrease) | 11,344 | $ | 199,300 | 9,983 | $ | 223,121 | ||||||||
* | Effective date for Class R4 shares was 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.
Certified Annual Report 35
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments and U. S. Government obligations) of $2,154,682,303 and $1,813,426,320, respectively and purchase and sale transactions of long-term U.S. Government obligations of $6,750,000 and $2,015,000, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 3,533,571,978 | ||
Gross unrealized appreciation on a tax basis | $ | 465,559,429 | ||
Gross unrealized depreciation on a tax basis | (262,794,218 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 202,765,211 | ||
Distributable earnings – ordinary income | $ | 20,130,064 |
At September 30, 2009, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2008 of $4,298,828 and $493,528,843, respectively. For tax purposes, such losses will be recognized in the year ending September 30, 2010.
At September 30, 2009, the Fund had tax basis capital losses which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations. Such capial loss carryfor-wards expire as follow:
2016 | $ | 4,262,779 | |
2017 | 280,451,429 | ||
$ | 284,714,208 | ||
In order to account for permanent book/tax differences, the Fund increased undistributed net investment income by $3,333,383, and increased accumulated net realized investment loss by $3,333,383. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency transactions and the recharacterization of income received from tender offers, partnership investments, and other return of capital distributions.
The tax character of distributions paid during the years ended September 30, 2009, and September 30, 2008, was as follows:
2009 | 2008 | |||||
Distributions from: | ||||||
Ordinary income | $ | 210,054,509 | $ | 240,357,528 | ||
Capital gains | — | 38,859,304 | ||||
Total distributions | $ | 210,054,509 | $ | 279,216,832 | ||
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50, (“ASC 815”) require certain disclosures. The new requirement amends and expands disclosures related to derivative instruments to provide users of financial statements with an enhanced understanding of the use of derivative instruments by the Fund and how these derivatives affect the financial position, financial performance and cash flows of the Fund. The Fund does not designate any derivative instruments as hedging instruments under ASC 815. During the year ended September 30, 2009, the Fund’s principal exposure to derivative financial instruments of the type
36 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
addressed by ASC 815 was investment in foreign exchange contracts. A foreign exchange contract is an agreement between two parties to exchange different currencies at a specified rate of exchange at an agreed upon future date. Foreign exchange contracts involve risks to the Fund, including the risk that a contract counterparty will not meet its obligations to the Fund, the risk that a change in a contract’s value may not correlate perfectly with the currency the contract was intended to track, and the risk that the Fund’s advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2009 in the normal course of pursuing its investment objectives, in anticipation of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments 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 investment transactions.
These contracts are accounted for by the Fund under ASC 815. Unrealized gains and unrealized losses on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities 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 each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations.
The following table displays the outstanding forward currency contracts, at September 30, 2009:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2009
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||
Euro Dollar | Sell | 200,000,000 | 10/05/2009 | $ | 292,669,405 | $ | — | $ | (27,899,405 | ) | ||||||
Great Britain Pound | Sell | 15,500,000 | 10/05/2009 | 24,771,014 | (1,919,364 | ) | ||||||||||
Swiss Franc | Sell | 68,000,000 | 10/05/2009 | 65,619,596 | (5,623,126 | ) | ||||||||||
Total | $ | 383,060,015 | $ | — | $ | (35,441,895 | ) | |||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2009 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2009
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (35,441,895 | ) |
Certified Annual Report 37
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 |
The realized gains (losses) from forward currency contracts, and the change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund's Statement of Operations for the year ended September 30, 2009 is disclosed in the following tables:
Amount of Realized Gain (Loss) on Derivative
Financial Instruments Recognized in Income for the
Year Ended September 30, 2009
Total | Forward Currency Contracts | |||||
Foreign exchange contracts | $ | 75,764,918 | $ | 75,764,918 |
Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2009
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (78,731,348 | ) | $ | (78,731,348 | ) |
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
38 Certified Annual Report
Thornburg Investment Income Builder Fund
Year Ended September 30, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Class A Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 16.86 | $ | 23.35 | $ | 19.58 | $ | 17.93 | $ | 15.60 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 1.01 | 1.04 | 0.93 | 0.78 | 0.73 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.58 | (6.04 | ) | 4.23 | 1.98 | 2.24 | ||||||||||||||
Total from investment operations | 1.59 | (5.00 | ) | 5.16 | 2.76 | 2.97 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (1.07 | ) | (1.02 | ) | (0.88 | ) | (0.77 | ) | (0.64 | ) | ||||||||||
Net realized gains | — | (0.47 | ) | (0.51 | ) | (0.34 | ) | — | ||||||||||||
Total dividends | (1.07 | ) | (1.49 | ) | (1.39 | ) | (1.11 | ) | (0.64 | ) | ||||||||||
Change in net asset value | 0.52 | (6.49 | ) | 3.77 | 1.65 | 2.33 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 17.38 | $ | 16.86 | $ | 23.35 | $ | 19.58 | $ | 17.93 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(a) | 10.89 | (22.48 | ) | 27.40 | 16.05 | 19.21 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 7.03 | 5.01 | 4.39 | 4.22 | 4.26 | |||||||||||||||
Expenses, after expense reductions (%) | 1.30 | 1.25 | 1.30 | 1.38 | 1.47 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.30 | 1.25 | 1.30 | 1.38 | 1.47 | |||||||||||||||
Expenses, before expense reductions (%) | 1.30 | 1.25 | 1.30 | 1.38 | 1.47 | |||||||||||||||
Portfolio turnover rate (%) | 63.05 | 46.07 | 62.60 | 55.29 | 76.76 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,400,454 | $ | 1,393,268 | $ | 1,697,061 | $ | 903,347 | $ | 515,915 |
(a) | Sales loads are not reflected in computing total return. |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 39
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Investment Income Builder Fund |
Year Ended September 30, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Class C Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 16.87 | $ | 23.37 | $ | 19.60 | $ | 17.95 | $ | 15.62 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.92 | 0.90 | 0.81 | 0.70 | 0.66 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.59 | (6.04 | ) | 4.22 | 1.97 | 2.24 | ||||||||||||||
Total from investment operations | 1.51 | (5.14 | ) | 5.03 | 2.67 | 2.90 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (0.99 | ) | (0.89 | ) | (0.75 | ) | (0.68 | ) | (0.57 | ) | ||||||||||
Net realized gains | — | (0.47 | ) | (0.51 | ) | (0.34 | ) | — | ||||||||||||
Total dividends | (0.99 | ) | (1.36 | ) | (1.26 | ) | (1.02 | ) | (0.57 | ) | ||||||||||
Change in net asset value | 0.52 | (6.50 | ) | 3.77 | 1.65 | 2.33 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 17.39 | $ | 16.87 | $ | 23.37 | $ | 19.60 | $ | 17.95 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 10.27 | (23.02 | ) | 26.64 | 15.45 | 18.70 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 6.44 | 4.36 | 3.79 | 3.73 | 3.84 | |||||||||||||||
Expenses, after expense reductions (%) | 1.90 | 1.90 | 1.90 | 1.90 | 1.90 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.90 | 1.90 | 1.89 | 1.90 | 1.89 | |||||||||||||||
Expenses, before expense reductions (%) | 2.08 | 2.03 | 2.06 | 2.15 | 2.23 | |||||||||||||||
Portfolio turnover rate (%) | 63.05 | 46.07 | 62.60 | 55.29 | 76.76 | |||||||||||||||
Net assets at end of year (thousands) | $ | 1,426,613 | $ | 1,399,947 | $ | 1,535,532 | $ | 636,947 | $ | 337,489 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
40 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Investment Income Builder Fund |
Year Ended September 30, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Class I Shares: | ||||||||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the year)+ | ||||||||||||||||||||
Net asset value, beginning of year | $ | 16.97 | $ | 23.50 | $ | 19.71 | $ | 18.03 | $ | 15.64 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 1.07 | 1.10 | 1.02 | 0.88 | 0.84 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.59 | (6.06 | ) | 4.24 | 1.98 | 2.22 | ||||||||||||||
Total from investment operations | 1.66 | (4.96 | ) | 5.26 | 2.86 | 3.06 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (1.13 | ) | (1.10 | ) | (0.96 | ) | (0.84 | ) | (0.67 | ) | ||||||||||
Net realized gains | — | (0.47 | ) | (0.51 | ) | (0.34 | ) | — | ||||||||||||
Total dividends | (1.13 | ) | (1.57 | ) | (1.47 | ) | (1.18 | ) | (0.67 | ) | ||||||||||
Change in net asset value | 0.53 | (6.53 | ) | 3.79 | 1.68 | 2.39 | ||||||||||||||
NET ASSET VALUE, end of year | $ | 17.50 | $ | 16.97 | $ | 23.50 | $ | 19.71 | $ | 18.03 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%) | 11.29 | (22.20 | ) | 27.80 | 16.53 | 19.73 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 7.39 | 5.34 | 4.74 | 4.68 | 4.86 | |||||||||||||||
Expenses, after expense reductions (%) | 0.97 | 0.89 | 0.95 | 0.99 | 1.00 | |||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.97 | 0.89 | 0.94 | 0.98 | 0.99 | |||||||||||||||
Expenses, before expense reductions (%) | 0.97 | 0.89 | 0.95 | 1.02 | 1.09 | |||||||||||||||
Portfolio turnover rate (%) | 63.05 | 46.07 | 62.60 | 55.29 | 76.76 | |||||||||||||||
Net assets at end of year (thousands) | $ | 908,126 | $ | 766,772 | $ | 644,294 | $ | 308,859 | $ | 129,110 |
+ | Based on weighted average shares outstanding. |
See notes to financial statements.
Certified Annual Report 41
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Investment Income Builder Fund |
Year Ended September 30, | Period Ended Sept. 30, | |||||||||||||||||||
Class R3 Shares: | 2009 | 2008 | 2007 | 2006 | 2005(a) | |||||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||||||
Net asset value, beginning of period | $ | 16.85 | $ | 23.34 | $ | 19.58 | $ | 17.93 | $ | 16.98 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 1.00 | 1.00 | 0.86 | 0.82 | 0.50 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.58 | (6.05 | ) | 4.24 | 1.92 | 0.79 | ||||||||||||||
Total from investment operations | 1.58 | (5.05 | ) | 5.10 | 2.74 | 1.29 | ||||||||||||||
Less dividends from: | ||||||||||||||||||||
Net investment income | (1.05 | ) | (0.97 | ) | (0.83 | ) | (0.75 | ) | (0.34 | ) | ||||||||||
Net realized gains | — | (0.47 | ) | (0.51 | ) | (0.34 | ) | — | ||||||||||||
Total dividends | (1.05 | ) | (1.44 | ) | (1.34 | ) | (1.09 | ) | (0.34 | ) | ||||||||||
Change in net asset value | 0.53 | (6.49 | ) | 3.76 | 1.65 | 0.95 | ||||||||||||||
NET ASSET VALUE, end of period | $ | 17.38 | $ | 16.85 | $ | 23.34 | $ | 19.58 | $ | 17.93 | ||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||
Total return (%)(b) | 10.74 | (22.69 | ) | 27.10 | 15.91 | 7.67 | ||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) (%) | 6.93 | 4.89 | 4.00 | 4.36 | 4.27 | (c) | ||||||||||||||
Expenses, after expense reductions (%) | 1.50 | 1.49 | 1.50 | 1.50 | 1.50 | (c) | ||||||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.50 | 1.49 | 1.50 | 1.50 | 1.49 | (c) | ||||||||||||||
Expenses, before expense reductions (%) | 1.87 | 1.77 | 2.16 | 6.05 | 28.93 | (c)(d) | ||||||||||||||
Portfolio turnover rate (%) | 63.05 | 46.07 | 62.60 | 55.29 | 76.76 | |||||||||||||||
Net assets at end of period (thousands) | $ | 14,828 | $ | 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.
42 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Investment Income Builder Fund |
Class R4 Shares: | Year Ended Sept. 30, 2009 | Period Ended Sept. 30, 2008(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 16.94 | $ | 21.22 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 1.01 | 0.66 | ||||||
Net realized and unrealized gain (loss) on investments | 0.59 | (4.39 | ) | |||||
Total from investment operations | 1.60 | (3.73 | ) | |||||
Less dividends from: | ||||||||
Net investment income | (1.07 | ) | (0.55 | ) | ||||
Change in net asset value | 0.53 | (4.28 | ) | |||||
NET ASSET VALUE, end of period | $ | 17.47 | $ | 16.94 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 10.83 | (17.79 | ) | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 7.02 | 5.28 | (c) | |||||
Expenses, after expense reductions (%) | 1.40 | 1.40 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 1.40 | 1.40 | (c) | |||||
Expenses, before expense reductions (%) | 9.54 | (d) | 16.97 | (c)(d) | ||||
Portfolio turnover rate (%) | 63.05 | 46.07 | ||||||
Net assets at end of period (thousands) | $ | 48 | $ | 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 43
FINANCIAL HIGHLIGHTS, CONTINUED | ||
Thornburg Investment Income Builder Fund |
Class R5 Shares: | Year Ended September 30, | Period Ended Sept. 30, 2007(a) | ||||||||||
2009 | 2008 | |||||||||||
PER SHARE PERFORMANCE | ||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||
Net asset value, beginning of period | $ | 16.98 | $ | 23.51 | $ | 20.74 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 1.04 | 1.11 | 0.46 | |||||||||
Net realized and unrealized gain (loss) on investments | 0.61 | (6.09 | ) | 2.87 | ||||||||
Total from investment operations | 1.65 | (4.98 | ) | 3.33 | ||||||||
Less dividends from: | ||||||||||||
Net investment income | (1.13 | ) | (1.08 | ) | (0.56 | ) | ||||||
Net realized gains | — | (0.47 | ) | — | ||||||||
Total dividends | (1.13 | ) | (1.55 | ) | (0.56 | ) | ||||||
Change in net asset value | 0.52 | (6.53 | ) | 2.77 | ||||||||
NET ASSET VALUE, end of period | $ | 17.50 | $ | 16.98 | $ | 23.51 | ||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||
Total return (%)(b) | 11.19 | (22.27 | ) | 16.19 | ||||||||
Ratios to average net assets: | ||||||||||||
Net investment income (loss) (%) | 7.14 | 5.48 | 3.17 | (c) | ||||||||
Expenses, after expense reductions (%) | 0.99 | 0.99 | 0.99 | (c) | ||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.98 | (c) | ||||||||
Expenses, before expense reductions (%) | 9.20 | (d) | 11.77 | (d) | 278.77 | (c)(d) | ||||||
Portfolio turnover rate (%) | 63.05 | 46.07 | 62.60 | |||||||||
Net assets at end of period (thousands) | $ | 427 | $ | 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.
44 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, 2009, 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
Certified Annual Report 45
Thornburg Investment Income Builder Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,424.90 | $ | 7.77 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.66 | $ | 6.47 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,421.60 | $ | 11.53 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,015.54 | $ | 9.60 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,426.60 | $ | 5.96 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.16 | $ | 4.96 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,423.40 | $ | 9.11 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.59 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,424.60 | $ | 8.45 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.10 | $ | 7.04 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,427.50 | $ | 6.03 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.28%; C: 1.90%; I: 0.98%; R3: 1.50%; R4: 1.39%; R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table 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.
46 Certified Annual Report
Thornburg Investment Income Builder Fund | September 30, 2009 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009 (with sales charge)
1 Yr | 5 Yrs | Since Inception | |||||||
A Shares (Incep: 12/24/02) | 5.92 | % | 7.66 | % | 10.86 | % | |||
C Shares (Incep: 12/24/02) | 9.27 | % | 8.06 | % | 11.05 | % | |||
I Shares (Incep: 11/3/03) | 11.29 | % | 9.08 | % | 9.74 | % | |||
R3 Shares (Incep: 2/1/05) | 10.74 | % | — | 6.79 | % | ||||
R4 Shares (Incep: 2/1/08) | 10.83 | % | — | -5.43 | % | ||||
R5 Shares (Incep: 2/1/07) | 11.19 | % | — | 0.17 | % | ||||
Blended Index (Since 12/24/02) | 1.62 | % | 4.21 | % | 6.97 | % | |||
S&P 500 Index (Since 12/24/02) | -6.91 | % | 1.02 | % | 4.60 | % |
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% 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 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 47
Thornburg Investment Income Builder Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
48 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report 49
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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 Investment Income Builder Fund | September 30, 2009 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
The Trust has delegated to Thornburg Investment Management, Inc. (the “Advisor”) voting decisions respecting proxies for the Fund’s voting securities. The Advisor makes voting decisions in accordance with its Proxy Voting Policy and Procedures. A description of the Policy and Procedures is available (i) without charge, upon request, by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
Information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information is available (i) without charge, upon request by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the tax year ended September 30, 2009, the Thornburg Investment Income Builder Fund designates 59.74% (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.
20.31% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2009 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, 2009. Complete information will be computed and reported in conjunction with your 2009 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 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for the purpose. 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 the independent Trustees unanimously voted 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.
Certified Annual Report 51
OTHER INFORMATION, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 (Unaudited) |
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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the Fund’s investment objectives. In addition, the Trustees considered the information specifically provided to them at their request in anticipation of their annual 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 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 the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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, tax efficiency, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment return had been lower than the return of the blended benchmark and the average return of the world allocation category (but higher than the S&P 500) in the most recent full calendar year. The Trustees also noted that the Fund’s investment returns had generally met or exceeded reasonable expectations over multi-year periods, given the investment objectives of the Fund. The quantitative data presented further demonstrated to the Trustees that the Fund’s returns had exceeded the returns of the blended benchmark and the index and the average returns of the category in each other calendar year since the Fund’s inception, and that the Fund’s performance fell within or near the top quartile of the category for the three-month, year-to-date, one-year, three-year and five-year periods ended with the second quarter of the current year. The Trustees noted the increasing levels of the Fund’s quarterly dividend payments since the Fund’s inception together with the annual increase in the Fund’s dividend in each year, and further noted the Fund’s higher historical cumulative return (net of expenses) relative to the blended benchmark and the index since the Fund’s inception. The Trustees further noted that the dividends paid by the S&P 500 had declined by more than 20% in 2009, creating a challenging environment.
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 equity income mutual funds assembled by an independent mutual fund analyst firm, comparison of the Fund’s expenses to average expenses charged to a group of world allocation mutual funds assembled by a second 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 somewhat higher than the median and average expense ratios for the group of equity income mutual funds selected by the first analyst firm and slightly lower than the average expense ratio for the group of world allocation mutual funds selected by the second analyst firm, and that the management fee was somewhat higher than the median and average fee rates for the same group of equity income mutual funds, but that the differences were not significant in view of their degree and the other factors considered. The Trustees considered information about the fees charged by the Advisor to other investment management
52 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2009 (Unaudited) |
clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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, compliance and systems capabilities 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 53
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted July 22, 2009
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.
54 This page is not part of the Annual Report.
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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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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg. com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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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. | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources. | |||||
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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, 2009. 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. Special risks may be associated with investments outside the United States, especially in emerging markets, including currency fluctuations, illiquidity and volatility. Investments in small capitalization companies 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 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 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 the Fund. There is no assurance that the Fund will have continued access to profitable IPOs and as the 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.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | THOAX | 885-215-343 | ||
Class C | THOCX | 885-215-335 | ||
Class I | THOIX | 885-215-327 | ||
Class R3 | THORX | 885-215-145 | ||
Class R4 | THOVX | 885-215-137 | ||
Class R5 | THOFX | 885-215-129 |
Glossary
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 45 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.
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.
Earnings Per Share (EPS) – The total earnings divided by the number of shares outstanding.
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.
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 equaling a company’s market value per share divided by earnings per share.
Gross Domestic Product (GDP) – The market value of goods and services produced by labor and property in the United States, regardless of nationality.
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Thornburg Global Opportunities Fund
IMPORTANT
PERFORMANCE INFORMATION
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit 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 1.67%, 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.
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. Rather, we believe that straightforward business models executed by capable management teams make the best investments.
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 2009
1 Yr | 3 Yr | Since Incep | |||||||
A Shares (Incep: 7/28/06) | |||||||||
Without sales charge | 3.60 | % | 4.16 | % | 6.38 | % | |||
With sales charge | -1.06 | % | 2.56 | % | 4.86 | % | |||
MSCI AC World Index | |||||||||
(Since 7/28/06) | -0.11 | % | -3.24 | % | -1.94 | % |
4 This page is not part of the Annual Report.
The Thornburg Global Opportunities Fund is unique in the marketplace. Currently, assets in the global stock fund 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 many names. In fact, about 82% of category assets are concentrated in 10 funds, and the average world stock fund holds approximately 200 stocks (as of 9/30/09).
Thornburg Global Opportunities Fund is different, in that it will typically be focused in 30–50 stocks which the management team feels have the best combination of promise and discount. Each stock is analyzed on its own merits, and the team then combines them into a portfolio of stocks, with attractive long-term prospects. 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 THE YEAR ENDED 9/30/09
Top Contributors | Top Detractors | |
Fifth Third Bancorp Pfd | Swiss Reinsurance Co. | |
Crown Castle International Corp. | KKR Financial Holdings LLC | |
SVB Financial Group | Precision Drilling Trust | |
Huntington Bancshares, Inc. Pfd | Level 3 Communications, Inc. | |
Apollo Investment Corp. | Mercator Minerals | |
Source: FactSet |
KEY PORTFOLIO ATTRIBUTES
As of 9/30/09
Portfolio P/E Trailing 12-months* | 13.3x | ||
Portfolio Price to Cash Flow* | 5.7x | ||
Portfolio Price to Book Value* | 1.7x | ||
Median Market Cap* | $ | 6.6 B | |
3-Year Beta (A Shares vs. MSCI AC World)* | 1.18 | ||
Number of Companies | 34 | ||
* Source: FactSet |
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Thornburg Global Opportunities Fund
September 30, 2009
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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 21, 2009
Dear Fellow Shareholder:
This letter will highlight the results of Thornburg Global Opportunities Fund’s investment activities for the six- and twelve- month periods ended September 30, 2009. In addition, we will comment on the overall investment landscape, which changed in important ways in 2008 and 2009.
In the six months ended September 30, 2009, Thornburg Global Opportunities Fund’s net asset value per Class A share increased 60.93% from $8.14 to $13.10. The Fund also paid dividends of 31.5 cents per Class A share to give a total return for the period of 65.19%. The dividends per share were higher for Class I and R5 shares, and lower for the Class C, R3, and R4 shares, to account for varying class-specific expenses. For the fiscal year ended September 30, 2009, the Fund’s net asset value per share decreased by 28 cents or 2.09%. Total return for the Class A shares for the fiscal year was 3.60%, taking into account income dividends paid of 59.8 cents per share, reinvested in Fund shares.
For the fiscal year ended September 30, 2009, Thornburg Global Opportunities Fund outperformed the MSCI All Country (AC) World Index by 3.71%. Since its inception on July 28, 2006, Thornburg Global Opportunities Fund has outperformed the same index by an average annualized margin of 8.32%.
We do not expect to pay any capital gains distributions for 2009. At September 30, 2009, the Fund had realized capital losses of $251 million, which may be utilized to offset future capital gains.
In assessing the performance of your Fund, it is constructive to consider the performance in United States dollars of the sector components of the MSCI AC World Index over the year ended September 30, 2009, because this is our global performance benchmark:
1. | Five sectors (information technology, materials, telecommunications, consumer discretionary, and consumer staples) showed positive total returns, with a range of 9.98% (information technology) to 1.25% (consumer staples). |
2. | Five sectors (health care, industrials, utilities, energy, and financials) showed negative total returns, with a range of negative 0.46% (health care) to negative 6.1% (financials). |
Compared to the index weightings, Global Opportunities Fund had a relatively large portfolio allocation in telecommunications industry firms. These investments delivered well-above-average returns. Millicom Cellular, Crown Castle International, and various bond and hybrid securities issued by Level 3 Communications were each among the leading contributors to portfolio performance for the year. We continue to have a large weighting in cash-generative telecommunication service providers, though the extent of the overweighting has been reduced.
Global Opportunities Fund also maintained a large investment allocation to the financial sector during the year. While this allocation hurt the performance of the portfolio during the October to March period, the rebound since March has been significant, with market prices of five portfolio investments at least doubling. Your Fund’s average return from this sector was greater than 12% for the fiscal year as a whole – well above the negative 6.1% performance of the comparable equities in the finance sector of the MSCI AC World Index. Our investment choices in the financial sector ended up being the largest driver of outperformance vis-à-vis the benchmark for the year ended September 30, 2009. Among the
Certified Annual Report 7
Letter to Shareholders,
Continued
best contributing investments to portfolio performance from this sector were Swiss Re Capital 6.85% notes; convertible preferred stocks from Fifth Third Bancorp and Huntington Bancshares; business development company Apollo Investment Corporation; insurer Hartford Financial Services Group; and specialized bank holding company SVB Financial Group. Two of the Fund’s financial sector investments, KKR Financial Holdings and Swiss Reinsurance (stock) were among the poorest performers for the year.
Your portfolio had outperformance, relative to the MSCI AC World Index sector, from its modest investments in consumer staples businesses, led by Walgreen’s. Your Fund’s investments in the materials (Eastern Platinum and Mercator Minerals), energy (Precision Drilling Trust and Canadian Natural Resources), consumer discretionary (Comcast), and health care (Eclipsys) sectors detracted from its performance on an absolute basis, and relative to the MSCI AC World Index. Your Fund had relatively few investments in materials, the second best performing sector of the MSCI AC World Index. In the best performing sector of the MSCI AC World Index, information technology, your Fund’s investments, led by Google, were generally positive and almost kept pace with the performance of stocks in the index.
Expectations for GDP and corporate earnings were reduced in most markets around the world between October 1, 2008 and September 30, 2009, with particularly harsh reassessments made between October and March. That period included the first months following the failures of Lehman Brothers and AIG, two long established financial giants that failed in the early autumn of 2008. Soon thereafter, significant portions of the investment portfolios of each of these, and many other financial entities, began to be liquidated by lenders or their managements into nervous markets with few buyers. Many other investors who were NOT forced to sell became caught up in the drama, and elected to join the selling frenzy, further pressuring prices. The semi-frozen condition of the global financial markets rippled through the real economy, and virtually every sector in every geography suffered slower business conditions and lower share prices. All ten major sectors of the MSCI AC World Index delivered average share price declines during those six months, ranging from negative 17.9% (telecommunication services) to negative 46.6% (financials):
MSCI ACWI Index Sector Total Return 9/30/08 – 3/31/09 | Sector Weight | |||||
Sector: | ||||||
Financials | -46.6 | % | 18 | % | ||
Energy | -28.2 | % | 12 | % | ||
Health Care | -19.6 | % | 11 | % | ||
Information Technology | -23.0 | % | 11 | % | ||
Consumer Staples | -22.9 | % | 11 | % | ||
Industrials | -34.7 | % | 10 | % | ||
Consumer Discretionary | -28.3 | % | 9 | % | ||
Materials | -29.5 | % | 7 | % | ||
Telecommunication Services | -17.9 | % | 6 | % | ||
Utilities | -24.7 | % | 5 | % |
We made changes to your Fund over the course of the fiscal year based upon our perceptions of how evolving circumstances would impact various businesses, and which price changes had created the best relative values. Overall, these sales and purchases were positive, although we would like to have second chances on several decisions taken last winter.
At September 30, 2009, domestic stocks comprised approximately 42% of your portfolio; foreign stocks around 43%; and interest bearing debt the remaining 15%. The average price/earnings multiple of the 34 stocks in your portfolio was 13.3x on a trailing basis and 12x on an estimated forward basis, using estimates provided by FactSet. For comparative reference,
8 Certified Annual Report
both the trailing and forward price/earnings multiples of the MSCI AC World Index were approximately 15x, again using estimates provided by FactSet. Industry weightings, country weightings, and the top equity holdings of Global Opportunities Fund are summarized on page ten of this report.
We have stated many times that an investment in Thornburg Global Opportunities Fund should be considered a long-term investment, and should be evaluated over longer periods. That said, it appears that the financial market volatility of the last year, which was reflected in share price fluctuations of the Fund, was unnerving to some shareholders. Owners of approximately 15 million shares of Thornburg Global Opportunities Fund sold their shares at an average price of approximately $9.05 per share between October 1, 2008, and March 31, 2009. We have no idea how these investors redeployed the funds redeemed from Global Opportunities Fund. The fact that the Fund achieved a price of $13.10 per Class A share on September 30, 2009, and paid dividends totaling 59.8 cents over the course of the fiscal year, sets a relatively high bar for the opportunity cost of having sold the Fund shares, thus far.
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 financial asset prices around the world during the first half of the fiscal year, but we are pleased that our efforts during that troubled period have recovered significant value for the Fund. As October 2009 draws to a close, a global recession appears to be giving way to modest positive economic growth in the coming year. In more cases than not, earnings expectations are being revised upward. We believe that your portfolio businesses carry low enough valuations to set the stage for future price appreciation, if 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 9
SCHEDULE OF INVESTMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/09
Banks | 18.8 | % | Software & Services | 5.2 | % | |||
Telecommunication Services | 18.1 | % | Technology Hardware & Equipment | 5.0 | % | |||
Insurance | 16.7 | % | Food & Staples Retailing | 2.4 | % | |||
Pharmaceuticals, Biotechnology & Life Sciences | 8.5 | % | Commercial & Professional Services | 1.5 | % | |||
Diversified Financials | 7.5 | % | Materials | 1.1 | % | |||
Capital Goods | 5.5 | % | Health Care Equipment & Services | 1.0 | % | |||
Energy | 5.3 | % | Other Assets & Cash Equivalents | 3.4 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/09 (percent of equity holdings)
United States | 49.8 | % | Austria | 2.9 | % | |||
Switzerland | 10.1 | % | Spain | 2.3 | % | |||
Bermuda | 7.1 | % | Ireland | 2.1 | % | |||
United Kingdom | 6.6 | % | Luxembourg | 2.1 | % | |||
Israel | 4.9 | % | Russia | 2.0 | % | |||
China | 4.5 | % | Hong Kong | 1.3 | % | |||
Italy | 3.2 | % | Greece | 1.1 | % |
TOP TEN HOLDINGS
As of 9/30/09
Swiss Re Capital I, LP | 7.7 | % | Teva Pharmaceutical Industries Ltd. ADR | 4.2 | % | |||
Global Crossing Ltd. | 6.0 | % | Willis Group Holdings Ltd. | 4.2 | % | |||
Dell, Inc. | 5.0 | % | SVB Financial Group | 4.1 | % | |||
Fifth Third Bancorp Pfd | 4.5 | % | Apollo Investment Corp. | 4.0 | % | |||
Liechtensteinische Landesbank AG | 4.2 | % | Hartford Financial Services Group, Inc. | 3.9 | % |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
COMMON STOCK — 77.97% | |||||
BANKS — 11.94% | |||||
COMMERCIAL BANKS — 11.94% | |||||
China Merchants Bank Co., Ltd. | 1,414,200 | $ | 3,153,189 | ||
Erste Group Bank AG | 151,300 | 6,761,700 | |||
Liechtensteinische Landesbank AG | 171,078 | 11,498,198 | |||
a SVB Financial Group | 256,100 | 11,081,447 | |||
32,494,534 | |||||
CAPITAL GOODS — 5.50% | |||||
AEROSPACE & DEFENSE — 3.69% | |||||
a Spirit Aerosystems Holdings, Inc. | 555,400 | 10,030,524 | |||
TRADING COMPANIES & DISTRIBUTORS — 1.81% | |||||
Babcock & Brown Air Ltd. ADR | 514,313 | 4,937,405 | |||
14,967,929 | |||||
COMMERCIAL & PROFESSIONAL SERVICES — 1.48% | |||||
PROFESSIONAL SERVICES — 1.48% | |||||
a Huron Consulting Group, Inc. | 155,500 | 4,016,565 | |||
4,016,565 | |||||
DIVERSIFIED FINANCIALS — 7.47% | |||||
CAPITAL MARKETS — 7.47% | |||||
Apollo Investment Corp. | 1,143,800 | 10,923,290 | |||
Prospect Capital Corp. | 878,216 | 9,405,693 | |||
20,328,983 | |||||
ENERGY — 5.32% | |||||
OIL, GAS & CONSUMABLE FUELS — 5.32% | |||||
Capital Product Partners LP | 265,411 | 2,433,819 | |||
Eni S.p.A. | 298,200 | 7,453,211 | |||
OAO Gazprom ADR | 197,581 | 4,593,758 | |||
14,480,788 | |||||
FOOD & STAPLES RETAILING — 2.41% | |||||
FOOD & STAPLES RETAILING — 2.41% | |||||
Walgreen Co. | 175,000 | 6,557,250 | |||
6,557,250 | |||||
HEALTH CARE EQUIPMENT & SERVICES — 1.01% | |||||
HEALTH CARE TECHNOLOGY — 1.01% | 142,045 | 2,741,469 | |||
a Eclipsys Corp. | 2,741,469 | ||||
INSURANCE — 8.06% | |||||
INSURANCE — 8.06% | |||||
Hartford Financial Services Group, Inc. | 401,700 | 10,645,050 | |||
Willis Group Holdings Ltd. | 400,200 | 11,293,644 | |||
21,938,694 | |||||
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||
MATERIALS — 1.11% | |||||
CONSTRUCTION MATERIALS — 1.11% | |||||
a,d China Resources Cement | 6,000,000 | $ | 3,019,607 | ||
3,019,607 | |||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 8.53% | |||||
LIFE SCIENCES TOOLS & SERVICES — 2.46% | |||||
Bachem Holding AG | 98,911 | 6,690,786 | |||
PHARMACEUTICALS — 6.07% | |||||
Roche Holding AG | 31,900 | 5,156,084 | |||
Teva Pharmaceutical Industries Ltd. ADR | 224,930 | 11,372,461 | |||
23,219,331 | |||||
SOFTWARE & SERVICES — 5.24% | |||||
INFORMATION TECHNOLOGY SERVICES — 1.43% | |||||
a Amdocs Ltd. | 144,500 | 3,884,160 | |||
INTERNET SOFTWARE & SERVICES — 1.86% | |||||
a Google, Inc. | 10,200 | 5,057,670 | |||
SOFTWARE — 1.95% | |||||
Microsoft Corp. | 205,500 | 5,320,395 | |||
14,262,225 | |||||
TECHNOLOGY HARDWARE & EQUIPMENT — 4.98% | |||||
COMPUTERS & PERIPHERALS — 4.98% | |||||
a Dell, Inc. | 888,800 | 13,563,088 | |||
13,563,088 | |||||
TELECOMMUNICATION SERVICES — 14.92% | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 7.94% | |||||
a Global Crossing Ltd. | 1,143,407 | 16,350,720 | |||
Telefonica SA | 190,700 | 5,261,689 | |||
WIRELESS TELECOMMUNICATION SERVICES — 6.98% | |||||
China Mobile Ltd. | 735,500 | 7,165,147 | |||
a Crown Castle International Corp. | 220,000 | 6,899,200 | |||
Millicom International Cellular S.A. | 67,600 | 4,917,224 | |||
40,593,980 | |||||
TOTAL COMMON STOCK (Cost $193,362,751) | 212,184,443 | ||||
PREFERRED STOCK — 6.84% | |||||
BANKS — 6.84% | |||||
COMMERCIAL BANKS — 6.84% | |||||
Fifth Third Bancorp Pfd, 8.50% | 101,600 | 12,158,471 | |||
Huntington Bancshares, Inc. Pfd, 8.50% | 7,405 | 6,442,350 | |||
18,600,821 | |||||
TOTAL PREFERRED STOCK (Cost $4,910,219) | 18,600,821 | ||||
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
Shares/ Principal Amount | Value | ||||||
CORPORATE BONDS — 11.84% | |||||||
INSURANCE — 8.63% | |||||||
INSURANCE — 8.63% | |||||||
b,c Swiss Re Capital I, LP, 6.854%, 5/29/2049 | $ | 28,000,000 | $ | 21,000,000 | |||
b ZFS Finance (USA) Trust IV, 5.875%, 5/9/2062 | 3,066,000 | 2,486,955 | |||||
23,486,955 | |||||||
TELECOMMUNICATION SERVICES — 3.21% | |||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 3.21% | |||||||
Level 3 Communications, Inc., 3.50%, 6/15/2012 | 11,000,000 | 8,745,000 | |||||
8,745,000 | |||||||
TOTAL CORPORATE BONDS (Cost $19,928,891) | 32,231,955 | ||||||
SHORT TERM INVESTMENTS — 4.23% | |||||||
Devon Energy Corp., 0.20%, 10/1/2009 | 6,500,000 | 6,500,000 | |||||
Precision Castparts Corp., 0.20%, 10/1/2009 | 5,000,000 | 5,000,000 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $11,500,000) | 11,500,000 | ||||||
TOTAL INVESTMENTS — 100.88% (Cost $229,701,861) | $ | 274,517,219 | |||||
LIABILITIES NET OF OTHER ASSETS — (0.88)% | (2,391,920 | ) | |||||
NET ASSETS — 100.00% | $ | 272,125,299 | |||||
Footnote Legend
a | Non-income producing |
b | 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, 2009, the aggregate value of these securities in the Fund’s portfolio was $23,486,955, representing 8.63% of the Fund’s net assets. |
c | Yankee Bond – Denominated in U.S. dollars and is publicly issued in the U.S. by foreign banks and corporations. |
d | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt | |
Pfd | Preferred Stock |
See notes to financial statements.
Certified Annual Report 13
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
ASSETS | ||||
Investments at value (cost $229,701,861) (Note 2) | $ | 274,517,219 | ||
Cash | 543,485 | |||
Receivable for investments sold | 710,588 | |||
Receivable for fund shares sold | 1,168,769 | |||
Dividends receivable | 809,121 | |||
Dividend and interest reclaim receivable | 93,861 | |||
Interest receivable | 856,103 | |||
Prepaid expenses and other assets | 34,028 | |||
Total Assets | 278,733,174 | |||
LIABILITIES | ||||
Payable for securities purchased | 4,302,693 | |||
Payable for fund shares redeemed | 283,020 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 1,544,091 | |||
Payable to investment advisor and other affiliates (Note 3) | 271,791 | |||
Accounts payable and accrued expenses | 201,840 | |||
Dividends payable | 4,440 | |||
Total Liabilities | 6,607,875 | |||
NET ASSETS | $ | 272,125,299 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (538,533 | ) | |
Net unrealized appreciation on investments | 43,282,911 | |||
Accumulated net realized gain (loss) | (253,719,727 | ) | ||
Net capital paid in on shares of beneficial interest | 483,100,648 | |||
$ | 272,125,299 | |||
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
NET ASSET VALUE: | |||
Class A Shares: | |||
Net asset value and redemption price per share ($82,308,588 applicable to 6,282,489 shares of beneficial interest outstanding - Note 4) | $ | 13.10 | |
Maximum sales charge, 4.50% of offering price | 0.62 | ||
Maximum offering price per share | $ | 13.72 | |
Class C Shares: | |||
Net asset value and offering price per share * ($81,333,674 applicable to 6,274,056 shares of beneficial interest outstanding - Note 4) | $ | 12.96 | |
Class I Shares: | |||
Net asset value, offering and redemption price per share ($107,132,089 applicable to 8,157,223 shares of beneficial interest outstanding - Note 4) | $ | 13.13 | |
Class R3 Shares: | |||
Net asset value, offering and redemption price per share ($20,280 applicable to 1,551 shares of beneficial interest outstanding - Note 4) | $ | 13.08 | |
Class R4 Shares: | |||
Net asset value, offering and redemption price per share ($1,244,328 applicable to 95,435 shares of beneficial interest outstanding - Note 4) | $ | 13.04 | |
Class R5 Shares: | |||
Net asset value, offering and redemption price per share ($86,340 applicable to 6,567 shares of beneficial interest outstanding - Note 4) | $ | 13.15 | |
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF OPERATIONS | ||
Thornburg Global Opportunities Fund | Year Ended September 30, 2009 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $432,279) | $ | 6,827,563 | ||
Interest income | 4,187,095 | |||
Total Income | 11,014,658 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 2,096,842 | |||
Administration fees (Note 3) | ||||
Class A Shares | 97,385 | |||
Class C Shares | 83,975 | |||
Class I Shares | 47,193 | |||
Class R3 Shares | 21 | |||
Class R4 Shares | 176 | |||
Class R5 Shares | 3 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 193,762 | |||
Class C Shares | 670,679 | |||
Class R3 Shares | 85 | |||
Class R4 Shares | 344 | |||
Transfer agent fees | ||||
Class A Shares | 132,382 | |||
Class C Shares | 151,559 | |||
Class I Shares | 268,865 | |||
Class R3 Shares | 2,546 | |||
Class R4 Shares | 1,904 | |||
Class R5 Shares | 2,225 | |||
Registration and filing fees | ||||
Class A Shares | 24,755 | |||
Class C Shares | 21,960 | |||
Class I Shares | 25,213 | |||
Class R3 Shares | 17,030 | |||
Class R4 Shares | 17,162 | |||
Class R5 Shares | 17,098 | |||
Custodian fees (Note 3) | 105,440 | |||
Professional fees | 63,389 | |||
Accounting fees | 12,864 | |||
Trustee fees | 7,305 | |||
Other expenses | 42,601 | |||
Total Expenses | 4,104,763 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (381,000 | ) | ||
Investment advisory fees waived by investment advisor (Note 3) | (39,002 | ) | ||
Fees paid indirectly (Note 3) | (9,585 | ) | ||
Net Expenses | 3,675,176 | |||
Net Investment Income | $ | 7,339,482 | ||
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Global Opportunities Fund | Year Ended September 30, 2009 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | (220,036,526 | ) | |
Forward currency contracts (Note 7) | 6,132,489 | |||
Foreign currency transactions | 21,400 | |||
(213,882,637 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 174,841,975 | |||
Forward currency contracts (Note 7) | (4,704,759 | ) | ||
Foreign currency translations | 46,881 | |||
170,184,097 | ||||
Net Realized and Unrealized Loss | (43,698,540 | ) | ||
Net Decrease in Net Assets Resulting From Operations | $ | (36,359,058 | ) | |
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Global Opportunities Fund
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 7,339,482 | $ | 10,150,566 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (213,882,637 | ) | (36,760,899 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | 170,184,097 | (183,908,572 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (36,359,058 | ) | (210,518,905 | ) | ||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (4,810,423 | ) | (2,015,112 | ) | ||||
Class C Shares | (3,391,652 | ) | (334,642 | ) | ||||
Class I Shares | (6,293,149 | ) | (2,715,611 | ) | ||||
Class R3 Shares | (1,185 | ) | (441 | ) | ||||
Class R4 Shares | (17,979 | ) | (22 | ) | ||||
Class R5 Shares | (1,340 | ) | (27 | ) | ||||
From realized gains | ||||||||
Class A Shares | — | (8,262,772 | ) | |||||
Class C Shares | — | (3,642,010 | ) | |||||
Class I Shares | — | (5,983,950 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (50,588,757 | ) | (5,314,571 | ) | ||||
Class C Shares | (12,146,667 | ) | 47,611,421 | |||||
Class I Shares | (31,514,614 | ) | 128,935,073 | |||||
Class R3 Shares | (5,789 | ) | 46,867 | |||||
Class R4 Shares | 1,132,663 | 3,327 | ||||||
Class R5 Shares | 77,340 | 3,227 | ||||||
Net Decrease in Net Assets | (143,920,610 | ) | (62,188,148 | ) | ||||
NET ASSETS: | ||||||||
Beginning of Year | 416,045,909 | 478,234,057 | ||||||
End of Year | $ | 272,125,299 | $ | 416,045,909 | ||||
Undistributed net investment income | $ | — | $ | 5,841,965 |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Global Opportunities Fund |
September 30, 2009 |
NOTE 1 – ORGANIZATION
Thornburg Global Opportunities 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 Fund is currently one of fifteen separate series of the Trust. 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) 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 of purchase, 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.
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, and 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.
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
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 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.
Valuation Measurements: Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three levels listed below.
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2009. 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:
Fair Value Measurements at September 30, 2009 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Assets | ||||||||||||||
Investments in Securities* | ||||||||||||||
Common Stock | $ | 212,184,443 | $ | 209,164,836 | $ | 3,019,607 | $ | — | ||||||
Preferred Stock | 18,600,821 | 18,600,821 | — | — | ||||||||||
Corporate Bonds | 32,231,955 | — | 32,231,955 | — | ||||||||||
Short Term Investments | 11,500,000 | — | 11,500,000 | — | ||||||||||
Total Investments in Securities | $ | 274,517,219 | $ | 227,765,657 | $ | 46,751,562 | $ | — | ||||||
Liabilities | ||||||||||||||
Other Financial Instruments** | ||||||||||||||
Forward Currency Contracts | $ | (1,544,091 | ) | $ | — | $ | (1,544,091 | ) | $ | — |
* | See Summary of Industry Exposure and Schedule of Investments beginning on page 10 for further detail. |
** | 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. |
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.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
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 issuers. 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 to shareholders substantially all taxable income, including any net realized gain on investments of the Funds. Therefore, no provision for federal income taxes is required.
When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with 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 Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records on the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Dividends to shareholders are generally paid quarterly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date or, at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually. Distributions to shareholders are based on income tax regulations and therefore, their characteristics may differ for financial statement and tax purposes.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned and dividend income is recorded on the ex-dividend date. Certain income from foreign securities is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares of each class of shares at the beginning of the day (after adjusting for the current share activity of the respective class). Expenses common to all funds are allocated among the funds comprising the Trust based upon their relative net asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown. However, based on experience, the Trust expects the risk of loss to be remote.
Use of Estimates: The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
NOTE 3 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, Thornburg Investment Management, Inc. (the “Advisor”) serves as the investment advisor and performs services to the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2009, 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, 2009, the Advisor voluntarily waived investment advisory fees of $39,002. 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
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
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, 2009, the Advisor voluntarily or contractually agreed to reimburse certain class specific expenses, administrative fees, and distribution fees of $5,011 for Class A shares, $14,232 for Class C shares, $304,052 for Class I shares, $19,589 for Class R3 shares, $18,800 for Class R4 shares, and $19,316 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, 2009, the Distributor has advised the Fund that it earned commissions aggregating $14,308 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $22,474 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, 2009, 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, 2009, fees paid indirectly were $9,585.
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, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A Shares | ||||||||||||||
Shares sold | 3,316,626 | $ | 31,636,505 | 7,801,931 | $ | 146,068,191 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 427,591 | 4,308,199 | 487,847 | 9,037,357 | ||||||||||
Shares repurchased | (9,418,047 | ) | (86,535,753 | ) | (9,414,853 | ) | (160,449,772 | ) | ||||||
Redemption fees received** | — | 2,292 | — | 29,653 | ||||||||||
Net Increase (Decrease) | (5,673,830 | ) | $ | (50,588,757 | ) | (1,125,075 | ) | $ | (5,314,571 | ) | ||||
Class C Shares | ||||||||||||||
Shares sold | 1,742,187 | $ | 17,178,589 | 4,215,177 | $ | 78,470,996 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 270,067 | 2,759,411 | 170,775 | 3,149,277 | ||||||||||
Shares repurchased | (3,446,600 | ) | (32,086,524 | ) | (2,077,837 | ) | (34,024,836 | ) | ||||||
Redemption fees received** | — | 1,857 | — | 15,984 | ||||||||||
Net Increase (Decrease) | (1,434,346 | ) | $ | (12,146,667 | ) | 2,308,115 | $ | 47,611,421 | ||||||
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class I Shares | ||||||||||||||
Shares sold | 2,831,034 | $ | 30,394,273 | 11,051,219 | $ | 214,187,269 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 548,896 | 5,653,896 | 389,918 | 7,203,956 | ||||||||||
Shares repurchased | (6,680,462 | ) | (67,565,461 | ) | (5,362,705 | ) | (92,479,984 | ) | ||||||
Redemption fees received** | — | 2,678 | — | 23,832 | ||||||||||
Net Increase (Decrease) | (3,300,532 | ) | $ | (31,514,614 | ) | 6,078,432 | $ | 128,935,073 | ||||||
Class R3 Shares* | ||||||||||||||
Shares sold | 1,290 | $ | 13,314 | 3,492 | $ | 60,788 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 120 | 1,185 | 27 | 441 | ||||||||||
Shares repurchased | (2,484 | ) | (20,289 | ) | (894 | ) | (14,366 | ) | ||||||
Redemption fees received** | — | 1 | — | 4 | ||||||||||
Net Increase (Decrease) | (1,074 | ) | $ | (5,789 | ) | 2,625 | $ | 46,867 | ||||||
Class R4 Shares* | ||||||||||||||
Shares sold | 93,846 | $ | 1,114,683 | 187 | $ | 3,304 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 1,401 | 17,979 | 1 | 23 | ||||||||||
Shares repurchased | — | — | — | — | ||||||||||
Redemption fees received** | — | 1 | — | — | ||||||||||
Net Increase (Decrease) | 95,247 | $ | 1,132,663 | 188 | $ | 3,327 | ||||||||
Class R5 Shares* | ||||||||||||||
Shares sold | 6,281 | $ | 76,001 | 179 | $ | 3,200 | ||||||||
Shares issued to shareholders in reinvestment of dividends | 106 | 1,339 | 1 | 27 | ||||||||||
Shares repurchased | — | — | — | — | ||||||||||
Redemption fees received** | — | — | — | — | ||||||||||
Net Increase (Decrease) | 6,387 | $ | 77,340 | 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, 2009, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $247,371,238 and $334,985,458, respectively.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
NOTE 6 – INCOME TAXES
At September 30, 2009, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 234,284,970 | ||
Gross unrealized appreciation on a tax basis | $ | 56,419,655 | ||
Gross unrealized depreciation on a tax basis | (16,187,406 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 40,232,249 | ||
Distributable earnings – ordinary income | $ | 1,248,362 |
At September 30, 2009, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2008 of $1,464,149 and $182,214,191, respectively. For tax purposes, such losses will be recognized in the year ending September 30, 2010.
At September 30, 2009, the Fund had tax basis capital losses, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations. Such loss carryforwards expire as follows:
2016 | $ | 88,134 | |
2017 | 68,696,690 | ||
$ | 68,784,824 | ||
In order to account for permanent book/tax differences, the Fund increased undistributed net realized investment loss by $776,227, and increased undistributed net investment income by $776,227. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains and recharacterization of income from certain investments.
The tax character of distributions paid during the year ended September 30, 2009 was as follows:
2009 | 2008 | |||||
Distributions from: | ||||||
Ordinary income | $ | 14,515,728 | $ | 21,195,150 | ||
Capital gains | — | 1,759,437 | ||||
Total distributions | $ | 14,515,728 | $ | 22,954,587 | ||
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50, (“ASC 815”) require certain disclosures. The new requirement amends and expands disclosures related to derivative instruments to provide users of financial statements with an enhanced understanding of the use of derivative instruments by the Fund and how these derivatives affect the financial position, financial performance and cash flows of the Fund. The Fund does not designate any derivative instruments as hedging instruments under ASC 815. During the year ended September 30, 2009, the Fund’s principal exposure to derivative financial instruments of the type addressed by ASC 815 was investment in foreign exchange contracts. A foreign exchange contract is an agreement between two parties to exchange different currencies at a specified rate of exchange at an agreed upon future date. Foreign exchange contracts involve risks to the Fund, including the risk that a contract counterparty will not meet its obligations to the Fund, the risk that a change in a contract’s value may not correlate perfectly with the currency the contract was intended to track, and the risk that the Fund’s advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 |
The Fund entered into forward currency contracts during the year ended September 30, 2009 in the normal course of pursuing its investment objectives, in anticipation of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments 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 investment transactions.
These contracts are accounted for by the Fund under ASC 815. Unrealized gains and unrealized losses on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities 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 each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations.
The following table displays the outstanding forward currency contracts, at September 30, 2009:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2009
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||
Euro Dollar | Sell | 6,320,000 | 02/22/2010 | $ | 9,245,814 | $ | — | $ | (345,042 | ) | ||||||
Swiss Franc | Sell | 14,500,000 | 10/05/2009 | 13,992,414 | — | (1,199,049 | ) | |||||||||
Total | $ | 23,238,228 | $ | — | $ | (1,544,091 | ) | |||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2009 is disclosed in the following table:
Fair Values of Derivative Financial Instruments at September 30, 2009
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (1,544,091 | ) |
The realized gains (losses) from forward currency contracts, and the change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2009 is disclosed in the following tables:
Amount of Realized Gain (Loss) on Derivative
Financial Instruments Recognized in Income for the
Year Ended September 30, 2009
Total | Forward Currency Contracts | |||||
Foreign exchange contracts | $ | 6,132,489 | $ | 6,132,489 |
Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2009
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (4,704,759 | ) | $ | (4,704,759 | ) |
OTHER NOTE
Fund management believes no events have occurred between September 30, 2009 and November 20, 2009, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.
Certified Annual Report 25
Thornburg Global Opportunities Fund
Class A Shares: | Year Ended September 30, | Period Ended September 30, | ||||||||||||||
2009 | 2008 | 2007 | 2006(a) | |||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 13.38 | $ | 20.06 | $ | 12.86 | $ | 11.94 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.29 | 0.30 | 0.07 | 0.01 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.03 | (6.30 | ) | 7.29 | 0.91 | |||||||||||
Total from investment operations | 0.32 | (6.00 | ) | 7.36 | 0.92 | |||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.60 | ) | (0.14 | ) | (0.00 | )(b) | — | |||||||||
Net realized gains | — | (0.54 | ) | (0.16 | ) | — | ||||||||||
Total dividends | (0.60 | ) | (0.68 | ) | (0.16 | ) | — | |||||||||
Change in net asset value | (0.28 | ) | (6.68 | ) | 7.20 | 0.92 | ||||||||||
NET ASSET VALUE, end of period | $ | 13.10 | $ | 13.38 | $ | 20.06 | $ | 12.86 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return (%)(c) | 3.60 | (30.85 | ) | 57.75 | 7.71 | |||||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) (%) | 2.96 | 1.68 | 0.41 | 0.34 | (d) | |||||||||||
Expenses, after expense reductions (%) | 1.53 | 1.50 | 1.51 | 1.70 | (d) | |||||||||||
Expenses, after expense reductions and net of custody credits (%) | 1.52 | 1.49 | 1.50 | 1.63 | (d) | |||||||||||
Expenses, before expense reductions (%) | 1.55 | 1.50 | 1.55 | 6.12 | (d)(e) | |||||||||||
Portfolio turnover rate (%) | 103.02 | 83.70 | 91.02 | 6.08 | ||||||||||||
Net assets at end of period (thousands) | $ | 82,309 | $ | 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.
26 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Global Opportunities Fund
Class C Shares: | Year Ended September 30, | Period Ended September 30, | ||||||||||||||
2009 | 2008 | 2007 | 2006(a) | |||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 13.22 | $ | 19.87 | $ | 12.84 | $ | 11.94 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.23 | 0.17 | (0.06 | ) | (0.01 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.01 | (6.24 | ) | 7.25 | 0.91 | |||||||||||
Total from investment operations | 0.24 | (6.07 | ) | 7.19 | 0.90 | |||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.50 | ) | (0.04 | ) | — | — | ||||||||||
Net realized gains | — | (0.54 | ) | (0.16 | ) | — | ||||||||||
Total dividends | (0.50 | ) | (0.58 | ) | (0.16 | ) | — | |||||||||
Change in net asset value | (0.26 | ) | (6.65 | ) | 7.03 | 0.90 | ||||||||||
NET ASSET VALUE, end of period | $ | 12.96 | $ | 13.22 | $ | 19.87 | $ | 12.84 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return (%)(b) | 2.79 | (31.38 | ) | 56.48 | 7.54 | |||||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) (%) | 2.36 | 0.97 | (0.34 | ) | (0.40 | )(c) | ||||||||||
Expenses, after expense reductions (%) | 2.31 | 2.25 | 2.28 | 2.41 | (c) | |||||||||||
Expenses, after expense reductions and net of custody credits (%) | 2.31 | 2.24 | 2.28 | 2.35 | (c) | |||||||||||
Expenses, before expense reductions (%) | 2.35 | 2.25 | 2.33 | 9.01 | (c)(d) | |||||||||||
Portfolio turnover rate (%) | 103.02 | 83.70 | 91.02 | 6.08 | ||||||||||||
Net assets at end of period (thousands) | $ | 81,334 | $ | 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.
Certified Annual Report 27
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Global Opportunities Fund
Class I Shares: | Year Ended September 30, | Period Ended September 30, | ||||||||||||||
2009 | 2008 | 2007 | 2006(a) | |||||||||||||
PER SHARE PERFORMANCE | ||||||||||||||||
(for a share outstanding throughout the period)+ | ||||||||||||||||
Net asset value, beginning of period | $ | 13.45 | $ | 20.16 | $ | 12.87 | $ | 11.94 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.37 | 0.40 | 0.17 | 0.02 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.01 | ) | (6.34 | ) | 7.29 | 0.91 | ||||||||||
Total from investment operations | 0.36 | (5.94 | ) | 7.46 | 0.93 | |||||||||||
Less dividends from: | ||||||||||||||||
Net investment income | (0.68 | ) | (0.23 | ) | (0.01 | ) | — | |||||||||
Net realized gains | — | (0.54 | ) | (0.16 | ) | — | ||||||||||
Total dividends | (0.68 | ) | (0.77 | ) | (0.17 | ) | — | |||||||||
Change in net asset value | (0.32 | ) | (6.71 | ) | 7.29 | 0.93 | ||||||||||
NET ASSET VALUE, end of period | $ | 13.13 | $ | 13.45 | $ | 20.16 | $ | 12.87 | ||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||
Total return (%)(b) | 4.16 | (30.49 | ) | 58.51 | 7.79 | |||||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) (%) | 3.65 | 2.25 | 0.97 | 0.90 | (c) | |||||||||||
Expenses, after expense reductions (%) | 0.99 | 0.99 | 1.00 | 1.04 | (c) | |||||||||||
Expenses, after expense reductions and net of custody credits (%) | 0.99 | 0.99 | 0.99 | 0.99 | (c) | |||||||||||
Expenses, before expense reductions (%) | 1.33 | 1.10 | 1.20 | 2.98 | (c) | |||||||||||
Portfolio turnover rate (%) | 103.02 | 83.70 | 91.02 | 6.08 | ||||||||||||
Net assets at end of period (thousands) | $ | 107,132 | $ | 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.
28 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Global Opportunities Fund
Class R3 Shares: | Year Ended Sept. 30, 2009 | Period Ended Sept. 30, 2008(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 13.37 | $ | 17.91 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.26 | 0.29 | ||||||
Net realized and unrealized gain (loss) on investments | 0.05 | (4.70 | ) | |||||
Total from investment operations | 0.31 | (4.41 | ) | |||||
Less dividends from: | ||||||||
Net investment income | (0.60 | ) | (0.13 | ) | ||||
Change in net asset value | (0.29 | ) | (4.54 | ) | ||||
NET ASSET VALUE, end of period | $ | 13.08 | $ | 13.37 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 3.61 | (24.78 | ) | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 2.57 | 2.61 | (c) | |||||
Expenses, after expense reductions (%) | 1.50 | 1.49 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 1.49 | 1.49 | (c) | |||||
Expenses, before expense reductions (%) | 116.95 | (d) | 67.47 | (c)(d) | ||||
Portfolio turnover rate (%) | 103.02 | 83.70 | ||||||
Net assets at end of period (thousands) | $ | 20 | $ | 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.
Certified Annual Report 29
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Global Opportunities Fund
Class R4 Shares: | Year Ended Sept. 30, 2009 | Period Ended Sept. 30 2008(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 13.38 | $ | 17.91 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.40 | 0.28 | ||||||
Net realized and unrealized gain (loss) on investments | (0.08 | ) | (4.69 | ) | ||||
Total from investment operations | 0.32 | (4.41 | ) | |||||
Less dividends from: | ||||||||
Net investment income | (0.66 | ) | (0.12 | ) | ||||
Change in net asset value | (0.34 | ) | (4.53 | ) | ||||
NET ASSET VALUE, end of period | $ | 13.04 | $ | 13.38 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 3.73 | (24.74 | ) | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 3.19 | 2.48 | (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 (%) | 14.73 | (d) | 864.00 | (c)(d) | ||||
Portfolio turnover rate (%) | 103.02 | 83.70 | ||||||
Net assets at end of period (thousands) | $ | 1,244 | $ | 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.
30 Certified Annual Report
FINANCIAL HIGHLIGHTS, CONTINUED
Thornburg Global Opportunities Fund
Class R5 Shares: | Year Ended Sept. 30, 2009 | Period Ended Sept. 30 2008(a) | ||||||
PER SHARE PERFORMANCE | ||||||||
(for a share outstanding throughout the period)+ | ||||||||
Net asset value, beginning of period | $ | 13.46 | $ | 17.98 | ||||
Income from investment operations: | ||||||||
Net investment income (loss) | 0.53 | 0.33 | ||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (4.70 | ) | ||||
Total from investment operations | 0.38 | (4.37 | ) | |||||
Less dividends from: | ||||||||
Net investment income | (0.69 | ) | (0.15 | ) | ||||
Change in net asset value | (0.31 | ) | (4.52 | ) | ||||
NET ASSET VALUE, end of period | $ | 13.15 | $ | 13.46 | ||||
RATIOS/SUPPLEMENTAL DATA | ||||||||
Total return (%)(b) | 4.25 | (24.47 | ) | |||||
Ratios to average net assets: | ||||||||
Net investment income (loss) (%) | 4.36 | 2.97 | (c) | |||||
Expenses, after expense reductions (%) | 0.97 | 0.92 | (c) | |||||
Expenses, after expense reductions and net of custody credits (%) | 0.97 | 0.92 | (c) | |||||
Expenses, before expense reductions (%) | 239.11 | (d) | 850.59 | (c)(d) | ||||
Portfolio turnover rate (%) | 103.02 | 83.70 | ||||||
Net assets at end of period (thousands) | $ | 86 | $ | 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 31
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, 2009, 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2009
32 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Global Opportunities Fund | September 30, 2009 (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 a $1,000 investment beginning on April 1, 2009, and held until September 30, 2009.
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 4/1/09 | Ending Account Value 9/30/09 | Expenses Paid During Period† 4/1/09–9/30/09 | |||||||
Class A Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,651.90 | $ | 9.41 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.97 | $ | 7.16 | |||
Class C Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,644.30 | $ | 14.95 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,013.76 | $ | 11.39 | |||
Class I Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,655.10 | $ | 6.59 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | |||
Class R3 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,650.00 | $ | 9.91 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,017.59 | $ | 7.55 | |||
Class R4 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,650.30 | $ | 9.27 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,018.07 | $ | 7.06 | |||
Class R5 Shares | |||||||||
Actual | $ | 1,000.00 | $ | 1,655.80 | $ | 6.54 | |||
Hypothetical* | $ | 1,000.00 | $ | 1,020.14 | $ | 4.97 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.42%; C: 2.26%; I: 0.99%; R3: 1.49%; R4: 1.39%; R5: 0.98%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table 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 Global Opportunities Fund | September 30, 2009 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2009 (with sales charge)
1 Yr | Since Inception | |||||
A Shares (Incep: 7/28/06) | -1.06 | % | 4.86 | % | ||
C Shares (Incep: 7/28/06) | 1.81 | % | 5.55 | % | ||
I Shares (Incep: 7/28/06) | 4.16 | % | 6.93 | % | ||
R3 Shares (Incep: 2/1/08) | 3.61 | % | -13.92 | % | ||
R4 Shares (Incep: 2/1/08) | 3.73 | % | -13.83 | % | ||
R5 Shares (Incep: 2/1/08) | 4.25 | % | -13.39 | % | ||
MSCI AC World Index (Since 7/28/06) | -0.11 | % | -1.94 | % |
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% 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 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 45 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.
34 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Global Opportunities Fund | September 30, 2009 (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, 63 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, to 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO to 2007 and Chairman to 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director to 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | Director of TMST, Inc. (real estate investment trust) | ||
Brian J. McMahon, 53 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Co-Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 64 Trustee since 1994, Member of Audit Committee & 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 TMST, Inc. (real estate investment trust) | ||
David D. Chase, 68 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); Managing Member of CS Group, LLC, Santa Fe, NM (merchant bank). | None | ||
Eliot R. Cutler, 63 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, to 2009, Partner of Akin, Gump, Strauss, Hauer & Feld. LLP (law firm) in Washington, D.C. and Beijing, China. | Director of TMST, Inc. (real estate investment trust) | ||
Susan H. Dubin, 60 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, 55 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, 50 Trustee since 1996, Member of Audit Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; President and Vice Chairman of Nambé Mills, Inc., Santa Fe, NM (manufacturer). | None |
Certified Annual Report 35
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 (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, 46 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 70 Vice President since 1995 | Portfolio Manager, Co-Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 42 Vice President since 2001 | Vice President and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 39 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, 38 Vice President since 1999 | Co-Portfolio Manager since 2006, Managing Director, Vice President, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 46 Vice President since 1999 | Co-Portfolio Manager since 2007, Managing Director, Associate Portfolio Manager and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 39 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. | Not applicable | ||
Leon Sandersfeld, 43 Vice President since 2003 | Managing Director since 2007, Fund Accounting Director, and Associate of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 35 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, 51 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, 39 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 | ||
Thomas Garcia, 38 Vice President since 2006 | Vice President, Managing Director, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 38 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 30 Vice President since 2006 | Co-Portfolio Manager and Managing Director since 2006, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
36 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 35 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. | Not applicable | ||
Lewis Kaufman, 33 Vice President since 2007 | Co-Portfolio Manager and Managing Director since 2007, and Associate Portfolio Manager since 2005 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 53 Vice President since 2008 | Co-Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager since 2008 of Thornburg Investment Management, Inc.; Principal, Vanguard Funds to 2008. | Not applicable | ||
Lon Erickson, 34 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, 49 Vice President since 2008 | Senior Tax Accountant and Associate of Thornburg Investment Management, Inc. since 2007; Chief Financial Officer, Vestor Partners, LP (private equity fund) to 2007. | Not applicable | ||
Jack Gardner, 55 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 | ||
Laura Hillstrom, 42 Vice President since 2009 | Chief Administrative Officer since 2009 and Managing Director of Thornburg Investment Management, Inc.; Director of Information Systems of Thornburg Investment Management, Inc. until 2009. | Not applicable |
(1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
(2) | The Fund is one of fifteen 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 fifteen Funds of the Trust. Each Trustee oversees the fifteen 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 fifteen 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 Global Opportunities Fund | September 30, 2009 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
The Trust has delegated to Thornburg Investment Management, Inc. (the “Advisor”) voting decisions respecting proxies for the Fund’s voting securities. The Advisor makes voting decisions in accordance with its Proxy Voting Policy and Procedures. A description of the Policy and Procedures is available (i) without charge, upon request, by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
Information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information is available (i) without charge, upon request by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the tax year ended September 30, 2009, the Thornburg Global Opportunities Fund designates 54.33% (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.
14.20% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2009 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, 2009. Complete information will be computed and reported in conjunction with your 2009 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s web site at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its web site at www.thornburg. com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Global Opportunities Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 14, 2009.
Throughout the year the independent Trustees meet with various personnel of the Advisor and receive information from the Advisor. In addition, and in anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in July 2009 to plan the Trustees’ evaluation of the Advisor’s performance and to specify certain information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently provided that information, reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose. 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 the independent Trustees unanimously voted 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.
38 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 (Unaudited) |
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. These reports addressed a wide variety of topics, including particularly the Advisor’s services to the Fund and its selection of investments and pursuit of the Fund’s investment objectives. In addition, the Trustees considered information specifically provided to them at their request in anticipation of their annual 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 relative to a “world stock” category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to a broad-based securities index, and (iv) a comparative measure of estimated portfolio earnings per share growth. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to the challenges presented by those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment 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, tax efficiency, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In considering quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment returns were significantly higher in 2007, and somewhat lower in 2008, than the returns of the broad based securities index and the average returns of the category of world stock equity mutual funds selected by an independent mutual fund analyst firm. The Trustees also noted that the Fund’s investment returns had generally met reasonable expectations over the periods since the Fund’s inception, given the investment objectives of the Fund. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment returns fell within the bottom half of the category for the one-year period ended with the second quarter of the current year but fell within the top quartile of the category for the three-month and year-to-date periods. The Trustees further noted the Fund’s higher cumulative investment return (net of expenses) relative to the Fund’s benchmark Morgan Stanley Capital International All Country World 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 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 flexible portfolio mutual funds assembled by an independent mutual fund analyst firm, and comparisons of fees and expenses charged to the Fund with fees and expenses charged to other specific mutual funds. The Trustees observed that the management fee charged to the Fund was slightly higher than the median and comparable to the average fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, that the overall expense ratio was somewhat higher than the median and average expense ratios for the same fund group, but that the differences observed were not significant in view of their degree and the other factors considered. The Trustees considered information about the fees charged by the Advisor to other investment management clients, together with information about fees charged by other advisors to different clients, and analysis of the differences between the requirements of institutional clients and mutual funds and the consequently different investment management services rendered, respectively, to institutional clients and mutual funds. The Trustees noted that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and observed that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation of fee rates charged to mutual funds, because of the significant differences between the respective requirements of institutional clients and mutual funds, the differences between the respective services rendered to institutional clients and mutual funds, and the different circumstances in which the respective fees originate.
Certified Annual Report 39
OTHER INFORMATION, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2009 (Unaudited) |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The Trustees were cognizant of the general reduction in advisory firms’ revenues due to declines in assets under management, and considered information from the Advisor respecting the effects of recent economic events on the Advisor and the Advisor’s responses to those events. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees noted no impairment of the Advisor’s resources or service capabilities. 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, compliance and systems capabilities 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 22, 2009
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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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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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
Thornburg Investment Management applies a disciplined philosophy to fixed-income management. Since the launch of our first fixed-income fund over 25 years ago, we have been conducting fundamental, bottom-up research in an effort to identify bonds which we believe provide the best return for a given level of risk. We are very organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.
• | 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 Strategic Municipal Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit thornburg. com. Read it carefully before investing.
For additional information, please visit www.thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
This page is not part of the Annual Report. 47
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TH1245 |
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, 2008 and September 30, 2009 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, 2008 | Year Ended September 30, 2009 | |||||
Thornburg Investment Trust | $ | 480,000 | $ | 353,000 |
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, 2008 | Year Ended September 30, 2009 | |||||
Thornburg Investment Trust | $ | 19,380 | $ | 18,500 |
The audit-related fees billed to the Trust in the years ended September 30, 2008 and September 30, 2009 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, 2008 and September 30, 2009 for professional services rendered by PWC for tax compliance, tax advice or tax planning are set out below.
Year Ended September 30, 2008 | Year Ended September 30, 2009 | |||||
Thornburg Investment Trust | $ | 182,535 | $ | 168,730 |
All Other Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years ended September 30, 2008 and September 30, 2009 for all other services rendered by PWC to the Trust are set out below.
Year Ended September 30, 2008 | Year Ended September 30, 2009 | |||||
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 $91,555 for the fiscal year ended September 30, 2008. There was no attestation work performed by PWC for the fiscal year ended September 30, 2009. 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, 2009, 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, Strategic Income Fund, and Strategic Municipal Income Fund.
By: | /s/ BRIAN J. MCMAHON | |
Brian J. McMahon | ||
President and principal executive officer |
Date: November 23, 2009
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 23, 2009
By: | /s/ GEORGE T. STRICKLAND | |
George T. Strickland | ||
Treasurer and principal financial officer |
Date: November 23, 2009